[DJN article below]
ChevronTexaco reported a strong fourth quarter Friday, thanks to high oil prices, and tried to reassure investors that it has none of the accounting problems that have recently tarnished the image of Royal Dutch/Shell, a big competitor.
The accounting questions revolve around how companies book their reserves, the amount of raw material that they know exists under their fields and that they will probably pump in the future.
Earlier this month, Royal Dutch/Shell cut its proven global reserves by 20 percent, or nearly $120 billion in current prices, reclassifying those reserves as undeveloped because they cannot be readily drilled. The company's move raised suspicions that others in the oil industry may follow suit.
However, ChevronTexaco, based in San Ramon, stood behind its accounting on Friday. David O'Reilly, the company's chief executive, reiterated that no adjustments are expected.
David O'Reilly, CEO ChevronTexaco
"ChevronTexaco has been very prudent in booking proved reserves," he said.
ChevronTexaco's fourth-quarter profit nearly doubled to $1.74 billion ($1. 63 per share) from $904 million (85 cents) in the same quarter a year earlier. Revenue was up 13 percent to $30.47 billion from $27.06 billion in the year- ago period.
For all of 2003, ChevronTexaco made a profit of $7.43 billion ($6.96) compared with $1.13 billion ($1.07) in 2002. Revenue rose to $121.76 billion in 2003, up from $98.91 billion in the previous year.
ChevronTexaco's fortunes in the fourth quarter were bolstered by relatively high oil prices. A barrel of oil sold for an average of $26 in the United States, up $2.60 per barrel from the same quarter a year earlier.
In fact, oil traded between $25 per barrel and $32 per barrel nearly all year long. The market's strength defied analysts' predictions that prices would drop after the war in Iraq.
Another big source of ChevronTexaco's profit was gasoline. The company underscored that the margins on the West Coast were particularly strong in the fourth quarter of 2003 because of lower inventory levels for the entire industry.
James Halloran, a money manager for National City Wealth Management, an investment company that holds 1.2 million shares of ChevronTexaco, gave ChevronTexaco's management a B or B+ for its performance in the fourth quarter of 2003. But he raised concerns about the company's declining production.
ChevronTexaco's oil and natural-gas production dropped nearly 3 percent in 2003, to the equivalent of 2.5 million barrels of oil per day on average. The declines are partly due to the maturation of existing fields and the sale of some others.
"The problem is that they are not replacing the production they're losing, " Halloran said. "But I'm not picking on ChevronTexaco, all the companies are having that problem."
ChevronTexaco said that it will increase production in 2004 at several fields, including at Hamaca in Venezuela, and offshore Angola. But at the same time, the company is planing to sell off a large number of fields in the United States and is considering similar sales in Western Canada.
The accounting issues swirling around the oil industry were started by Royal Dutch/Shell when it announced that it had mistakenly accounted for certain oil and natural-gas projects as being readily exploitable, when in fact they were not.
One of them was a joint liquid- natural-gas project with ChevronTexaco in Australia, which has yet to get final government approval.
ChevronTexaco never counted that as part of its proven reserves.
ChevronTexaco's shares fell 96 cents in regular trading Friday to $86.35, or 1.1 percent.
CHEVRONTEXACO (San Ramon)
4th Qtr 2003 2002
Revenue... $30,470,000 $27,060,000
Net profit... $1,740,000 $904,000,000
Share earnings... $1.63 $0.85
Year 2003 2002
Revenue... $121,760,000 $98,910,000
Net profit ...$7,430,000 $1,130,000
Share earnings ... $6.96 $1.07
source: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2004/01/31/BUG274M0SL1.DTL&type=printable 31jan04
ChevronTexaco Reports Net Income Of $1.7 B - DOW JONES NEWSWIRES 30jan04
SAN RAMON, Calif. -- ChevronTexaco Corp.'s (CVX) fourth-quarter income rose 91%, led by higher prices for crude oil and natural gas, and improved margins.
In a press release Friday, the energy giant said income for the three months ended Dec. 31 rose to $1.74 billion, $1.63 a share, including a gain of $118 million from a tax adjustment; a gain of $71 million from asset dispositions; a charge of $60 million for employee severance; a charge of $40 million for asset-impairment by its Dynegy Inc. (DYN) affiliate; and foreign-currency losses of $171 million.
Analysts surveyed by Thomson First Call were expecting ChevronTexaco to earn $1.59 a share for the fourth quarter.
For the year-ago fourth quarter, ChevronTexaco earned $904,000 million, or 85 cents a share, including charges of $161 million and foreign-currency losses of $79 million.
Fourth-quarter total sales rose about 13% to $30.47 billion from $27.06 billion. Sales and operating revenue, excluding income from equity affiliates, rose to $30.13 billion from $26.94 billion.
ChevronTexaco said it added about 1 billion oil-equivalent barrels of proved oil and gas reserves in 2003, including the results of contract extensions in Denmark and Colombia, domestic drilling activities, revisions from reservoir management activities and improved recovery processes in the U.S., Kazakhstan and Nigeria.
The company's domestic exploration and production, or upstream, income rose 42% to $721 million from $507 million, while international upstream income increased 14% to $848 million from $745 million last year.
In its upstream business, ChevronTexaco said average domestic crude oil and natural-gas liquids sales price rose about $2.60 a barrel to more than $26 a barrel in the fourth quarter. Average domestic natural gas price increased more than 20% to about $4.35 per thousand cubic feet.
Average liquids prices increased $1.70 a barrel to about $27 internationally, while the average price of natural gas rose 15% to about $2.70.
The company said a roughly 3% decline in worldwide oil-equivalent production from a year ago offset gains from higher oil and gas prices in the quarter.
ChevronTexaco
Corp. - San Ramon, Calif.
4th Quar Dec. 31:
2003 2002
Total revenue $30,465,000,000 $27,058,000,000
Net income a 1,735,000,000 b 904,000,000
Avg shrs (diluted) 1,064,445,000 1,063,624,000
Shr earns
Net income a 1.63 b .85
Year:
Total revenue 121,761,000,000 98,913,000,000
Inc bef adj 7,426,000,000 1,132,000,000
Acctg adj (196,000,000) ....
Net income 7,230,000,000 1,132,000,000
Avg shrs (diluted) 1,063,964,000 1,063,398,000
Shr earns
Inc cont op 7.14 1.07
Inc dis op (.18) ....
Net income 6.96 1.07
Figures in parentheses are losses.
a. Includes a gain of $118 million from a tax adjustment; a gain of $71 million from asset dispositions; a charge of $60 million for employee severance; a
charge of $40 million for asset-impairment by its Dynegy Inc. (DYN) affiliate; and foreign-currency losses of $171 million.
b. Includes charges of $161 million and foreign-currency losses of $79 million.
The company said capital and exploratory expenditures, including its share of affiliates' expenditures, were $7.4 billion in 2003 down from $9.3 billion in 2002.
ChevronTexaco said about 55% of the 2003 budget was used for international exploration and production projects.
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