Chevron earnings jump to $7.7B on higher oil prices

Source: Chevron

Chevron Corporation (NYSE:CVXFriday reported earnings of $7.7 billion ($3.85 per share – diluted) for the second quarter 2011, compared with $5.4 billion ($2.70 per share – diluted) in the 2010 second quarter.
Sales and other operating revenues in the second quarter 2011 were $67 billion, up from $51 billion in the year-ago period, mainly due to higher prices for crude oil and refined products. 

“Our second quarter financial performance was very strong,” said Chevron Chairman and CEO John Watson. “Earnings gains versus last year’s quarter were primarily in our oil and gas exploration and production business, resulting from higher crude oil prices on world markets.” 

Watson commented, “We continued to advance our major capital projects, resumed important exploration and development drilling activity in the deepwater Gulf of Mexico and acquired new upstream resource opportunities in the second quarter.” These achievements include: 

Kazakhstan/Russia – Marked the start of the construction phase for expansion of the Caspian Pipeline Consortium’s pipeline, which carries crude oil from western Kazakhstan to a dedicated terminal on the Black Sea. The design capacity of the pipeline will increase to 1.4 million barrels per day from its current capacity of 730,000 barrels per day. The project is planned to be implemented in three phases, with capacity increasing progressively from 2012 to 2015. 

Australia – Received recommendation of conditional environmental approval for the Wheatstone liquefied natural gas (LNG) project from Western Australia’s Environmental Protection Authority. The company will continue negotiations to finalize the permit conditions as it works toward a final investment decision on the project in the second half of this year. 

Australia – Signed binding Sales and Purchase Agreements with Tokyo Electric for Wheatstone LNG.
Bulgaria – Awarded an exploration permit for a prospective shale gas block of more than 1 million acres in northeastern Bulgaria. 

United States – Returned to work in the Gulf of Mexico with three rigs active in the deepwater, drilling the Moccasin exploration well, the Buckskin appraisal well and the Tahiti 2 development program. The company is also drilling on the Gulf of Mexico Shelf to test the ultra-deep gas play. 

United States – Acquired additional acreage in the Marcellus Shale, including from Chief Oil and Gas LLC and Tug Hill, Inc., primarily in Pennsylvania. 

“We reached an important milestone in streamlining our downstream asset portfolio with receipt of government approval for the planned sale of our refining and marketing assets in the United Kingdom and Ireland,” Watson added. The sale is expected to close in the third quarter. The company also completed the sale of its fuels-marketing and aviation businesses in three Central American countries in the second quarter 2011, as well as other assets in China and North America. 

The company purchased $1 billion of its common stock in the second quarter 2011 under its share repurchase program. 

UPSTREAM 

Worldwide net oil-equivalent production was 2.69 million barrels per day in the second quarter 2011, down from 2.75 million barrels per day in the 2010 second quarter. Production increases from project ramp-ups in Canada and the United States and new volumes stemming from the acquisition of Atlas Energy, Inc. were more than offset by an approximately 40,000 barrels per day negative effect of higher prices on volumes related to cost-recovery and variable-royalty contract terms, and normal field declines. 

U.S. upstream earnings of $1.95 billion in the second quarter 2011 were up $860 million from a year earlier. The benefit of higher crude oil realizations was partly offset by higher operating expenses. 

The company’s average sales price per barrel of crude oil and natural gas liquids was $104 in the second quarter 2011, compared with $71 a year ago. The average sales price of natural gas was $4.35 per thousand cubic feet, up from $4.01 in last year’s second quarter. 

Net oil-equivalent production of 694,000 barrels per day in the second quarter 2011 was down 2 percent, or 14,000 barrels per day, from a year earlier. The decrease in production was associated with normal field declines and maintenance-related downtime. Partially offsetting this decrease was production from the acquisition of Atlas Energy, Inc. and increases at Perdido in the Gulf of Mexico. The net liquids component of oil-equivalent production decreased 2 percent in the 2011 second quarter to 478,000 barrels per day, while net natural gas production declined 1 percent to 1.30 billion cubic feet per day. 

International upstream earnings of $4.92 billion increased $1.47 billion from the second quarter 2010. Higher realizations for crude oil increased earnings between quarters. This benefit was partly offset by higher operating expenses, including fuel, and increased exploration expense. Tax charges were also higher between periods. Foreign currency effects increased earnings by $26 million in the 2011 second quarter, compared with an increase of $107 million a year earlier. 

The average sales price for crude oil and natural gas liquids in the 2011 second quarter was $107 per barrel, compared with $71 a year earlier. The average price of natural gas was $5.49 per thousand cubic feet, up from $4.40 in last year’s second quarter. 

Net oil-equivalent production of 2.00 million barrels per day in the second quarter 2011 was down 38,000 barrels per day from a year ago. Production increases from project ramp-ups in Canada and Brazil were more than offset by an approximately 40,000 barrels per day negative effect of higher prices on volumes related to cost-recovery and variable-royalty contractual terms, and normal field declines. The net liquids component of oil-equivalent production decreased 2 percent to 1.39 million barrels per day, while net natural gas production declined 1 percent to 3.67 billion cubic feet per day. 

DOWNSTREAM 

U.S. downstream operations earned $564 million in the second quarter 2011, compared with $433 million a year earlier. Earnings mainly benefited from improved margins on refined product sales and higher earnings from the 50 percent-owned Chevron Phillips Chemical Company LLC. 

Refinery crude-input of 875,000 barrels per day in the second quarter 2011 decreased 42,000 barrels per day from the year-ago period. 

Refined product sales of 1.27 million barrels per day were down 140,000 barrels per day from the second quarter of 2010, mainly due to lower gasoline and jet fuel sales. Branded gasoline sales decreased 16 percent to 510,000 barrels per day, largely due to previously completed exits from selected eastern U.S. retail markets.

International Downstream

International downstream operations earned $480 million in the second quarter 2011, compared with $542 million a year earlier. Earnings benefited from improved refined product margins in the 2011 second quarter. However, foreign currency effects decreased earnings by $94 million in the 2011 quarter, compared with an increase of $131 million a year earlier. 

Refinery crude-input of 1.02 million barrels per day increased 63,000 barrels per day from the second quarter of 2010. Total refined product sales of 1.83 million barrels per day in the 2011 second quarter were 3 percent higher than a year earlier, mainly due to increased sales of fuel oil.



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