01—Abstract
Summary
Summary of the 10-K filed February 23, 2012. Cited figures are marked; the original filing is the authoritative source.
Chevron's 2011 Form 10-K shows a year of strong financial results driven by higher commodity prices.
Net income attributable to Chevron rose to $26.9 billiona in 2011, up from $19.0 billion in 2010 and $10.5 billion in 2009, with diluted EPS of $13.44 versus $9.48 a year earlier. Sales and other operating revenues reached $244.4 billion, and Brent crude averaged $111 per barrel in 2011 versus $80 in 2010. Upstream earnings were $24.8 billion, accounting for the large majority of segment earnings, while downstream earnings more than doubled to $3.6 billion, helped by refining margins and asset sales such as the Pembroke Refinery.
Production was broadly flat-to-down: worldwide net oil-equivalent output averaged 2.673 million barrels per day, about 3% below 2010, reflecting normal field declines and entitlement effects, partly offset by new projects such as Perdido, Platong II, Frade and the Marcellus acquisitions. Management guides 2012 production to roughly 2.68 million barrels per day. Total 2011 capital and exploratory spending was $29.1 billionb, and 2012 is budgeted at $32.7 billion, with about 78% of the upstream budget directed outside the United States.
Proved reserves rose to 8.5 billion barrels of oil equivalent on a consolidated basis, supported by Wheatstone and other discoveries. Investors should weigh several risks disclosed in the filing. The Ecuador Lago Agrio litigation carries a February 2011 judgment of roughly $8.6 billionc plus punitive amounts that Chevron is contesting, and management says it cannot estimate a reasonably possible loss.
Commodity price volatility, OPEC quotas, project execution risk on large LNG and deepwater developments, and an effective tax rate that rose to 43.3% are further considerations. The company's balance sheet remains strong, with total debt of $10.2 billiond, a debt ratio of 7.7%, AA/Aa1 credit ratings, and $41.1 billion of operating cash flow that covered $27.4 billion of cash capital spending and $6.1 billion of dividends.
02—Key points
Key Highlights
- Net income attributable to Chevron rose 41% to $26.9 billion in 2011 (diluted EPS $13.44), versus $19.0 billion in 2010.
- Sales and other operating revenues increased 23% to $244.4 billion, driven mainly by higher crude oil and refined product prices.
- Upstream earnings reached $24.8 billion (International $18.3 billion, U.S. $6.5 billion); downstream earnings rose to $3.6 billion.
- Worldwide net oil-equivalent production averaged 2.673 million barrels per day, down about 3% from 2010; 2012 guidance is about 2.680 million barrels per day.
- Capital and exploratory expenditures were $29.1 billion in 2011, with $32.7 billion budgeted for 2012 (about 87% for exploration and production).
- Proved reserves were 8.5 billion BOE for consolidated companies at year-end 2011, plus 2.7 billion BOE for equity affiliates.
- Ecuador litigation (Lago Agrio) remains a material contingency: a February 2011 provincial court judgment is under appeal, and Chevron says it cannot estimate a reasonably possible loss.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 23, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $253.71B$204.93B | +23.8% |
| R&D Expenses | $627.00M$526.00M | +19.2% |
| SG&A Expenses | $4.75B$4.77B | −0.5% |
| Operating Expenses | $206.07B$172.87B | +19.2% |
| Interest Expense | $0$50.00M | −100.0% |
| Net Income | $26.89B$19.02B | +41.4% |
| EPS (Basic) | $13.54$9.53 | +42.1% |
| EPS (Diluted) | $13.44$9.48 | +41.8% |
| Shares Outstanding (Basic) | 1.99B2.00B | −0.6% |
| Shares Outstanding (Diluted) | 2.00B2.01B | −0.3% |
05—Questions
Frequently Asked Questions
How did Chevron's profitability change in 2011?
Net income attributable to Chevron was $26.9 billion, up from $19.0 billion in 2010 and $10.5 billion in 2009. The increase was driven mainly by higher crude oil prices (Brent averaged $111 per barrel versus $80 in 2010), partly offset by higher income tax expense, which rose to $20.6 billion and implied an effective tax rate of 43.3%.
What is the outlook for Chevron's production and capital spending?
Management estimates 2012 worldwide oil-equivalent production of about 2.680 million barrels per day, roughly flat with 2011, and capital and exploratory expenditures of $32.7 billion, up from $29.1 billion in 2011. About 78% of the upstream budget is for projects outside the United States, including major developments such as Gorgon, Wheatstone, Jack/St. Malo and Angola LNG.
What are the main legal and financial risks disclosed?
The most significant legal risk is the Ecuador Lago Agrio case, where a provincial court entered an adverse judgment in 2011 that Chevron is appealing and considers unenforceable. Other risks include commodity price volatility, OPEC production quotas, political instability in operating countries, and pension and environmental liabilities. Chevron's balance sheet remains strong, with a 7.7% debt ratio and AA/Aa1 credit ratings.
How is Chevron's balance sheet and shareholder return?
Chevron ended 2011 with $20.1 billion in cash, cash equivalents, time deposits and marketable securities, and total debt and capital lease obligations of $10.2 billion. Operating cash flow of $41.1 billion covered $27.4 billion of cash capital spending and $6.1 billion of dividends. The company paid $3.09 per share in dividends in 2011 and repurchased $4.25 billion of its stock under its ongoing program.
06—Continue