10-QPeriod: Q3 FY2002

CHEVRON CORP Quarterly Report for Q3 Ended Sep 30, 2002

Filed November 12, 2002For Securities:CVX

Summary

ChevronTexaco Corporation reported a net loss of $904 million for the third quarter of 2002, a significant downturn from the $1.269 billion net income reported in the same period of 2001. This loss was heavily influenced by substantial special charges, primarily a $1.549 billion write-down related to its investment in the Dynegy affiliate, along with other asset impairments and environmental remediation costs. For the first nine months of 2002, net income also saw a considerable decrease, falling to $228 million from $5.810 billion in the prior year, again largely due to significant special charges, including the Dynegy investment write-down. Despite the net loss in the current quarter, operating earnings, excluding special items and merger effects, were $1.237 billion, down 28% from the prior year, reflecting pressures across various segments, particularly a decline in refining and marketing margins. The company continues to focus on synergy savings from the Chevron-Texaco merger, having achieved $1.8 billion in annual savings by Q3 2002, ahead of schedule, with a revised target of $2.2 billion. Liquidity remains robust, with cash and cash equivalents increasing and credit facilities available.

Key Highlights

  • 1Reported a net loss of $904 million for Q3 2002, compared to a net income of $1.269 billion in Q3 2001.
  • 2The Q3 2002 net loss was significantly impacted by $2.068 billion in special charges, primarily a $1.549 billion write-down of the Dynegy investment.
  • 3First nine months net income decreased to $228 million in 2002 from $5.810 billion in 2001, also due to substantial special charges.
  • 4Operating earnings (excluding special items and merger effects) for Q3 2002 were $1.237 billion, down 28% year-over-year, driven by lower refining and marketing margins.
  • 5The company achieved $1.8 billion in annual synergy savings from the merger by Q3 2002, ahead of schedule, and raised its target to $2.2 billion.
  • 6Cash and cash equivalents increased to $2.767 billion as of September 30, 2002, up from $2.117 billion at the end of 2001.
  • 7The company continued to invest heavily in Exploration and Production, accounting for 71% of capital expenditures in the first nine months of 2002.

Frequently Asked Questions

The primary driver of the net loss was a substantial special charge of $1.549 billion related to the write-down of the company's investment in its affiliate, Dynegy Inc., to its estimated fair value. Additional special charges for asset impairments and environmental remediation also contributed.

The merger resulted in merger-related expenses, which were $73 million in Q3 2002 and $278 million for the first nine months of 2002. The company also continued to realize synergy savings from the merger, achieving $1.8 billion in annual savings ahead of schedule, with a revised target of $2.2 billion.

The outlook for the Refining, Marketing, and Transportation segment appears challenging in the near term. The company experienced a significant decline in operating earnings for this segment, particularly in the U.S., due to severely compressed refined product margins and weak demand. This trend is expected to continue to impact profitability.

The company's liquidity appears strong. Cash and cash equivalents increased to $2.767 billion at the end of Q3 2002. They also have substantial revolving credit facilities available. Proceeds from asset sales, like the Equilon and Motiva investments, further bolstered cash resources, allowing for debt reduction and dividend payments.