-CHEVRON: Chevron reports first quarter 1998 net income of $500 million
Presswire - April 27, 1998 15:00
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M2 PRESSWIRE-27 April 1998-CHEVRON: Chevron reports first quarter 1998 net income of $500 million (C)1994-98 M2 COMMUNICATIONS LTD
-- Average U.S. crude oil realizations declined by 37 percent from the 1997 quarter.
-- Average U.S. natural gas realizations fell by 25 percent.
-- Foreign currency losses of $46 million adversely impacted earnings for the 1998 period.
-- Operational expenses continued to decline, averaging $5.52 per barrel for the quarter, a decrease of 7 percent from the 1997 first quarter.
Chevron Corp. today reported first quarter net income of $500 million ($.77 per share), a decrease of 40 percent from 1997 first quarter net income of $831 million ($1.27 per share). Excluding special items, first quarter operating earnings were $436 million (including a $46 million foreign currency loss), compared with 1997 first quarter operating earnings of $804 million.
Net income for 1998 benefited $64 million from net special items, compared with net benefits of $27 million in last year's first quarter. In the 1998 first quarter, favorable prior-year tax adjustments were partially offset by deferred tax effects from an exchange of international exploration and production properties and net environmental remediation provisions in the company's U.S. refining, marketing and transportation operations.
Chairman and CEO Ken Derr commented, "Unfortunately, first quarter 1998 earnings were affected adversely by several major factors -- significantly lower crude oil prices, lower natural gas prices, foreign currency losses and major scheduled maintenance at two of our main U.S. refineries. We've estimated that these refinery turnarounds adversely impacted earnings by roughly $75 million."
"Chevron's worldwide exploration and production earnings suffered appreciably from the decline in crude oil and natural gas prices since last year's first quarter. These lower prices were the primary driver for the decline in earnings," commented Derr. "Our average U.S. crude oil realization per barrel in the first quarter 1998 fell 37 percent to $12.49 compared with $19.86 in the 1997 first quarter, while our average U.S. natural gas realization declined 25 percent to $2.09 per MCF in 1998, compared with $2.77 per MCF in 1997."
"On the positive side, our international liquids production continues to grow. During the first quarter 1998 net international liquids production was up 2 percent from the first quarter of last year to 746,000 barrels per day. As we celebrate this month the 5-year anniversary of the Chevron-operated Tengizchevroil (TCO) joint venture in Kazakhstan, our liquids production from TCO's Tengiz field averaged a record level of 183,000 barrels per day for the first quarter 1998."
Derr added, "Our U.S. refining, marketing and transportation first quarter operating results also declined compared with last year, reflecting narrower sales margins. Despite lower feedstock costs, sales margins were squeezed by lower refined product prices resulting from an abundance of supply. Our international downstream earnings increased compared with the first quarter 1997, mainly in our Caltex and international shipping operations.
"The company continues to focus on costs, which is particularly important during this period of low crude oil prices," continued Derr. "Ongoing operating expenses declined to $5.52 per barrel, down 41 cents from the year-ago quarter and about 3 percent from the full year 1997, helping to mitigate the effect of declining prices on our operations."
"Crude oil prices have remained 'soft' into the second quarter despite the agreement by oil producing countries to cut production," said Derr. "Although we're monitoring this crude oil market closely, we haven't made any substantive changes to our capital spending plans and expect to move forward with our attractive investment opportunities to grow the company."
"In spite of the low crude prices in the first quarter 1998, "Derr continued, "we've been very active in all areas of our business."
Some of the operational highlights since the beginning of 1998 were:
-- The company announced the discovery of the Viosca Knoll Carbonate Trend in the Gulf of Mexico offshore Mississippi. The exploratory drilling has discovered the first offshore U.S. Gulf natural gas reserves to originate from Lower Cretaceous pay sands. This carbonate trend is contiguous to and lies south of the giant Chevron-operated Norphlet natural gas trend and other offshore production, possibly permitting the tie-in of production from the new trend into existing infrastructure.
-- Chevron signed two new exploration concessions in Qatar and Bahrain.
-- The company announced two crude oil discoveries in the Haute Mer permit area offshore Congo, suspected to be on-trend with Chevron's two 1997 giant discoveries in Block 14 offshore Angola in the Cabinda Concession.
-- Initial liquids production began from 4 new fields
-- the Opolo and Gbokoda fields of Nigeria, and the Gobe and Moran fields of Papua New Guinea.
-- Chevron and Sasol, a South African fuels and petrochemicals company, will pool resources to begin the design and engineering of a 20,000 barrel per day gas-to-liquids plant adjacent to Chevron's Escravos Gas Project facilities in Nigeria. Processed gas from the Escravos Gas Project will feed the proposed gas-to-liquids plant for the conversion of natural gas to synthetic crude oil, which will be processed further into petroleum products.
-- The company will build a new pipeline section and reconstruct an existing section of pipeline across the Republic of Georgia to provide a transportation outlet to the Georgian Black Sea port of Batumi for crude oil from the Tengiz field in Kazakhstan.
-- Chevron and Texaco will establish a joint venture of their global marine and industrial fuels and marine lubricant businesses, operating in over 100 countries worldwide.
Total revenues for the quarter were $7.7 billion, a decrease of 31 percent from $11.1 billion in last year's first quarter. Average sales realizations from refined products, crude oil, and natural gas have declined in the first quarter 1998 compared with the same quarter 1997. Nearly 25 percent of the decrease in revenues is attributable to the company's exit from the U. K refining and marketing business in the fourth quarter 1997.
Foreign currency effects reduced net income by $46 million and $18 million in the first quarters of 1998 and 1997, respectively. The adverse change primarily reflects higher foreign currency losses from the company's and Caltex's operations in Australia, Thailand and the Philippines.
Exploration and Production
U.S. exploration and production net earnings were $106 million, down from $361 million in the 1997 first quarter. There were no special items in the first quarter 1998; however, 1997 results included gains of $49 million from the sales of two producing properties offset by charges of $6 million for environmental remediation provisions. Excluding the effects of special items, operating earnings declined by 67 percent from the 1997 operating earnings of $318 million.
The company's average 1998 U.S. crude oil and natural gas realizations declined by 37 percent and 25 percent, respectively, compared with the first quarter 1997. Average U.S. crude oil realizations of $12.49 per barrel were down $7.37 from the 1997 first quarter. Average U.S. natural gas realizations of $2.09 per thousand cubic feet were 68 cents lower than in the first quarter of last year.
Net U.S. liquids production decreased to 336,000 barrels per day from 347,000 barrels per day in the prior-year first quarter. Net U.S. natural gas production of 1.8 billion cubic feet per day declined from 1.9 billion cubic feet per day compared with the 1997 first quarter. The declines in the production of liquids and natural gas were primarily attributable to property sales and 1998 weather-related shut-ins of liquids production in California.
International exploration and production net earnings were $99 million, down from $347 million in the 1997 first quarter. Net earnings for the 1998 quarter included a loss of $56 million from deferred tax effects of a swap of certain U.K. North Sea producing properties for properties in the Norwegian North Sea. Excluding the effect of this special item, 1998 operating earnings of $155 million decreased by $192 million compared with last year's quarter. The decline in operating earnings reflected lower crude oil prices, offset partially by higher liftings when compared with the year-ago quarter.
Net international liquids production increased 17,000 barrels per day to 746,000 barrels per day, mostly due to increased production in Canada, Indonesia and West Africa areas. These increases were partially offset by declines in the United Kingdom and Papua New Guinea. Natural gas production increased 4 percent to 644 million cubic feet per day, reflecting higher production in Indonesia and Nigeria that was partially offset by production declines in Canada and Kazakhstan.
Foreign currency losses in the first quarter 1998 were $15 million compared with gains of $5 million in the 1997 quarter, primarily in the company's Australian and U.K. operations.
Refining, Marketing and Transportation
U.S. refining, marketing and transportation 1998 net earnings were $45 million compared with $70 million in the first quarter 1997. Operating earnings were $50 million, a decline of 36 percent from the $78 million reported in last year's first quarter, after excluding special charges of $5 million and $8 million from the 1998 and 1997 results, respectively.
U.S. refined product sales margins decreased in the 1998 first quarter, as the deterioration in sales realizations outpaced the decline in feedstock costs. Unfavorable effects of refinery downtime for scheduled maintenance were comparable in the 1998 and 1997 periods.
Total refined product sales volumes were 1.13 million barrels per day, down 3 percent from the comparable quarter last year. While most refined products sales volumes decreased, gasoline sales increased 2 percent to 599,000 barrels per day, and jet fuel sales also rose by about 3 percent.
International refining, marketing and transportation net earnings were $101 million, up from $56 million reported for the first quarter of 1997. In the Caltex areas of operations, refined product sales margins improved as crude oil prices declined. The company's international shipping results improved as freight rates rose.
Sales volumes declined by 11 percent in the first quarter of 1998, primarily the effect of the company's exit from the U.K. refining and marketing business in the fourth quarter of 1997. For the remaining operations, increased sales volumes for Caltex more than offset sales volume declines by the company's other international downstream businesses.
Foreign currency losses in the first quarter 1998 were $31 million compared with losses of $29 million in 1997.
Chemicals
Chemicals net earnings were $63 million in the 1998 quarter, the same earned in last year's first quarter. Higher sales volumes and improved sales margins for additives were offset primarily by lower earnings from equity affiliates, a result of the sale of the company's interest in a U.K. affiliate in the fourth quarter of 1997.
Coal and Other Minerals
Coal and other minerals net earnings declined by $4 million in the first quarter 1998 to $11 million. Higher operating expenses at one of the company's mines offset higher overall sales of coal and additional earnings from equity affiliates.
Corporate and Other
Corporate and other provided net earnings of $75 million in the first quarter 1998, compared with net charges of $81 million in the comparable prior-year quarter. After excluding a favorable prior-year tax adjustment of $125 million in 1998 and a special charge of $8 million for environmental remediation in 1997, net charges declined to $50 million in 1998 from $73 million in 1997. The decline in net charges was due primarily to recoveries of certain prior-year claims and lower costs of variable components of employee compensation plans.
Capital and Exploratory Expenditures
Capital and exploratory expenditures, including the company's share of affiliates' expenditures, were $972 million in the 1998 first quarter, compared with $941 million in the first quarter 1997. Expenditures for international exploration and production projects were $422 million, or 43 percent of total expenditures, reflecting the company's continued emphasis on increasing international oil and gas production. |
