Chevron Corp. reported a loss of $8.3 billion for second-quarter 2020, compared with earnings of $4.3 billion in second-quarter 2019.
Included in the current quarter were impairments and other net charges of $1.8 billion primarily associated with downward revisions to the company's commodity price outlook, severance accruals of $780 million, and a gain of $310 million on the sale of Azerbaijan assets. The company also fully impaired its $2.6 billion investment in Venezuela due to uncertainty associated with the current operating environment and overall outlook. Foreign currency effects decreased earnings by $437 million.
Excluding the special items, the adjusted loss of $3.0 billion in the second quarter compares to adjusted earnings of $3.4 billion in second-quarter 2019.
Sales and other operating revenues in the quarter were $16 billion, compared to $36 billion in the year-ago period. Second quarter organic capital expenditures were $3.0 billion, 40% below the quarterly budget, and year to date organic capital expenditures are on track with the company’s revised full year guidance of $14 billion.
“The economic impact of the response to COVID-19 significantly reduced demand for our products and lowered commodity prices. Given the uncertainties associated with economic recovery, and ample oil and gas supplies, we made a downward revision to our commodity price outlook which resulted in asset impairments and other charges.” said Michael K. Wirth, Chevron’s chairman of the board and chief executive officer. “While demand and commodity prices have shown signs of recovery, they are not back to pre-pandemic levels, and financial results may continue to be depressed into the third quarter 2020.”
The company recently entered into a definitive agreement to acquire Noble Energy in an all-stock transaction (OGJ Online, July 20, 2020). Wirth said, “Noble’s high-quality assets provide Chevron with low-cost, proved reserves and attractive undeveloped resources that will enhance an already advantaged upstream portfolio.”
Upstream
Worldwide net oil-equivalent production was 2.99 million b/d in second-quarter 2020, a decrease of 3% from a year ago, and down 8% from first-quarter 2020. The decrease was largely a result of curtailed production in response to low commodity prices and asset sales, partially offset by net production increases in a number of properties.
US upstream operations reported a loss of $2.1 billion in second-quarter 2020, compared with earnings of $896 million a year earlier. Included in the current quarter were charges of $1.3 billion for special items including impairments, write-offs, and severance accruals. Sharply lower crude oil realizations also contributed to the decrease in earnings between periods.
US net oil-equivalent production of 991,000 b/d for the quarter was up 93,000 b/d 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 the effects of production curtailments due to market conditions.
International upstream operations reported a loss of $4.0 billion in second-quarter 2020, compared with earnings of $2.6 billion a year ago. Special items included charges of $3.9 billion for impairments, write-offs and severance accruals and gains of $700 million related to tax items and the Azerbaijan sale. Foreign currency effects had an unfavorable impact on earnings of $284 million between periods.
International net oil-equivalent production of 2 million b/d in the second quarter decreased 189,000 b/d from second-quarter 2019. The decrease is due to production curtailments associated with market conditions and OPEC+ restrictions combined with asset sale related decreases of 100,000 b/d.
Downstream
US downstream operations reported a loss of $988 million in the second quarter, compared with earnings of $465 million a year earlier. The decrease was mainly due to lower margins on refined product sales, lower sales volumes, lower earnings from 50%-owned Chevron Phillips Chemical Co. and severance accruals, partially offset by lower maintenance and transportation costs.
US refinery crude oil input in second-quarter 2020 decreased 39% to 581,000 b/d from the year-ago period, as the company cut refinery runs in response to the weak refining margin environment. Refined product sales of 827,000 b/d were down 35% from second-quarter 2019, mainly due to gasoline, jet fuel, and diesel demand destruction associated with the COVID-19 pandemic.
International downstream operations reported a loss of $22 million in second-quarter 2020, compared with earnings of $264 million a year earlier. The decrease in earnings was largely due to lower margins on refined product sales and severance accruals, partially offset by lower shutdown and transportation costs. Foreign currency effects had an unfavorable impact on earnings of $14 million between periods.
International refinery crude oil input of 589,000 b/d in the second quarter decreased 2% from the year-ago period. Refined product sales of 1.10 million b/d in second-quarter 2020 were down 13% from the year-ago period.