10-QPeriod: Q1 FY2005

CHEVRON CORP Quarterly Report for Q1 Ended Mar 31, 2005

Filed May 4, 2005For Securities:CVX

Summary

ChevronTexaco Corporation (CVX) reported a strong first quarter in 2005, with net income increasing to $2.7 billion, or $1.28 per diluted share, up from $2.6 billion, or $1.20 per diluted share, in the prior year. This growth was primarily driven by the Upstream segment, which benefited from significantly higher crude oil and natural gas prices, despite a slight decrease in production volumes. The company also announced its intention to acquire Unocal Corporation for approximately $16.5 billion, a strategic move aimed at bolstering its upstream portfolio and expanding its natural gas resources. Despite the overall positive financial performance, the Downstream segment experienced a decline in earnings due to planned and unplanned refinery downtime, impacting margins. The company continued its shareholder-friendly capital allocation by increasing its quarterly dividend and repurchasing shares. Looking ahead, ChevronTexaco remains focused on investing in upstream projects and managing operational costs effectively to sustain long-term growth and profitability.

Key Highlights

  • 1Net income increased to $2.7 billion in Q1 2005 from $2.6 billion in Q1 2004, with diluted EPS rising to $1.28 from $1.20.
  • 2Upstream segment earnings significantly improved, driven by a substantial increase in average crude oil and natural gas prices.
  • 3ChevronTexaco announced a $16.5 billion agreement to acquire Unocal Corporation, enhancing its upstream capabilities.
  • 4Downstream segment earnings decreased due to refinery downtime impacting margins.
  • 5The company increased its quarterly dividend by 12.5% and continued its share repurchase program, returning capital to shareholders.
  • 6Total capital and exploratory expenditures remained stable at $1.7 billion, with a continued emphasis on upstream projects.
  • 7Cash and cash equivalents increased to $11.9 billion, indicating a strong liquidity position.

Frequently Asked Questions

The primary driver of earnings growth was the Upstream segment, which benefited significantly from higher realized prices for crude oil and natural gas. Although production volumes saw a slight decrease, the strong commodity price environment more than offset this decline.

The proposed acquisition of Unocal for approximately $16.5 billion is a strategic move to strengthen ChevronTexaco's upstream portfolio. It aims to grow profitability in core upstream areas, build new legacy positions, and commercialize the company's substantial undeveloped natural gas resource base.

The Downstream segment experienced a decline in earnings primarily due to planned and unplanned downtime at several of the company's refineries. This downtime impacted operational efficiencies and the company's refining margins.

ChevronTexaco is returning capital to shareholders through two main avenues: a consistent dividend payout, which saw a 12.5% increase in the quarterly dividend, and a share repurchase program. The company repurchased $708 million of its common stock in the first quarter of 2005.