Chevron Reports Third Quarter Net Income of $5 Billion
Chevron Corporation reported net income of $5.0 billion ($2.29 per share -- diluted) for the third quarter 2006, compared with $3.6 billion ($1.64 per share -- diluted) in the year-ago period.
"Downstream profits increased to $1.4 billion in the third quarter, driven by higher utilization of our U.S. refineries and improved refined-product margins in most of our areas of operation," said Chairman and CEO Dave O'Reilly. Utilization rates for the company's refineries were much improved in this year's third quarter, with the U.S. fuels refinery network operating at close to its crude oil design capacity during the period.
O'Reilly said upstream earnings of $3.5 billion for the third quarter 2006 increased about $200 million from a year earlier. Profits were $1.3 billion in the United States and $2.2 billion for international operations, both about 5 percent higher than last year. Worldwide oil-equivalent production was up 6 percent from last year's third quarter.
"Our strong performance this year has allowed us to invest $11.5 billion in our excellent queue of projects, which are targeted to increase energy supplies," O'Reilly said. "Our company's focus on operational excellence and capital investment discipline continues to be key to our success."
Also in the first nine months of this year, cash flows from operations enabled the company to purchase $3.7 billion of its shares of common stock in the open market. The company remains on schedule to complete its $5 billion stock buyback program by the end of the year. Earnings for the past 12 months resulted in a 23 percent return on capital employed for the period.
UPSTREAM -- EXPLORATION AND PRODUCTION
Worldwide oil-equivalent production of 2.7 million barrels per day increased 152,000 barrels per day from the third quarter 2005. The net increase was mostly attributable to last year's quarter having included only two months of production associated with the August 2005 acquisition of Unocal Corporation.
Average U.S. prices for crude oil and natural gas liquids in the third quarter 2006 increased approximately $9 per barrel from a year ago to $62. Outside the United States, prices in this year's third quarter also averaged $62 per barrel, up nearly $8. The average U.S. natural gas sales price decreased 19 percent to $5.93 per thousand cubic feet, while outside the United States the average natural gas price of $3.66 per thousand cubic feet was 17 percent higher than a year earlier.
U.S. Upstream Three Months Nine Months Ended Sept. 30 Ended Sept. 30 Millions of Dollars 2006 2005 2006 2005 Income $1,269 $1,206 $3,384 $2,945
U.S. upstream income of $1.3 billion in the third quarter was up 5 percent from the corresponding 2005 period. Contributing to the increase in earnings were the effects of higher prices for crude oil, an increase in oil-equivalent production and a reduction in expenses associated with hurricanes in 2005. Partially offsetting these benefits to earnings were lower prices for natural gas, higher operating expenses and an increase in depreciation expense for wells, equipment and facilities.
Net oil-equivalent production of 772,000 barrels per day increased 5 percent from the 2005 quarter. The increase was associated with the effect of the Unocal acquisition. Otherwise, restoration of volumes following the hurricanes in 2005 was offset by normal field declines. The net liquids component of production was up 2 percent to 464,000 barrels per day, and net natural gas production increased 10 percent to 1.8 billion cubic feet per day.
International Upstream Three Months Nine Months Ended Sept. 30 Ended Sept. 30 Millions of Dollars 2006 2005 2006 2005 Income* $2,234 $2,117 $6,849 $5,529 *Includes foreign currency effects $(100) $(30) $(319) $9
International upstream income of $2.2 billion was up about 5 percent from the 2005 third quarter. Earnings improved between periods as a result of increased production and higher average prices for crude oil and natural gas. These benefits to earnings were largely offset by one-time charges for income taxes, including an increase in tax rates on operations in the U.K. North Sea, higher exploration and operating expenses, and an unfavorable variance in foreign currency effects.
Net oil-equivalent production increased 115,000 barrels per day from the year-ago period to 1,928,000 barrels per day. The net liquids component of production increased 4 percent to 1,408,000 barrels per day, and net natural gas production was up 12 percent to 3.1 billion cubic feet per day.
DOWNSTREAM -- REFINING, MARKETING AND TRANSPORTATION Three Months Nine Months Ended Sept. 30 Ended Sept. 30 Millions of Dollars 2006 2005 2006 2005 Income $831 $139 $1,595 $595
U.S. downstream earnings of $831 million increased $692 million from the depressed level of the 2005 quarter, mainly as a result of improved refinery utilization and higher refined-product margins.
Crude oil inputs at the company's refineries increased by about one-third to 967,000 barrels per day in the 2006 quarter. In the year-ago period, refinery downtime included an extended outage of the company's refinery in Pascagoula, Mississippi, due to hurricane damage.
Refined-product sales volumes increased 2 percent to 1,502,000 barrels per day in the 2006 quarter, including a 3 percent increase in branded gasoline sales to 625,000 barrels per day. Effective April 1 of this year, a new accounting standard required certain purchase and sale transactions with the same counterparty to be netted for reporting. These types of transactions previously were reported as a purchase and a sale. Excluding the impact of this new accounting standard, sales increased 9 percent between periods, primarily the result of higher refinery output.
International Downstream Three Months Nine Months Ended Sept. 30 Ended Sept. 30 Millions of Dollars 2006 2005 2006 2005 Income* $610 $434 $1,424 $1,363 *Includes foreign currency effects $(21) $(22) $2 $2
International downstream earned $610 million in the 2006 quarter, an increase of $176 million from the year-ago period. The increase related mainly to higher refined-product margins in the Asia-Pacific region and improved results from crude oil and refined product trading activities. Total refined- product sales volumes of 2,148,000 barrels per day were 1 percent lower than in last year's quarter. Excluding the impact of the new accounting standard for purchase and sale contracts, refined product sales were up 5 percent.
CHEMICALS Three Months Nine Months Ended Sept. 30 Ended Sept. 30 Millions of Dollars 2006 2005 2006 2005 Income* $168 $6 $415 $227 *Includes foreign currency effects $4 $2 $(7) $--
Chemical operations earned $168 million, up from $6 million in the 2005 quarter. Earnings for the 50 percent-owned Chevron Phillips Chemical Company LLC and the company's Oronite subsidiary were both negatively affected in the 2005 quarter by impacts of hurricanes in the Gulf of Mexico.
ALL OTHER Three Months Nine Months Ended Sept. 30 Ended Sept. 30 Millions of Dollars 2006 2005 2006 2005 Net Charges* $(95) $(308) $(301) $(704) *Includes foreign currency effects $6 $ (2) $49 $(30)
All Other consists of the company's interest in Dynegy, mining operations, power generation businesses, worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities and technology companies.
Net charges were $95 million in the third quarter 2006, compared with $308 million in the corresponding 2005 period. The 2006 period included lower net charges for environmental and litigation matters, income taxes and other corporate items. This year's quarter also benefited from higher interest income and lower interest expense.
SALES AND OTHER OPERATING REVENUES
Sales and other operating revenues in the third quarter 2006 were $53 billion, approximately the same as a year earlier. Increased production of crude oil and higher prices for crude oil and refined products improved revenues between periods. However, these effects were essentially offset by the impact of an accounting-rule change beginning in the second quarter 2006 that requires certain purchase and sale contracts with the same counterparty to be netted for reporting. Nine-month 2006 sales and other operating revenues were $159 billion, up from $141 billion in the corresponding 2005 period.
CAPITAL AND EXPLORATORY EXPENDITURES
Capital and exploratory expenditures in the first nine months of 2006 were $11.5 billion, compared with $7.1 billion in the corresponding 2005 period. The company's share of equity affiliates' expenditures was $1.3 billion and $1.1 billion in the nine months of 2006 and 2005, respectively. Upstream expenditures represented 78 percent of the companywide total in 2006.
For the first nine months of 2006, net income was $13.4 billion ($6.06 per share -- diluted), compared with $10.0 billion ($4.68 per share -- diluted) in the 2005 nine-month period. Earnings Summary Three Months Nine Months Ended Sept. 30 Ended Sept. 30 Millions of Dollars 2006 2005 2006 2005 Income by Business Segment Upstream -- Exploration and Production $3,503 $3,323 $10,233 $8,474 Downstream -- Refining, 1,441 573 3,019 1,958 Marketing and Transportation Chemicals 168 6 415 227 All Other (95) (308) (301) (704) Net Income* $5,017 $3,594 $13,366 $9,955 *Includes foreign currency effects $(111) $(52) $(275) $(19)
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