Chevron Corporation reported earnings of US$571 million (US$0.30 per share - diluted) for 2Q15, compared with earnings of US$5.7 billion (US$2.98 per share - diluted) in 2Q14. Included in the quarter were impairments of US$1.96 billion and other charges of approximately US$670 million relating to project suspensions and adverse tax effects, all of which were non-cash charges stemming from a downward revision in the company’s longer term crude oil price outlook. Partially offsetting were gains on asset sales totalling US$1.80 billion in the current quarter. Foreign currency effects decreased earnings by US$251 million in 2Q15, compared with a decrease of US$232 million a year earlier. Sales and other operating revenues in were US$37 billion in 2Q15, compared to US$56 billion in the year ago period.
“Second quarter financial results were weak, reflecting a crude price decline of nearly 50% from a year ago. Our Upstream businesses were particularly hard hit, as lower prices reduced revenues and triggered impairments and other charges. Downstream operations continued to deliver strong financial performance, reflecting both high reliability and improved margins,” said Chairman and CEO John Watson. “Multiple efforts to improve future earnings and cash flows are underway. We’re getting our cost structure down, through renegotiations across the supply chain and by sizing our contractor and employee workforce to reflect lower activity levels going forward. We’re actively managing to a smaller capital program, as projects currently under construction come online and as potential new projects are paced and rebid. In addition, our 4 year divestment programme is ahead of pace.”
“Project execution on our Gorgon and Wheatstone Australian LNG projects is a priority for us,” Watson continued. “Incremental production and cash generation from these projects and others, along with a curtailed capital programme, should provide support for continuing competitive shareholder distributions.”
- Completed the sale of the company’s 50% interest in Caltex Australia Limited.
- Progressed commissioning activities at the Gorgon Project. Commissioning of the Jansz-Io Field subsea infrastructure is ongoing. All Train 2 modules are installed on foundations, with Train 3 modules being delivered to site.
- Continued construction of the Wheatstone Project, which is now over 65% complete. Eleven of 24 Train 1 process modules required for first LNG have been delivered to site. All gas turbine generators are installed on foundations. Subsea infrastructure is being installed, with all three production manifolds now in place.
- Completed the sale of the company’s interest in The New Zealand Refining Company Limited and reached agreement to sell the company’s marketing interests in New Zealand.
- Achieved start up of sixth production well at Jack/St. Malo in the deepwater Gulf of Mexico. Ramp up of total oil equivalent production to approximately 80 000 bpd continues to exceed expectations.
- On track to drill 325 gross wells in 2015, including multiple horizontal well development programmes, in the Midland and Delaware Basins in Texas and New Mexico.
Worldwide net oil equivalent production was 2.60 million bpd in 2Q15, up from 2.55 million bpd in 2Q14. This production increase of 2% came from project ramp ups in the US, Bangladesh and Argentina, production entitlement effects in several locations, and lower maintenance related downtime, primarily reflecting the absence of a major turnaround at Tengizchevroil in Kazakhstan. Normal field declines, the Partitioned Zone shut in, and the effect of asset sales partially offset these effects.
US upstream operations incurred a loss of US$1.04 billion in 2Q15 compared to earnings of US$1.05 billion in 2Q14. The decrease was due to sharply lower crude oil realisations and higher depreciation expenses, primarily reflecting impairments, partially offset by higher crude oil production and lower operating expenses. The company’s average sales price per barrel of crude oil and natural gas liquids was US$50 in 2Q15, down from US$92 a year ago. The average sales price of natural gas was US$1.92/1000 ft3, compared with US$4.09 in 2Q14. Net oil equivalent production of 730 000 bpd in 2Q15 was up 63 000 bpd, or 9%, from a year earlier. Production increases due to project ramp ups in the Gulf of Mexico, the Permian Basin in Texas and New Mexico, and the Marcellus Shale in western Pennsylvania were only partially offset by normal field declines. The net liquids component of oil equivalent production increased 11% in 2Q15 to 511 000 bpd, while net natural gas production increased 5% to 1.31 billion ft3/d.
International upstream operations incurred a loss of US$1.18 billion in 2Q15 compared to earnings of US$4.21 billion from a year earlier. The decrease was due to sharply lower crude oil realisations, higher depreciation expenses, primarily reflecting impairments, higher income tax items and higher exploration expenses. Foreign currency effects decreased earnings by US$146 million in 2Q15, compared with a decrease of US$147 million a year earlier. The average sales price for crude oil and natural gas liquids in 2Q15 was US$56/bbl, down from US$101 a year earlier. The average price of natural gas was US$4.48/1000 ft3, compared with US$5.98 in 2Q14. Net oil equivalent production of 1.87 million bpd in 2Q15 decreased 12 000 bpd, or less than 1%, from a year ago. Production increases from entitlement effects in several locations, lower maintenance related downtime, primarily reflecting the absence of a major turnaround at Tengizchevroil in Kazakhstan, and project ramp ups in Bangladesh and Argentina were more than offset by the Partitioned Zone shut in, normal field declines, and the effect of asset sales. The net liquids component of oil equivalent production decreased 2% to 1.21 million bpd in 2Q15, while net natural gas production increased 2% to 3.93 billion ft3/d.
US downstream operations earned US$731 million in 2Q15 compared with earnings of US$517 million a year earlier. The increase was due to higher margins on refined product sales, partially offset by the absence of a 2014 asset sale gain and lower earnings from the 50% owned Chevron Phillips Chemical Company LLC. Refinery crude oil input of 916 000 bpd in 2Q15 increased 155 000 bpd from the year ago period. The increase was primarily due to the absence of 2Q14 major crude unit turnaround at the El Segundo, California refinery. Refined product sales of 1.23 million bpd were up 3% from 2Q14, primarily reflecting higher gasoline sales. Branded gasoline sales of 535 000 bpd were up 2% from the 2014 period.
International downstream operations earned US$2.23 billion in 2Q15 compared with US$204 million a year earlier. The increase was primarily due to a US$1.6 billion gain from the sale of the company’s interest in Caltex Australia Limited. Higher margins on refined product sales also contributed to the increase. Foreign currency effects decreased earnings by US$103 million in 2Q15, compared with a decrease of US$84 million a year earlier. Refinery crude oil input of 774 000 bpd in 2Q15 decreased 70 000 bpd from the year ago period as a result of the Caltex Australia Limited divestment. Total refined product sales of 1.48 million bpd in 2Q15 were down 69 000 bpd from the year ago period, due to lower gasoline and gas oil sales resulting from the Caltex Australia Limited divestment.
Adapted from press release by Rosalie Starling