Chevron records loss of $1.5 billion in second quarter

Chevron Corp. recorded a second-quarter loss of $1.5 billion compared with earnings of $571 million in second-quarter 2015.

Included in the quarter were impairments and other noncash charges totaling $2.8 billion, partially offset by gains on asset sales of $420 million. Foreign currency effects increased earnings in the quarter by $279 million compared with a decrease of $251 million a year earlier.

“The second quarter results reflected lower oil prices and our ongoing adjustment to a lower oil price world,” explained John Watson, Chevron chairman and chief executive officer. “In our upstream business, we recorded impairment and other charges on certain assets where revenue from expected oil and gas production is expected to be insufficient to recover costs.”

US upstream operations incurred a loss of $1.11 billion, down from a loss of $1.04 billion a year ago due to lower crude oil and natural gas realizations. In both quarters, depreciation expense was impacted by a similar amount of impairments and other charges.

Net production in the US of 682,000 boe/d was down 48,000 boe/d from a year earlier. Production increases due to project ramp-ups in the Marcellus shale in western Pennsylvania, the Gulf of Mexico, and the Permian basin in Texas and New Mexico were more than offset by the effect of asset sales, maintenance-related downtime, and normal field declines. The net liquids component of production decreased 2% to 501,000 boe/d, while net natural gas production decreased 17% to 1.09 bcfd.

International upstream operations incurred a loss of $1.35 billion, down from a loss of $1.18 billion a year ago due to lower crude oil and natural gas realizations, higher impairments, and other charges, and lower gains on asset sales.

Worldwide production during the quarter was 2.53 million boe/d, down from 2.6 million b/d in the year-ago period. Production increases from project ramp-ups in the US, Angola, Canada, and other areas were more than offset by normal field declines, the effect of asset sales, the partitioned zone shut-in, maintenance-related downtime, and the effects of civil unrest in Nigeria.

US downstream operations earned $537 million, down from $731 million a year earlier due to lower margins on refined product sales and lower earnings from the 50%-owned Chevron Phillips Chemical Co. LLC. Refinery crude oil input in the second quarter increased 4% to 955,000 b/d from the year-ago period.

International downstream operations earned $741 million, down from $2.23 billion a year earlier due to the absence of a $1.6 billion gain from the sale of the company’s interest in Caltex Australia Ltd. in second-quarter 2015. Lower margins on refined product sales also contributed to the decline. Refinery crude oil input of 764,000 b/d in the quarter decreased 1% from the year-ago period.

Capital and exploratory expenditures in the first half totaled $12 billion, compared with $17.3 billion in first-half 2015. Expenditures for upstream represented 92% of the companywide total in the second quarter.

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