10-QPeriod: Q2 FY2009

CHEVRON CORP Quarterly Report for Q2 Ended Jun 30, 2009

Filed August 6, 2009For Securities:CVX

Summary

Chevron Corporation (CVX) reported a significant year-over-year decline in net income for both the second quarter and the first six months of 2009, primarily driven by lower crude oil and natural gas prices. Net income attributable to Chevron Corporation fell to $1.75 billion in Q2 2009 from $5.98 billion in Q2 2008, and to $3.58 billion for the first six months of 2009 from $11.14 billion in the prior year period. This was largely due to a substantial decrease in upstream earnings, which were heavily impacted by the sharp drop in commodity prices from their 2008 peaks. Despite the earnings decline, the downstream segment showed a notable improvement, moving from a significant loss in the prior year to profitability, partly bolstered by gains from asset sales. The company also highlighted operational developments, including the startup of several key upstream projects and continued capital expenditures, particularly in upstream activities. Management expressed confidence in the company's financial strength to navigate the challenging economic environment and market conditions.

Financial Highlights

44 data points
Beta

Revenue

$40.20B

Net Income

$1.75B

4.3% Net Margin

EPS (Diluted)

$0.87

Total Assets

$161.20B

Cash & Equivalents

$7.24B

Free Cash Flow

$3.28B

Financial Statements
Beta
Revenue$40.20B
SG&A Expenses$1.04B
Operating Expenses$36.86B
Interest Expense$6.00M
Net Income$1.75B
EPS (Basic)$0.88
EPS (Diluted)$0.87
Shares Outstanding (Basic)1.99B
Shares Outstanding (Diluted)2.00B

Key Highlights

  • 1Net income attributable to Chevron Corporation for Q2 2009 was $1.75 billion, down significantly from $5.98 billion in Q2 2008, largely due to lower oil and gas prices.
  • 2Upstream segment earnings experienced a sharp decline, dropping to $1.52 billion in Q2 2009 from $7.25 billion in Q2 2008, primarily driven by lower commodity prices.
  • 3The Downstream segment improved significantly, reporting earnings of $161 million in Q2 2009 compared to a loss of $734 million in Q2 2008, aided by gains on asset sales.
  • 4Chemicals segment earnings increased, with $108 million reported in Q2 2009 versus $41 million in Q2 2008, driven by improved performance in additives and lower costs.
  • 5Several key upstream projects commenced or progressed, including the startup of the Tahiti Field in the Gulf of Mexico and the Frade Field in Brazil.
  • 6Total capital and exploratory expenditures for the first six months of 2009 were $11.4 billion, with 80% allocated to upstream projects.
  • 7The company's cash and marketable securities stood at $7.3 billion as of June 30, 2009, while total debt and capital lease obligations increased to $12.1 billion from $8.9 billion at year-end 2008.

Frequently Asked Questions

The primary reason for the significant decrease in Chevron's earnings for the periods ended June 30, 2009, compared to the same periods in 2008, is the substantial decline in crude oil and natural gas prices. These lower commodity prices directly impacted the profitability of the upstream segment, which is a major contributor to the company's overall earnings.

The Downstream segment showed a significant improvement, moving from a loss of $734 million in the second quarter of 2008 to earnings of $161 million in the second quarter of 2009. This turnaround was driven by improved refining and marketing margins and also significantly benefited from gains on the sale of marketing businesses outside the United States, which amounted to $140 million in the quarter.

Chevron continued to invest heavily in upstream projects, with $11.4 billion in capital and exploratory expenditures for the first six months of 2009, 80% of which was directed towards upstream activities. Management expressed confidence in the company's financial strength and flexibility to manage capital spending, borrowings, and potential asset dispositions to continue paying its common stock dividend and maintain its credit ratings, even amidst lower commodity prices and refining margins.

Yes, Chevron is involved in significant legal proceedings, most notably the MTBE litigation and a substantial civil lawsuit in Ecuador related to alleged environmental damage from past oil operations. The company believes the Ecuador lawsuit lacks merit but acknowledges the potential for an adverse judgment, though an estimate of a reasonably possible loss cannot be made. The company also has other contingent liabilities, including guarantees and indemnifications related to past asset sales, which could result in future payments, the ultimate amounts of which are uncertain in some cases.