Chevron Corporation yesterday reported earnings of $3.07 billion ($1.53 per share – diluted) for the fourth quarter 2009,

compared with $4.90 billion ($2.44 per share – diluted) in the fourth
quarter 2008. Earnings in the 2008 quarter included a gain of
approximately $600 million on an upstream asset-exchange transaction.
Foreign-currency effects reduced earnings in the 2009 quarter by $67
million, compared with a benefit to income of $478 million a year
earlier.

Full-year 2009 earnings were $10.48 billion ($5.24 per
share – diluted), down 56 percent from $23.93 billion ($11.67 per share
- diluted) in 2008.

Sales and other operating revenues in the
fourth quarter 2009 were $48 billion, compared with $43 billion in the
year-ago quarter. For the full-year 2009, sales and other operating
revenues were $167 billion, versus $265 billion in 2008. The decrease
in the twelve-month period was primarily due to lower prices for crude
oil, natural gas and refined products.

“Earnings decreased in 2009
as a result of lower crude oil and natural gas prices and a decline in
refined product sales margins, driven by a weak global economy,” said
Chevron’s Chairman and CEO, John Watson. “In this challenging
environment, Chevron’s successes in operational reliability and cost
management made valuable contributions to our bottom line. Our
financial strength enabled continued investment in our excellent
portfolio of capital and exploratory projects and an increase in the
annual dividend on our common shares for the 22nd consecutive year.

“In
fourth quarter 2009, earnings in our upstream business benefited from
higher crude oil prices than in the same quarter in 2008. Net
oil-equivalent production for the quarter was over 9 percent higher
than in the 2008 quarter, driven by new production from several of our
major capital projects.

“In our downstream business, our operated
refineries continued to run reliably during the fourth quarter.
However, this operational success did not offset the effects of low
margins on the sale of gasoline and other refined products due to weak
demand and excess supply worldwide,” continued Watson.

Watson said
on-going, aggressive cost-management efforts companywide resulted in
about a 15 percent decrease in operating, selling, general and
administrative expenses in 2009 compared with the previous year.

Watson
also said that recent developments related to the company’s projects in
Australia have demonstrated continued progress in building a
high-impact natural-gas business. Developments related to Australia
projects in recent months include:

•??? Gorgon – Agreements were
signed for delivery of liquefied natural gas (LNG) from the Gorgon
Project. These include long-term, binding agreements for the delivery
of about 4.4 million metric tons per year and non-binding Heads of
Agreement (HOAs) for delivery of an additional 2.1 million metric tons
per year of LNG from Gorgon. Together, these agreements underpin the
final investment decision on the 47.3 percent-owned and operated
project and represent about 90 percent of Chevron’s share in the 15
million metric-tons-per-year capacity of the LNG facilities.

•???
Wheatstone – Non-binding HOAs were signed with two buyers to take
delivery of 4.9 million metric tons per year of LNG from the Wheatstone
Project and acquire an equity share in the field licenses and LNG
facilities. An agreement was also signed to bring in two other equity
partners to the Wheatstone LNG facilities. The project, currently
undergoing front-end engineering and design, has a planned capacity of
8.6 million metric tons per year.

•??? Exploration – Additional
discoveries of natural gas were made in the Carnarvon Basin off the
northwest coast in the Chevron-operated and 50 percent-owned Blocks
WA-374-P and WA-268-P.

Another recently-announced achievement was
the final investment decision to develop the 37.5 percent-owned,
partner-operated Papa-Terra Field offshore Brazil. First production is
expected in 2013. Project facilities are designed with a capacity to
handle up to 140,000 barrels of crude oil per day.

Watson
commented that the company added approximately 1.10 billion barrels of
net oil-equivalent proved reserves in 2009. These additions, which are
subject to final reviews, equate to 112 percent of net oil-equivalent
production for the year. Included in the additions were proved reserves
related to the Gorgon Project in Australia. Also included were
additions for the Athabasca Oil Sands Project in Canada as a result of
a change in financial reporting rules. The increase in proved reserves
was partially offset by the unfavorable effect of higher crude oil
prices on certain production-sharing and variable-royalty contracts.
The company will provide additional details relating to 2009 reserve
activity in its Annual Report on Form 10-K scheduled for filing with
the SEC on February 25.

UPSTREAM – EXPLORATION AND PRODUCTION

Worldwide
net oil-equivalent production was 2.78 million barrels per day in the
fourth quarter 2009, up 238,000 from 2.54 million barrels per day in
the 2008 fourth quarter. Production for the full year 2009 averaged
2.70 million barrels per day, an increase of 7 percent compared with
2.53 million barrels per day in 2008. The increases for both periods
were primarily driven by new projects in the United States and Nigeria,
and expansion of capacity at Tengiz in Kazakhstan.

U.S. upstream
earnings of $1.04 billion in the fourth quarter of 2009 were down $105
million from a year earlier. Higher crude-oil production and
realizations in the fourth quarter of 2009 were more than offset by the
absence of a $600 million gain on an asset-exchange transaction in the
corresponding 2008 period. Operating expenses were lower between
periods, while depreciation expense was higher.

The company’s
average sales price per barrel of crude oil and natural gas liquids was
approximately $67 in the 2009 quarter, compared with $49 a year ago.
The average sales price of natural gas was $4.23 per thousand cubic
feet, down from $5.23 in the 2008 fourth quarter.

Net
oil-equivalent production of 751,000 barrels per day in the fourth
quarter 2009 was up 132,000 barrels per day, or about 21 percent, from
a year earlier. The increase in production was primarily associated
with ramp-ups of the Blind Faith and Tahiti fields (which started
producing in late 2008 and second quarter 2009, respectively), along
with the restoration of volumes that were offline in the fourth quarter
of 2008 due to hurricanes in the Gulf of Mexico. The net liquids
component of production was up 30 percent to 518,000 barrels per day in
the 2009 fourth quarter and net natural-gas production of 1.40 billion
cubic feet per day increased 6 percent between periods.

International
upstream earnings of $2.96 billion increased $956 million from the
fourth quarter 2008 due mainly to the impact of higher prices and sales
volumes for crude oil. Foreign-currency effects reduced earnings by $47
million in the 2009 quarter, compared with an increase of $644 million
a year earlier. Gains from asset sales and lower exploration expense
also benefited earnings in the fourth quarter of 2009.

The average
sales price for crude oil and natural gas liquids in the 2009 quarter
was $68 per barrel, compared with $47 a year earlier. The average price
of natural gas was $4.15 per thousand cubic feet, down from $5.10 in
last year’s fourth quarter.

Net oil-equivalent production of 2.03
million barrels per day in the fourth quarter 2009 was up 6 percent, or
106,000 barrels per day, from a year ago. The increase included
approximately 135,000 barrels per day associated with the ramp-up of
two projects – Agbami in Nigeria, which commenced operations in the
third quarter of 2008, and expansion at Tengiz in Kazakhstan. The
impact of higher prices on cost-recovery volumes and other contractual
provisions decreased net production from fourth quarter 2008. The net
liquids component of production increased about 6 percent from a year
ago to 1.42 million barrels per day and net natural-gas production was
up about 5 percent to 3.65 billion cubic feet per day.

U.S.
downstream operations lost $345 million in the fourth quarter 2009,
compared with earnings of $1.03 billion a year earlier. The decline was
mainly the result of weaker margins on the sale of gasoline and other
refined products.

Refinery crude-input of 856,000 barrels per day
in the fourth quarter 2009 decreased 74,000 barrels per day from the
year-ago period, primarily due to the effects of a planned shutdown in
this year’s fourth quarter at the refinery in El Segundo, California.

Refined-product
sales of 1.35 million barrels per day were down 60,000 barrels per day
from the fourth quarter of 2008, mainly due to weaker demand for jet
fuel and gas oils. Branded gasoline sales decreased 2 percent to
595,000 barrels per day, also due to weaker demand.

International
downstream operations incurred losses of $268 million in the fourth
quarter 2009, compared with earnings of $1.05 billion a year earlier.
The decline was associated mainly with narrower margins on the sale of
gasoline and refined products and the absence of gains from commodity
derivative instruments in the fourth quarter of 2008. Partially
offsetting were the benefits of lower operating expenses in the fourth
quarter of 2009.

Refinery crude-input of 975,000 barrels per day
was essentially unchanged from the fourth quarter of 2008. Total
refined-product sales of 1.8 million barrels per day in the 2009 fourth
quarter were 7 percent lower than a year earlier, due mainly to asset
sales since the fourth quarter of last year. Excluding the impact of
2009 asset sales, sales volumes were up 1 percent between periods.

Source: Chevron

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