01—Abstract
Summary
Summary of the 10-K filed February 22, 2013. Cited figures are marked; the original filing is the authoritative source.
Chevron's 2012 Form 10-K shows a company that remained highly profitable but saw net income slip modestly.
Net income attributable to Chevron was $26.2 billiona in 2012, down from $26.9 billion in 2011 and up from $19.0 billion in 2010. Diluted EPS was $13.32, versus $13.44 in 2011. Operating revenues fell to $230.6 billion from $244.4 billion, reflecting the 2011 sale of U.K./Irish downstream assets and lower crude volumes.
Upstream earnings were $23.8 billionb, with international operations contributing $18.5 billion. Downstream earnings rose to $4.3 billion, helped by stronger refined product margins and CPChem results. Returns on capital employed were 18.7%, down from 21.6% in 2011.
Production was the main operational watch item. Worldwide oil-equivalent output averaged 2.610 million barrels per day, down about 2%c year over year, due to normal field declines, the shut-in of the Frade Field in Brazil, and a Tengizchevroil turnaround. Management guides 2013 output to approximately 2.650 million barrels per day, and new projects such as Usan, Agbami 2 and Perdido are expected to offset declines.
Total 2012 capital and exploratory spending was $34.2 billiond, with $36.7 billion budgeted for 2013, about 90% of it for exploration and production and roughly 70% outside the U.S. Proved reserves rose to 11.3 billion barrels of oil-equivalent, and the company's large LNG and development pipeline (Gorgon, Wheatstone, Big Foot, Jack/St. Malo, Hebron) underpins medium-term growth. Balance sheet strength and shareholder returns remained solid. Operating cash flow was $38.8 billion, and total debt rose to $12.2 billion, with a debt ratio of 8.2%.
The company repurchased $5.0 billion of stock in 2012 under an ongoing program and raised its quarterly dividend 11.1% to $0.90. Key risks disclosed include the Ecuador Lago Agrio judgment (about $19.1 billion, which Chevron contests), a suspended Brazilian production license following the Frade seeps, and exposure to commodity prices and OPEC-related supply factors.
02—Key points
Key Highlights
- Net income attributable to Chevron fell 3% to $26.2 billion ($13.32 diluted EPS) from $26.9 billion in 2011, but remained well above 2010's $19.0 billion.
- Upstream earnings were $23.8 billion, with international upstream at $18.5 billion; U.S. upstream fell to $5.3 billion on lower realizations and production.
- Worldwide net oil-equivalent production averaged 2.610 million barrels per day, down about 2%; 2013 guidance is approximately 2.650 million barrels per day.
- Capital and exploratory expenditures were $34.2 billion in 2012 and $36.7 billion are budgeted for 2013, about 90% for exploration and production.
- Operating cash flow was $38.8 billion, funding $6.8 billion of dividends and $5.0 billion of share repurchases; the quarterly dividend was raised 11.1% to $0.90.
- Total debt rose to $12.2 billion, with debt ratio of 8.2% and AA/Aa1 credit ratings; return on capital employed declined to 18.7% from 21.6%.
- Material legal exposures include the Ecuador Lago Agrio judgment (approximately $19.1 billion, which Chevron calls unenforceable) and the suspended Frade Field operations in Brazil.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 22, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $241.91B$253.71B | −4.6% |
| R&D Expenses | $648.00M$627.00M | +3.3% |
| SG&A Expenses | $4.72B$4.75B | −0.4% |
| Operating Expenses | $195.58B$206.07B | −5.1% |
| Interest Expense | $0$0 | — |
| Net Income | $26.18B$26.89B | −2.7% |
| EPS (Basic) | $13.42$13.54 | −0.9% |
| EPS (Diluted) | $13.32$13.44 | −0.9% |
| Shares Outstanding (Basic) | 1.95B1.99B | −1.8% |
| Shares Outstanding (Diluted) | 1.97B2.00B | −1.8% |
05—Questions
Frequently Asked Questions
Why did Chevron's earnings decline in 2012 despite high oil prices?
Brent averaged $112 per barrel, but earnings fell modestly to $26.2 billion from $26.9 billion. Drivers included lower U.S. natural gas and crude realizations, lower crude volumes, and the absence of 2011 gains, partly offset by a roughly $1.4 billion asset-exchange gain in Australia, a nearly $600 million gain on the Wheatstone stake sale, and higher downstream margins.
What is the outlook for Chevron's production?
Management estimates 2013 worldwide oil-equivalent production of approximately 2.650 million barrels per day, up from 2.610 million in 2012. Growth is expected from major projects such as Papa-Terra, Usan, Agbami 2, Gorgon, Big Foot and Jack/St. Malo, though results depend on OPEC quotas, project start-up timing and field declines.
How significant is the Ecuador litigation for investors?
The Lago Agrio judgment, which the court calculated at about $19.1 billion, is under appeal, and Chevron says it is unenforceable and the product of fraud. Chevron has no assets in Ecuador, and an international arbitration tribunal ruled in February 2013 that Ecuador violated its obligations under the bilateral investment treaty. The company says it cannot estimate a reasonably possible loss, so the ultimate financial effect remains uncertain.
How is Chevron returning capital to shareholders and funding its investments?
In 2012 Chevron paid $6.8 billion in common dividends and repurchased $5.0 billion of stock, with an ongoing program that has no set term. Operating cash flow of $38.8 billion covered most of the $34.2 billion capital program and returns. Total debt rose to $12.2 billion after a $4 billion bond issuance, and the company holds $6.0 billion of committed credit facilities.
What are the main risks identified in the filing?
The filing highlights commodity price volatility, the possibility of declining reserve replacement, operational hazards, and political and regulatory changes in producing countries (21% of proved reserves are in Kazakhstan and 21% in OPEC countries). It also flags greenhouse gas regulation, environmental liabilities, and the company's largely self-insured position against major incidents.
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