Chevron Triples Earnings to $5.41B in 2Q10
Chevron reported earnings of $5.41 billion ($2.70 per share - diluted) for the second quarter 2010, compared with $1.75 billion ($0.87 per share - diluted) in the 2009 second quarter. Foreign currency effects increased earnings in the 2010 quarter by $241 million, compared with a reduction of $453 million a year earlier.
For the first half of 2010, earnings were $9.96 billion ($4.97 per share - diluted), up from $3.58 billion ($1.79 per share - diluted) in the first six months of 2009.
Sales and other operating revenues in the second quarter 2010 were $51 billion, up from $40 billion in the year-ago period due mainly to higher prices for crude oil, natural gas and refined products.
"We had another very successful quarter - both operationally and financially," said Chairman and CEO John Watson. "Current quarter earnings from upstream operations benefited significantly from higher prices for crude oil and natural gas and higher net oil-equivalent production. In the downstream, improved margins for refined petroleum products contributed to increased earnings."
Watson added, "During the second quarter, we continued to make significant progress toward building a leading natural gas business to supply Australia and the Asia-Pacific region. We also progressed several new upstream opportunities in other areas." Recent upstream achievements include:
- Australia - Two deepwater natural gas discoveries in the Carnarvon Basin off the northwest coast, Clio-3 in 67 percent-owned Block WA-205-P and Sappho-1 in 50 percent-owned Block WA-392-P. These discoveries will contribute to future growth at the company-operated Gorgon and Wheatstone liquefied natural gas (LNG) projects.
- Australia - Signed nonbinding Heads of Agreement (HOA) with Korea Gas Corporation to take delivery of 1.95 million metric tons per year of LNG from the Chevron-operated Wheatstone Project and to acquire an equity share in the field licenses and LNG facilities. HOAs are now in place representing about 80 percent of the total LNG available from the foundation project. The project, currently undergoing front-end engineering and design, has a planned capacity of 8.6 million metric tons per year.
- Indonesia - Reached final investment decision for Development Area 13 of the Duri Field where Chevron holds a 100 percent working interest. The expansion project is expected to increase crude oil production by approximately 20,000 barrels per day.
- Romania - Successful bidder for three shale-gas exploration blocks, comprising approximately 675,000 acres in the southeast region of the country.
- Canada - Acquired approximately 200,000 acres of shale-gas leasehold in Western Canada. The appraisal of this acreage is expected to begin by the end of 2011.
- Venezuela - Formed consortium to work toward commercializing the Carabobo heavy oil resource.
- Russia - Signed nonbinding Heads of Agreement with Rosneft, Russia's largest oil company, for a deepwater development partnership on the Shatsky Ridge in the eastern Black Sea.
In addition, the company has terminated the three-year $15 billion share repurchase program that had been initiated in September 2007. In its place, the Board of Directors approved a new, ongoing share repurchase program with no set term or monetary limits. The company does not plan to purchase any shares in the third quarter 2010.
Worldwide net oil-equivalent production was 2.75 million barrels per day in the second quarter 2010, up 76,000 barrels per day or 3 percent from 2.67 million barrels per day in the 2009 second quarter. The increase was primarily driven by new production from major project start-ups and ramp-ups in the United States and Brazil, and expansion of capacity at Tengiz in Kazakhstan.
U.S. upstream earnings of $1.09 billion in the second quarter of 2010 were up $810 million from a year earlier, primarily due to higher crude oil and natural gas realizations.
The company's average sales price per barrel of crude oil and natural gas liquids was approximately $71 in the 2010 quarter, compared with $50 a year ago. The average sales price of natural gas was $4.01 per thousand cubic feet, up from $3.27 in last year's second quarter.
Net oil-equivalent production of 708,000 barrels per day in the second quarter 2010 was up 8,000 barrels per day, or about 1 percent, from a year earlier. The increase in production was primarily associated with start-up of the Tahiti Field in second quarter 2009, along with the restoration of volumes that were offline in the second quarter of 2009 due to 2008 hurricanes in the Gulf of Mexico, partly offset by natural field declines. The net liquids component of production increased 4 percent in the 2010 second quarter to 488,000 barrels per day, while net natural gas production declined 6 percent to 1.32 billion cubic feet per day.
International upstream earnings of $3.45 billion increased $2.08 billion from the second quarter 2009 due mainly to the impact of higher prices and sales volumes for crude oil. Foreign currency effects increased earnings by $107 million in the 2010 quarter, compared with a decrease of $467 million a year earlier.
The average sales price for crude oil and natural gas liquids in the 2010 quarter was $71 per barrel, compared with $53 a year earlier. The average price of natural gas was $4.40 per thousand cubic feet, up from $3.73 in last year's second quarter.
Net oil-equivalent production of 2.04 million barrels per day in the second quarter 2010 was up 3 percent, or 68,000 barrels per day, from a year ago. The increase included approximately 72,000 barrels per day associated with ramp-up of two projects - the expansion at Tengiz in Kazakhstan and Frade in Brazil.The impact of higher prices on cost-recovery volumes and other contractual provisions decreased net production from last year's second quarter. The net liquids component of production increased 4 percent from a year ago to 1.42 million barrels per day and net natural gas production was up 3 percent to 3.70 billion cubic feet per day.
U.S. downstream operations earned $433 million in the second quarter 2010, compared with a loss of $51 million a year earlier. The increase was due mainly to improved margins on refined products, a favorable change in effects on derivative instruments and higher earnings from chemicals operations - primarily from the 50 percent-owned Chevron Phillips Chemical Company LLC.
Refinery crude-input of 917,000 barrels per day in the second quarter 2010 decreased 6,000 barrels per day from the year-ago period.
Refined product sales of 1.41 million barrels per day were down 34,000 barrels per day from the second quarter of 2009, mainly due to lower jet fuel and fuel oil sales. Branded gasoline sales decreased 5 percent to 605,000 barrels per day.
International downstream operations earned $542 million in the second quarter 2010, compared with earnings of $182 million a year earlier. The increase was due mainly to a favorable change in effects on derivative instruments. Foreign currency effects increased earnings by $131 million in the 2010 quarter, compared with a reduction of $28 million a year earlier.
Refinery crude-input of 954,000 barrels per day decreased 16,000 barrels per day from the second quarter of 2009, mainly due to planned and unplanned downtime. Total refined product sales of 1.78 million barrels per day in the 2010 second quarter were 3 percent lower than a year earlier, due mainly to lower sales of gas oil and fuel oil. Excluding the impact of 2009 asset sales, sales volumes were down 2 percent between periods.
CAPITAL AND EXPLORATORY EXPENDITURES
Capital and exploratory expenditures in the first six months of 2010 were $9.4 billion, compared with $11.4 billion in the corresponding 2009 period. The amounts included $609 million in 2010 and $577 million in 2009 for the company's share of expenditures by affiliates, which did not require cash outlays by the company. Outlays in the 2009 period included $2 billion for the extension of an upstream concession. Expenditures for upstream projects represented 88 percent of the companywide total in 2010.
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