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Chevron Reports First Quarter Loss of $725 Million

CVX, -1.40% today reported a loss of $725 million ($0.39 per share – diluted) for first quarter 2016, compared with earnings of $2.6 billion ($1.37 per share – diluted) in the 2015 first quarter. Foreign currency effects decreased earnings in the 2016 quarter by $319 million, compared with an increase of $580 million a year earlier.

Sales and other operating revenues in first quarter 2016 were $23 billion, compared to $32 billion in the year-ago period.

Earnings Summary

Three Months
Ended March 31

Millions of dollars 2016 2015
Earnings by business segment
Upstream $ (1,459 ) $ 1,560
Downstream 735 1,423
All Other (1 ) (416 )
Total [(1)(2)] $ (725 ) $ 2,567
(1) Includes foreign currency effects $ (319 ) $ 580
(2) Net income (loss) attributable to Chevron Corporation (See Attachment 1)

“First quarter results declined from a year ago,” said Chairman and CEO John Watson. “Our Upstream business was impacted by a more than 35 percent decline in crude oil prices. Our Downstream operations continued to perform well, although overall industry conditions and margins this quarter were weaker than a year ago.”

“Our efforts are focused on improving free cash flow,” Watson stated. “We are controlling our spend and getting key projects under construction online, which will boost revenues. We announced first LNG production and first cargo shipment from Train 1 at the Gorgon Project in March. Production from the Angola LNG plant is imminent and a cargo shipment is expected in May. Earlier in the year, we started up production at the Chuandongbei Project in China, and we continue to ramp up production in the Permian Basin and elsewhere.”

“We continue to lower our cost structure with better pricing, work flow efficiencies and matching our organizational size to expected future activity levels,” Watson added. “Our capital spending is coming down. We are moving our focus to high-return, shorter-cycle projects and pacing longer-cycle investments.”

UPSTREAM

Worldwide net oil-equivalent production was 2.67 million barrels per day in first quarter 2016, compared with 2.68 million barrels per day in the 2015 first quarter. Production increases from project ramp-ups in the United States, Nigeria and other areas, and production entitlement effects in several locations, were offset by the Partitioned Zone shut-in and normal field declines.

U.S. Upstream

Three Months
Ended March 31

Millions of Dollars 2016 2015
Earnings $ (850 ) $ (460 )

U.S. upstream operations incurred a loss of $850 million in first quarter 2016 compared to a loss of $460 million from a year earlier. The decrease was due to lower crude oil and natural gas realizations, partially offset by lower operating expenses.

The company’s average sales price per barrel of crude oil and natural gas liquids was $26 in first quarter 2016, down from $43 a year ago. The average sales price of natural gas was $1.32 per thousand cubic feet, compared with $2.27 in last year’s first quarter.

Net oil-equivalent production of 701,000 barrels per day in first quarter 2016 was up 2,000 barrels per day from a year earlier. Production increases due to project ramp-ups in the Gulf of Mexico, the Marcellus Shale in western Pennsylvania, and the Permian Basin in Texas and New Mexico were mostly offset by maintenance-related downtime in the Gulf of Mexico, normal field declines and the effect of asset sales. The net liquids component of oil-equivalent production in first quarter 2016 was essentially unchanged at 490,000 barrels per day, while net natural gas production increased 1 percent to 1.27 billion cubic feet per day.

International Upstream

Three Months
Ended March 31

Millions of Dollars 2016 2015
Earnings* $ (609 ) $ 2,020
*Includes foreign currency effects $ (298 ) $ 522

International upstream operations incurred a loss of $609 million in first quarter 2016 compared with earnings of $2.02 billion a year earlier. The decrease was due to lower crude oil and natural gas realizations, the absence of a first quarter 2015 reduction in statutory tax rates in the United Kingdom, and lower gains on asset sales. Partially offsetting these effects were higher liftings and lower exploration expenses. Foreign currency effects decreased earnings by $298 million in the 2016 quarter, compared with an increase of $522 million a year earlier.

The average sales price for crude oil and natural gas liquids in first quarter 2016 was $29 per barrel, down from $46 a year earlier. The average price of natural gas was $3.91 per thousand cubic feet, compared with $5.01 in last year’s first quarter.

Net oil-equivalent production of 1.97 million barrels per day in first quarter 2016 decreased 17,000 barrels per day, or 1 percent, from a year ago. Production increases from project ramp-ups in Nigeria and other areas, and production entitlement effects in several locations, were more than offset by the Partitioned Zone shut-in and normal field declines. The net liquids component of oil-equivalent production decreased 2 percent to 1.29 million barrels per day in the 2016 first quarter, while net natural gas production was essentially unchanged at 4.04 billion cubic feet per day.

DOWNSTREAM

U.S. Downstream

Three Months
Ended March 31

Millions of Dollars 2016 2015
Earnings $ 247 $ 706

U.S. downstream operations earned $247 million in first quarter 2016 compared with earnings of $706 million a year earlier. The decrease was primarily due to lower margins on refined products, an asset impairment, higher operating expenses primarily due to planned turnaround activity in first quarter...


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