Chevron’s 2Q profit slips on impairments
Chevron Corporation, an American multinational energy corporation, Friday reported earnings of $571 million for the second quarter 2015, compared with earnings of $5.7 billion in the same period last year.
Included in the quarter were impairments of $1.96 billion and other charges of approximately $670 million relating to project suspensions and adverse tax effects, all of which were non-cash charges stemming from a downward revision in the company’s longer-term crude oil price outlook.
According to the company, partially offsetting were gains on asset sales totaling $1.8 billion in the current quarter. Foreign currency effects decreased earnings in the 2015 quarter by $251 million, compared with a decrease of $232 million a year earlier.
Sales and other operating revenues in second quarter 2015 were $37 billion, compared to $56 billion in the year-ago period.
Chevron Chairman and CEO, John Watson, said: “Second quarter financial results were weak, reflecting a crude price decline of nearly 50 percent from a year ago. Our Upstream businesses were particularly hard hit, as lower prices reduced revenues and triggered impairments and other charges. Downstream operations continued to deliver strong financial performance, reflecting both high reliability and improved margins.”
“Multiple efforts to improve future earnings and cash flows are underway,” Watson continued.
“We’re getting our cost structure down, through renegotiations across the supply chain and by sizing our contractor and employee workforce to reflect lower activity levels going forward. We’re actively managing to a smaller capital program, as projects currently under construction come online and as potential new projects are paced and re-bid. In addition, our 4-year divestment program is ahead of pace.”
“Project execution on our Gorgon and Wheatstone Australian LNG projects is a priority for us,” Watson commented.
“Incremental production and cash generation from these projects and others, along with a curtailed capital program, should provide support for continuing competitive shareholder distributions.”
Worldwide net oil-equivalent production was 2.60 million barrels per day in second quarter 2015, up from 2.55 million barrels per day in the 2014 second quarter.
U.S. upstream incurs loss
U.S. upstream operations incurred a loss of $1.04 billion in second quarter 2015 compared to earnings of $1.05 billion from a year earlier. The decrease was due to sharply lower crude oil realizations and higher depreciation expenses, primarily reflecting impairments, partially offset by higher crude oil production and lower operating expenses.
The company’s average sales price per barrel of crude oil and natural gas liquids was $50 in second quarter 2015, down from $92 a year ago. The average sales price of natural gas was $1.92 per thousand cubic feet, compared with $4.09 in last year’s second quarter.
Net oil-equivalent production of 730,000 barrels per day in second quarter 2015 was up 63,000 barrels per day, or 9 percent, from a year earlier. Production increases due to project ramp-ups in the Gulf of Mexico, the Permian Basin in Texas and New Mexico, and the Marcellus Shale in western Pennsylvania were only partially offset by normal field declines. The net liquids component of oilequivalent production increased 11 percent in the 2015 second quarter to 511,000 barrels per day, while net natural gas production increased 5 percent to 1.31 billion cubic feet per day.
Capital and exploratory expenditures in the first six months of 2015 were $17.3 billion, compared with $19.6 billion in the corresponding 2014 period. The amounts included $1.5 billion in 2015 and $1.5 billion in 2014 for the company’s share of expenditures by affiliates, which did not require cash outlays by the company. Expenditures for upstream represented 93 percent of the companywide total in the first six months of 2015.