Chevron: Rebound And Grow After Storms

Nov. 8, 2005
Storm-related damages don't stop Chevron from posting a third-quarter profit increase and continued development efforts.

Despite taking a hit from hurricanes and storms that battered the Gulf of Mexico, San Ramon, Calif.-based Chevron Corp. still reported a quarterly profit increase of 12%.

Chevron, the second-largest U.S. oil company and one of IndustryWeek's IW 50 Best Manufacturing companies in 2005, reported net income of $3.6 billion in the third quarter of 2005, compared with $3.2 billion during the same period last year.

That falls far short of record profits reported by other major U.S. oil companies, which the company attributes to losses sustained from the storms. The impact from Hurricanes Katrina and Rita and other storms reduced crude oil and natural gas production by approximately 90,000 barrels of oil per day and lowered earnings by $600 million, said Chairman and CEO Dave O'Reilly in an Oct. 28 press release.

But with the August acquisition of Unocal Corp. and other investments, the company expects to rebound and to continue growing.

Chevron Corp.
At A Glance

Chevron Corp.
San Ramon, Calif.
Primary Industry: Petroleum & Coal Products
Number of employees: 56,000

2004 In Review
Revenue: $152.7 billion
Profit Margin: 8.7%
Sales Turnover: 1.6
Inventory Turnover: 37
Revenue Growth: 26.5%
Return On Assets: 16.4%
Return On Equity: 36.7%
"While the recovery of our operations in the Gulf of Mexico region will take several months, I am very optimistic about our company's many growth opportunities," O'Reilly commented in the press release. "We have the financial strength to fund the excellent investments in the combined Chevron and Unocal asset portfolio. And our employees are dedicated to quickly integrating the two companies so we can successfully capture the benefits of the merged operations."

The $17 billion acquisition, approved by shareholders Aug. 10, will increase Chevron's proved reserves by more than 15%. By adding Unocal's Asia-Pacific operations to its portfolio, Chevron expects the move will strengthen its position there, with 20% of its oil and gas output coming from the Asia-Pacific region.

Additionally, the company restarted its Pascagoula, Miss., refinery Oct. 13, which was shut down prior to Hurricane Katrina. The hurricane damaged the refinery's marine terminal, cooling towers and other equipment. Restarting the refinery is significant because it's Chevron's largest, processing an average of 325,000 barrels of crude oil per day and a variety of products, including 5 million gallons of gasoline a day.

The company continues providing support to employees affected by the hurricanes, raising more than $720,000 in donations, as of Oct. 5, through its Chevron Humanitarian Relief Fund. The company plans to continue matching employee contributions to the fund through Nov. 30.

Another sign of progress is the company's Oct. 10 announcement that it plans to spend $900 million on developing an oil field, called Blind Faith, located in the Gulf of Mexico, about 160 miles southeast of New Orleans. The company estimates the field could produce the equivalent of more than 100 million barrels of oil. The company expects to begin production in 2008, with initial daily output estimated at 30,000 barrels of crude oil and 30 million cubic feet of natural gas.

In September, the company also began installation of a 350-mile main offshore segment of the West African Gas Pipeline that will provide natural gas to potential markets in Ghana, Togo and Benin by connecting to an existing onshore pipeline in Nigeria. The pipeline will have a capacity of approximately 475 million cubic feet per day.

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