Chevron Cites 3Q Earnings Lower than 2Q10
Chevron reported in its interim update that earnings for the third quarter 2010 are expected to be lower than in the second quarter.
Non-cash foreign currency effects due to the weakening of the U.S. dollar are expected to reduce earnings approximately $400 million for the full quarter, primarily in the International Upstream business segment. Higher expenses and lower crude oil realizations are expected to further reduce Upstream earnings.
Basis for Comparison in Interim Update
The interim update contains certain industry and company operating data for the third quarter 2010. The production volumes, realizations, margins and certain other items in the report are based on a portion of the quarter and are not necessarily indicative of Chevron's quarterly results to be reported on October 29, 2010. The reader should not place undue reliance on this data.
Unless noted otherwise, all commentary is based on two months of the third quarter 2010 versus full second quarter 2010 results.
The table that follows includes information on production and price indicators for crude oil and natural gas for specific markets. Actual realizations may vary from indicative pricing due to quality and location differentials and the effect of pricing lags. International earnings are driven by actual liftings, which may differ from production due to the timing of cargoes and other factors.
Total U.S. net oil-equivalent production during the first two months of the third quarter decreased 16,000 barrels per day compared to the second quarter average, reflecting small declines across multiple assets. International net oil-equivalent production rose slightly compared with the second quarter 2010, an increase of 3,000 barrels per day, reflecting increased production after second quarter planned maintenance in Kazakhstan and Canada, largely offset by third quarter planned maintenance in Europe.
U.S. crude oil realizations decreased $1.93 per barrel to $72.23 during the first two months of the third quarter. International liquids realizations also declined during the same period, to $68.92 per barrel. U.S. and International natural gas realizations increased slightly during the first two months of the third quarter to $4.33 and $4.84 per thousand cubic feet, respectively.
Additionally, U.S. Upstream earnings are expected to reflect higher expenses associated with the Gulf of Mexico moratorium. International Upstream earnings are expected to be negatively impacted by foreign currency effects, several discrete non-recurring items of approximately $200 million in aggregate and higher exploration expenses.
The company's general guidance for the quarterly net after-tax charges related to corporate and other activities is between $250 million and $350 million. Due to foreign currency effects and the potential for irregularly occurring accruals related to income taxes, pension settlements and other matters, actual results may significantly differ from the guidance range.
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