10-QPeriod: Q2 FY2013

CHEVRON CORP Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 7, 2013For Securities:CVX

Summary

Chevron Corporation's Q2 2013 results show a notable decrease in net income and earnings per share compared to the same period in the prior year, primarily driven by lower upstream earnings due to reduced crude oil realizations and volumes, and weaker downstream performance characterized by lower refining margins and higher operating expenses. For the first six months of 2013, the trend of declining profitability continued, with net income and EPS significantly lower than the first half of 2012. Despite the earnings decline, the company maintained a strong liquidity position with approximately $22.3 billion in cash, equivalents, time deposits, and marketable securities. Capital expenditures increased significantly, reflecting ongoing investments in major projects like the Kitimat LNG project. Chevron also managed its debt levels, issuing $6 billion in bonds and utilizing its commercial paper program, while continuing its share repurchase program and paying consistent dividends.

Financial Highlights

44 data points
Beta

Revenue

$57.37B

Net Income

$5.37B

9.4% Net Margin

EPS (Diluted)

$2.77

Total Assets

$244.05B

Cash & Equivalents

$20.63B

Free Cash Flow

$8.52B

Financial Statements
Beta
Revenue$57.37B
SG&A Expenses$1.14B
Operating Expenses$48.78B
Net Income$5.37B
EPS (Basic)$2.80
EPS (Diluted)$2.77
Shares Outstanding (Basic)1.92B
Shares Outstanding (Diluted)1.94B

Key Highlights

  • 1Net income attributable to Chevron Corporation for Q2 2013 was $5.4 billion, a decrease from $7.2 billion in Q2 2012. Diluted EPS fell to $2.77 from $3.66.
  • 2First six months net income was $11.5 billion, down from $13.7 billion in the prior year's comparable period, with diluted EPS at $5.95 versus $6.93.
  • 3Upstream earnings declined in both Q2 and the year-to-date period, primarily due to lower crude oil realizations and volumes.
  • 4Downstream earnings saw a substantial decrease, particularly in the U.S., driven by lower refined product margins and increased refinery repair and maintenance expenses.
  • 5Total debt and capital lease obligations increased to $20.0 billion from $12.2 billion at year-end 2012, including a $6 billion bond issuance.
  • 6Capital expenditures increased significantly, reaching $18.3 billion for the first six months of 2013, up from $14.2 billion in the prior year, with a substantial portion allocated to upstream projects.
  • 7Chevron continued its share repurchase program, buying back $1.25 billion of common stock in Q2 2013 and a total of $12.5 billion since the program's inception.

Frequently Asked Questions

The primary drivers for the decrease in net income were lower earnings from the Upstream segment, primarily due to reduced crude oil realizations and volumes, and a significant decline in Downstream earnings caused by lower refined product margins and increased refinery operating expenses, particularly for maintenance.

Chevron's total debt and capital lease obligations increased to $20.0 billion from $12.2 billion at the end of 2012, largely due to a $6 billion bond issuance in June 2013 aimed at taking advantage of low interest rates. Despite this, the company maintained a strong liquidity position, with cash, cash equivalents, time deposits, and marketable securities totaling $22.3 billion, a slight increase from year-end 2012.

Capital expenditures increased substantially to $18.3 billion for the first six months of 2013, up from $14.2 billion in the same period of 2012. A significant majority, 92%, of these expenditures were directed towards upstream projects, indicating a continued strong investment in exploration and production, including new resources and major capital projects such as the Kitimat LNG project.

Yes, Chevron is involved in significant legal proceedings, most notably the ongoing litigation in Ecuador related to alleged environmental damage. While Chevron believes the lawsuit lacks merit and the judgment is illegitimate, it faces substantial potential damages. The company is also subject to other environmental contingencies and legal proceedings, including those related to MTBE and specific regulatory violations, though management does not currently believe these will have a material impact on consolidated financial position or liquidity, other than the Ecuador case where an estimate of loss is not determinable.