Chevron Reported $3.7 Billion in Net Income for 3Q 2007

Chevron Corporation (NYSE: CVX) reported net income of $3.7 billion ($1.75 per share - diluted) for the third quarter 2007, compared with $5 billion ($2.29 per share - diluted) in the year-ago period.

Results for the 2007 quarter included approximately $400 million ($0.19 per share) of net charges associated with nonrecurring items, about the same amount recorded for such items a year ago.

For the first nine months of 2007, net income was $13.8 billion ($6.45 per share - diluted), compared with $13.4 billion ($6.06 per share - diluted) in the corresponding 2006 period.

"Earnings declined due mainly to weak refining and marketing conditions in the United States," said Chairman and CEO Dave O'Reilly. "Margins were squeezed as escalating costs for crude-oil feedstocks could not be fully recovered in a U.S. marketplace that was well-supplied with gasoline and other refined products."

In the upstream business, O'Reilly said earnings declined slightly from last year's third quarter. Although prices for crude oil increased between periods, this benefit to earnings was more than offset by the impacts of lower sales volumes due to the timing of crude-oil cargo liftings and higher operating and depreciation expenses.

"Capital and exploratory expenditures during the third quarter totaled $5.2 billion, up more than a billion dollars from a year earlier," O'Reilly added. "We also retired approximately $2 billion of debt during this year's third quarter and purchased $2 billion of Chevron common stock in the open market. We have now completed the $5 billion common stock buyback program that began last December and have initiated a new program to acquire up to $15 billion of our common shares over the next three years."

In additional comments on the upstream and geothermal businesses, O'Reilly cited recent milestones and achievements in a number of countries that included:

  • Thailand -- Reached agreement with Ministry of Energy on 10-year lease extensions to 2022 on four Gulf of Thailand production blocks in which Chevron has working interests ranging between 70 percent and 80 percent.
  • Australia -- Received government environmental approvals for development of the 50 percent-owned and operated Gorgon natural gas development project.
  • Angola - Discovered crude oil at the 31 percent-owned and operated Malange-1 well located in Angola's Block 14.
  • Indonesia -- Commenced commercial operation of the Darajat III geothermal power plant in Garut, West Java, Indonesia.

Upstream – Exploration and Production:

Worldwide oil-equivalent production was approximately 2.6 million barrels per day in the third quarter 2007, a decline of about 100,000 barrels per day from the corresponding 2006 period, due mainly to the effect of the conversion of operating service agreements in Venezuela to joint-stock companies.

U.S. upstream income of $1.14 billion in the third quarter 2007 decreased $134 million from the same period last year. The decline was mainly associated with charges of approximately $100 million for adjustments to asset retirement obligations that have been retained after properties were sold. The benefit of higher average prices between periods was more than offset by the impact of lower production and higher operating expenses.

The average sales price per barrel of crude oil and natural gas liquids was approximately $67 in the third quarter 2007, an increase of about $5 from the corresponding 2006 period. The average sales price of natural gas decreased about 50 cents per thousand cubic feet to $5.43.

International upstream earnings of $2.30 billion increased from $2.23 billion in the 2006 quarter. A benefit to income from higher sales prices for liquids and natural gas in the 2007 quarter was largely offset by lower sales volumes due to the timing of certain cargo liftings and higher operating and depreciation expenses. Included in the 2007 quarter were nonrecurring charges of approximately $250 million related to asset write-downs and income tax items, compared with charges for income tax items in the year-ago quarter of about $300 million.

The average sales price for crude oil and natural gas liquids in the 2007 quarter increased more than $5 from a year earlier to $67 per barrel, while the average price of natural gas was up 12 cents to $3.78 per thousand cubic feet.

Net oil-equivalent production of 1,850,000 barrels per day decreased 4 percent from the year-ago period due to the effect on liquids production of the October 2006 conversion of operating service agreements to joint-stock companies in Venezuela. The net liquids component of production declined about 8 percent from a year ago to 1,302,000 barrels per day, while net natural gas production increased 5 percent to 3.3 billion cubic feet per day.