Chevron Reports Upstream Income of $1.6 Billion in Q1 2008

Chevron Corporation reported net income of $5.17 billion ($2.48 per share -- diluted) for the first quarter 2008, compared with $4.72 billion ($2.18 per share -- diluted) in the 2007 first quarter. Earnings in the 2007 period included a $700 million gain on downstream asset sales in Europe.

Sales and other operating revenues in the first quarter 2008 were $65 billion, up from $46 billion a year earlier on higher prices for crude oil, natural gas and refined products.

"Upstream earnings benefited from a significant increase in the price of crude oil from a year ago," said Chairman and CEO Dave O'Reilly. "However, market conditions prevented our downstream business from fully recovering these higher costs through the price of gasoline and other refined products. Downstream results in the United States were essentially break-even in this year's first quarter."

In the first quarter of this year, the company reported capital and exploratory expenditures of $5.1 billion. Common stock buybacks in the period totaled $2 billion, and earlier this week the company announced a 12 percent increase in its quarterly dividend on common stock.

O'Reilly said continued strong cash flows from operations have enabled the funding of major development projects that are providing the foundation for the company's growth. Scheduled for start-up this year in upstream are deepwater projects at 68 percent-owned Agbami in Nigeria and 75 percent-owned Blind Faith in the U.S. Gulf of Mexico. Total maximum oil-equivalent production is estimated at 250,000 barrels per day from Agbami within one year of start-up and 70,000 barrels per day at Blind Faith shortly after production begins. Also this year at the 50 percent-owned Tengizchevroil affiliate in Kazakhstan, full start-up of new facilities is expected to increase total crude-oil production capacity from 400,000 barrels per day to 540,000.

O'Reilly also indicated milestones were achieved in recent months on other upstream projects:

--Republic of the Congo: Confirmed start-up ahead of schedule of the 31 percent owned, partner-operated Moho Bilondo deepwater project, which is expected to reach maximum total crude-oil production of 90,000 barrels per day in 2010.

--Thailand: Approved construction in the Gulf of Thailand of the 70 percent-owned and operated Platong Gas II project, which is designed to have a processing capacity of 420 million cubic feet of natural gas per day.

--Australia: Announced plans to develop a new liquefied natural gas project associated with Chevron's 100 percent-owned Wheatstone natural gas discovery.

--Nigeria: Confirmed that the company and its partners plan to develop the 30 percent-owned and partner-operated offshore Usan Field, which is expected to have maximum total production of 180,000 barrels of crude oil per day within one year of start-up in late 2011.


Worldwide oil-equivalent production was 2.60 million barrels per day in the first quarter 2008, down 44,000 barrels per day from the corresponding 2007 period. Absent the impact of higher prices on cost-recovery and variable-royalty volumes under provisions of certain production contracts outside the United States, production increased slightly between periods.

U.S. upstream income of $1.6 billion in the first quarter 2008 was double the amount earned in the year-ago period, driven mainly by higher prices for crude oil. Prices for natural gas also increased between periods. Partially offsetting the benefit of higher prices were increases in depreciation and operating expenses and the impact of lower production.

The company's average sales price per barrel of crude oil and natural gas liquids was approximately $87 in the 2008 quarter, up about $37 per barrel from a year earlier. The average price of natural gas increased $1.15 per thousand cubic feet to $7.55.

Net oil-equivalent production of 715,000 barrels per day declined 34,000 barrels per day from the 2007 first quarter due mainly to normal field declines. The net liquids component of production was down about 5 percent to 437,000 barrels per day. Net natural gas production of 1.67 billion cubic feet per day in the 2008 quarter declined 3 percent between periods.

International upstream earnings of $3.5 billion increased $1.4 billion from the first quarter 2007 due primarily to higher prices for crude oil. Prices and sales volumes of natural gas were also higher between periods. Partially offsetting these benefits to income were higher operating expenses and lower crude-oil sales volumes associated with the timing of cargo liftings in certain producing regions.

The average sales price for crude oil and natural gas liquids in the 2008 quarter was $86 per barrel, up about $35. The average price of natural gas increased 98 cents to $4.83 per thousand cubic feet.

Net oil-equivalent production of 1.88 million barrels per day was essentially unchanged between periods. Absent the impact of higher prices on cost-recovery and variable-royalty volumes, production would have increased about 3 percent from last year's first quarter. The net liquids component of production in the 2008 quarter was 1.26 million barrels per day, down 93,000 from a year earlier. Net natural gas production was 3.77 billion cubic feet per day, up 497 million from the 2007 first quarter.