Chevron Hit by Price Declines, Turnarounds in First-Quarter 2013, but Expects Growth from Ongoing Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--Chevron Corporation (NYSE:CVX) (San Ramon, California) saw a drop in revenues and profits in the first quarter of 2013, as global crude oil prices declined and expenses related to downstream maintenance activity piled up. Refinery output declined, largely as a result of turnarounds. Net income was reported to be $6.18 billion, a 4.53% decrease from first-quarter 2012.

Total revenues stood at $56.82 billion, a 6.4% decrease from the same period last year. Worldwide net oil-equivalent production increased from 2.63 million in first-quarter 2012 to 2.65 million barrels per day in first-quarter 2013, with production ramping up in the U.S. and Nigeria. Chevron's U.S. upstream businesses saw a continued ramp-up of projects in the Gulf of Mexico, the Marcellus Shale, and Chevron's recently acquired Delaware Basin properties in New Mexico. However, lower crude oil realizations and tougher operating costs diminished earnings.

Earnings in the downstream businesses weakened due to turnaround-related expenses at refineries in El Segundo, California and Pascagoula, Mississippi. Refinery crude oil input declined almost 40% from the same period last year due a planned turnaround at the Pascagoula refinery and repairs to a crude unit at the company's refinery in Richmond, California. Refined product sales yielded lower margins in the U.S. as sales declined for gas oil, gasoline and kerosene, but improved in the international downstream businesses.

Earnings improved for Chevron Phillips Chemical Company LLC, in which Chevron holds a 50% ownership. Capital and exploratory expenditures for the first quarter of 2013 were reported to be $8.9 billion, compared with $6.4 billion in the same period last year. About 93% of the amount went toward upstream projects.

Industrial Info is tracking more than $104 billion in active projects involving Chevron, including the $990 million construction of a base oil plant in Pascagoula, Mississippi. The project includes a new isodewaxing unit and ARDS residue hydrocracker, the addition of a fuel gas desulfurization unit, and the modification of flares to support the proposed 25,000-barrel-per-day base oil plant. It is expected to be completed in December this year.

"We added new offshore exploration acreage in both Morocco and China," said Pat Yarrington, the vice president and chief financial officer of Chevron, in a conference call. "We also reached an agreement to enter the Cooper Basin in Australia, another early low-cost entry opportunity focused on unconventional resources. And finally, we recently sanctioned the Moho Nord development located in the Republic of Congo, the largest ever oil and gas development in that country."

Chevron executives also announced a crude oil discovery at the Coronado prospect and the successful production test of the St. Melo well in the deepwater the Gulf of Mexico. In Australia, Chevron agreed to acquire interest in two onshore natural gas blocks in the Cooper Basin, and signed a long-term sales and purchase agreement with Chubu Electric Power Company (Nagoya, Japan) for the Wheatstone LNG project.

"The Big Foot hull has arrived in the Gulf of Mexico and the Jack/St. Malo hull is on its way," Yarrington said in the conference call. "We announced the signing of a binding long-term sales and purchase agreement with Chubu Electric to deliver 1 million tons per year of LNG from the Wheatstone project. Our Wheatstone LNG project has over 80% of its offtake secured under long-term sales contracts."

For more information, visit Industrial Info's International Oil and Gas Production Project Database.

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