e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
|
|
|
þ
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended
June 30,
2009
|
or
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
Commission file number 1-368-2
Chevron Corporation
(Exact name of registrant as
specified in its charter)
|
|
|
Delaware
|
|
94-0890210
|
(State or other jurisdiction
of
incorporation or organization)
|
|
(I.R.S. Employer
Identification Number)
|
6001 Bollinger Canyon Road,
San Ramon, California
|
|
94583-2324
(Zip Code)
|
(Address of principal executive
offices)
|
|
|
Registrants telephone number, including area code:
(925) 842-1000
NONE
(Former name or former address, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes þ
No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
|
|
|
|
|
|
|
Large accelerated
filer þ
|
|
Accelerated
filer o
|
|
Non-accelerated
filer o
(Do not check if a smaller reporting company)
|
|
Smaller reporting
company o
|
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest
practicable date:
|
|
|
Class
|
|
Outstanding as of June 30, 2009
|
|
Common stock, $.75 par value
|
|
2,005,512,604
|
CAUTIONARY
STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION
FOR THE PURPOSE OF SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This quarterly report on
Form 10-Q
of Chevron Corporation contains forward-looking statements
relating to Chevrons operations that are based on
managements current expectations, estimates and
projections about the petroleum, chemicals, and other
energy-related industries. Words such as
anticipates, expects,
intends, plans, targets,
projects, believes, seeks,
schedules, estimates,
budgets and similar expressions are intended to
identify such forward-looking statements. These statements are
not guarantees of future performance and are subject to certain
risks, uncertainties and other factors, some of which are beyond
the companys control and are difficult to predict.
Therefore, actual outcomes and results may differ materially
from what is expressed or forecasted in such forward-looking
statements. The reader should not place undue reliance on these
forward-looking statements, which speak only as of the date of
this report. Unless legally required, Chevron undertakes no
obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or
otherwise.
Among the important factors that could cause actual results to
differ materially from those in the forward-looking statements
are crude-oil and natural-gas prices; refining, marketing and
chemicals margins; actions of competitors or regulators; timing
of exploration expenses; timing of crude-oil liftings, the
competitiveness of alternate-energy sources or product
substitutes; technological developments; the results of
operations and financial condition of equity affiliates; the
inability or failure of the companys joint-venture
partners to fund their share of operations and development
activities; the potential failure to achieve expected net
production from existing and future crude-oil and natural-gas
development projects; potential delays in the development,
construction or
start-up of
planned projects; the potential disruption or interruption of
the companys net production or manufacturing facilities or
delivery/transportation networks due to war, accidents,
political events, civil unrest, severe weather or crude-oil
production quotas that might be imposed by the Organization of
Petroleum Exporting Countries (OPEC); the potential liability
for remedial actions or assessments under existing or future
environmental regulations and litigation; significant investment
or product changes under existing or future environmental
statutes, regulations and litigation; the potential liability
resulting from pending or future litigation; the companys
acquisition or disposition of assets; gains and losses from
asset dispositions or impairments; government-mandated sales,
divestitures, recapitalizations, industry-specific taxes,
changes in fiscal terms or restrictions on scope of company
operations; foreign-currency movements compared with the
U.S. dollar; the effects of changed accounting rules under
generally accepted accounting principles promulgated by
rule-setting bodies; and the factors set forth under the heading
Risk Factors on pages 30 and 31 of the
companys 2008 Annual Report on
Form 10-K.
In addition, such statements could be affected by general
domestic and international economic and political conditions.
Unpredictable or unknown factors not discussed in this report
could also have material adverse effects on forward-looking
statements.
2
PART I.
FINANCIAL INFORMATION
Item 1.
Consolidated Financial Statements
CHEVRON
CORPORATION AND SUBSIDIARIES
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions of dollars, except per-share amounts)
|
|
|
Revenues and Other Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and other operating revenues*
|
|
|
$ 39,647
|
|
|
|
$ 80,962
|
|
|
|
$ 74,634
|
|
|
|
$145,621
|
|
Income from equity affiliates
|
|
|
735
|
|
|
|
1,563
|
|
|
|
1,346
|
|
|
|
2,807
|
|
Other (loss) income
|
|
|
(177
|
)
|
|
|
464
|
|
|
|
355
|
|
|
|
507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues and Other Income
|
|
|
40,205
|
|
|
|
82,989
|
|
|
|
76,335
|
|
|
|
148,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Other Deductions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased crude oil and products
|
|
|
23,678
|
|
|
|
56,056
|
|
|
|
44,078
|
|
|
|
98,584
|
|
Operating expenses
|
|
|
4,209
|
|
|
|
5,248
|
|
|
|
8,555
|
|
|
|
9,703
|
|
Selling, general and administrative expenses
|
|
|
1,043
|
|
|
|
1,639
|
|
|
|
2,020
|
|
|
|
2,986
|
|
Exploration expenses
|
|
|
438
|
|
|
|
307
|
|
|
|
819
|
|
|
|
560
|
|
Depreciation, depletion and amortization
|
|
|
3,099
|
|
|
|
2,275
|
|
|
|
5,966
|
|
|
|
4,490
|
|
Taxes other than on income*
|
|
|
4,386
|
|
|
|
5,699
|
|
|
|
8,364
|
|
|
|
11,142
|
|
Interest and debt expense
|
|
|
6
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Costs and Other Deductions
|
|
|
36,859
|
|
|
|
71,224
|
|
|
|
69,816
|
|
|
|
127,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Tax Expense
|
|
|
3,346
|
|
|
|
11,765
|
|
|
|
6,519
|
|
|
|
21,470
|
|
Income Tax Expense
|
|
|
1,585
|
|
|
|
5,756
|
|
|
|
2,904
|
|
|
|
10,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
1,761
|
|
|
|
6,009
|
|
|
|
3,615
|
|
|
|
11,205
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
16
|
|
|
|
34
|
|
|
|
33
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Chevron Corporation
|
|
|
$ 1,745
|
|
|
|
$ 5,975
|
|
|
|
$ 3,582
|
|
|
|
$ 11,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share of Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Chevron Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$ 0.88
|
|
|
|
$ 2.91
|
|
|
|
$ 1.80
|
|
|
|
$ 5.41
|
|
Diluted
|
|
|
$ 0.87
|
|
|
|
$ 2.90
|
|
|
|
$ 1.79
|
|
|
|
$ 5.38
|
|
Dividends
|
|
|
$ 0.65
|
|
|
|
$ 0.65
|
|
|
|
$ 1.30
|
|
|
|
$ 1.23
|
|
Weighted Average Number of Shares Outstanding (000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
1,991,605
|
|
|
|
2,050,773
|
|
|
|
1,991,368
|
|
|
|
2,058,596
|
|
Diluted
|
|
|
1,999,667
|
|
|
|
2,064,888
|
|
|
|
1,999,588
|
|
|
|
2,072,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Includes excise, value-added and similar taxes:
|
|
|
$ 2,034
|
|
|
|
$ 2,652
|
|
|
|
$ 3,944
|
|
|
|
$ 5,189
|
|
See accompanying notes to consolidated financial statements.
3
CHEVRON
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Millions of dollars)
|
|
|
|
|
|
Net Income
|
|
$
|
1,761
|
|
|
$
|
6,009
|
|
|
$
|
3,615
|
|
|
$
|
11,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustment
|
|
|
43
|
|
|
|
(14
|
)
|
|
|
13
|
|
|
|
(17
|
)
|
Unrealized holding (loss) gain on securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) gain arising during period
|
|
|
(2
|
)
|
|
|
7
|
|
|
|
(5
|
)
|
|
|
8
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivatives loss on hedge transactions
|
|
|
(23
|
)
|
|
|
|
|
|
|
(72
|
)
|
|
|
|
|
Reclassification to net income of net realized gain
|
|
|
(17
|
)
|
|
|
(45
|
)
|
|
|
(16
|
)
|
|
|
(41
|
)
|
Income taxes on derivatives transactions
|
|
|
14
|
|
|
|
14
|
|
|
|
30
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(26
|
)
|
|
|
(31
|
)
|
|
|
(58
|
)
|
|
|
(29
|
)
|
Defined benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization to net income of net actuarial loss
|
|
|
157
|
|
|
|
61
|
|
|
|
315
|
|
|
|
125
|
|
Prior service cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization to net income of net prior service credits
|
|
|
(18
|
)
|
|
|
(15
|
)
|
|
|
(34
|
)
|
|
|
(31
|
)
|
Defined benefit plans sponsored by equity affiliates
|
|
|
7
|
|
|
|
7
|
|
|
|
5
|
|
|
|
15
|
|
Income taxes on defined benefit plans
|
|
|
(54
|
)
|
|
|
(19
|
)
|
|
|
(107
|
)
|
|
|
(48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
92
|
|
|
|
34
|
|
|
|
179
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Gain (Loss), Net of Tax
|
|
|
107
|
|
|
|
(4
|
)
|
|
|
129
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income
|
|
|
1,868
|
|
|
|
6,005
|
|
|
|
3,744
|
|
|
|
11,228
|
|
Comprehensive income attributable to noncontrolling interests
|
|
|
(16
|
)
|
|
|
(34
|
)
|
|
|
(33
|
)
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income Attributable to Chevron Corporation
|
|
$
|
1,852
|
|
|
$
|
5,971
|
|
|
$
|
3,711
|
|
|
$
|
11,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
4
CHEVRON
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEET
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
At June 30
|
|
At December 31
|
|
|
2009
|
|
2008
|
|
|
(Millions of dollars, except
|
|
|
per-share amounts)
|
|
ASSETS
|
Cash and cash equivalents
|
|
|
$ 7,236
|
|
|
|
$ 9,347
|
|
Marketable securities
|
|
|
108
|
|
|
|
213
|
|
Accounts and notes receivable, net
|
|
|
16,617
|
|
|
|
15,856
|
|
Inventories:
|
|
|
|
|
|
|
|
|
Crude oil and petroleum products
|
|
|
4,828
|
|
|
|
5,175
|
|
Chemicals
|
|
|
307
|
|
|
|
459
|
|
Materials, supplies and other
|
|
|
1,349
|
|
|
|
1,220
|
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
|
6,484
|
|
|
|
6,854
|
|
Prepaid expenses and other current assets
|
|
|
4,271
|
|
|
|
4,200
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
34,716
|
|
|
|
36,470
|
|
Long-term receivables, net
|
|
|
2,389
|
|
|
|
2,413
|
|
Investments and advances
|
|
|
21,548
|
|
|
|
20,920
|
|
Properties, plant and equipment, at cost
|
|
|
180,074
|
|
|
|
173,299
|
|
Less: Accumulated depreciation, depletion and amortization
|
|
|
86,401
|
|
|
|
81,519
|
|
|
|
|
|
|
|
|
|
|
Properties, plant and equipment, net
|
|
|
93,673
|
|
|
|
91,780
|
|
Deferred charges and other assets
|
|
|
4,156
|
|
|
|
4,711
|
|
Goodwill
|
|
|
4,619
|
|
|
|
4,619
|
|
Assets held for sale
|
|
|
100
|
|
|
|
252
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
$161,201
|
|
|
|
$161,165
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
Short-term debt
|
|
|
$ 868
|
|
|
|
$ 2,818
|
|
Accounts payable
|
|
|
15,584
|
|
|
|
16,580
|
|
Accrued liabilities
|
|
|
5,428
|
|
|
|
8,077
|
|
Federal and other taxes on income
|
|
|
2,106
|
|
|
|
3,079
|
|
Other taxes payable
|
|
|
1,378
|
|
|
|
1,469
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
25,364
|
|
|
|
32,023
|
|
Long-term debt
|
|
|
10,850
|
|
|
|
5,742
|
|
Capital lease obligations
|
|
|
342
|
|
|
|
341
|
|
Deferred credits and other noncurrent obligations
|
|
|
17,889
|
|
|
|
17,678
|
|
Noncurrent deferred income taxes
|
|
|
11,391
|
|
|
|
11,539
|
|
Reserves for employee benefit plans
|
|
|
6,885
|
|
|
|
6,725
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
72,721
|
|
|
|
74,048
|
|
|
|
|
|
|
|
|
|
|
Preferred stock (authorized 100,000,000 shares,
$1.00 par value, none issued)
|
|
|
|
|
|
|
|
|
Common stock (authorized 6,000,000,000 shares,
$.75 par value, 2,442,676,580 shares issued at
June 30, 2009, and December 31, 2008)
|
|
|
1,832
|
|
|
|
1,832
|
|
Capital in excess of par value
|
|
|
14,539
|
|
|
|
14,448
|
|
Retained earnings
|
|
|
102,097
|
|
|
|
101,102
|
|
Accumulated other comprehensive loss
|
|
|
(3,795
|
)
|
|
|
(3,924
|
)
|
Deferred compensation and benefit plan trust
|
|
|
(414
|
)
|
|
|
(434
|
)
|
Treasury stock, at cost (437,163,976 and 438,444,795 shares
at June 30, 2009, and December 31, 2008, respectively)
|
|
|
(26,301
|
)
|
|
|
(26,376
|
)
|
|
|
|
|
|
|
|
|
|
Total Chevron Corporation Stockholders Equity
|
|
|
87,958
|
|
|
|
86,648
|
|
Noncontrolling interests
|
|
|
522
|
|
|
|
469
|
|
|
|
|
|
|
|
|
|
|
Total Equity
|
|
|
88,480
|
|
|
|
87,117
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity
|
|
|
$161,201
|
|
|
|
$161,165
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
5
CHEVRON
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions of dollars)
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
Net Income Attributable to Chevron Corporation
|
|
$
|
3,582
|
|
|
$
|
11,143
|
|
Adjustments
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization
|
|
|
5,966
|
|
|
|
4,490
|
|
Dry hole expense
|
|
|
421
|
|
|
|
199
|
|
Distributions (less than) more than income from equity affiliates
|
|
|
(766
|
)
|
|
|
105
|
|
Net before-tax gains on asset retirements and sales
|
|
|
(624
|
)
|
|
|
(123
|
)
|
Net foreign currency effects
|
|
|
443
|
|
|
|
30
|
|
Deferred income tax provision
|
|
|
(77
|
)
|
|
|
(381
|
)
|
Net increase in operating working capital
|
|
|
(3,250
|
)
|
|
|
(502
|
)
|
Net income attributable to noncontrolling interests
|
|
|
33
|
|
|
|
62
|
|
Increase in long-term receivables
|
|
|
(260
|
)
|
|
|
(167
|
)
|
Decrease (increase) in other deferred charges
|
|
|
68
|
|
|
|
(7
|
)
|
Cash contributions to employee pension plans
|
|
|
(148
|
)
|
|
|
(127
|
)
|
Other
|
|
|
300
|
|
|
|
589
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities
|
|
|
5,688
|
|
|
|
15,311
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(10,414
|
)
|
|
|
(8,971
|
)
|
Proceeds and deposits related to asset sales
|
|
|
1,527
|
|
|
|
418
|
|
Net sales of marketable securities
|
|
|
97
|
|
|
|
297
|
|
Repayment of loans by equity affiliates
|
|
|
168
|
|
|
|
162
|
|
Proceeds from sale of other short-term investments
|
|
|
221
|
|
|
|
261
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used for Investing Activities
|
|
|
(8,401
|
)
|
|
|
(7,833
|
)
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
Net (payments) borrowings of short-term obligations
|
|
|
(1,421
|
)
|
|
|
308
|
|
Proceeds from issuance of long-term debt
|
|
|
4,990
|
|
|
|
|
|
Repayments of long-term debt and other financing obligations
|
|
|
(439
|
)
|
|
|
(877
|
)
|
Cash dividends
|
|
|
(2,590
|
)
|
|
|
(2,538
|
)
|
Dividends paid to noncontrolling interests
|
|
|
(27
|
)
|
|
|
(41
|
)
|
Net sales (purchases) of treasury shares
|
|
|
47
|
|
|
|
(3,561
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used for) Financing Activities
|
|
|
560
|
|
|
|
(6,709
|
)
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash and Cash
Equivalents
|
|
|
42
|
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents
|
|
|
(2,111
|
)
|
|
|
818
|
|
Cash and Cash Equivalents at January 1
|
|
|
9,347
|
|
|
|
7,362
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at June 30
|
|
$
|
7,236
|
|
|
$
|
8,180
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
6
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Note 1.
|
Interim
Financial Statements
|
The accompanying consolidated financial statements of Chevron
Corporation and its subsidiaries (the company) have not been
audited by an independent registered public accounting firm. In
the opinion of the companys management, the interim data
include all adjustments necessary for a fair statement of the
results for the interim periods. These adjustments were of a
normal recurring nature. The results for the three- and
six-month periods ended June 30, 2009, are not necessarily
indicative of future financial results. The term
earnings is defined as net income attributable to
Chevron Corporation.
Certain notes and other information have been condensed or
omitted from the interim financial statements presented in this
Quarterly Report on
Form 10-Q.
Therefore, these financial statements should be read in
conjunction with the companys 2008 Annual Report on
Form 10-K.
Events subsequent to June 30, 2009, were evaluated until
the time of the
Form 10-Q
filing with the Securities and Exchange Commission on
August 6, 2009. Refer to Note 15 on page 22 for
discussion of FASB Statement No. 165, Subsequent
Events.
Earnings for the second quarter and first six months of 2009
included $140 million and $540 million, respectively,
of after-tax gains on the sale of international downstream
assets.
|
|
Note 2.
|
New
Accounting Standard Noncontrolling
Interests
|
The company adopted FASB Statement No. 160,
Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51 (FAS 160),
effective January 1, 2009, and retroactive to the earliest
period presented. Prospectively, certain changes in a
parents ownership interest are to be accounted for as
equity transactions and when a subsidiary is deconsolidated, any
noncontrolling equity investment in the former subsidiary is to
be initially measured at fair value.
With the adoption of FAS 160, ownership interests in the
companys subsidiaries held by parties other than the
parent are presented separately from the parents equity on
the Consolidated Balance Sheet. The amount of consolidated net
income attributable to the parent and the noncontrolling
interests are both presented on the face of the Consolidated
Statement of Income.
Shown in the table below is activity for the equity attributable
to noncontrolling interests during the first six months of 2009
and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
Chevron Corporation
|
|
Noncontrolling
|
|
Total
|
|
Chevron Corporation
|
|
Noncontrolling
|
|
Total
|
|
|
Stockholders Equity
|
|
Interest
|
|
Equity
|
|
Stockholders Equity
|
|
Interest
|
|
Equity
|
|
|
(Millions of dollars)
|
|
Balance at January 1
|
|
|
$86,648
|
|
|
|
$469
|
|
|
|
$87,117
|
|
|
|
$76,884
|
|
|
|
$204
|
|
|
|
$77,088
|
|
Net income
|
|
|
3,582
|
|
|
|
33
|
|
|
|
3,615
|
|
|
|
11,081
|
|
|
|
62
|
|
|
|
11,143
|
|
Dividends
|
|
|
(2,590
|
)
|
|
|
(27
|
)
|
|
|
(2,617
|
)
|
|
|
(2,497
|
)
|
|
|
(41
|
)
|
|
|
(2,538
|
)
|
Treasury shares, net
|
|
|
47
|
|
|
|
|
|
|
|
47
|
|
|
|
(3,561
|
)
|
|
|
|
|
|
|
(3,561
|
)
|
Other changes, net*
|
|
|
271
|
|
|
|
47
|
|
|
|
318
|
|
|
|
135
|
|
|
|
1
|
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30
|
|
|
$87,958
|
|
|
|
$522
|
|
|
|
$88,480
|
|
|
|
$82,042
|
|
|
|
$226
|
|
|
|
$82,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes components of comprehensive income, which are disclosed
separately in the Consolidated Statement of Comprehensive Income. |
7
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 3.
|
Information
Relating to the Consolidated Statement of Cash Flows
|
The Net increase in operating working capital was
composed of the following operating changes:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions of dollars)
|
|
|
Increase in accounts and notes receivable
|
|
$
|
(285
|
)
|
|
$
|
(8,160
|
)
|
Decrease (increase) in inventories
|
|
|
224
|
|
|
|
(1,062
|
)
|
Increase in prepaid expenses and other current assets
|
|
|
(176
|
)
|
|
|
(216
|
)
|
(Decrease) increase in accounts payable and accrued liabilities
|
|
|
(1,918
|
)
|
|
|
7,438
|
|
(Decrease) increase in income and other taxes payable
|
|
|
(1,095
|
)
|
|
|
1,498
|
|
|
|
|
|
|
|
|
|
|
Net increase in operating working capital
|
|
$
|
(3,250
|
)
|
|
$
|
(502
|
)
|
|
|
|
|
|
|
|
|
|
In accordance with the cash-flow classification requirements of
FAS 123R, Share-Based Payment, the Net
increase in operating working capital includes reductions
of $6 million and $98 million for excess income tax
benefits associated with stock options exercised during the six
months ended June 30, 2009, and 2008, respectively. These
amounts are offset by an equal amount in Net sales
(purchases) of treasury shares.
Net Cash Provided by Operating Activities included
the following cash payments for interest on debt and for income
taxes:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions of dollars)
|
|
|
Interest on debt (net of capitalized interest)
|
|
$
|
|
|
|
$
|
2
|
|
Income taxes
|
|
|
3,337
|
|
|
|
8,679
|
|
The Net sales of marketable securities consisted of
the following gross amounts:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions of dollars)
|
|
|
Marketable securities purchased
|
|
$
|
|
|
|
$
|
(3,103
|
)
|
Marketable securities sold
|
|
|
97
|
|
|
|
3,400
|
|
|
|
|
|
|
|
|
|
|
Net sales of marketable securities
|
|
$
|
97
|
|
|
$
|
297
|
|
|
|
|
|
|
|
|
|
|
The Net sales (purchases) of treasury shares
represents the cost of common shares less the cost of shares
issued for share-based compensation plans. Net sales totaled
$47 million in the first half of 2009 and net purchases
totaled $3.6 billion in the 2008 period. Purchases in the
2008 period were under the companys stock repurchase
program initiated in September 2007. No purchases were made
under the program in the 2009 period.
8
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The major components of Capital expenditures and the
reconciliation of this amount to the capital and exploratory
expenditures, including equity affiliates are presented in the
following table:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions of dollars)
|
|
|
Additions to properties, plant and equipment
|
|
$
|
9,773
|
|
|
$
|
8,433
|
|
Additions to investments
|
|
|
403
|
|
|
|
487
|
|
Current-year dry-hole expenditures
|
|
|
339
|
|
|
|
154
|
|
Payments for other liabilities and assets, net
|
|
|
(101
|
)
|
|
|
(103
|
)
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
10,414
|
|
|
|
8,971
|
|
Expensed exploration expenditures
|
|
|
398
|
|
|
|
361
|
|
Assets acquired through capital-lease obligations
|
|
|
26
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Capital and exploratory expenditures, excluding equity affiliates
|
|
|
10,838
|
|
|
|
9,343
|
|
Companys share of expenditures by equity affiliates
|
|
|
577
|
|
|
|
941
|
|
|
|
|
|
|
|
|
|
|
Capital and exploratory expenditures, including equity affiliates
|
|
$
|
11,415
|
|
|
$
|
10,284
|
|
|
|
|
|
|
|
|
|
|
Additions to properties, plant and equipment in the
2009 period include $2 billion for a cash payment related
to the extension of an upstream concession agreement.
|
|
Note 4.
|
Operating
Segments and Geographic Data
|
Although each subsidiary of Chevron is responsible for its own
affairs, Chevron Corporation manages its investments in these
subsidiaries and their affiliates. For this purpose, the
investments are grouped as follows: upstream
exploration and production; downstream refining,
marketing and transportation; chemicals; and all other. The
first three of these groupings represent the companys
reportable segments and operating
segments as defined in Financial Accounting Standards
Board (FASB) Statement No. 131, Disclosures about
Segments of an Enterprise and Related Information
(FAS 131).
The segments are separately managed for investment purposes
under a structure that includes segment managers who
report to the companys chief operating decision
maker (CODM) (terms as defined in FAS 131). The CODM
is the companys Executive Committee, a committee of senior
officers that includes the Chief Executive Officer, and that in
turn reports to the Board of Directors of Chevron Corporation.
The operating segments represent components of the company as
described in FAS 131 terms that engage in activities
(a) from which revenues are earned and expenses are
incurred; (b) whose operating results are regularly
reviewed by the CODM, which makes decisions about resources to
be allocated to the segments and to assess their performance;
and (c) for which discrete financial information is
available.
Segment managers for the reportable segments are directly
accountable to and maintain regular contact with the
companys CODM to discuss the segments operating
activities and financial performance. The CODM approves annual
capital and exploratory budgets at the reportable segment level,
as well as reviews capital and exploratory funding for major
projects and approves major changes to the annual capital and
exploratory budgets. However,
business-unit
managers within the operating segments are directly responsible
for decisions relating to project implementation and all other
matters connected with daily operations. Company officers who
are members of the Executive Committee also have individual
management responsibilities and participate in other committees
for purposes other than acting as the CODM.
All Other activities include mining operations,
power generation businesses, worldwide cash management and debt
financing activities, corporate administrative functions,
insurance operations, real estate activities, alternative fuels
and technology companies.
9
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The companys primary country of operation is the United
States of America, its country of domicile. Other components of
the companys operations are reported as
International (outside the United States).
Segment Earnings The company evaluates the performance of
its operating segments on an after-tax basis, without
considering the effects of debt financing interest expense or
investment interest income, both of which are managed by the
company on a worldwide basis. Corporate administrative costs and
assets are not allocated to the operating segments. However,
operating segments are billed for the direct use of corporate
services. Nonbillable costs remain at the corporate level in
All Other. Earnings by major operating area for the
three- and six-month periods ended June 30, 2009 and 2008,
are presented in the following table:
Segment
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Millions of dollars)
|
|
|
|
|
|
Upstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
273
|
|
|
$
|
2,191
|
|
|
$
|
294
|
|
|
$
|
3,790
|
|
International
|
|
|
1,246
|
|
|
|
5,057
|
|
|
|
2,494
|
|
|
|
8,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Upstream
|
|
|
1,519
|
|
|
|
7,248
|
|
|
|
2,788
|
|
|
|
12,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Downstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
(95
|
)
|
|
|
(682
|
)
|
|
|
38
|
|
|
|
(678
|
)
|
International
|
|
|
256
|
|
|
|
(52
|
)
|
|
|
946
|
|
|
|
196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Downstream
|
|
|
161
|
|
|
|
(734
|
)
|
|
|
984
|
|
|
|
(482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemicals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
51
|
|
|
|
1
|
|
|
|
60
|
|
|
|
2
|
|
International
|
|
|
57
|
|
|
|
40
|
|
|
|
87
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Chemicals
|
|
|
108
|
|
|
|
41
|
|
|
|
147
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment Earnings
|
|
|
1,788
|
|
|
|
6,555
|
|
|
|
3,919
|
|
|
|
11,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense
|
|
|
(5
|
)
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
Interest Income
|
|
|
13
|
|
|
|
48
|
|
|
|
26
|
|
|
|
105
|
|
Other
|
|
|
(51
|
)
|
|
|
(628
|
)
|
|
|
(352
|
)
|
|
|
(940
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Chevron Corporation
|
|
$
|
1,745
|
|
|
$
|
5,975
|
|
|
$
|
3,582
|
|
|
$
|
11,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Segment Assets Segment assets do not include intercompany
investments or intercompany receivables. All Other
assets in 2009 consist primarily of worldwide cash, cash
equivalents and marketable securities, real estate, information
systems, mining operations, power generation businesses,
technology companies and assets of the corporate administrative
functions. Segment assets at June 30, 2009, and
December 31, 2008, are as follows:
Segment
Assets
|
|
|
|
|
|
|
|
|
|
|
At June 30
|
|
At December 31
|
|
|
2009
|
|
2008
|
|
|
(Millions of dollars)
|
|
Upstream
|
|
|
|
|
|
|
|
|
United States
|
|
|
$ 25,048
|
|
|
|
$ 26,071
|
|
International
|
|
|
73,836
|
|
|
|
72,530
|
|
Goodwill
|
|
|
4,619
|
|
|
|
4,619
|
|
|
|
|
|
|
|
|
|
|
Total Upstream
|
|
|
103,503
|
|
|
|
103,220
|
|
|
|
|
|
|
|
|
|
|
Downstream
|
|
|
|
|
|
|
|
|
United States
|
|
|
17,160
|
|
|
|
15,869
|
|
International
|
|
|
24,965
|
|
|
|
23,572
|
|
|
|
|
|
|
|
|
|
|
Total Downstream
|
|
|
42,125
|
|
|
|
39,441
|
|
|
|
|
|
|
|
|
|
|
Chemicals
|
|
|
|
|
|
|
|
|
United States
|
|
|
2,618
|
|
|
|
2,535
|
|
International
|
|
|
989
|
|
|
|
1,086
|
|
|
|
|
|
|
|
|
|
|
Total Chemicals
|
|
|
3,607
|
|
|
|
3,621
|
|
|
|
|
|
|
|
|
|
|
Total Segment Assets
|
|
|
149,235
|
|
|
|
146,282
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
United States
|
|
|
6,004
|
|
|
|
8,984
|
|
International
|
|
|
5,962
|
|
|
|
5,899
|
|
|
|
|
|
|
|
|
|
|
Total All Other
|
|
|
11,966
|
|
|
|
14,883
|
|
|
|
|
|
|
|
|
|
|
Total Assets United States
|
|
|
50,830
|
|
|
|
53,459
|
|
Total Assets International
|
|
|
105,752
|
|
|
|
103,087
|
|
Goodwill
|
|
|
4,619
|
|
|
|
4,619
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
$161,201
|
|
|
|
$161,165
|
|
|
|
|
|
|
|
|
|
|
Segment Sales and Other Operating Revenues
Operating-segment sales and other operating revenues,
including internal transfers, for the three- and six-month
periods ended June 30, 2009, and 2008, are presented in the
table on the next page. Products are transferred between
operating segments at internal product values that approximate
market prices. Revenues for the upstream segment are derived
primarily from the production and sale of crude oil and natural
gas, as well as the sale of third-party production of natural
gas. Revenues for the downstream segment are derived from the
refining and marketing of petroleum products such as gasoline,
jet fuel, gas oils, lubricants, residual fuel oils and other
products derived from crude oil. This segment also generates
revenues from the transportation and trading of crude oil and
refined products. Revenues for the chemicals segment are derived
primarily from the manufacture and sale of additives for
lubricants and fuels. All Other activities include
revenues from mining operations, power generation businesses,
insurance operations, real estate activities and technology
companies.
11
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Sales and
Other Operating Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions of dollars)
|
|
|
Upstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
4,250
|
|
|
$
|
12,111
|
|
|
$
|
8,632
|
|
|
$
|
21,944
|
|
International
|
|
|
7,544
|
|
|
|
13,780
|
|
|
|
13,935
|
|
|
|
24,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
11,794
|
|
|
|
25,891
|
|
|
|
22,567
|
|
|
|
46,163
|
|
Intersegment Elimination United States
|
|
|
(2,311
|
)
|
|
|
(4,782
|
)
|
|
|
(3,902
|
)
|
|
|
(8,633
|
)
|
Intersegment Elimination International
|
|
|
(4,678
|
)
|
|
|
(8,399
|
)
|
|
|
(7,831
|
)
|
|
|
(14,169
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Upstream
|
|
|
4,805
|
|
|
|
12,710
|
|
|
|
10,834
|
|
|
|
23,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Downstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
15,196
|
|
|
|
27,957
|
|
|
|
26,603
|
|
|
|
50,111
|
|
International
|
|
|
19,152
|
|
|
|
39,793
|
|
|
|
36,267
|
|
|
|
71,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
34,348
|
|
|
|
67,750
|
|
|
|
62,870
|
|
|
|
121,273
|
|
Intersegment Elimination United States
|
|
|
(45
|
)
|
|
|
(135
|
)
|
|
|
(90
|
)
|
|
|
(251
|
)
|
Intersegment Elimination International
|
|
|
(23
|
)
|
|
|
(44
|
)
|
|
|
(39
|
)
|
|
|
(63
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Downstream
|
|
|
34,280
|
|
|
|
67,571
|
|
|
|
62,741
|
|
|
|
120,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemicals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
119
|
|
|
|
146
|
|
|
|
230
|
|
|
|
278
|
|
International
|
|
|
352
|
|
|
|
429
|
|
|
|
662
|
|
|
|
822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
471
|
|
|
|
575
|
|
|
|
892
|
|
|
|
1,100
|
|
Intersegment Elimination United States
|
|
|
(49
|
)
|
|
|
(71
|
)
|
|
|
(95
|
)
|
|
|
(129
|
)
|
Intersegment Elimination International
|
|
|
(36
|
)
|
|
|
(40
|
)
|
|
|
(64
|
)
|
|
|
(79
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Chemicals
|
|
|
386
|
|
|
|
464
|
|
|
|
733
|
|
|
|
892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
421
|
|
|
|
439
|
|
|
|
707
|
|
|
|
764
|
|
International
|
|
|
16
|
|
|
|
19
|
|
|
|
29
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
437
|
|
|
|
458
|
|
|
|
736
|
|
|
|
801
|
|
Intersegment Elimination United States
|
|
|
(253
|
)
|
|
|
(235
|
)
|
|
|
(398
|
)
|
|
|
(381
|
)
|
Intersegment Elimination International
|
|
|
(8
|
)
|
|
|
(6
|
)
|
|
|
(12
|
)
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total All Other
|
|
|
176
|
|
|
|
217
|
|
|
|
326
|
|
|
|
409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and Other Operating Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
19,986
|
|
|
|
40,653
|
|
|
|
36,172
|
|
|
|
73,097
|
|
International
|
|
|
27,064
|
|
|
|
54,021
|
|
|
|
50,893
|
|
|
|
96,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
47,050
|
|
|
|
94,674
|
|
|
|
87,065
|
|
|
|
169,337
|
|
Intersegment Elimination United States
|
|
|
(2,658
|
)
|
|
|
(5,223
|
)
|
|
|
(4,485
|
)
|
|
|
(9,394
|
)
|
Intersegment Elimination International
|
|
|
(4,745
|
)
|
|
|
(8,489
|
)
|
|
|
(7,946
|
)
|
|
|
(14,322
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales and Other Operating Revenues
|
|
$
|
39,647
|
|
|
$
|
80,962
|
|
|
$
|
74,634
|
|
|
$
|
145,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 5.
|
Summarized
Financial Data Chevron U.S.A. Inc.
|
Chevron U.S.A. Inc. (CUSA) is a major subsidiary of Chevron
Corporation. CUSA and its subsidiaries manage and operate most
of Chevrons U.S. businesses. Assets include those
related to the exploration and production of crude oil, natural
gas and natural gas liquids and those associated with refining,
marketing, supply and distribution of products derived from
petroleum, excluding most of the regulated pipeline operations
of Chevron. CUSA also holds the companys investment in the
Chevron Phillips Chemical Company LLC joint venture, which is
accounted for using the equity method.
During 2008, Chevron implemented legal reorganizations in which
certain Chevron subsidiaries transferred assets to or under
CUSA. The summarized financial information for CUSA and its
consolidated subsidiaries presented in the table below gives
retroactive effect to the reorganizations as if they had
occurred on January 1, 2008. However, the financial
information below may not reflect the financial position and
operating results in the future or the historical results in the
period presented if the reorganization actually had occurred on
that date.
The summarized financial information for CUSA and its
consolidated subsidiaries is presented in the table below:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions of dollars)
|
|
|
Sales and other operating revenues
|
|
$
|
53,210
|
|
|
$
|
109,290
|
|
Costs and other deductions
|
|
|
53,251
|
|
|
|
106,379
|
|
Net (loss) income attributable to Chevron U.S.A. Inc.
|
|
|
(109
|
)
|
|
|
1,795
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30
|
|
At December 31
|
|
|
2009
|
|
2008
|
|
|
(Millions of dollars)
|
|
Current assets
|
|
|
$31,250
|
|
|
|
$32,759
|
|
Other assets
|
|
|
32,153
|
|
|
|
31,807
|
|
Current liabilities
|
|
|
12,836
|
|
|
|
14,322
|
|
Other liabilities
|
|
|
15,252
|
|
|
|
14,805
|
|
|
|
|
|
|
|
|
|
|
Total Chevron U.S.A. Inc. net equity
|
|
|
$35,315
|
|
|
|
$35,439
|
|
|
|
|
|
|
|
|
|
|
Memo: Total debt
|
|
|
$ 6,785
|
|
|
|
$ 6,813
|
|
|
|
Note 6.
|
Summarized
Financial Data Chevron Transport
Corporation
|
Chevron Transport Corporation Limited (CTC), incorporated in
Bermuda, is an indirect, wholly owned subsidiary of Chevron
Corporation. CTC is the principal operator of Chevrons
international tanker fleet and is engaged in the marine
transportation of crude oil and refined petroleum products. Most
of CTCs shipping revenue is derived by providing
transportation services to other Chevron companies. Chevron
Corporation has fully and unconditionally guaranteed this
subsidiarys obligations in connection with certain debt
securities issued by a third party. Summarized financial
information for CTC and its consolidated subsidiaries is
presented as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions of dollars)
|
|
|
(Millions of dollars)
|
|
|
Sales and other operating revenues
|
|
$
|
157
|
|
|
$
|
260
|
|
|
$
|
339
|
|
|
$
|
501
|
|
Costs and other deductions
|
|
|
187
|
|
|
|
234
|
|
|
|
379
|
|
|
|
453
|
|
Net (loss) income attributable to Chevron Transport Corporation
|
|
|
(29
|
)
|
|
|
27
|
|
|
|
(39
|
)
|
|
|
90
|
|
13
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
At June 30
|
|
At December 31
|
|
|
2009
|
|
2008
|
|
|
(Millions of dollars)
|
|
Current assets
|
|
|
$458
|
|
|
|
$482
|
|
Other assets
|
|
|
168
|
|
|
|
172
|
|
Current liabilities
|
|
|
102
|
|
|
|
98
|
|
Other liabilities
|
|
|
94
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
Total Chevron Transport Corporation net equity
|
|
|
$430
|
|
|
|
$468
|
|
|
|
|
|
|
|
|
|
|
There were no restrictions on CTCs ability to pay
dividends or make loans or advances at June 30, 2009.
Taxes on income for the second quarter and first half of 2009
were $1.6 billion and $2.9 billion, respectively,
compared with $5.8 billion and $10.3 billion for the
corresponding periods in 2008. The associated effective tax
rates (calculated as the amount of Income Tax Expense divided by
Income Before Income Tax Expense) for the second quarters of
2009 and 2008 were 47 percent and 49 percent,
respectively. For the comparative six-month periods, the
effective tax rates were 45 percent and 48 percent,
respectively. The 2009 rates in the comparative periods were
lower due to proportionally higher income being earned in
international downstream businesses that were taxed at lower
average rates than income earned in international upstream tax
jurisdictions.
|
|
Note 8.
|
Employee
Benefits
|
The company has defined-benefit pension plans for many
employees. The company typically prefunds defined-benefit plans
as required by local regulations or in certain situations where
pre-funding provides economic advantages. In the United States,
this includes all qualified plans subject to the Employee
Retirement Income Security Act of 1974 (ERISA) minimum funding
standard. The company does not typically
fund U.S. nonqualified pension plans that are not
subject to funding requirements under applicable laws and
regulations because contributions to these pension plans may be
less economic and investment returns may be less attractive than
the companys other investment alternatives.
The company also sponsors other postretirement plans that
provide medical and dental benefits, as well as life insurance
for some active and qualifying retired employees. The plans are
unfunded, and the company and the retirees share the costs.
Medical coverage for Medicare-eligible retirees in the
companys main U.S. medical plan is secondary to
Medicare (including Part D) and the increase to the
company contribution for retiree medical coverage is limited to
no more than 4 percent each year. Certain life insurance
benefits are paid by the company.
14
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The components of net periodic benefit costs for 2009 and 2008
were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions of dollars)
|
|
|
(Millions of dollars)
|
|
|
Pension Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
66
|
|
|
$
|
62
|
|
|
$
|
133
|
|
|
$
|
125
|
|
Interest cost
|
|
|
120
|
|
|
|
124
|
|
|
|
240
|
|
|
|
249
|
|
Expected return on plan assets
|
|
|
(98
|
)
|
|
|
(148
|
)
|
|
|
(197
|
)
|
|
|
(296
|
)
|
Amortization of prior-service credits
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(4
|
)
|
|
|
(4
|
)
|
Amortization of actuarial losses
|
|
|
74
|
|
|
|
15
|
|
|
|
149
|
|
|
|
30
|
|
Settlement losses
|
|
|
51
|
|
|
|
20
|
|
|
|
101
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total United States
|
|
|
211
|
|
|
|
71
|
|
|
|
422
|
|
|
|
143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
|
29
|
|
|
|
35
|
|
|
|
59
|
|
|
|
68
|
|
Interest cost
|
|
|
70
|
|
|
|
70
|
|
|
|
139
|
|
|
|
143
|
|
Expected return on plan assets
|
|
|
(50
|
)
|
|
|
(63
|
)
|
|
|
(96
|
)
|
|
|
(133
|
)
|
Amortization of prior-service costs
|
|
|
5
|
|
|
|
7
|
|
|
|
11
|
|
|
|
13
|
|
Amortization of actuarial losses
|
|
|
25
|
|
|
|
17
|
|
|
|
51
|
|
|
|
37
|
|
Termination costs
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total International
|
|
|
79
|
|
|
|
67
|
|
|
|
164
|
|
|
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Pension Benefit Costs
|
|
$
|
290
|
|
|
$
|
138
|
|
|
$
|
586
|
|
|
$
|
272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Benefits*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
8
|
|
|
$
|
49
|
|
|
$
|
16
|
|
|
$
|
56
|
|
Interest cost
|
|
|
45
|
|
|
|
45
|
|
|
|
89
|
|
|
|
89
|
|
Amortization of prior-service credits
|
|
|
(21
|
)
|
|
|
(20
|
)
|
|
|
(41
|
)
|
|
|
(40
|
)
|
Amortization of actuarial losses
|
|
|
7
|
|
|
|
9
|
|
|
|
14
|
|
|
|
19
|
|
Curtailment gains
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Other Benefit Costs
|
|
$
|
39
|
|
|
$
|
83
|
|
|
$
|
73
|
|
|
$
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes costs for U.S. and international other postretirement
benefit plans. Obligations for plans outside the U.S. are not
significant relative to the companys total other
postretirement benefit obligation. |
At the end of 2008, the company estimated it would contribute
$800 million to employee pension plans during 2009
(composed of $550 million for the U.S. plans and
$250 million for the international plans). Through
June 30, 2009, a total of $148 million was contributed
(including $65 million to the U.S. plans). Total
contributions for the full year are currently estimated at
$1 billion ($750 million for the U.S. plans and
$250 million for the international plans). Actual
contribution amounts are dependent upon investment returns,
changes in pension obligations, regulatory environments and
other economic factors. Additional funding may ultimately be
required if investment returns are insufficient to offset
increases in plan obligations.
During the first half of 2009, the company contributed
$94 million to its other postretirement benefit plans. The
company anticipates contributing $115 million during the
remainder of 2009.
15
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 9.
|
Accounting
for Suspended Exploratory Wells
|
The company accounts for the cost of exploratory wells in
accordance with FASB Statement No. 19, Financial
Accounting and Reporting by Oil and Gas Producing Companies,
as amended by FASB Staff Position
FAS 19-1,
Accounting for Suspended Well Costs, which provides that
an exploratory well continues to be capitalized after the
completion of drilling if certain criteria are met. The
companys capitalized cost of suspended wells at
June 30, 2009, was $2.3 billion, an increase of
$185 million from year-end 2008 mainly due to activities in
the United States, Angola and Australia. For the category of
exploratory well costs at year-end 2008 that were suspended more
than one year, a total of $76 million was expensed in the
first half of 2009.
MTBE Chevron and many other companies in the petroleum
industry have used methyl tertiary butyl ether (MTBE) as a
gasoline additive. Chevron is a party to 49 pending lawsuits and
claims, the majority of which involve numerous other petroleum
marketers and refiners. Resolution of these lawsuits and claims
may ultimately require the company to correct or ameliorate the
alleged effects on the environment of prior release of MTBE by
the company or other parties. Additional lawsuits and claims
related to the use of MTBE, including personal-injury claims,
may be filed in the future. The companys ultimate exposure
related to pending lawsuits and claims is not currently
determinable, but could be material to net income in any one
period. The company no longer uses MTBE in the manufacture of
gasoline in the United States.
Ecuador Chevron is a defendant in a civil lawsuit before
the Superior Court of Nueva Loja in Lago Agrio, Ecuador, brought
in May 2003 by plaintiffs who claim to be representatives of
certain residents of an area where an oil production consortium
formerly had operations. The lawsuit alleges damage to the
environment from the oil exploration and production operations,
and seeks unspecified damages to fund environmental remediation
and restoration of the alleged environmental harm, plus a health
monitoring program. Until 1992, Texaco Petroleum Company
(Texpet), a subsidiary of Texaco Inc., was a minority member of
this consortium with Petroecuador, the Ecuadorian state-owned
oil company, as the majority partner; since 1990, the operations
have been conducted solely by Petroecuador. At the conclusion of
the consortium and following an independent third-party
environmental audit of the concession area, Texpet entered into
a formal agreement with the Republic of Ecuador and Petroecuador
for Texpet to remediate specific sites assigned by the
government in proportion to Texpets ownership share of the
consortium. Pursuant to that agreement, Texpet conducted a
three-year remediation program at a cost of $40 million.
After certifying that the sites were properly remediated, the
government granted Texpet and all related corporate entities a
full release from any and all environmental liability arising
from the consortium operations.
Based on the history described above, Chevron believes that this
lawsuit lacks legal or factual merit. As to matters of law, the
company believes first, that the court lacks jurisdiction over
Chevron; second, that the law under which plaintiffs bring the
action, enacted in 1999, cannot be applied retroactively to
Chevron; third, that the claims are barred by the statute of
limitations in Ecuador; and, fourth, that the lawsuit is also
barred by the releases from liability previously given to Texpet
by the Republic of Ecuador and Petroecuador. With regard to the
facts, the company believes that the evidence confirms that
Texpets remediation was properly conducted and that the
remaining environmental damage reflects Petroecuadors
failure to timely fulfill its legal obligations and
Petroecuadors further conduct since assuming full control
over the operations.
In April 2008, a mining engineer appointed by the court to
identify and determine the cause of environmental damage, and to
specify steps needed to remediate it, issued a report
recommending that the court assess $8 billion, which would,
according to the engineer, provide financial compensation for
purported damages, including wrongful death claims, and pay for,
among other items, environmental remediation, health care
systems, and additional infrastructure for Petroecuador. The
engineers report also asserted that an additional
$8.3 billion could be assessed against Chevron for unjust
enrichment. The engineers report is not binding on the
court. Chevron also believes that the engineers work was
performed and his report prepared in a manner contrary to law
and in violation of the courts orders. Chevron submitted a
rebuttal to the report in which it asked the court to strike the
report in its
16
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
entirety. In November 2008, the engineer revised the report and,
without additional evidence, recommended an increase in the
financial compensation for purported damages to a total of
$18.9 billion and an increase in the assessment for
purported unjust enrichment to a total of $8.4 billion.
Chevron submitted a rebuttal to the revised report, and Chevron
will continue a vigorous defense of any attempted imposition of
liability.
The court has completed most of the procedural aspects of the
case and could render a judgment at any time. In the event of an
adverse judgment, Chevron would expect to pursue its appeals and
vigorously defend against enforcement of any such judgment;
therefore, the ultimate outcome and any financial
effect on Chevron remains uncertain. Management does
not believe an estimate of a reasonably possible loss (or a
range of loss) can be made in this case. Due to the defects
associated with the engineers report, management does not
believe the report itself has any utility in calculating a
reasonably possible loss (or a range of loss). Moreover, the
highly uncertain legal environment surrounding the case provides
no basis for management to estimate a reasonably possible loss
(or a range of loss).
|
|
Note 11.
|
Other
Contingencies and Commitments
|
Guarantees The company and its subsidiaries have certain
other contingent liabilities with respect to guarantees, direct
or indirect, of debt of affiliated companies or third parties.
Under the terms of the guarantee arrangements, generally the
company would be required to perform should the affiliated
company or third party fail to fulfill its obligations under the
arrangements. In some cases, the guarantee arrangements may have
recourse provisions that would enable the company to recover any
payments made under the terms of the guarantees from assets
provided as collateral.
Off-Balance-Sheet Obligations The company and its
subsidiaries have certain other contractual obligations relating
to long-term unconditional purchase obligations and commitments,
including throughput and
take-or-pay
agreements, some of which relate to suppliers financing
arrangements. The agreements typically provide goods and
services, such as pipeline, storage and regasification capacity,
drilling rigs, utilities and petroleum products, to be used or
sold in the ordinary course of the companys business.
Indemnifications The company provided certain indemnities
of contingent liabilities of Equilon and Motiva to Shell and
Saudi Refining, Inc., in connection with the February 2002 sale
of the companys interests in those investments. The
company would be required to perform if the indemnified
liabilities become actual losses. Were that to occur, the
company could be required to make future payments up to
$300 million. Through the end of June 2009, the company
paid $48 million under these indemnities and continues to
be obligated for possible additional indemnification payments in
the future.
The company has also provided indemnities relating to contingent
environmental liabilities related to assets originally
contributed by Texaco to the Equilon and Motiva joint ventures
and environmental conditions that existed prior to the formation
of Equilon and Motiva or that occurred during the period of
Texacos ownership interest in the joint ventures. In
general, the environmental conditions or events that are subject
to these indemnities must have arisen prior to December 2001.
Claims had to be asserted by February 2009 for Equilon
indemnities and must be asserted no later than February 2012 for
Motiva indemnities. Under the terms of these indemnities, there
is no maximum limit on the amount of potential future payments.
In February 2009, Shell delivered a letter to the company
purporting to preserve unmatured claims for certain Equilon
indemnities. The letter itself provides no estimate of the
ultimate claim amount, and management does not believe the
letter or any other information provides a basis to estimate the
amount, if any, of a range of loss or potential range of loss
with respect to the Equilon or the Motiva indemnities. The
company posts no assets as collateral and has made no payments
under the indemnities.
The amounts payable for the indemnities described above are to
be net of amounts recovered from insurance carriers and others
and net of liabilities recorded by Equilon or Motiva prior to
September 30, 2001, for any applicable incident.
17
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In the acquisition of Unocal, the company assumed certain
indemnities relating to contingent environmental liabilities
associated with assets that were sold in 1997. Under the
indemnification agreement, the companys liability is
unlimited until April 2022, when the liability expires. The
acquirer of the assets sold in 1997 shares in certain
environmental remediation costs up to a maximum obligation of
$200 million, which had not been reached as of
June 30, 2009.
Environmental The company is subject to loss
contingencies pursuant to laws, regulations, private claims and
legal proceedings related to environmental matters that are
subject to legal settlements or that in the future may require
the company to take action to correct or ameliorate the effects
on the environment of prior release of chemicals or petroleum
substances, including MTBE, by the company or other parties.
Such contingencies may exist for various sites, including, but
not limited to, federal Superfund sites and analogous sites
under state laws, refineries, crude-oil fields, service
stations, terminals, land development areas, and mining
operations, whether operating, closed or divested. These future
costs are not fully determinable due to such factors as the
unknown magnitude of possible contamination, the unknown timing
and extent of the corrective actions that may be required, the
determination of the companys liability in proportion to
other responsible parties, and the extent to which such costs
are recoverable from third parties.
Although the company has provided for known environmental
obligations that are probable and reasonably estimable, the
amount of additional future costs may be material to results of
operations in the period in which they are recognized. The
company does not expect these costs will have a material effect
on its consolidated financial position or liquidity. Also, the
company does not believe its obligations to make such
expenditures have had, or will have, any significant impact on
the companys competitive position relative to other
U.S. or international petroleum or chemical companies.
Financial Instruments The company believes it has no
material market or credit risks to its operations, financial
position or liquidity as a result of its commodities and other
derivative activities.
Equity Redetermination For oil and gas producing
operations, ownership agreements may provide for periodic
reassessments of equity interests in estimated crude-oil and
natural-gas reserves. These activities, individually or
together, may result in gains or losses that could be material
to earnings in any given period. One such equity redetermination
process has been under way since 1996 for Chevrons
interests in four producing zones at the Naval Petroleum Reserve
at Elk Hills, California, for the time when the remaining
interests in these zones were owned by the U.S. Department
of Energy. A wide range remains for a possible net settlement
amount for the four zones. For this range of settlement, Chevron
estimates its maximum possible net before-tax liability at
approximately $200 million, and the possible maximum net
amount that could be owed to Chevron is estimated at about
$150 million. The timing of the settlement and the exact
amount within this range of estimates are uncertain.
Other Contingencies Chevron receives claims from and
submits claims to customers; trading partners;
U.S. federal, state and local regulatory bodies;
governments; contractors; insurers; and suppliers. The amounts
of these claims, individually and in the aggregate, may be
significant and take lengthy periods to resolve.
The company and its affiliates also continue to review and
analyze their operations and may close, abandon, sell, exchange,
acquire or restructure assets to achieve operational or
strategic benefits and to improve competitiveness and
profitability. These activities, individually or together, may
result in gains or losses in future periods.
|
|
Note 12.
|
Fair
Value Measurements
|
FASB Statement No. 157, Fair Value Measurements
(FAS 157), and its various amendments, establishes a
framework for measuring fair value and stipulates disclosures
about fair-value measurements. FAS 157 generally applies to
recurring and nonrecurring financial and nonfinancial assets and
liabilities under other accounting pronouncements that require
or permit fair-value measurements. FAS 157 became effective
for Chevron on January 1, 2008, for all financial assets
and liabilities and recurring nonfinancial assets and
liabilities. On January 1, 2009, FAS 157 became
effective for nonrecurring nonfinancial assets and liabilities.
Among the required
18
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
disclosures is the fair-value hierarchy of inputs the company
uses to value an asset or a liability. The three levels of the
fair-value hierarchy are described as follows:
Level 1: Quoted prices (unadjusted) in active markets for
identical assets and liabilities. For the company, Level 1
inputs include exchange-traded futures contracts for which the
parties are willing to transact at the exchange-quoted price and
marketable securities that are actively traded.
Level 2: Inputs other than Level 1 that are
observable, either directly or indirectly. For the company,
Level 2 inputs include quoted prices for similar assets or
liabilities, prices obtained through third-party broker quotes
and prices that can be corroborated with other observable inputs
for substantially the complete term of a contract.
Level 3: Unobservable inputs. The company does not use
Level 3 inputs for any of its recurring fair-value
measurements. Level 3 inputs may be required for the
determination of fair value associated with certain nonrecurring
measurements of nonfinancial assets and liabilities. In the
second quarter the company used Level 3 inputs to determine
the fair value of nonrecurring nonfinancial assets.
The fair value hierarchy for recurring assets and liabilities
measured at fair value at June 30, 2009, is as follows:
Assets
and Liabilities Measured at Fair Value on a Recurring
Basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in Active
|
|
Other
|
|
|
|
|
|
|
Markets for
|
|
Observable
|
|
Unobservable
|
|
|
At June 30
|
|
Identical Assets
|
|
Inputs
|
|
Inputs
|
|
|
2009
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
|
(Millions of dollars)
|
|
Marketable Securities
|
|
|
$108
|
|
|
|
$108
|
|
|
|
$
|
|
|
|
$
|
|
Derivatives
|
|
|
178
|
|
|
|
22
|
|
|
|
156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Recurring Assets at Fair Value
|
|
|
$286
|
|
|
|
$130
|
|
|
|
$156
|
|
|
|
$
|
|
Derivatives
|
|
|
$381
|
|
|
|
$244
|
|
|
|
$137
|
|
|
|
$
|
|
Total Recurring Liabilities at Fair Value
|
|
|
$381
|
|
|
|
$244
|
|
|
|
$137
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities The company calculates fair value
for its marketable securities based on quoted market prices for
identical assets and liabilities. The fair values reflect the
cash that would have been received if the instruments were sold
at June 30, 2009. Marketable securities had average
maturities of less than one year.
Derivatives The company records its derivative
instruments other than any commodity derivative
contracts that are designated as normal purchase and normal
sale on the Consolidated Balance Sheet at fair
value, with virtually all the offsetting amounts to the
Consolidated Statement of Income. For derivatives with identical
or similar provisions as contracts that are publicly traded on a
regular basis, the company uses the market values of the
publicly traded instruments as an input for fair-value
calculations.
The companys derivative instruments principally include
crude oil, natural gas and refined-product futures, swaps,
options and forward contracts, as well as foreign-currency
forward contracts. Derivatives classified as Level 1
include futures, swaps and options contracts traded in active
markets such as the NYMEX (New York Mercantile Exchange).
Derivatives classified as Level 2 include swaps, options,
and forward (including foreign currency) contracts principally
with financial institutions and other oil and gas companies, the
fair values for which are obtained from third-party broker
quotes, industry pricing services and exchanges. The company
obtains multiple sources of pricing information for the
Level 2 instruments. Since this pricing information is
generated from observable market data, it has historically been
very consistent. The company does not materially adjust this
information. The company incorporates internal review,
evaluation and assessment procedures, including a comparison of
Level 2
19
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
fair values derived from the companys internally developed
forward curves (on a sample basis) with the pricing information
to document reasonable, logical and supportable fair-value
determinations and proper level of classification.
The fair-value hierarchy for nonrecurring assets and liabilities
measured at fair value at June 30, 2009, is as follows:
Assets
and Liabilities Measured at Fair Value on a Non-Recurring
Basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in Active
|
|
Other
|
|
|
|
Loss (Before Tax)
|
|
Loss (Before Tax)
|
|
|
|
|
Markets for
|
|
Observable
|
|
Unobservable
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
At June 30
|
|
Identical Assets
|
|
Inputs
|
|
Inputs
|
|
June 30,
|
|
June 30,
|
|
|
2009
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
2009
|
|
2009
|
|
|
(Millions of dollars)
|
|
Properties, plant and equipment, net (held and used)
|
|
|
$193
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$193
|
|
|
|
$155
|
|
|
|
$265
|
|
Properties, plant and equipment, net (held for sale)
|
|
|
56
|
|
|
|
|
|
|
|
56
|
|
|
|
|
|
|
|
48
|
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Nonrecurring Assets at Fair Value
|
|
|
$249
|
|
|
|
$
|
|
|
|
$56
|
|
|
|
$193
|
|
|
|
$203
|
|
|
|
$357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairments of Properties, plant and equipment
In accordance with the provisions of FASB Statement
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets (FAS 144), long-lived assets
held and used with a carrying amount of
$348 million were written down to a fair value of
$193 million, resulting in a before-tax loss of
$155 million. The fair values were determined from internal
cash-flow models, using discount rates consistent with those
used by the company to evaluate cash flows of other assets of a
similar nature. Long-lived assets held for sale with
a carrying amount of $104 million were written down to a
fair value of $56 million, resulting in a before-tax loss
of $48 million. The fair values were determined based on
bids received from prospective buyers.
Assets and Liabilities Not Required to be Measured at Fair
Value FASB Staff Position
No. 107-1
and APB
28-1,
Interim Disclosures about Fair Value of Financial Instruments
(FSP 107-1),
requires certain fair-value disclosure of financial instruments
that are within the scope of FAS 107, Disclosures about
Fair Value of Financial Instruments (FAS 107), to be
presented in both interim and annual reports.
FSP 107-1
became effective for Chevron for the quarterly period ending
June 30, 2009. The company holds cash equivalents in
U.S. and
non-U.S. portfolios.
The instruments held are primarily time deposits, money market
funds and fixed rate bonds. Cash equivalents had carrying/fair
values of $5.3 billion and $7.1 billion at
June 30, 2009 and December 31, 2008, respectively, and
average maturities under 90 days. The balance at
June 30, 2009, includes $146 million of investments
for restricted funds related to an international upstream
development project. The amount is included in Deferred
charges and other assets on the Consolidated Balance
Sheet. Long-term debt of $5.8 billion and $1.2 billion
had estimated fair values of $6.3 billion and
$1.4 billion at June 30, 2009 and December 31,
2008, respectively.
Fair values of other financial instruments at June 30,
2009, were not material.
|
|
Note 13.
|
Derivative
Instruments and Hedging Activities
|
The company implemented FASB Statement No. 161,
Disclosures about Derivative Instruments and Hedging
Activities, an amendment of FASB Statement No. 133
(FAS 161), as of January 1, 2009.
Implementation of FAS 161 did not have any effect on the
companys results of operations or consolidated financial
position, nor any effect on the companys use of derivative
instruments or hedging activities. However, FAS 161 amended
and expanded the disclosures required by FAS 133 in order
to provide an enhanced understanding of how and why the company
uses derivative instruments, how derivative instruments and
related hedged items are accounted for under FAS 133 and
its related interpretations, and how derivative instruments
affect the companys financial position, financial
performance and cash flows.
20
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The companys derivative instruments principally include
crude-oil, natural-gas and refined-product futures, swaps,
options and forward contracts, as well as foreign-currency
forward contracts. None of the companys derivative
instruments is designated as a hedging instrument, although
certain of the companys affiliates make such designation.
The companys derivatives are not material to the
companys financial position, financial performance or cash
flows.
The company believes it has no material market or credit risks
to its operations, financial position or liquidity as a result
of its commodities and other derivatives activities, including
forward-exchange contracts.
Derivative instruments measured at fair value at June 30,
2009, and their classification on the Consolidated Balance Sheet
and Consolidated Statement of Income are as follows:
Consolidated
Balance Sheet:
Fair Value of Derivatives not Designated as Hedging
Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
|
Liability Derivatives
|
|
|
|
|
Fair Value
|
|
|
|
Fair Value
|
|
|
|
|
(Millions of Dollars)
|
Type of
|
|
Balance Sheet
|
|
At June 30
|
|
At December 31
|
|
Balance Sheet
|
|
At June 30
|
|
At December 31
|
Derivative Contract
|
|
Classification
|
|
2009
|
|
2008
|
|
Classification
|
|
2009
|
|
2008
|
|
Foreign Exchange
|
|
Accounts and notes receivable, net
|
|
|
$ 18
|
|
|
|
$ 5
|
|
|
Accrued liabilities
|
|
|
$
|
|
|
|
$ 89
|
|
Commodity
|
|
Accounts and notes
receivable, net
|
|
|
148
|
|
|
|
764
|
|
|
Accounts payable
|
|
|
345
|
|
|
|
344
|
|
Commodity
|
|
Long-term receivables, net
|
|
|
12
|
|
|
|
30
|
|
|
Deferred credits and other noncurrent obligations
|
|
|
36
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$178
|
|
|
|
$799
|
|
|
|
|
|
$381
|
|
|
|
$516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statement of Income:
The Effect of Derivatives not Designated as Hedging
Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain/(Loss)
|
|
|
Gain/(Loss)
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Type of
|
|
|
|
|
|
|
|
|
Derivative Contract
|
|
Statement of Income Classification
|
|
(Millions of dollars)
|
|
|
(Millions of dollars)
|
|
|
Foreign Exchange
|
|
Other income
|
|
$
|
26
|
|
|
$
|
(2
|
)
|
|
$
|
85
|
|
|
$
|
(2
|
)
|
Commodity
|
|
Sales and other operating revenues
|
|
|
(168
|
)
|
|
|
(325
|
)
|
|
|
(95
|
)
|
|
|
(438
|
)
|
Commodity
|
|
Purchased crude oil and products
|
|
|
(340
|
)
|
|
|
(634
|
)
|
|
|
(277
|
)
|
|
|
(738
|
)
|
Commodity
|
|
Other income
|
|
|
(7
|
)
|
|
|
(4
|
)
|
|
|
(7
|
)
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(489
|
)
|
|
$
|
(965
|
)
|
|
$
|
(294
|
)
|
|
$
|
(1,183
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 14.
|
Assets
Held For Sale
|
At June 30, 2009, the company classified $100 million
of net properties, plant and equipment as Assets held for
sale on the Consolidated Balance Sheet. These assets are
expected to be sold before the end of 2009.
21
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 15.
|
Other New
Accounting Standards
|
FASB Statement No. 165, Subsequent Events
(FAS 165)
In May 2009, the FASB issued FAS 165, which became
effective for the company for the quarter ended June 30,
2009. This Statement establishes the accounting for and
disclosure of events that occur after the balance sheet date but
before the financial statements are issued or made available. It
requires disclosure of the date through which a company has
evaluated subsequent events and the basis for that date, which
for public companies is the date the financial statements are
issued. This Statement is not expected to result in any
significant changes in the subsequent events reported by the
company. Refer to Note 1 on page 7 for the
FAS 165-related
disclosure for the quarter ended June 30, 2009.
FASB Statement No. 166, Accounting for Transfers of
Financial Assets an amendment of FASB Statement
No. 140 (FAS 166)
In June 2009, the FASB issued FAS 166, which will become
effective for the company on January 1, 2010. The standard
amends FASB Statement No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of
Liabilities. FAS 166 changes how companies account for
transfers of financial assets and eliminates the concept of
qualifying special purpose entities. Adoption of FAS 166 is
not expected to have an impact on the companys results of
operations, financial position or liquidity.
FASB Statement No. 167, Amendments to FASB
Interpretation No. 46(R) (FAS 167)
In June 2009, the FASB issued FAS 167, which will become
effective for the company January 1, 2010. The standard
amends the consolidation guidance for variable interest entities
(VIEs) in FASB Interpretation No. 46(R) by requiring the
enterprise to qualitatively assess if it is the primary
beneficiary of the VIE and, if so, the VIE must be consolidated.
Adoption of the Standard is not expected to have a material
impact on the companys results of operations, financial
position or liquidity.
FASB Statement No. 168, The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles a replacement of FASB
Statement No. 162 (FAS 168)
The FASB issued FAS 168 in June 2009, which becomes
effective for the company in the quarter ending
September 30, 2009. This standard establishes the FASB
Accounting Standards Codification system as the single
authoritative source of U.S. generally accepted accounting
principles (GAAP), which supersedes existing literature of the
FASB, Emerging Issues Task Force, American Institute of CPAs and
other sources. At the effective date, all literature outside the
Codification will no longer be authoritative. The Codification
does not change GAAP but takes existing GAAP literature and
organizes it in about 90 accounting Topics. Adoption of this
Statement will not affect the companys accounting.
22
|
|
Item 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Second
Quarter 2009 Compared With Second Quarter 2008
And Six Months 2009 Compared with Six Months 2008
Key
Financial Results
Earnings
by Business Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions of dollars)
|
|
|
Upstream Exploration and Production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
273
|
|
|
$
|
2,191
|
|
|
$
|
294
|
|
|
$
|
3,790
|
|
International
|
|
|
1,246
|
|
|
|
5,057
|
|
|
|
2,494
|
|
|
|
8,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Upstream
|
|
|
1,519
|
|
|
|
7,248
|
|
|
|
2,788
|
|
|
|
12,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Downstream Refining, Marketing and
Transportation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
(95
|
)
|
|
|
(682
|
)
|
|
|
38
|
|
|
|
(678
|
)
|
International
|
|
|
256
|
|
|
|
(52
|
)
|
|
|
946
|
|
|
|
196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Downstream
|
|
|
161
|
|
|
|
(734
|
)
|
|
|
984
|
|
|
|
(482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemicals
|
|
|
108
|
|
|
|
41
|
|
|
|
147
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment Earnings
|
|
|
1,788
|
|
|
|
6,555
|
|
|
|
3,919
|
|
|
|
11,978
|
|
All Other
|
|
|
(43
|
)
|
|
|
(580
|
)
|
|
|
(337
|
)
|
|
|
(835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Chevron Corporation(1)(2)
|
|
$
|
1,745
|
|
|
$
|
5,975
|
|
|
$
|
3,582
|
|
|
$
|
11,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes foreign currency effects
|
|
$
|
(453
|
)
|
|
$
|
126
|
|
|
$
|
(507
|
)
|
|
$
|
81
|
|
(2) Also referred to as earnings in the discussions
that follow.
|
|
|
|
|
|
|
|
|
Net income attributable to Chevron Corporation for the
second quarter 2009 was $1.75 billion ($0.87 per
share diluted), compared with $5.98 billion
($2.90 per share diluted) in the corresponding 2008
period. Net income attributable to Chevron Corporation for the
first six months of 2009 was $3.58 billion ($1.79 per
share diluted), versus $11.14 billion ($5.38
per share diluted) in the 2008 first half.
Upstream earnings in the second quarter 2009 were
$1.52 billion, compared with $7.25 billion in the 2008
quarter. Earnings for the first half of 2009 were
$2.79 billion, versus $12.38 billion a year earlier.
The decrease between both comparative periods was due mainly to
lower prices for crude oil and natural gas.
Downstream earnings were $161 million in the second
quarter 2009, compared with a loss of $734 million in the
year-earlier period. Earnings for the first six months of 2009
were $984 million, versus a loss of $482 million in
the corresponding 2008 period. Earnings for the second quarter
and first half of 2009 included $140 million and
$540 million, respectively, of gains on sales of marketing
businesses outside the United States.
Chemicals earned $108 million and $147 million
for the second quarter and the first half of 2009, respectively.
Comparative amounts in 2008 were $41 million and
$84 million.
Refer to pages 27 through 30 for additional discussion of
results by business segment and All Other activities
for the second quarter and first six months of 2009 versus the
same periods in 2008.
23
Business
Environment and Outlook
Chevron is a global energy company with significant business
activities in the following countries: Angola, Argentina,
Australia, Azerbaijan, Bangladesh, Brazil, Cambodia, Canada,
Chad, China, Colombia, Democratic Republic of the Congo,
Denmark, Indonesia, Kazakhstan, Myanmar, the Netherlands,
Nigeria, Norway, the Partitioned Neutral Zone between Saudi
Arabia and Kuwait, the Philippines, Republic of the Congo,
Singapore, South Africa, South Korea, Thailand, Trinidad and
Tobago, the United Kingdom, the United States, Venezuela, and
Vietnam.
Earnings of the company depend largely on the profitability of
its upstream (exploration and production) and downstream
(refining, marketing and transportation) business segments. The
single biggest factor that affects the results of operations for
both segments is movement in the price of crude oil. In the
downstream business, crude oil is the largest cost component of
refined products. The overall trend in earnings is typically
less affected by results from the companys chemicals
business and other activities and investments. Earnings for the
company in any period may also be influenced by events or
transactions that are infrequent
and/or
unusual in nature.
In recent years and through most of 2008, Chevron and the oil
and gas industry at large experienced an increase in certain
costs that exceeded the general trend of inflation in many areas
of the world. This increase in costs affected the companys
operating expenses and capital programs for all business
segments, but particularly for upstream. These cost pressures
began to soften somewhat in late 2008 and through the first half
of 2009. As the price of crude oil dropped precipitously from a
record high in mid-2008, the demand for some goods and services
in the industry began to slacken. This downward cost trend is
expected to continue during 2009 if crude-oil prices do not
significantly rebound. The company is actively managing its
schedule of work and contracting and procurement activities to
capture the value associated with this decline in costs. (Refer
to the Upstream section on page 25 for a
discussion of the trend in crude-oil prices.)
The companys operations, especially upstream, can also be
affected by changing economic, regulatory and political
environments in the various countries in which it operates,
including the United States. Civil unrest, acts of violence or
strained relations between a government and the company or other
governments may impact the companys operations or
investments. Those developments have at times significantly
affected the companys operations and results and are
carefully considered by management when evaluating the level of
current and future activity in such countries.
To sustain its long-term competitive position in the upstream
business, the company must develop and replenish an inventory of
projects that offer adequate financial returns for the
investment required. Identifying promising areas for
exploration, acquiring the necessary rights to explore for and
to produce crude oil and natural gas, drilling successfully, and
handling the many technical and operational details in a safe
and cost-effective manner are all important factors in this
effort. Projects often require long lead times and large capital
commitments. From time to time, certain governments have sought
to renegotiate contracts or impose additional costs on the
company. Governments may attempt to do so in the future. The
company will continue to monitor these developments, take them
into account in evaluating future investment opportunities, and
otherwise seek to mitigate any risks to the companys
current operations or future prospects.
The company also continually evaluates opportunities to dispose
of assets that are not expected to provide sufficient long-term
value or to acquire assets or operations complementary to its
asset base to help augment the companys growth. Refer to
the Results of Operations section beginning on
page 27 for discussions of net gains on asset sales during
the first half of 2009. Asset dispositions and restructurings
may also occur in future periods and could result in significant
gains or losses.
The company continues to closely monitor developments in the
financial and credit markets, the level of worldwide economic
activity and the implications to the company from weakness in
prices for crude oil and natural gas. Management is taking these
developments into account in the conduct of daily operations and
for business planning. The company remains confident of its
underlying financial strength to deal with potential problems
presented in this environment. (Refer also to discussion of the
companys liquidity and capital resources on page 34.)
24
Comments related to earnings trends for the companys major
business areas are as follows:
Upstream Earnings for the upstream segment are closely
aligned with industry price levels for crude oil and natural
gas. Crude-oil and natural-gas prices are subject to external
factors over which the company has no control, including product
demand connected with global economic conditions, industry
inventory levels, production quotas imposed by the Organization
of Petroleum Exporting Countries (OPEC), weather-related damage
and disruptions, competing fuel prices, and regional supply
interruptions or fears thereof that may be caused by military
conflicts, civil unrest or political uncertainty. Moreover, any
of these factors could also inhibit the companys
production capacity in an affected region. The company monitors
developments closely in the countries in which it operates and
holds investments, and attempts to manage risks in operating its
facilities and business. Besides the impact of the fluctuation
in prices for crude oil and natural gas, the longer-term trend
in earnings for the upstream segment is also a function of other
factors, including the companys ability to find or acquire
and efficiently produce crude oil and natural gas, changes in
fiscal terms of contracts and changes in tax rates on income.
Price levels for capital and exploratory costs and operating
expenses associated with the efficient production of crude oil
and natural gas can also be subject to external factors beyond
the companys control. External factors include not only
the general level of inflation but also prices charged by the
industrys material- and service-providers, which can be
affected by the volatility of the industrys own
supply-and-demand
conditions for such materials and services. Capital and
exploratory expenditures and operating expenses also can be
affected by damage to production facilities caused by severe
weather or civil unrest. The chart below shows the trend in
benchmark prices for West Texas Intermediate (WTI) crude oil and
U.S. Henry Hub natural gas. During 2008, industry price
levels for WTI averaged $100 per barrel. The WTI price peaked at
$147 in July 2008 and fell sharply to $45 at the end of the
year. The WTI price in the first half of 2009 averaged $52 and
ended July at about $69. The decline in prices from mid-2008 is
largely associated with a weakening in global economic
conditions and a reduction in the demand for crude oil. In a
July 2009 report, the International Energy Agency (IEA)
predicted global demand for crude oil in 2009 would decline
2.9 percent from the 2008 level of consumption. Such a
contraction in demand would be the most severe since the early
1980s. In the same report, IEA projected 2010 demand will
increase 1.7 percent from expected consumption for the
full-year 2009.
|
|
|
|
|
A differential in crude-oil prices exists between high-quality
(high-gravity, low sulfur) crudes and those of lower quality
(low-gravity, high sulfur). The amount of the differential in
any period is associated with the supply of heavy crude
available versus the demand that is a function of the limited
number of refineries that are able to process this lower-quality
feedstock into light products (motor gasoline, jet fuel,
aviation gasoline and diesel fuel). The differential has narrowed
|
significantly over the past year as production curtailments by
OPEC have been mainly of lower-quality crudes. Chevron produces
or shares in the production of heavy crude oil in California,
Chad, Indonesia, the Partitioned Neutral Zone between Saudi
Arabia and Kuwait, Venezuela and in certain fields in Angola,
China and the United Kingdom North Sea. (Refer to page 33
for the companys average U.S. and international
crude-oil realizations.)
|
In contrast to price movements in the global market for crude
oil, price changes for natural gas in many regional markets are
more closely aligned with supply and demand conditions in those
markets. Prices at Henry Hub averaged $4 per thousand cubic feet
(MCF) in the first half of 2009, compared with about $10 for the
first half of 2008 and almost $9 for the full-year 2008. At the
end of July 2009, the Henry Hub spot price was about $3.30 per
MCF. Fluctuations in the price for natural gas in the United
States are closely associated with the volumes produced in North
America and the level of inventory in underground storage
relative to customer demand. The lower U.S. price levels in
2009 are also associated with a softening in demand as a result
of the economic slowdown. In a July 2009 report, the
U.S. Energy Information Administration (EIA) forecasted
2009 natural-gas demand in the United States would be about two
percent lower than in 2008.
25
Certain other regions of the world in which the company operates
have different supply, demand and regulatory circumstances,
which until recently have resulted in significantly lower
average sales prices than in the United States for the
companys production of natural gas. As a result of the
U.S. natural gas
supply-and-demand
conditions in the first half of 2009, the companys
U.S. and international realizations were about the same.
(Refer to page 33 for the companys average natural
gas realizations for the U.S. and international regions.)
In the first half of 2009, the companys worldwide net
oil-equivalent production averaged 2.67 million barrels per
day. During the period, the companys net oil production
was curtailed by an average of about 40,000 barrels per day
due to quotas imposed by OPEC. About one-fifth of the
companys net oil-equivalent production in the first six
months occurred in the OPEC-member countries of Angola, Nigeria
and Venezuela and in the Partitioned Neutral Zone between Saudi
Arabia and Kuwait.
The company estimates that oil-equivalent production for the
full-year 2009 will average 2.66 million barrels per day.
This estimate is subject to many factors and uncertainties,
including additional quotas that may be imposed by OPEC, price
effects on production volumes calculated under cost-recovery and
variable-royalty provisions of certain contracts, changes in
fiscal terms or restrictions on the scope of company operations,
delays in project startups, fluctuations in demand for natural
gas in various markets, weather conditions that may shut in
production, civil unrest, changing geopolitics, or other
disruptions to operations. The outlook for future production
levels also is affected by the size and number of economic
investment opportunities and, for new large-scale projects, the
time lag between initial exploration and the beginning of
production. A significant majority of Chevrons upstream
investment is currently being made outside the United States.
Investments in upstream projects generally begin well in advance
of the start of the associated crude-oil and natural-gas
production.
Refer to the Results of Operations on pages 27 through 29
for additional discussion of the companys upstream
business.
Downstream Earnings for the downstream segment are
closely tied to margins on the refining and marketing of
products that include gasoline, diesel, jet fuel, lubricants,
fuel oil and feedstocks for chemical manufacturing. Industry
margins are sometimes volatile and can be affected by the global
and regional
supply-and-demand
balance for refined products and by changes in the price of
crude oil used for refinery feedstock. Industry margins can also
be influenced by refined-product inventory levels, geopolitical
events, refinery maintenance programs and disruptions at
refineries resulting from unplanned outages that may be due to
severe weather, fires or other operational events.
Other factors affecting profitability for downstream operations
include the reliability and efficiency of the companys
refining and marketing network, the effectiveness of the
crude-oil and product-supply functions and the economic returns
on invested capital. Profitability can also be affected by the
volatility of tanker-charter rates for the companys
shipping operations, which are driven by the industrys
demand for crude-oil and product tankers. Other factors beyond
the companys control include the general level of
inflation and energy costs to operate the companys
refinery and distribution network.
The companys most significant marketing areas are the West
Coast of North America, the U.S. Gulf Coast, Latin America,
Asia, southern Africa and the United Kingdom. Chevron operates
or has ownership interests in refineries in each of these areas,
except Latin America. As part of its downstream strategy to
focus on areas of market strength, the company completed sales
of marketing businesses during the first half of 2009 in Brazil
and certain countries of Africa.
The companys refining and marketing margins in the first
half of 2009 were generally weak, as demand for refined products
in most areas was dampened by the economic slowdown, and
refined-product supplies in most areas were plentiful.
Refer to the Results of Operations on pages 29 through 30 for
additional discussion of the companys downstream
operations.
Chemicals Earnings in the petrochemicals business are
closely tied to global chemical demand, industry inventory
levels and plant capacity utilization. Feedstock and fuel costs,
which tend to follow crude-oil and natural-gas price movements,
also influence earnings in this segment.
26
Refer to the Results of Operations on page 30 for
additional discussion of chemical earnings.
Operating
Developments
Recent milestones for other upstream projects were achieved in:
|
|
|
United States
Start-up
in the Gulf of Mexico of deepwater production at the
58 percent-owned and operated Tahiti Field, reaching
maximum total oil-equivalent production of 135,000 barrels
per day during July.
|
|
|
Brazil
Start-up
of deepwater production at the 52 percent-owned and
operated Frade Field, which is projected to attain maximum
production of 90,000 barrels per day of crude oil and
natural gas liquids in 2011.
|
|
|
Angola
Start-up
of the 39 percent-owned and operated Mafumeira Norte
offshore project, which is expected to reach maximum total daily
production of 30,000 barrels of crude oil and
30 million cubic feet of natural gas in 2011.
|
|
|
Republic of the Congo Discovery of crude oil
offshore at 31 percent-owned Moho Nord Marine-4 in the area
of the Moho-Bilondo project, which commenced production in 2008.
|
|
|
Australia Award of the front-end engineering
and design (FEED) contract for an LNG plant with two trains,
each with a processing capacity of 4.3 million metric tons
per year, and a co-located domestic gas plant that would support
development of the companys 100 percent-owned
Wheatstone Field and other natural gas resources off the
northwest coast.
|
|
|
Australia Recommendation by the Western
Australian Environmental Protection Authority (EPA) that the
proposed revision and expansion of the 50 percent-owned and
operated Gorgon Project to add a third 5 million
metric-ton-per-year LNG train could meet the EPAs
environmental objectives, representing a necessary step in
Chevrons process to make a final investment decision later
this year.
|
Results
of Operations
Business Segments The following section presents the
results of operations for the companys business
segments upstream, downstream and
chemicals as well as for all
other the departments and companies managed at
the corporate level. (Refer to Note 4 beginning on
page 9 for a discussion of the companys
reportable segments, as defined in FAS 131,
Disclosures about Segments of an Enterprise and Related
Information.)
Upstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Millions of dollars)
|
|
|
|
|
|
U.S. Upstream Earnings
|
|
$
|
273
|
|
|
$
|
2,191
|
|
|
$
|
294
|
|
|
$
|
3,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. upstream earnings of $273 million in the second
quarter of 2009 decreased about $1.9 billion from the same
period last year. Lower prices for crude oil and natural gas
reduced earnings by about $2.0 billion between periods. The
2009 quarter included charges of approximately $100 million
for the impairment of assets. Operating expenses were about
$100 million lower between quarters.
Earnings for the first six months of 2009 were
$294 million, compared with $3.8 billion a year
earlier. The $3.5 billion decline between periods equaled
the approximate effect of lower prices for crude oil and natural
gas. Other factors of lesser significance were essentially
offsetting.
The average realization per barrel for crude oil and natural gas
liquids in the second quarter of 2009 was approximately $50,
compared with $109 a year earlier. Average prices were $43 and
$98 for the six months of 2009 and 2008, respectively. The
average natural-gas realization was $3.27 per thousand cubic
feet in the 2009 quarter, compared with $9.84 in the year-ago
period. First-half realizations were $3.70 in 2009 and $8.67 in
2008.
Net oil-equivalent production was 700,000 barrels per day
in the second quarter 2009, down 2,000 barrels per day from
the corresponding period in 2008. First-half 2009 production was
686,000 barrels per day, down 22,000 barrels
27
per day from the first six months of 2008. A production benefit
between the comparative periods associated with the late-2008
start-up of
the Blind Faith Field and the second quarter 2009
start-up of
the Tahiti Field, both located in the Gulf of Mexico, was more
than offset by the impacts of normal field declines, production
offline due to damages from last years hurricanes and
minor asset sales. The net liquids component of oil-equivalent
production was 467,000 barrels per day and
454,000 barrels per day for the second quarter and first
half of 2009, respectively. Volumes were about 7 percent
and 4 percent higher than the corresponding 2008 periods.
Net natural gas production was 1.4 billion cubic feet per
day for both the second quarter and six months of 2009, down
about 12 percent and 15 percent from the comparative
2008 periods, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Millions of dollars)
|
|
|
|
|
|
International Upstream Earnings*
|
|
$
|
1,246
|
|
|
$
|
5,057
|
|
|
$
|
2,494
|
|
|
$
|
8,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Includes foreign currency effects
|
|
$
|
(476
|
)
|
|
$
|
80
|
|
|
$
|
(443
|
)
|
|
$
|
(87
|
)
|
International upstream earnings of $1.2 billion in the
second quarter of 2009 decreased about $3.8 billion from
the year ago period. Lower prices for crude oil and natural gas
reduced earnings by about $2.8 billion between periods. The
swing in foreign-currency effects decreased earnings by about
$560 million. Depreciation expense was about
$250 million higher between periods, and charges for
exploratory well write-offs increased about $100 million.
Earnings for the first six months of 2009 were
$2.5 billion, down about $6 billion from the 2008
period. Lower prices for crude oil and natural gas in 2009
decreased earnings by about $5.5 billion. Depreciation
expenses were about $500 million higher due in part to
increased production between periods. The change in
foreign-currency effects decreased earnings by about
$360 million. Exploration expenses increased about
$150 million between periods. Partially offsetting all of
these effects was the impact of higher sales volumes, which
increased earnings approximately $700 million between
quarters.
The average realization per barrel of crude oil and natural gas
liquids in the second quarter 2009 was about $53, compared with
$110 in the corresponding 2008 period. For the first half of
2009, the average realization was about $46 per barrel, down
from $99 in the 2008 first half. The average natural-gas
realization in the 2009 second quarter was $3.73 per thousand
cubic feet, down from $5.44 in the second quarter last year.
Between the six-month periods, the average natural gas
realization decreased to $3.97 from $5.13.
Net oil-equivalent production, including volumes from oil sands
in Canada, was 1.97 million barrels per day in the second
quarter 2009, up 135,000 barrels per day from the year-ago
period. Included in the increase was about 185,000 barrels
per day of production associated with two projects
Agbami in Nigeria, which commenced operations in the third
quarter of last year, and the expansion at Tengiz in Kazakhstan.
Also included in the increase was 85,000 barrels per day
associated with the impact of lower prices on cost-recovery
volumes and other contractual provisions affecting
Chevrons share of production. Factors other than normal
field declines that partially offset these increases included
OPEC-related curtailments of 35,000 barrels per day,
approximately 30,000 barrels per day offline due to civil
unrest in the onshore area of Nigeria and about
25,000 barrels per day of lower oil-equivalent natural gas
production in Thailand.
Net oil-equivalent production for the first half of 2009 was
1.98 million barrels per day, up 121,000 barrels per
day from the 2008 first half. Production was higher in Nigeria,
Kazakhstan, and Indonesia and lower in Thailand, Venezuela and
Angola. Included in the increase was about 120,000 barrels
per day from Agbami and approximately 50,000 barrels per
day from Tengiz. Also included in the increase was about
70,000 barrels per day associated with the impact of lower
prices on cost-recovery volumes and other contractual provisions
affecting Chevrons share of production. Factors other than
normal field declines that partially offset these increases
included OPEC-related curtailments of 40,000 barrels per
day, 20,000 barrels per day due to the civil unrest in
Nigeria and 20,000 barrels per day of lower oil equivalent
natural gas production in Thailand.
The net liquids component of oil-equivalent production was
1.37 million barrels per day in the second quarter 2009 and
1.38 million barrels per day in first half of 2009, an
increase of 11 percent for both comparative periods. Net
28
natural gas production of 3.59 billion cubic feet per day
in the second quarter 2009 and 3.62 billion cubic feet per
day in first half of 2009 decreased about 1 percent and
2 percent for the respective periods.
Downstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(Millions of dollars)
|
|
|
U.S. Downstream Earnings
|
|
$
|
(95
|
)
|
|
$
|
(682
|
)
|
|
$
|
38
|
|
|
$
|
(678
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. downstream incurred a loss of $95 million in the
second quarter of 2009, compared with a loss of
$682 million a year earlier. Margins on the sale of refined
products were higher in the 2009 quarter, but were weak in both
periods. Losses on derivative instruments were about
$200 million lower in the 2009 quarter. Operating expenses
declined about $150 million from last years second
quarter, which included higher expenses associated with planned
shutdowns for refinery maintenance in 2008.
Earnings for the first six months of 2009 were $38 million,
compared with a loss of $678 million in the 2008 first
half. Refined-product margins were higher in the first six
months of 2009, but were weak in both periods. Losses on
derivative instruments were about $250 million lower in the
2009 first half. Operating expenses declined about
$200 million between the six-month periods.
Crude-inputs to the companys refineries were
923,000 barrels per day in the second quarter 2009, up
13 percent, or 107,000 barrels per day, from a year
earlier. Crude-oil inputs of 931,000 barrels per day
increased about 9 percent between the six-month periods.
The increase in both comparative periods was attributable mainly
to less planned and unplanned downtime for refinery turnarounds.
Refined-product sales volumes increased 4 percent between
the quarterly periods to 1.44 million barrels per day.
Between the six- month periods, refined-product sales volumes
were up 1 percent to 1.42 million barrels per day. The
increase for both comparative periods was primarily due to
higher sales volumes of gasoline. Branded gasoline sales volumes
were up 7 percent between quarters to 639,000 barrels
per day. For the six-month periods, branded gasoline sales
volumes increased 5 percent to 626,000 barrels per day.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
(Millions of dollars)
|
|
|
|
|
|
International Downstream Earnings*
|
|
$
|
256
|
|
|
$
|
(52
|
)
|
|
$
|
946
|
|
|
$
|
196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Includes foreign currency effects
|
|
$
|
(25
|
)
|
|
$
|
46
|
|
|
$
|
(90
|
)
|
|
$
|
157
|
|
International downstream earned $256 million in the second
quarter 2009, compared with a loss of $52 million a year
earlier. Margins on the sale of refined products improved in
most areas, due mainly to a decrease in crude-oil feedstock
costs. Operating expenses were about $200 million lower
between the quarterly periods. Earnings in the second quarter
2009 included gains of approximately $140 million associated
with asset sales. Foreign-currency effects reduced earnings by
$25 million in the 2009 quarter, compared with a
$46 million benefit a year earlier.
Earnings for the six months of 2009 were $946 million, up
$750 million from the 2008 period. The 2009 period included
gains of approximately $540 million on the sale of
marketing businesses in Brazil and certain countries in Africa.
Operating expenses declined about $400 million from the
first six months of 2008. Foreign-currency effects reduced
earnings by $90 million in 2009, compared with a
$157 million benefit to earnings a year earlier.
The companys share of crude-oil inputs to refineries was
970,000 barrels per day in the 2009 second quarter, up
18,000 from the year-ago period. For the six months of 2009,
crude-oil inputs were 977,000 barrels per day, up 17,000
from the 2008 first half. The increase for both comparative
periods was attributable mainly to less planned and unplanned
downtime for refinery turnarounds.
Refined-product sales volumes of 1.82 million barrels per
day in the 2009 second quarter were 12 percent lower than a
year earlier, due mainly to asset sales (referenced above).
Excluding the impact of asset sales, sales volumes
29
were down 5 percent between periods primarily due to lower
demand for jet fuel and fuel oil. Between the six-month periods,
refined-product sales volumes of 1.89 million barrels per
day decreased by about 8 percent, also due mainly to asset
sales.
Chemicals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Millions of dollars)
|
|
|
|
|
|
Earnings*
|
|
$
|
108
|
|
|
$
|
41
|
|
|
$
|
147
|
|
|
$
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Includes foreign currency effects
|
|
$
|
6
|
|
|
$
|
1
|
|
|
$
|
13
|
|
|
$
|
|
|
Chemical operations earned $108 million in the second
quarter of 2009, compared with $41 million in the year-ago
quarter. Six-month earnings increased from $84 million in
2008 to $147 million in 2009. For both comparative periods,
earnings increased at the 50-percent owned Chevron Phillips
Chemical Company LLC (CPChem) due to lower utility and
manufacturing costs, the effect of which was partially offset by
lower margins on the sale of commodity chemicals. For
Chevrons Oronite subsidiary, earnings in the second
quarter of 2009 increased from a year earlier on higher margins
for the sale of lubricant and fuel additives, the effect of
which more than offset the impact of lower sales volumes.
Earnings declined between the six-month periods mainly on lower
sales volumes.
All
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Millions of dollars)
|
|
|
|
|
|
Net Charges*
|
|
$
|
(43
|
)
|
|
$
|
(580
|
)
|
|
$
|
(337
|
)
|
|
$
|
(835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Includes foreign currency effects
|
|
$
|
42
|
|
|
$
|
(1
|
)
|
|
$
|
13
|
|
|
$
|
11
|
|
All Other consists of mining operations, power generation
businesses, worldwide cash management and debt financing
activities, corporate administrative functions, insurance
operations, real estate activities, alternative fuels and
technology companies.
Net charges in the second quarter 2009 were $43 million,
compared with $580 million in the year-ago period. For the
six months of 2009, net charges were $337 million, compared
with $835 million a year earlier. Net charges were lower in
the 2009 quarterly and six-month periods for environmental
remediation at sites that previously had been closed or sold,
corporate tax items and employee compensation and benefits.
Consolidated
Statement of Income
Explanations of variations between periods for certain income
statement categories are provided below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Millions of dollars)
|
|
|
|
|
|
Sales and other operating revenues
|
|
$
|
39,647
|
|
|
$
|
80,962
|
|
|
$
|
74,634
|
|
|
$
|
145,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and other operating revenues for the quarterly and six
month periods decreased $41 billion and $71 billion,
respectively, due mainly to lower prices for crude oil, natural
gas and refined products.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Millions of dollars)
|
|
|
|
|
|
Income from equity affiliates
|
|
$
|
735
|
|
|
$
|
1,563
|
|
|
$
|
1,346
|
|
|
$
|
2,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
Income from equity affiliates decreased for the quarterly and
six-month periods due mainly to lower upstream-related earnings
from Tengizchevroil in Kazakhstan and Petropiar and Petroboscan
in Venezuela, again principally related to lower prices for
crude oil.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Millions of dollars)
|
|
|
|
|
|
Other income
|
|
$
|
(177
|
)
|
|
$
|
464
|
|
|
$
|
355
|
|
|
$
|
507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income for the quarterly period in 2009 and the six-month
period decreased mainly due to foreign-exchange losses
associated with weakening of the U.S. dollar and lower
interest income. These effects were partially offset by gains
from downstream asset sales outside of the United States.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Millions of dollars)
|
|
|
|
|
|
Purchased crude oil and products
|
|
$
|
23,678
|
|
|
$
|
56,056
|
|
|
$
|
44,078
|
|
|
$
|
98,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases decreased $32 billion and $55 billion in the
quarterly and six-month periods due mainly to lower prices for
crude oil, natural gas and refined products.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Millions of dollars)
|
|
|
|
|
|
Operating, selling, general and administrative expenses
|
|
$
|
5,252
|
|
|
$
|
6,887
|
|
|
$
|
10,575
|
|
|
$
|
12,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating, selling, general and administrative expenses
decreased approximately $1.6 billion between quarters and
$2.1 billion between the six-month periods. Lower expenses
related to environmental remediation, shipping charters and
other transportation, contract labor and fuel accounted for
approximately $1.1 billion and $1.5 billion of the
decline between the quarterly and six-month periods,
respectively. Other categories of expense were also generally
lower but were of lesser significance individually.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Millions of dollars)
|
|
|
|
|
|
Exploration expenses
|
|
$
|
438
|
|
|
$
|
307
|
|
|
$
|
819
|
|
|
$
|
560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration expenses in the quarterly period in 2009 and the
six-month period increased due to higher amounts for well
write-offs and geological and geophysical costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Millions of dollars)
|
|
|
|
|
|
Depreciation, depletion and amortization
|
|
$
|
3,099
|
|
|
$
|
2,275
|
|
|
$
|
5,966
|
|
|
$
|
4,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in both comparative periods was associated mainly
with production
start-ups
for upstream projects in the United States and Africa and higher
depreciation rates for certain other oil and gas producing
fields. Asset impairments accounted for less than
$200 million of the increase in the quarterly period and
about $300 million of the increase in the six-month period.
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Millions of dollars)
|
|
|
|
|
|
Taxes other than on income
|
|
$
|
4,386
|
|
|
$
|
5,699
|
|
|
$
|
8,364
|
|
|
$
|
11,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes other than on income decreased primarily due to lower
import duties in the companys U.K. downstream operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Millions of dollars)
|
|
|
|
|
|
Income tax expense
|
|
$
|
1,585
|
|
|
$
|
5,756
|
|
|
$
|
2,904
|
|
|
$
|
10,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rates for the 2009 and 2008 second quarters
were 47 percent and 49 percent, respectively. For the
year-to-date
periods, the effective tax rates were 45 and 48 percent,
respectively. The 2009 rates in the comparative periods were
lower due to proportionally higher income being earned in
international downstream businesses that were taxed at lower
average rates than income earned in international upstream tax
jurisdictions.
32
Selected
Operating Data
The following table presents a comparison of selected operating
data:
Selected
Operating Data(1)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
U.S. Upstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net crude-oil and natural-gas-liquids production (MBPD)
|
|
|
467
|
|
|
|
438
|
|
|
|
454
|
|
|
|
437
|
|
Net natural-gas production (MMCFPD)(3)
|
|
|
1,395
|
|
|
|
1,588
|
|
|
|
1,387
|
|
|
|
1,627
|
|
Net oil-equivalent production (MBOEPD)
|
|
|
700
|
|
|
|
702
|
|
|
|
686
|
|
|
|
708
|
|
Sales of natural gas (MMCFPD)
|
|
|
5,721
|
|
|
|
7,631
|
|
|
|
6,046
|
|
|
|
7,817
|
|
Sales of natural gas liquids (MBPD)
|
|
|
163
|
|
|
|
167
|
|
|
|
157
|
|
|
|
156
|
|
Revenue from net production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil and natural gas liquids ($/Bbl.)
|
|
$
|
50.42
|
|
|
$
|
108.67
|
|
|
$
|
43.46
|
|
|
$
|
97.66
|
|
Natural gas ($/MCF)
|
|
$
|
3.27
|
|
|
$
|
9.84
|
|
|
$
|
3.70
|
|
|
$
|
8.67
|
|
International Upstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net crude-oil and natural-gas-liquids production (MBPD)
|
|
|
1,346
|
|
|
|
1,207
|
|
|
|
1,353
|
|
|
|
1,218
|
|
Net natural-gas production (MMCFPD)(3)
|
|
|
3,593
|
|
|
|
3,621
|
|
|
|
3,618
|
|
|
|
3,695
|
|
Net oil-equivalent production (MBOEPD)(4)
|
|
|
1,970
|
|
|
|
1,835
|
|
|
|
1,981
|
|
|
|
1,860
|
|
Sales of natural gas (MMCFPD)
|
|
|
3,962
|
|
|
|
4,205
|
|
|
|
4,108
|
|
|
|
4,190
|
|
Sales of natural gas liquids (MBPD)
|
|
|
110
|
|
|
|
127
|
|
|
|
113
|
|
|
|
131
|
|
Revenue from liftings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil and natural gas liquids ($/Bbl.)
|
|
$
|
53.17
|
|
|
$
|
110.44
|
|
|
$
|
46.36
|
|
|
$
|
98.63
|
|
Natural gas ($/MCF)
|
|
$
|
3.73
|
|
|
$
|
5.44
|
|
|
$
|
3.97
|
|
|
$
|
5.13
|
|
U.S. and International Upstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net oil-equivalent production, including volumes from oil
sands (MBOEPD) (3)(4)
|
|
|
2,670
|
|
|
|
2,537
|
|
|
|
2,667
|
|
|
|
2,568
|
|
U.S. Downstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gasoline sales (MBPD)(5)
|
|
|
733
|
|
|
|
677
|
|
|
|
719
|
|
|
|
687
|
|
Sales of other refined products (MBPD)
|
|
|
708
|
|
|
|
706
|
|
|
|
703
|
|
|
|
721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,441
|
|
|
|
1,383
|
|
|
|
1,422
|
|
|
|
1,408
|
|
Refinery input (MBPD)
|
|
|
923
|
|
|
|
816
|
|
|
|
931
|
|
|
|
855
|
|
International Downstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gasoline sales (MBPD)(5)
|
|
|
447
|
|
|
|
512
|
|
|
|
469
|
|
|
|
507
|
|
Sales of other refined products (MBPD)
|
|
|
870
|
|
|
|
1,043
|
|
|
|
924
|
|
|
|
1,048
|
|
Share of affiliate sales (MBPD)
|
|
|
504
|
|
|
|
511
|
|
|
|
497
|
|
|
|
504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,821
|
|
|
|
2,066
|
|
|
|
1,890
|
|
|
|
2,059
|
|
Refinery input (MBPD)
|
|
|
970
|
|
|
|
952
|
|
|
|
977
|
|
|
|
960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes company share of equity affiliates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) MBPD thousands of barrels per day;
MMCFPD millions of
cubic feet per day; Bbl. Barrel; MCF
thousands of cubic
feet; oil-equivalent gas (OEG) conversion ratio is 6,000 cubic
feet
of natural gas = 1 barrel of crude oil; MBOEPD
thousands of
barrels of oil-equivalent per day.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) Includes natural gas consumed in operations (MMCFPD):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
56
|
|
|
|
69
|
|
|
|
57
|
|
|
|
80
|
|
International
|
|
|
487
|
|
|
|
424
|
|
|
|
493
|
|
|
|
454
|
|
(4) Includes production from oil sands net
(MBPD):
|
|
|
26
|
|
|
|
24
|
|
|
|
25
|
|
|
|
26
|
|
(5) Includes branded and unbranded gasoline.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
Liquidity
and Capital Resources
Cash, cash equivalents and marketable securities totaled
approximately $7.3 billion at June 30, 2009, down
$2.2 billion from year-end 2008. Cash provided by operating
activities in the first half of 2009 was $5.7 billion,
compared with $15.3 billion in the year ago period. The net
cash provided by operating activities in the 2009 period was
less than the $8.4 billion of cash used for investing
activities, which included $2 billion for the extension of
an upstream concession. (Refer also to the discussion of the
companys capital and exploratory expenditures on
page 35.)
Dividends The company paid dividends of $2.6 billion
to common stockholders during the first six months of 2009. In
July 2009, the company declared a quarterly dividend of 68 cents
per common share payable in September 2009.
Debt and Capital Lease and Noncontrolling Interest
Obligations Chevrons total debt and capital lease
obligations were $12.1 billion at June 30, 2009, up
from $8.9 billion at December 31, 2008. The company
also had noncontrolling interest obligations of
$522 million at June 30, 2009.
The $3.2 billion increase in total debt and capital lease
obligations during the first half of 2009 included the net
effect of a $5 billion public bond issuance, a
$1.6 billion decrease in commercial paper, and payment of
principal for $400 million of Texaco Capital Inc. bonds
that matured in January. The companys debt and capital
lease obligations due within one year, consisting primarily of
commercial paper and the current portion of long-term debt,
totaled $6.0 billion at June 30, 2009, and
$7.8 billion at December 31, 2008. Of these amounts,
$5.1 billion and $5.0 billion were reclassified to
long-term at the end of the respective periods. At June 30,
2009, settlement of these obligations was not expected to
require the use of working capital within one year, as the
company had the intent and the ability, as evidenced by
committed credit facilities, to refinance them on a long-term
basis.
At June 30, 2009, the company had $5.1 billion in
committed credit facilities with various major banks, which
permit the refinancing of short-term obligations on a long-term
basis. These facilities support commercial paper borrowing and
also can be used for general corporate purposes. The
companys practice has been to continually replace expiring
commitments with new commitments on substantially the same
terms, maintaining levels management believes appropriate. Any
borrowings under the facilities would be unsecured indebtedness
at interest rates based on London Interbank Offered Rate or an
average of base lending rates published by specified banks and
on terms reflecting the companys strong credit rating. No
borrowings were outstanding under these facilities at
June 30, 2009. In addition, the company has an automatic
shelf registration statement that expires in March 2010 for an
unspecified amount of nonconvertible debt securities issued or
guaranteed by the company.
The company has outstanding public bonds issued by Chevron
Corporation, Chevron Corporation Profit Sharing/Savings Plan
Trust Fund, Texaco Capital Inc. and Union Oil Company of
California. All of these securities are the obligations of, or
guaranteed by, Chevron Corporation and are rated AA by Standard
and Poors Corporation and Aa1 by Moodys Investors
Service. The companys U.S. commercial paper is rated
A-1+ by
Standard and Poors and
P-1 by
Moodys. All of these ratings denote high-quality,
investment-grade securities.
The companys future debt level is dependent primarily on
results of operations, the capital-spending program and cash
that may be generated from asset dispositions. The company
believes that it has substantial borrowing capacity to meet
unanticipated cash requirements and that during periods of low
prices for crude oil and natural gas and narrow margins for
refined products and commodity chemicals, it has the flexibility
to increase borrowings
and/or
modify capital-spending plans to continue paying the common
stock dividend and maintain the companys high-quality debt
ratings.
Common Stock Repurchase Program In September 2007, the
company authorized the acquisition of up to $15 billion of
its common shares from time to time at prevailing prices, as
permitted by securities laws and other legal requirements and
subject to market conditions and other factors. The program is
for a period of up to three years and may be discontinued at any
time. The company did not acquire any shares during the first
half of 2009 and does not plan to acquire any shares in the 2009
third quarter. From the inception of the program, the company
has acquired 119 million shares at a cost of
$10.1 billion.
Current Ratio current assets divided by
current liabilities. The current ratio was 1.4 at June 30,
2009, and 1.1 at December 31, 2008. The current ratio is
adversely affected by the valuation of Chevrons
inventories on a LIFO
34
basis. At June 30, 2009, the book value of inventory was
significantly lower than replacement cost. The company does not
consider its inventory valuation methodology to affect liquidity.
Debt Ratio total debt as a percentage of
total debt plus Chevron Corporation stockholders equity.
This ratio was 12.1 percent at June 30, 2009, and
9.3 percent at year-end 2008.
Pension Obligations At the end of 2008, the company
estimated it would contribute $800 million to employee
pension plans during 2009 (composed of $550 million for the
U.S. plans and $250 million for the international
plans). Through June 30, 2009, a total of $148 million
was contributed (including $65 million to the
U.S. plans). Total contributions for the full year are
currently estimated at $1 billion ($750 million for the U.S.
plans and $250 million for the international plans). Actual
contribution amounts are dependent upon investment returns,
changes in pension obligations, regulatory environments and
other economic factors. Additional funding may ultimately be
required if investment returns are insufficient to offset
increases in plan obligations.
Capital and Exploratory Expenditures Total expenditures,
including the companys share of spending by affiliates,
were $11.4 billion in the first six months of 2009,
compared with $10.3 billion in the corresponding 2008
period. The amounts included the companys share of
equity-affiliate expenditures of about $600 million and
$900 million in the 2009 and 2008 periods, respectively.
Outlays in the 2009 period included $2 billion for the
extension of an upstream concession. Expenditures for upstream
projects in the first half of 2009 were about $9.2 billion,
representing 80 percent of the companywide total.
Capital
and Exploratory Expenditures by Major Operating Area
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upstream
|
|
$
|
795
|
|
|
$
|
1,239
|
|
|
$
|
1,812
|
|
|
$
|
2,690
|
|
Downstream
|
|
|
553
|
|
|
|
528
|
|
|
|
923
|
|
|
|
900
|
|
Chemicals
|
|
|
38
|
|
|
|
21
|
|
|
|
74
|
|
|
|
127
|
|
All Other
|
|
|
87
|
|
|
|
142
|
|
|
|
156
|
|
|
|
265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total United States
|
|
|
1,473
|
|
|
|
1,930
|
|
|
|
2,965
|
|
|
|
3,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upstream
|
|
|
2,915
|
|
|
|
2,887
|
|
|
|
7,372
|
|
|
|
5,723
|
|
Downstream
|
|
|
538
|
|
|
|
325
|
|
|
|
1,043
|
|
|
|
554
|
|
Chemicals
|
|
|
23
|
|
|
|
13
|
|
|
|
34
|
|
|
|
22
|
|
All Other
|
|
|
|
|
|
|
2
|
|
|
|
1
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total International
|
|
|
3,476
|
|
|
|
3,227
|
|
|
|
8,450
|
|
|
|
6,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide
|
|
$
|
4,949
|
|
|
$
|
5,157
|
|
|
$
|
11,415
|
|
|
$
|
10,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingencies
and Significant Litigation
MTBE Chevron and many other companies in the
petroleum industry have used methyl tertiary butyl ether (MTBE)
as a gasoline additive. Chevron is a party to 49 pending
lawsuits and claims, the majority of which involve numerous
other petroleum marketers and refiners. Resolution of these
lawsuits and claims may ultimately require the company to
correct or ameliorate the alleged effects on the environment of
prior release of MTBE by the company or other parties.
Additional lawsuits and claims related to the use of MTBE,
including personal-injury claims, may be filed in the future.
The companys ultimate exposure related to pending lawsuits
and claims is not currently determinable, but could be material
to net income in any one period. The company no longer uses MTBE
in the manufacture of gasoline in the United States.
Ecuador Chevron is a defendant in a civil lawsuit
before the Superior Court of Nueva Loja in Lago Agrio, Ecuador,
brought in May 2003 by plaintiffs who claim to be
representatives of certain residents of an area where an oil
production consortium formerly had operations. The lawsuit
alleges damage to the environment from the oil exploration and
production operations, and seeks unspecified damages to fund
environmental remediation and restoration of the alleged
environmental harm, plus a health monitoring program. Until
1992, Texaco Petroleum
35
Company (Texpet), a subsidiary of Texaco Inc., was a minority
member of this consortium with Petroecuador, the Ecuadorian
state-owned oil company, as the majority partner; since 1990,
the operations have been conducted solely by Petroecuador. At
the conclusion of the consortium and following an independent
third-party environmental audit of the concession area, Texpet
entered into a formal agreement with the Republic of Ecuador and
Petroecuador for Texpet to remediate specific sites assigned by
the government in proportion to Texpets ownership share of
the consortium. Pursuant to that agreement, Texpet conducted a
three-year remediation program at a cost of $40 million.
After certifying that the sites were properly remediated, the
government granted Texpet and all related corporate entities a
full release from any and all environmental liability arising
from the consortium operations.
Based on the history described above, Chevron believes that this
lawsuit lacks legal or factual merit. As to matters of law, the
company believes first, that the court lacks jurisdiction over
Chevron; second, that the law under which plaintiffs bring the
action, enacted in 1999, cannot be applied retroactively to
Chevron; third, that the claims are barred by the statute of
limitations in Ecuador; and, fourth, that the lawsuit is also
barred by the releases from liability previously given to Texpet
by the Republic of Ecuador and Petroecuador. With regard to the
facts, the company believes that the evidence confirms that
Texpets remediation was properly conducted and that the
remaining environmental damage reflects Petroecuadors
failure to timely fulfill its legal obligations and
Petroecuadors further conduct since assuming full control
over the operations.
In April 2008, a mining engineer appointed by the court to
identify and determine the cause of environmental damage, and to
specify steps needed to remediate it, issued a report
recommending that the court assess $8 billion, which would,
according to the engineer, provide financial compensation for
purported damages, including wrongful death claims, and pay for,
among other items, environmental remediation, health care
systems, and additional infrastructure for Petroecuador. The
engineers report also asserted that an additional
$8.3 billion could be assessed against Chevron for unjust
enrichment. The engineers report is not binding on the
court. Chevron also believes that the engineers work was
performed and his report prepared in a manner contrary to law
and in violation of the courts orders. Chevron submitted a
rebuttal to the report in which it asked the court to strike the
report in its entirety. In November 2008, the engineer revised
the report and, without additional evidence, recommended an
increase in the financial compensation for purported damages to
a total of $18.9 billion and an increase in the assessment
for purported unjust enrichment to a total of $8.4 billion.
Chevron submitted a rebuttal to the revised report, and Chevron
will continue a vigorous defense of any attempted imposition of
liability.
The court has completed most of the procedural aspects of the
case and could render a judgment at any time. In the event of an
adverse judgment, Chevron would expect to pursue its appeals and
vigorously defend against enforcement of any such judgment;
therefore, the ultimate outcome and any financial
effect on Chevron remains uncertain. Management does
not believe an estimate of a reasonably possible loss (or a
range of loss) can be made in this case. Due to the defects
associated with the engineers report, management does not
believe the report itself has any utility in calculating a
reasonably possible loss (or a range of loss). Moreover, the
highly uncertain legal environment surrounding the case provides
no basis for management to estimate a reasonably possible loss
(or a range of loss).
Guarantees The company and its subsidiaries have
certain other contingent liabilities with respect to guarantees,
direct or indirect, of debt of affiliated companies or third
parties. Under the terms of the guarantee arrangements,
generally the company would be required to perform should the
affiliated company or third party fail to fulfill its
obligations under the arrangements. In some cases, the guarantee
arrangements may have recourse provisions that would enable the
company to recover any payments made under the terms of the
guarantees from assets provided as collateral.
Off-Balance-Sheet Obligations The company and its
subsidiaries have certain other contractual obligations relating
to long-term unconditional purchase obligations and commitments,
including throughput and
take-or-pay
agreements, some of which relate to suppliers financing
arrangements. The agreements typically provide goods and
services, such as pipeline, storage and regasification capacity,
drilling rigs, utilities and petroleum products, to be used or
sold in the ordinary course of the companys business.
Indemnifications The company provided certain
indemnities of contingent liabilities of Equilon and Motiva to
Shell and Saudi Refining, Inc., in connection with the February
2002 sale of the companys interests in those
36
investments. The company would be required to perform if the
indemnified liabilities become actual losses. Were that to
occur, the company could be required to make future payments up
to $300 million. Through the end of June 2009, the company
paid $48 million under these indemnities and continues to
be obligated for possible additional indemnification payments in
the future.
The company has also provided indemnities relating to contingent
environmental liabilities related to assets originally
contributed by Texaco to the Equilon and Motiva joint ventures
and environmental conditions that existed prior to the formation
of Equilon and Motiva or that occurred during the period of
Texacos ownership interest in the joint ventures. In
general, the environmental conditions or events that are subject
to these indemnities must have arisen prior to December 2001.
Claims had to be asserted by February 2009 for Equilon
indemnities and must be asserted no later than February 2012 for
Motiva indemnities. Under the terms of these indemnities, there
is no maximum limit on the amount of potential future payments.
In February 2009, Shell delivered a letter to the company
purporting to preserve unmatured claims for certain Equilon
indemnities. The letter itself provides no estimate of the
ultimate claim amount, and management does not believe the
letter or any other information provides a basis to estimate the
amount, if any, of a range of loss or potential range of loss
with respect to the Equilon or the Motiva indemnities. The
company posts no assets as collateral and has made no payments
under the indemnities.
The amounts payable for the indemnities described above are to
be net of amounts recovered from insurance carriers and others
and net of liabilities recorded by Equilon or Motiva prior to
September 30, 2001, for any applicable incident.
In the acquisition of Unocal, the company assumed certain
indemnities relating to contingent environmental liabilities
associated with assets that were sold in 1997. Under the
indemnification agreement, the companys liability is
unlimited until April 2022, when the liability expires. The
acquirer of the assets sold in 1997 shares in certain
environmental remediation costs up to a maximum obligation of
$200 million, which had not been reached as of
June 30, 2009.
Noncontrolling Interests The company has commitments
of $522 million related to noncontrolling interests in
subsidiary companies.
Environmental The company is subject to loss
contingencies pursuant to laws, regulations, private claims and
legal proceedings related to environmental matters that are
subject to legal settlements or that in the future may require
the company to take action to correct or ameliorate the effects
on the environment of prior release of chemicals or petroleum
substances, including MTBE, by the company or other parties.
Such contingencies may exist for various sites, including, but
not limited to, federal Superfund sites and analogous sites
under state laws, refineries, crude-oil fields, service
stations, terminals, land development areas, and mining
operations, whether operating, closed or divested. These future
costs are not fully determinable due to such factors as the
unknown magnitude of possible contamination, the unknown timing
and extent of the corrective actions that may be required, the
determination of the companys liability in proportion to
other responsible parties, and the extent to which such costs
are recoverable from third parties.
Although the company has provided for known environmental
obligations that are probable and reasonably estimable, the
amount of additional future costs may be material to results of
operations in the period in which they are recognized. The
company does not expect these costs will have a material effect
on its consolidated financial position or liquidity. Also, the
company does not believe its obligations to make such
expenditures have had, or will have, any significant impact on
the companys competitive position relative to other
U.S. or international petroleum or chemical companies.
Financial Instruments The company believes it has no
material market or credit risks to its operations, financial
position or liquidity as a result of its commodities and other
derivative activities.
Income Taxes Tax positions for Chevron and its
subsidiaries and affiliates are subject to income tax audits by
many tax jurisdictions throughout the world. For the
companys major tax jurisdictions, examinations of tax
returns for certain prior tax years had not been completed as of
June 30, 2009. For Chevrons major tax jurisdictions,
the latest years for which income tax examinations had been
finalized were as follows: United States 2005,
Nigeria 1994, Angola 2001 and Saudi
Arabia 2003.
37
Settlement of open tax years, as well as tax issues in other
countries where the company conducts its businesses, is not
expected to have a material effect on the consolidated financial
position or liquidity of the company and, in the opinion of
management, adequate provision has been made for income and
franchise taxes for all years under examination or subject to
future examination.
Equity Redetermination For oil and gas producing
operations, ownership agreements may provide for periodic
reassessments of equity interests in estimated crude-oil and
natural-gas reserves. These activities, individually or
together, may result in gains or losses that could be material
to earnings in any given period. One such equity redetermination
process has been under way since 1996 for Chevrons
interests in four producing zones at the Naval Petroleum Reserve
at Elk Hills, California, for the time when the remaining
interests in these zones were owned by the U.S. Department
of Energy. A wide range remains for a possible net settlement
amount for the four zones. For this range of settlement, Chevron
estimates its maximum possible net before-tax liability at
approximately $200 million, and the possible maximum net
amount that could be owed to Chevron is estimated at about
$150 million. The timing of the settlement and the exact
amount within this range of estimates are uncertain.
Other Contingencies Chevron receives claims from and
submits claims to customers; trading partners;
U.S. federal, state and local regulatory bodies;
governments; contractors; insurers; and suppliers. The amounts
of these claims, individually and in the aggregate, may be
significant and take lengthy periods to resolve.
The company and its affiliates also continue to review and
analyze their operations and may close, abandon, sell, exchange,
acquire or restructure assets to achieve operational or
strategic benefits and to improve competitiveness and
profitability. These activities, individually or together, may
result in gains or losses in future periods.
New
Accounting Standards
FASB Statement No. 165, Subsequent Events
(FAS 165)
In May 2009, the FASB issued FAS 165, which became
effective for the company for the quarter ended June 30,
2009. This Statement establishes the accounting for and
disclosure of events that occur after the balance sheet date but
before the financial statements are issued or made available. It
requires disclosure of the date through which a company has
evaluated subsequent events and the basis for that date, which
for public companies is the date the financial statements are
issued. This Statement is not expected to result in any
significant changes in the subsequent events reported by the
company. Refer to Note 1 on page 7 for the
FAS 165-related
disclosure for the quarter ended June 30, 2009.
FASB Statement No. 166, Accounting for Transfers of
Financial Assets an amendment of FASB Statement
No. 140 (FAS 166)
In June 2009, the FASB issued FAS 166, which will become
effective for the company on January 1, 2010. The standard
amends FASB Statement No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of
Liabilities. FAS 166 changes how companies account for
transfers of financial assets and eliminates the concept of
qualifying special purpose entities. Adoption of FAS 166 is
not expected to have an impact on the companys results of
operations, financial position or liquidity.
FASB Statement No. 167, Amendments to FASB
Interpretation No. 46(R) (FAS 167)
In June 2009, the FASB issued FAS 167, which will become
effective for the company January 1, 2010. The standard
amends the consolidation guidance for variable interest entities
(VIEs) in FASB Interpretation No. 46(R) by requiring the
enterprise to qualitatively assess if it is the primary
beneficiary of the VIE and, if so, the VIE must be consolidated.
Adoption of the Standard is not expected to have a material
impact on the companys results of operations, financial
position or liquidity.
FASB Statement No. 168, The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles a replacement of FASB
Statement No. 162 (FAS 168)
The FASB issued FAS 168 in June 2009, which becomes
effective for the company in the quarter ending
September 30, 2009. This standard establishes the FASB
Accounting Standards Codification system as the single
authoritative source of U.S. generally accepted accounting
principles (GAAP), which supersedes existing literature
38
of the FASB, Emerging Issues Task Force, American Institute of
CPAs and other sources. At the effective date, all literature
outside the Codification will no longer be authoritative. The
Codification does not change GAAP but takes existing GAAP
literature and organizes it in about 90 accounting Topics.
Adoption of this Statement will not affect the companys
accounting.
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Information about market risks for the three months ended
June 30, 2009, does not differ materially from that
discussed under Item 7A of Chevrons 2008 Annual
Report on
Form 10-K.
|
|
Item 4.
|
Controls
and Procedures
|
(a) Evaluation of disclosure controls and procedures
The companys management has evaluated, with the
participation of the Chief Executive Officer and Chief Financial
Officer, the effectiveness of the companys disclosure
controls and procedures (as defined in
Rule 13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934) as of the end of
the period covered by this report. Based on this evaluation, the
Chief Executive Officer and Chief Financial Officer concluded
that the companys disclosure controls and procedures were
effective as of June 30, 2009.
(b) Changes in internal control over financial reporting
During the quarter ended June 30, 2009, there were no
changes in the companys internal control over financial
reporting that have materially affected, or were reasonably
likely to materially affect, the companys internal control
over financial reporting.
PART II
OTHER
INFORMATION
|
|
Item 1.
|
Legal
Proceedings
|
None.
Chevron is a major fully integrated petroleum company with a
diversified business portfolio, a strong balance sheet, and a
history of generating sufficient cash to fund capital and
exploratory expenditures and to pay dividends. Nevertheless,
some inherent risks could materially impact the companys
financial results of operations or financial condition.
Information about risk factors for the three months ended
June 30, 2009, does not differ materially from that set
forth in Part I, Item 1A, of Chevrons 2008
Annual Report on
Form 10-K.
39
|
|
Item 2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
CHEVRON
CORPORATION
ISSUER
PURCHASES OF EQUITY SECURITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
|
Total
|
|
|
|
|
|
Total Number of
|
|
|
Number of Shares
|
|
|
|
Number of
|
|
|
Average
|
|
|
Shares Purchased as
|
|
|
that May Yet Be
|
|
|
|
Shares
|
|
|
Price Paid
|
|
|
Part of Publicly
|
|
|
Purchased Under
|
|
Period
|
|
Purchased(1)
|
|
|
per Share
|
|
|
Announced Program
|
|
|
the Program(2)
|
|
|
April 1-30, 2009
|
|
|
1,147
|
|
|
|
69.62
|
|
|
|
|
|
|
|
|
|
May 1-31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 1-30, 2009
|
|
|
35,878
|
|
|
|
72.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
37,025
|
|
|
|
72.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes 21,680 common shares repurchased during the three-month
period ended June 30, 2009, from company employees for
required personal income tax withholdings on the exercise of the
stock options issued to management and employees under the
companys long-term incentive plans. Also includes
15,345 shares delivered or attested to in satisfaction of
the exercise price by holders of certain former Texaco Inc.
employee stock options exercised during the three-month period
ended June 30, 2009. |
|
(2) |
|
In September 2007, the company authorized common stock
repurchases of up to $15 billion that may be made from time
to time at prevailing prices as permitted by securities laws and
other requirements, and subject to market conditions and other
factors. The program will occur over a period of up to three
years and may be discontinued at any time. Through June 30,
2009, $10.1 billion had been expended to repurchase
118,996,749 shares since the common stock repurchase
program began. |
40
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
The following matters were submitted to a vote of stockholders
at the Annual Meeting on May 27, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
Voted For
|
|
|
Voted Against
|
|
|
Abstain
|
|
|
1. Election of Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel H. Armacost
|
|
|
1,608,167,735
|
|
|
|
63,430,073
|
|
|
|
8,782,564
|
|
Linnet F. Deily
|
|
|
1,642,467,129
|
|
|
|
29,328,182
|
|
|
|
8,577,567
|
|
Robert E. Denham
|
|
|
1,634,530,636
|
|
|
|
36,426,186
|
|
|
|
9,423,551
|
|
Robert J. Eaton
|
|
|
1,621,776,548
|
|
|
|
49,828,662
|
|
|
|
8,776,363
|
|
Enrique Hernandez, Jr.
|
|
|
1,631,116,685
|
|
|
|
40,379,375
|
|
|
|
8,877,617
|
|
Franklyn G. Jenifer
|
|
|
1,634,246,460
|
|
|
|
36,958,058
|
|
|
|
9,176,654
|
|
Sam Nunn
|
|
|
1,618,810,074
|
|
|
|
52,769,541
|
|
|
|
8,800,758
|
|
David J. OReilly
|
|
|
1,634,807,077
|
|
|
|
37,968,850
|
|
|
|
7,604,446
|
|
Donald B. Rice
|
|
|
1,623,273,011
|
|
|
|
48,380,174
|
|
|
|
8,719,292
|
|
Kevin W. Sharer
|
|
|
1,606,280,193
|
|
|
|
65,326,543
|
|
|
|
8,766,536
|
|
Charles R. Shoemate
|
|
|
1,637,803,686
|
|
|
|
33,446,087
|
|
|
|
9,135,800
|
|
Ronald D. Sugar
|
|
|
1,580,505,371
|
|
|
|
91,215,592
|
|
|
|
8,663,409
|
|
Carl Ware
|
|
|
1,626,741,373
|
|
|
|
44,671,421
|
|
|
|
8,968,778
|
|
John S. Watson
|
|
|
1,647,663,502
|
|
|
|
25,216,060
|
|
|
|
7,502,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Represent Broker
|
|
|
|
|
|
Voted For
|
|
|
Voted Against
|
|
|
Abstain
|
|
|
Non-Votes
|
|
|
2.
|
|
Ratification of Independent Registered Public Accounting
Firm
|
|
|
1,655,240,786
|
|
|
|
19,758,693
|
|
|
|
5,392,688
|
|
|
|
|
|
3.
|
|
Board Proposal to Approve the Material Terms of Performance
Goals for Performance-Based Awards under the Chevron Incentive
Plan (CIP)
|
|
|
1,540,577,419
|
|
|
|
124,592,199
|
|
|
|
15,163,595
|
|
|
|
|
|
4.
|
|
Board Proposal to Approve the Material Terms of Performance
Goals for Performance-Based Awards under the Long-Term Incentive
Plan of Chevron Corporation (LTIP)
|
|
|
1,552,340,763
|
|
|
|
112,407,672
|
|
|
|
15,612,704
|
|
|
|
|
|
5.
|
|
Stockholder Proposal Regarding Special Stockholder
Meetings
|
|
|
632,722,279
|
|
|
|
716,122,291
|
|
|
|
11,484,225
|
|
|
|
320,013,372
|
|
6.
|
|
Stockholder Proposal Regarding Advisory Vote on Summary
Compensation Table
|
|
|
568,531,885
|
|
|
|
751,801,668
|
|
|
|
40,004,924
|
|
|
|
320,053,690
|
|
7.
|
|
Stockholder Proposal Regarding Greenhouse Gas
Emissions
|
|
|
Withdrawn
|
|
|
|
Withdrawn
|
|
|
|
Withdrawn
|
|
|
|
Withdrawn
|
|
8.
|
|
Stockholder Proposal Regarding Country Selection
Guidelines
|
|
|
311,665,942
|
|
|
|
854,160,806
|
|
|
|
194,510,588
|
|
|
|
320,054,831
|
|
9.
|
|
Stockholder Proposal Regarding Human Rights Policy
|
|
|
339,238,113
|
|
|
|
826,411,470
|
|
|
|
194,719,135
|
|
|
|
320,023,449
|
|
10.
|
|
Stockholder Proposal Regarding Report on Host Country
Laws
|
|
|
101,461,352
|
|
|
|
1,058,100,189
|
|
|
|
200,825,976
|
|
|
|
320,004,650
|
|
41
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
(4)
|
|
Pursuant to the Instructions to Exhibits, certain instruments
defining the rights of holders of long-term debt securities of
the company and its consolidated subsidiaries are not filed
because the total amount of securities authorized under any such
instrument does not exceed 10 percent of the total assets
of the corporation and its subsidiaries on a consolidated basis.
A copy of such instrument will be furnished to the Commission
upon request.
|
(12.1)
|
|
Computation of Ratio of Earnings to Fixed Charges
|
(31.1)
|
|
Rule 13a-14(a)/15d-14(a)
Certification by the companys Chief Executive Officer
|
(31.2)
|
|
Rule 13a-14(a)/15d-14(a)
Certification by the companys Chief Financial Officer
|
(32.1)
|
|
Section 1350 Certification by the companys Chief
Executive Officer
|
(32.2)
|
|
Section 1350 Certification by the companys Chief
Financial Officer
|
(101.INS)
|
|
XBRL Instance Document
|
(101.SCH)
|
|
XBRL Schema Document
|
(101.CAL)
|
|
XBRL Calculation Linkbase Document
|
(101.LAB)
|
|
XBRL Label Linkbase Document
|
(101.PRE)
|
|
XBRL Presentation Linkbase Document
|
(101.DEF)
|
|
XBRL Definition Linkbase Document
|
Attached as Exhibit 101 to this report are documents
formatted in XBRL (Extensible Business Reporting Language).
Users of this data are advised pursuant to Rule 406T of
Regulation S-T
that the interactive data file is deemed not filed or part of a
registration statement or prospectus for purposes of
section 11 or 12 of the Securities Act of 1933, is deemed
not filed for purposes of section 18 of the Securities
Exchange Act of 1934, and otherwise not subject to liability
under these sections. The financial information contained in the
XBRL-related documents is unaudited or
unreviewed.
42
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Chevron Corporation
(Registrant)
M.A. Humphrey, Vice President and Comptroller
(Principal Accounting Officer and
Duly Authorized Officer)
Date: August 6, 2009
43
EXHIBIT INDEX
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
(4)
|
|
Pursuant to the Instructions to Exhibits, certain instruments
defining the rights of holders of long-term debt securities of
the company and its consolidated subsidiaries are not filed
because the total amount of securities authorized under any such
instrument does not exceed 10 percent of the total assets
of the corporation and its subsidiaries on a consolidated basis.
A copy of such instrument will be furnished to the Commission
upon request.
|
(12.1)*
|
|
Computation of Ratio of Earnings to Fixed Charges
|
(31.1)*
|
|
Rule 13a-14(a)/15d-14(a)
Certification by the companys Chief Executive Officer
|
(31.2)*
|
|
Rule 13a-14(a)/15d-14(a)
Certification by the companys Chief Financial Officer
|
(32.1)*
|
|
Section 1350 Certification by the companys Chief
Executive Officer
|
(32.2)*
|
|
Section 1350 Certification by the companys Chief
Financial Officer
|
(101.INS)*
|
|
XBRL Instance Document
|
(101.SCH)*
|
|
XBRL Schema Document
|
(101.CAL)*
|
|
XBRL Calculation Linkbase Document
|
(101.LAB)*
|
|
XBRL Label Linkbase Document
|
(101.PRE)*
|
|
XBRL Presentation Linkbase Document
|
(101.DEF)*
|
|
XBRL Definition Linkbase Document
|
Attached as Exhibit 101 to this report are documents
formatted in XBRL (Extensible Business Reporting Language).
Users of this data are advised pursuant to Rule 406T of
Regulation S-T
that the interactive data file is deemed not filed or part of a
registration statement or prospectus for purposes of
section 11 or 12 of the Securities Act of 1933, is deemed
not filed for purposes of section 18 of the Securities
Exchange Act of 1934, and otherwise not subject to liability
under these sections. The financial information contained in the
XBRL-related documents is unaudited or
unreviewed.
Copies of above exhibits not contained herein are available to
any security holder upon written request to the Corporate
Governance Department, Chevron Corporation, 6001 Bollinger
Canyon Road, San Ramon, California
94583-2324.
44