Replies to post #196 on The Rising Influence of Rising Affluence

[DewDiligence]

Chevron's Profit Declines 71% Year-Over-Year

[It’s impressive, IMO, that CVX managed to increase 2Q09 production by 5% Y-o-Y in spite of the disruptions in Nigeria. The guidance for full-year 2009 production is likewise a 5% increase vs 2008. As is the case with XOM, CVX hasn’t done any aggressive cost cutting, but rather is positioning itself for the long term. Among the oil majors, CVX has the highest proportion of its hydrocarbon production in oil (rather than NG) and it plans to increase this proportion even further due to low NG prices.]

http://online.wsj.com/article/SB124904446052296783.html

›AUGUST 3, 2009
By ANGEL GONZALEZ

Chevron Corp. reported a 71% drop in second-quarter earnings on lower oil and gas prices, weak demand for refined fuel and a weaker dollar. But success with new projects prompted the company to raise its 2009 production outlook.

Profit at the second-largest U.S. oil company by market value after Exxon Mobil Corp. sank to its lowest level since the second quarter of 2003. Exxon Mobil, which reported results on Thursday, also saw its profits drop to six-year lows. Both companies fell short of Wall Street's expectations.

Energy prices are sharply lower compared with a year ago, but analysts had expected a recent rebound in oil prices to lift producers' earnings from a slump in the first quarter.

Chevron, which is based in San Ramon, Calif., posted second-quarter profit of $1.75 billion, or 87 cents a share, down from $5.96 billion, or $2.90 a share, a year earlier. Analysts polled by Thomson Reuters expected earnings of 95 cents a share.

Revenue dropped 52% to $40.21 billion, despite a 5.1% rise in oil and gas production.

Chevron's second-quarter performance was marked by "weaker than expected" exploration-and-production results, Credit Suisse said in a research note.

Profit in Chevron's upstream business, which includes exploration and production, slumped 79% to $1.52 billion. As the company had warned, exchange-rate fluctuations took a bite out of the segment's earnings, subtracting $476 million.

At the same time, the company highlighted operational successes, including the start-up of major projects in the Gulf of Mexico and offshore Brazil.

Some of its new projects have performed better than expected, leading the company to raise its full-year production outlook to 2.66 million of barrels of oil equivalent per day -- 30,000 barrels more than in previous guidance and 5% higher than its 2008 output.

The boost marks a turning point for the company, which saw its hopes for production growth dimmed in the past two years by several significant delays, said Phil Weiss, an analyst with Argus Research. Now "they've got their act together," he said.

Meanwhile, Chevron's downstream business -- which refines and markets petroleum products -- swung to a profit of $161 million, despite a loss in the U.S.

"Although our downstream results were better than a year ago, the demand for refined products remained generally weak," Chevron Chairman and Chief Executive Dave O'Reilly said in prepared comments.

Earnings in its chemical business more than doubled to $108 million.

While other companies in the industry have had to cut jobs, production and dividends to help weather the recession, Chevron hasn't yet made any major cost cuts. It announced Wednesday a 4.6% dividend boost, marking the 22nd consecutive year it has increased the payout.

However, the company said Friday it isn't reinstating a share buyback program, as it allocates cash toward capital spending as well as dividend payments.

Chevron executives also said they are reducing investment in U.S. onshore natural gas, where depressed pricing has led many companies to curtail production. Instead, the company will steer spending toward oil drilling.‹

[DewDiligence]

Gorgon LNG Project Clears Final Hurlde

http://www.reuters.com/article/marketsNews/idAFSYD44598720090817

›Mon Aug 17, 2009 5:16am EDT

CANBERRA, Aug 17 (Reuters) - Australia's $50 billion ($41.3 billion) Gorgon liquefied natural gas project cleared another hurdle on Monday, when the national and Western Australian state government agreed to accept joint liability for storing carbon dioxide from the scheme.

Prime Minister Kevin Rudd said the two governments would accept any liabilities arising from the carbon storage in geological formations under Barrow Island, off the Western Australian coast.

"The Commonwealth's decision to accept a share of the long term liability for CO2 storage acknowledges the Gorgon LNG project's scale and significance to the Australian economy," Rudd said in a statement.

Chevron holds a 50 percent stake and is the operator of the project, while Royal Dutch Shell Plc and Exxon Mobil Corp each hold 25 percent.

On August 10, the Western Australia state government granted environmental approval for the project, leaving the national government to finalise its own environmental approval process.

The project was originally expected to cost A$11 billion, but the state government has estimated the scaled-up project could end up costing A$50 billion. ($1=A$1.21)‹

[DewDiligence]

Chevron CEO to Retire at End of Year

http://online.wsj.com/article/SB125431595211052413.html

›SEPTEMBER 30, 2009, 10:57 A.M. ET
By BEN CASSELMAN

Chevron Corp. Chairman and Chief Executive David J. O'Reilly will retire after a decade at the helm of the second-largest U.S. oil company, making way for a seasoned strategist and deal maker.

John S. Watson, Chevron's 52-year-old vice chairman, will succeed Mr. O'Reilly on Dec. 31, the San Ramon, Calif., company said Wednesday.

Mr. Watson, who began his Chevron career in 1980 as a financial analyst, rose to prominence leading the company's integration with Texaco Inc. early this decade. He has since held a variety of senior posts, including chief financial officer, head of international exploration and production, and head of strategy.

Mr. Watson's selection wasn't a surprise. His promotion to vice chairman earlier this year was widely interpreted as a sign that he would take over when Mr. O'Reilly stepped down.

The timing of Mr. O'Reilly's departure, after exactly 10 years in the job, was less expected. At 62, Mr. O'Reilly is three years short of Chevron's mandatory retirement age for senior executives, though past CEOs have left before turning 65. Chevron recently has achieved several significant milestones, including the completion of major offshore projects in Brazil, Angola and the Gulf of Mexico, and the final decision to move forward with the company's long-delayed Gorgon liquefied-natural-gas project in Australia.

The board's selection of Mr. Watson, a long-time lieutenant of Mr. O'Reilly, suggests directors don't want a radical shift in direction. So does the board's decision, also announced Wednesday, to promote George Kirkland to vice chairman. A 35-year Chevron veteran, Mr. Kirkland oversees oil and gas exploration and production for the company.

Mr. Watson will take over at a time of uncertainty for both the company and the broader oil industry. After years of record profits due to rapidly rising oil prices, companies have seen their earnings fall sharply along with the price of oil. Chevron's second-quarter net income fell 71% from a year earlier, to $1.75 billion, and the company suspended its share-buyback program to conserve cash.

The industry also is facing longer-term questions about supply and demand. Companies are struggling to find new sources of oil and gas as old fields begin to dry up and governments restrict access to many of the most attractive new fields. At the same time, concerns about global climate change are leading governments in the U.S. and elsewhere to consider policies that could damp demand of traditional fuels by favoring renewable sources of energy.

So far, Chevron has met those challenges better than many of its competitors. The company hoarded cash when oil prices were rising, amassing a war chest of more than $7 billion that has allowed it to keep its capital spending steady, even as other big producers such as Royal Dutch Shell and ConocoPhillips have cut their budgets.

Chevron found more oil than it produced last year, while global oil reserves fell for the first time in a decade. And the company expects to increase oil and gas production by 5% this year, the fastest projected growth of the major publicly traded producers.

Mr. O'Reilly will step down after a more than 40-year career with the company. Born in Ireland, Mr. O'Reilly began his career at Chevron as a chemical engineer and rose through the ranks to run Chevron's chemical business and later, its refining unit.

One of Big Oil's longest-serving chief executives, Mr. O'Reilly made his most lasting mark on the company early in his tenure, orchestrating Chevron's $35 billion acquisition of Texaco less than a year after taking over in 2000. The merger, a deal Mr. O'Reilly's predecessor had tried unsuccessfully to negotiate less than two years earlier, vaulted Chevron into the ranks of the global "supermajors" alongside Exxon Mobil Corp., Royal Dutch Shell and BP PLC.

Four years later, Chevron bought Unocal Corp. for $18 billion, a deal that required fending off a rival bid from the Chinese national oil company, Cnooc Ltd.

But Mr. O'Reilly is also known for insisting on a disciplined, methodical approach to decision making, and analysts said the deals he didn't make may be as significant as the ones he did. Chevron avoided making big investments in Russia, which have proven difficult for Conoco and BP, or in North American natural-gas assets, which have dropped in value along with the price of natural gas.‹