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Chevron 3Q20: Oil Output Up on Permian Growth; Cash Flow, Spending Falls YOY

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Chevron Corp. reported its Q3 2020 results.

Cash Flow Down 62% YOY

Cash flow from operations in the first nine months of 2020 was $8.3 billion, down 62% compared with $21.7 billion in the corresponding 2019 period.

Excluding working capital effects, cash flow from operations in the first nine months of 2020 was $8.4 billion, compared with $20.5 billion in the corresponding 2019 period.

Q3 Expenditures Down 31% YOY

Capital and exploratory expenditures in the first nine months of 2020 were $10.3 billion, down 31% compared with $15.0 billion in 2019.

The amounts included $3.1 billion in 2020 and $4.6 billion in 2019 for the company's share of expenditures by affiliates, which did not require cash outlays by the company. Expenditures for upstream represented 82 percent of the company-wide total in 2020. Third quarter 2020 capital expenditures were down 48 percent compared to the prior year period. Included in the first nine months of 2020 were inorganic capital expenditures of $350 million primarily associated with the downstream acquisition of Puma Energy (Australia) Holdings Pty Ltd.

Total Production Down 7%, Oil Up 48 MBPD

Worldwide net oil-equivalent production was 2.83 million barrels per day in third quarter 2020, a decrease of 7% from a year ago.

The decrease was largely a result of curtailed production in response to low commodity prices and asset sales, partially offset by net production increases at a number of properties.

Net oil-equivalent production of 982,000 barrels per day in third quarter 2020 was up 48,000 barrels per day from a year earlier.

Production increases from shale and tight properties in the Permian Basin in Texas and New Mexico were partially offset by normal field declines and planned maintenance in the Gulf of Mexico. The net liquids component of oil-equivalent production in third quarter 2020 increased 1 percent to 731,000 barrels per day, while net natural gas production increased 21 percent to 1.51 billion cubic feet per day, compared to last year's third quarter.

U.S. upstream operations earned $116 million in third quarter 2020, compared with $727 million a year earlier. The decrease was primarily due to lower crude oil realizations.

The company's average sales price per barrel of crude oil and natural gas liquids was $31 in third quarter 2020, down from $47 a year earlier. The average sales price of natural gas was $0.89 per thousand cubic feet in third quarter 2020, down from $0.95 in last year's third quarter.

International upstream operations earned $119 million in third quarter 2020, compared with $2.0 billion a year ago. The decrease in earnings was primarily due to lower crude oil and natural gas realizations, lower crude oil and natural gas sales volumes, and a tax item related to an end of contract settlement, partially offset by lower depreciation and operating expenses. Foreign currency effects had an unfavorable impact on earnings of $156 million between periods.

The average sales price for crude oil and natural gas liquids in third quarter 2020 was $39 per barrel, down from $56 a year earlier. The average sales price of natural gas was $3.89 per thousand cubic feet in the quarter, compared with $5.62 in last year's third quarter.

Net oil-equivalent production of 1.85 million barrels per day in third quarter 2020 decreased 247,000 barrels per day from third quarter 2019.

The decrease was due to production curtailments associated with OPEC+ restrictions and market conditions combined with asset sale related decreases of 104,000 barrels per day. The net liquids component of oil-equivalent production decreased 12 percent to 976,000 barrels per day in third quarter 2020, while net natural gas production of 5.26 billion cubic feet per day decreased 12 percent, compared to last year's third quarter.

Q3 Financials

Chevron reported a loss of $207 million ($(0.12) per share - diluted) for third quarter 2020, compared with earnings of $2.6 billion ($1.36 per share - diluted) in third quarter 2019. Included in the current quarter was a charge of $130 million attributable to a tax item related to an international upstream end-of-contract settlement and a non-cash provision of $90 million for remediation of a former mining asset. Foreign currency effects decreased earnings by $188 million.

Adjusted earnings of $201 million ($0.11 per share - diluted) in third quarter 2020 compares to adjusted earnings of $2.9 billion ($1.55 per share - diluted) in third quarter 2019. For a reconciliation of adjusted earnings/(loss), see Attachment 5.

Sales and other operating revenues in third quarter 2020 were $24 billion, compared to $35 billion in the year-ago period.

Earnings Summary

CEO Michael K. Wirth said: "Third quarter results were down from a year ago, primarily due to lower commodity prices and margins resulting from the impact of COVID-19. The world's economy continues to operate below pre-pandemic levels, impacting demand for our products which are closely linked to economic activity.

"We remain focused on what we can control - safe operations, capital discipline and cost management," Wirth continued. "Compared to last year's third quarter, organic capital expenditures and operating expenses were down 48 percent and 12 percent, respectively.

"I'm proud of our employees' continued focus on safe and reliable operations during these challenging times," Wirth added. "Our actions are guided by our long-standing financial priorities: to protect the dividend, invest for long term value and maintain a strong balance sheet.

The company's acquisition of Noble Energy, Inc. was completed in October following approval by Noble Energy shareholders. Wirth said, "Noble's high-quality assets, including those in the Eastern Mediterranean, Colorado's DJ Basin and the Permian Basin, strengthen our portfolio and are expected to increase the long-term value of our company.

"The company's joint venture, CalBioGas LLC, successfully started production of dairy biomethane, a renewable natural gas (RNG), from dairy farms in California and marketed it as an alternative fuel for heavy-duty trucks and buses. The company also announced the formation of a joint venture with Brightmark LLC to produce and market additional dairy biomethane.

"Lastly, the company signed an agreement in October to sell its Appalachia natural gas business. The transaction is expected to close before the end of the year."

Downstream

U.S. downstream operations earned $141 million in third quarter 2020, compared with $389 million a year earlier. The decrease was mainly due to lower sales volumes and lower margins on refined product sales, partially offset by lower operating expenses.

Refinery crude oil input in third quarter 2020 decreased 17 percent to 820,000 barrels per day from the year-ago period, as the company cut refinery runs in response to the weak refining margin environment.

Refined product sales of 1.00 million barrels per day were down 22 percent from third quarter 2019, mainly due to lower jet fuel, gasoline and diesel demand associated with the COVID-19 pandemic.

International downstream operations earned $151 million in third quarter 2020, compared with $439 million a year earlier. The decrease in earnings was largely due to lower margins on refined product sales, partially offset by lower operating expenses. Foreign currency effects had an unfavorable impact on earnings of $76 million between periods.

Refinery crude oil input of 570,000 barrels per day in third quarter 2020 decreased 9 percent from the year-ago period, primarily due to the economic slowdowns in response to the COVID-19 pandemic.

Refined product sales of 1.28 million barrels per day in third quarter 2020 were down 6 percent from the year-ago period, mainly due to lower jet fuel demand associated with the COVID-19 pandemic, partially offset by higher diesel sales resulting from the second quarter 2020 acquisition of Puma Energy (Australia) Holdings Pty Ltd.

Other

All Other consists of worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities and technology companies.

Net charges in third quarter 2020 were $734 million, compared to $952 million a year earlier. The decrease in net charges between periods was mainly due to the absence of prior year tax charge. Higher corporate expenses partially offset the decrease between periods, primarily from a non-cash provision for remediation of a former mining asset. Foreign currency effects increased net charges by $30 million between periods.