Chevron hit hard by oil slump

Chevron Chairman and CEO John Watson.

Chevron Chairman and CEO John Watson.

Chevron has reported a 32 per cent decline in revenue across its international operations in the first half of 2015.

The company’s quarterly report was issued to the US Stock Exchange yesterday and detailed dramatic falls in sales and income levels.

Sales revenue plummeted to $US69 million, a 35 per cent decline from the same six-month period in 2014. Net income for the multinational energy firm fell by more than 95 per cent during the first half of the year to total just $US571 million.

A myriad of factors contributed to the company’s disappointing performance over H1, 2015 including a decline in average international natural gas realizations, which hit $US4.75 per Mcf during the past six months, compared to $US6 per Mcf.

The company noted that its contract prices for liquefied natural gas (LNG) are typically linked to crude oil prices.

Overall Chevron’s upstream businesses alone incurred a $US2.2 billion loss over the first half of 2015, compared to $5.3 billion in 2014.

“The decrease was due to lower crude oil and natural gas realization, higher depreciation expenses, primarily reflecting impairments, and higher tax items and exploration expenses. Favourable foreign currency effects and higher crude oil production somewhat offset the decrease,” the company stated.

Downstream, however, performed markedly better than in the previous year primarily off the back of Chevron’s sale of Caltex Australia Limited.

Total downstream earnings reached $US4.4 billion between January and 30 June this year, compared with just $US1.4 billion during the 2014 period. The Caltex Australia sale raked in some $US1.6 billion for the company.

In a statement to the bourse, Chevron chairman and CEO John Watson admitted the latest results were “weak” and attributable to the 50 per cent oil price slump over the past 12 months.

“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,” he said.

“Multiple efforts to improve future earnings and cash flows are underway… 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.”

Watson noted that the company would focus its gaze on its Gorgon and Wheatstone Australian LNG projects while curtailing capex.

Chevron is progressing with commissioning its Jansz-Io Field subsea infrastructure at its Gorgon project and confirmed that all Train 2 modules had been installed on foundations with Train 3 modules currently being delivered.

At the Wheatstone Project, which is about 65 per cent complete, eleven of 24 Train 1 modules had been delivered to the site, gas turbine generators have been installed and subsea infrastructure is currently underway.

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