Chevron Stays Strong in First-Quarter 2012 as Higher Crude Prices Make Up for Drops in Production

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Researched by Industrial Info Resources (Sugar Land, Texas)--Chevron Corporation (NYSE:CVX) (San Ramon, California) reported steady gains in the first quarter of 2012, as higher prices for crude oil and refined products more than offset the effects of lower production and weaker natural gas prices. Net income for the quarter was reported to be $6.47 billion, a 4.19% increase from first-quarter 2011.

Total revenues for the quarter stood at $60.71 billion, a 0.6% increase from the same period last year. Higher crude oil prices drove most of the company's gains. Worldwide net oil-equivalent production saw an overall decrease, at 2.63 million barrels per day during the quarter from 2.76 million barrels per day in first-quarter 2011, caused by normal field declines, maintenance-related downtime and dispositions. Nonetheless, the company ramped up production in Thailand and the U.S.

Also contributing to both the increase in revenues and the decrease in production were the 2011 sale of Chevron's refining assets in the U.K. and Ireland, including the sale of the Pembroke Refinery in Wales to Valero Energy Corporation (NYSE:VLO) (San Antonio, Texas), and the 2011 sale of the company's oil and gas assets in Cook Inlet, Alaska, to Hilcorp Energy Company (Houston, Texas).

Capital and exploratory expenditures in the first quarter totaled $6.4 billion, a 28% increase from first-quarter 2011. About 92% of this spending was attributed to the Upstream segment.

Industrial Info is tracking more than $96 billion in active Chevron projects worldwide, including two major unit additions at a refinery in El Segundo, California: the $60 million construction of a 235-long-ton-per-day sulfur recovery unit, with a tail-gas treater and sour water stripper, that is expected to be completed in November 2012; and the $45 million installation of the 49.9-megawatt, combined-cycle generator Train D as part of a product reliability and optimization project that is expected to be completed in August 2012.

"About two-thirds of our U.S. crude sales are in the Gulf of Mexico and California, where heavy Louisiana Sweet, Mars, and Midway-Sunset crude markers experienced only modest increases in the quarter," said Jeanette Ourada, the general manager of Investor Relations for Chevron, in a conference call. "The remaining third of our U.S. crude sales are in the mid-continent, where West Texas crude markers increased more dramatically."

Despite Chevron's overall declines in production, earnings in all four major businesses improved due to higher prices:

• The Upstream segment reported total earnings of $6.17 billion, a 3.25% increase from first-quarter 2011:
• The U.S. Upstream business reported total earnings of $1.53 billion, a 5.52% increase from the same period last year.
• The International Upstream business reported total earnings of $4.64 billion, a 2.52% decrease from first-quarter 2011.
• The Downstream segment reported total earnings of $804 million, a 29.26% increase from the same period last year:
• The U.S. Downstream business reported total earnings of $459 million, a 3.85% increase from first-quarter 2011.
• The International Downstream business reported total earnings of $345 million, compared with $180 million in the same period last year.
• All other segments reported a total earnings loss of $504 million, compared with a $388 million loss in first-quarter 2011.

Overall, production and sales volumes showed mostly small decreases from the same period last year, although sales of natural gas slightly increased:

• Net liquids production was reported to be 1.79 million barrels per day (BBL/d), a 6.07% decrease from first-quarter 2011.
• Net natural gas production was reported to be 5.02 million metric cubic feet per day, a 1.51% decrease from the same period last year.
• Total net-oil equivalent production was reported to be 2.63 million BBL/d, a 4.67% decrease from first-quarter 2011.
• Sales of natural gas were reported to be 10.26 million metric cubic feet per day, a 0.61% increase from the same period last year.
• Sales of natural gas liquids were reported to be 234,000 BBL/d, a 6.02% decrease from first-quarter 2011.
• Sales of refined products were reported to be 2.76 million BBL/d, a 9.89% decrease from the same period last year.
• Refinery input was reported to be 1.71 million BBL/d, a 10.78% decrease from first-quarter 2011.

Chevron executives are optimistic about new production that is coming online in 2012, particularly in Australia, where the company recently signed a non-binding heads of agreement with Chubu Electric Power (Tokyo, Japan) for the Wheatstone LNG project.

"Both the Usan project, which is offshore Nigeria, and the Caesar Tonga field in the Gulf of Mexico achieved first production [during the quarter]," said Pat Yarrington, the vice president and chief financial officer of Chevron, in the conference call. "Both deepwater projects are expected to ramp up to peak production within a year."

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

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Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.