Chevron’s net income down by 9%
Upstream earnings of $2.91 billion decline $340 million, due primarily to lower prices for US natural gas
Posted: 05 February 2007
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Chevron reported preliminary net income of $3.77 billion ($1.74 per share - diluted) for the fourth quarter 2006, compared with $4.14 billion ($1.86 per share - diluted) in the 2005 fourth quarter.
For the full year 2006, net income was $17.14 billion ($7.80 per share - diluted), an increase of 22 percent from $14.10 billion ($6.54 per share - diluted) in 2005.
"Fourth quarter earnings benefited from an improvement in the operating performance of our oil and gas fields and refineries, especially in the United States ," said Chairman and CEO Dave O'Reilly. "However, this benefit to earnings was more than offset by the effect of a sharp decline in U.S. natural gas prices from a year earlier."
The company reported an addition of approximately 950 million barrels of oil- equivalent proved reserves in 2006, including volumes associated with oil sands mining activities. These additions, which are subject to final reviews, equated to 101 percent of oil-equivalent production for the year.
Approximately 30 percent of the added reserves were associated with mining activities at the Athabasca Oil Sands Project in Canada . The crude oil extracted through this bitumen- mining operation is not considered to be an oil and gas producing activity by the Securities and Exchange Commission (SEC). Excluding the oil sands volumes, the company's proved-reserve additions in 2006 equated to approximately 70 percent of oil-equivalent production for the year.
"We achieved success on many fronts in 2006," O'Reilly said. "Earnings for the year were a record for our company, and we operated safely and reliably. Our refineries achieved their highest utilization rate in several years. We also completed the integration of the former Unocal operations and reached a number of milestones during the year on our major capital projects.
"As we begin 2007, our queue of excellent projects, strong financial position and dedicated workforce provide a solid foundation for our company's future growth," O'Reilly added.
UPSTREAM - EXPLORATION AND PRODUCTION
Worldwide oil-equivalent production was 2.66 million barrels per day in the fourth quarter 2006, about the same as the corresponding 2005 period. Production for the full year 2006 averaged 2.67 million barrels per day, up from 2.52 million in 2005. The increase between years was mainly attributable to 2005 having included only five months of production associated with Unocal properties that were acquired in August of that year.
The average sales price per barrel of crude oil and natural gas liquids in the United States was $51 in the fourth quarter 2006, down about $1 from the corresponding period in 2005. Outside the United States , the sales price increased more than $1 to $52 per barrel. The average U.S. natural gas sales price decreased 42 percent to $5.90 per thousand cubic feet in the fourth quarter 2006, while outside the United States the average price of $3.67 per thousand cubic feet was 5 percent higher than a year earlier.
U.S. upstream income of $886 million in the fourth quarter decreased 28 percent from the corresponding period in 2005. The primary reason for the decline was a sharp drop in the average price of natural gas. Other factors included higher operating expenses and an increase in depreciation expense for wells, equipment and facilities. Partially offsetting these adverse effects on earnings was the benefit of an increase in production of crude oil and natural gas.
Net oil-equivalent production of 763,000 barrels per day increased approximately 6 percent from the 2005 quarter, due mainly to restoration of volumes following the effects of hurricanes in 2005. The net liquids component of production was up 5 percent to 466,000 barrels per day. Net natural gas production was 9 percent higher at approximately 1.8 billion cubic feet per day.
International upstream earnings of approximately $2 billion were relatively unchanged from the fourth quarter 2005. While oil-equivalent production was lower in the 2006 fourth quarter, sales volumes were higher due to the timing of cargo liftings in certain producing regions. The benefit to earnings from this increase in liftings, as well as higher prices for crude oil and natural gas, was offset by increases in exploration, depreciation and operating expense. Foreign currency effects reduced earnings $52 million in the 2006 fourth quarter but increased earnings by $5 million a year earlier.
Net oil-equivalent production decreased 74,000 barrels per day from the fourth quarter 2005 to 1,892,000 barrels per day. In Venezuela , the conversion of operating service agreements to joint venture arrangements resulted in a decline of about 90,000 barrels per day between the quarterly periods. Elsewhere, production was higher in Nigeria , Angola and Azerbaijan but lower in Indonesia and the United Kingdom . The net liquids component of production decreased 37,000 barrels per day to 1,381,000. Natural gas production was 3.1 billion cubic feet per day in the 2006 period, down about 200 million cubic feet per day from a year earlier. |
