The plummeting crude oil prices has taken its toll on the operation of Chevron Corporation as the company’s second quarter 2015 net income dropped to $571 million from the $5.7 billion recorded in the second quarter of 2014.
Chevron at the weekend reported earnings of $571 million ($0.30 per share – diluted) for second quarter 2015, compared with earnings of $5.7 billion ($2.98 per share – diluted) in the 2014 second quarter.
The company blamed its poor performance on the 50 per cent drop in the prices of crude oil since June 2014.
Included in the quarter were impairments of $1.96 billion and other charges of approximately $670 million relating to project suspensions and adverse tax effects, all of which were non-cash charges stemming from a downward revision in the company’s longer-term crude oil price outlook.
Partially offsetting were gains on asset sales totaling $1.80 billion in the current quarter. Foreign currency effects decreased earnings in the 2015 quarter by $251 million, compared with a decrease of $232 million a year earlier.
According to the results, sales and other operating revenues in second quarter 2015 were $37 billion, compared to $56 billion in the year-ago period.
“Second quarter financial results were weak, reflecting a crude price decline of nearly 50 percent from a year ago. Our Upstream businesses were particularly hard hit, as lower prices reduced revenues and triggered impairments and other charges. Downstream operations continued to deliver strong financial performance, reflecting both high reliability and improved margins,” said Chairman and CEO John Watson.
“Multiple efforts to improve future earnings and cash flows are underway,” Watson continued. “We’re getting our cost structure down, through renegotiations across the supply chain and by sizing our contractor and employee workforce to reflect lower activity levels going forward. We’re actively managing to a smaller capital program, as projects currently under construction come online and as potential new projects are paced and re-bid. In addition, our 4-year divestment program is ahead of pace.”
“Project execution on our Gorgon and Wheatstone Australian LNG projects is a priority for us,” Watson commented. “Incremental production and cash generation from these projects and others, along with a curtailed capital program, should provide support for continuing competitive shareholder distributions.”
Worldwide net oil-equivalent production was 2.60 million barrels per day in second quarter 2015, up from 2.55 million barrels per day in the 2014 second quarter.
This production increase of 2 percent came from project ramp-ups in the United States, Bangladesh and Argentina, production entitlement effects in several locations, and lower maintenance-related downtime, primarily reflecting the absence of a major turnaround at Tengizchevroil in Kazakhstan.
The company’s average sales price per barrel of crude oil and natural gas liquids was $50 in second quarter 2015, down from $92 a year ago.
The average sales price of natural gas was $1.92 per thousand cubic feet, compared with $4.09 in last year’s second quarter.
Net oil-equivalent production of 730,000 barrels per day in second quarter 2015 was up 63,000 barrels per day, or 9 percent, from a year earlier.
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