Chevron reports 4Q15 loss of US$588 million

Chevron Corporation reported a loss of US$588 million (US$0.31 per share, diluted) for 4Q15, compared with earnings of US$3.5 billion (US$1.85 per share, diluted) in 4Q14. Foreign currency effects increased earnings in the 2015 quarter by US$46 million, compared with an increase of US$432 million a year earlier. Full year 2015 earnings were US$4.6 billion (US$2.45 per share, diluted) compared with US$19.2 billion ($10.14 per share, diluted) in 2014. Sales and other operating revenues in 4Q15 were US$28 billion, compared to US$42 billion in the year ago period.

“Our 2015 earnings were down significantly from the previous year, reflecting a nearly 50% y/y decline in crude oil prices,” said Chairman and CEO John Watson.

“We’re taking significant action to improve earnings and cash flow in this low price environment,” Watson stated. “Operating expenses and capital spending were reduced US$9 billion in 2015 from 2014, and I expect similarly large reductions again in 2016. In addition, asset sales proceeds were US$6 billion in 2015, with additional sales planned for 2016 and 2017.”

“Improved refinery reliability allowed us to capture the benefits of a favourable margin environment and post excellent downstream results for the year,” Watson added. “We continued to reshape the downstream portfolio with well timed asset sales and good progress on petrochemical investments.”

“We advanced our upstream major capital projects,” Watson added. “We had first production from two deepwater projects in Africa, and ramped up production from Jack/St. Malo in the deepwater Gulf of Mexico and our shale and tight resources in the Permian Basin. We made significant progress on our LNG projects in Australia, in particular the Gorgon Project, where we expect to be producing LNG within the next few weeks. Successful completion and startup of these and other major capital projects will translate into significantly lower capital spending, higher production and growing cash generation in the months ahead.”

Watson commented that the company added approximately 1.02 billion bbls of net oil equivalent proved reserves in 2015. These additions, which are subject to final reviews, equate to approximately 107% of net oil equivalent production for the year. The largest additions were from production entitlement effects in several locations and drilling results for the Permian Basin in the US and the Wheatstone Project in Australia. The company will provide additional details relating to 2015 reserve additions in its Annual Report on Form 10-K scheduled for filing with the SEC on 25 February 2016. At year end, balances of cash, cash equivalents, time deposits and marketable securities totalled US$11.3 billion, a decrease of US$1.9 billion from the end of 2014. Total debt at 31 December 2015 stood at US$38.6 billion, an increase of US$10.8 billion from a year earlier.

Upstream

Worldwide net oil equivalent production was 2.67 million bpd in 4Q15, up from 2.58 million bpd in 4Q14. Net oil equivalent production for the full year 2015 was 2.62 million bpd, an increase of 2% from the prior year, and within the range of the production guidance for the year. Production increases from project ramp ups in the US and Bangladesh, and production entitlement effects in several locations, were partially offset by the Partitioned Zone shut-in and normal field declines for both comparative periods.

US upstream

US upstream operations incurred a loss of US$1.95 billion in 4Q15 compared to earnings of US$432 million from a year earlier. The decrease was due to lower crude oil realisations, higher depreciation expenses, higher exploration expenses and lower gains on asset sales, partially offset by higher crude oil production. The increase in depreciation and exploration expenses was primarily due to impairments and project cancellations. The company’s average sales price per barrel of crude oil and natural gas liquids was US$35 in 4Q15, down from US$66 a year ago. The average sales price of natural gas was US$1.54/1000 ft³, compared with US$3.34 in 4Q14. Net oil equivalent production of 719 000 bpd in 4Q15 was up 46 000 bpd, or 7%, from a year earlier. Production increases due to project ramp ups in the Gulf of Mexico and the Permian Basin in Texas and New Mexico were partially offset by normal field declines and the effect of asset sales. The net liquids component of oil equivalent production increased 8% in 4Q15 to 499 000 bpd, while net natural gas production increased 4% to 1.32 billion ft³/d.

International upstream

International upstream operations earned US$593 million in 4Q15 compared with US$2.24 billion a year earlier. The decrease was due to lower crude oil and natural gas realisations, and lower gains on asset sales. Partially offsetting these effects were lower depreciation, operating, tax and exploration expenses, and higher crude oil production. Foreign currency effects increased earnings by US$91 million in the 2015 quarter, compared with an increase of US$453 million a year earlier. The average sales price for crude oil and natural gas liquids in 4Q15 was US$39/bbl, down from US$68 a year earlier. The average price of natural gas was US$3.99/1000 ft³, compared with US$5.38 in 4Q14. Net oil equivalent production of 1.95 million bpd in 4Q15 increased 45 000 bpd, or 2%, from a year ago. Production increases from entitlement effects in several locations and project ramp ups in Bangladesh and several other areas were partially offset by the Partitioned Zone shut-in and normal field declines. The net liquids component of oil equivalent production was essentially unchanged at 1.28 million bpd in 4Q15, while net natural gas production increased 6% to 4.07 billion ft³/d.

Downstream

US downstream

US downstream operations earned US$496 million in 4Q15 compared with earnings of US$889 million a year earlier. The decrease was primarily due to the absence of 2014 gains on asset sales, partially offset by higher margins on refined product sales in 4Q15 compared to the year ago period.

Refinery crude oil input in 4Q15 decreased 1% to 916 000 bpd from the year ago period. Refined product sales of 1.23 million bpd were unchanged from 4Q14. Branded gasoline sales of 515 000 bpd were up 1% from 4Q14.

International downstream

International downstream operations earned US$515 million in 4Q15 compared with US$629 million a year earlier. The decrease was primarily due to an unfavourable change in effects on derivative instruments and lower margins on refined product sales, partially offset by the absence of certain one time employee benefits expenses in the year ago period and lower income tax expense. Foreign currency effects decreased earnings by US$45 million in 4Q15, compared with a decrease of US$21 million a year earlier. Refinery crude oil input of 783 000 bpd in 4Q15 decreased 39 000 bpd from the year ago period, mainly as a result of the Caltex Australia Limited divestment. Total refined product sales of 1.47 million bpd in 4Q15 were down 77 000 bpd from the year ago period, mainly as a result of the Caltex Australia Limited divestment. Excluding the effects of the Caltex Australia Limited divestment, refined product sales were up 35 000 bpd, primarily reflecting higher sales of gasoline.

Adapted from press release by Rosalie Starling

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