Chevron Corporation — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2013; comparative results are for the three and nine months ended September 30, 2012. Financial statements are unaudited.
Financial results and position
- Third-quarter revenue: $56.6 billion, up 1.7% year over year. Chevron-attributable net income was $4.95 billion, down 5.8%; diluted EPS was $2.57 versus $2.69.
- Nine-month revenue: $166.2 billion, down 4.7%. Chevron-attributable net income was $16.49 billion, down 12.9%; diluted EPS was $8.52 versus $9.62.
- Margins: The filing does not state a consolidated net margin. Dividing Chevron-attributable income by sales yields approximately 8.7% for Q3 2013 versus 9.4% for Q3 2012, and 9.9% for the first nine months versus 10.9%.
- Cash flow, nine months: Operating cash flow was $24.55 billion, down from $26.03 billion. Capital expenditures were $26.37 billion, compared with $20.45 billion. Operating cash flow less capital expenditures was negative $1.23 billion, versus positive $5.58 billion in 2012.
- Liquidity: Cash, cash equivalents, time deposits and marketable securities totaled $18.6 billion at quarter-end, down $3.3 billion from year-end 2012. Current assets were $53.5 billion and current liabilities $33.5 billion; the current ratio was 1.6.
- Debt: Debt and capital lease obligations totaled $18.6 billion, up from $12.2 billion at year-end 2012, including a June $6.0 billion bond issuance. The debt ratio rose to 11.4% from 8.2%. Chevron reported $6.0 billion of committed credit facilities with no borrowings outstanding.
- Shareholder returns: Nine-month common dividends were $5.57 billion. The company repurchased $1.25 billion of shares in Q3 and declared a $1.00 per-share quarterly dividend payable in December 2013.
Changes versus comparable periods
- Upstream earnings were $5.09 billion in Q3, broadly similar to $5.14 billion a year earlier; nine-month earnings declined to $15.96 billion from $16.93 billion. Higher crude realizations and production supported Q3, while the prior-year Wheatstone equity-sale gain and higher operating costs weighed on comparisons.
- Downstream earnings fell to $380 million in Q3 from $689 million and to $1.85 billion for nine months from $3.37 billion. Lower refined-product margins were a principal factor; U.S. refinery maintenance and repair costs also reduced earnings.
- Worldwide net oil-equivalent production averaged 2.585 million barrels per day in Q3, up 3% year over year; nine-month production averaged 2.604 million barrels per day, up slightly.
- Higher capital spending, particularly on Australian LNG and deepwater Gulf of Mexico projects, contributed to increased investment outflows and higher debt. Nine-month operating expenses, selling and administrative expenses rose to $21.44 billion from $19.84 billion; depreciation, depletion and amortization rose to $10.55 billion from $9.86 billion.
Outlook, risks and significant items
- Management estimated full-year 2013 net oil-equivalent production would average about 98% to 99% of the previously announced 2.650 million barrels per day target. The shortfall was attributed mainly to slower-than-expected Angola LNG ramp-up, higher turnaround activity and lightning damage to a Thailand gas plant.
- Results remain exposed to crude and natural gas prices, refining margins, project execution and start-up timing, operating costs, political and regulatory conditions, weather and disruptions, and foreign currency movements. Management said it could adjust capital spending during extended periods of low commodity prices or narrow margins.
- Ecuador litigation: The filing describes an Ecuadorian judgment and enforcement actions, while Chevron disputes the judgment. Management said it could not estimate a reasonably possible loss or range; the ultimate outcome and financial effect remain uncertain.
- Brazil incident: On October 1, 2013, two civil lawsuits relating to the Frade Field seeps were dismissed under a settlement providing approximately $43 million for social and environmental programs. Certain criminal allegations against employees had been reinstated on appeal; Chevron said its ultimate exposure was not determinable and could be significant in a period.
- Other matters: Chevron U.S.A. agreed to pay $2 million in fines and restitution after pleading no contest to six misdemeanor charges related to the 2012 Richmond refinery fire. Other environmental, tax, MTBE and regulatory contingencies remain subject to uncertainty.
- Management reported disclosure controls were effective at September 30, 2013, with no material change in internal control over financial reporting during the quarter.
Investor verification points
- Verify production delivery against the reduced 2013 outlook and progress at Angola LNG and other ramp-up projects.
- Track upstream and downstream earnings drivers, especially crude realizations, refined-product margins, refinery reliability and operating-cost trends.
- Assess whether operating cash flow covers the capital program, dividends and repurchases, and monitor debt growth and liquidity.
- Follow developments in the Ecuador arbitration and enforcement proceedings, and the potential outcomes of Brazil and environmental matters.
- Review the timing, cost and expected returns of major LNG and deepwater projects, as well as planned pension contributions and other commitments.