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UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
☑QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
quarterly period ended
March 31, 2020
or
☐TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission
file number 001-00368
Chevron
Corporation
(Exact name
of registrant as specified in its charter)
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6001
Bollinger Canyon Road
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Delaware
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94-0890210
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San Ramon,
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California
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94583-2324
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(State or
other jurisdiction of
incorporation or organization)
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(I.R.S.
Employer
Identification No.)
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(Address of
principal executive offices)
(Zip Code)
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Registrant’s
telephone number, including area code: (925) 842-1000
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|
|
|
NONE
|
|
|
|
|
(Former name,
former address and former fiscal year, if changed since last
report.)
|
|
Securities
registered pursuant to Section 12(b) of the Act:
|
|
|
|
|
|
|
Title of each
class
|
|
Trading Symbol
|
|
Name of each exchange on
which registered
|
|
Common stock, par value
$.75 per share
|
|
CVX
|
|
New York Stock
Exchange
|
Indicate by check
mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past
90 days. Yes ☑ No ☐
Indicate by check
mark whether the registrant has submitted electronically every
Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit such
files). Yes ☑ No ☐
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
|
|
|
|
|
|
|
|
|
|
|
|
Large accelerated
filer
|
☑
|
|
Accelerated filer
|
☐
|
|
Non-accelerated filer
|
☐
|
|
Smaller reporting
company
|
☐
|
|
|
|
|
Emerging growth
company
|
☐
|
If an emerging
growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange
Act. ☐
Indicate by check
mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange
Act). Yes ☐ No ☑
There were
1,866,978,650
shares of the
Company's common stock outstanding on March 31,
2020.
TABLE OF
CONTENTS
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Page No.
|
|
|
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|
FINANCIAL
INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INFORMATION
|
|
|
|
|
|
|
|
|
|
|
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|
|
Item 5.
|
|
|
|
|
|
|
|
|
|
CAUTIONARY
STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION
FOR THE
PURPOSE OF “SAFE HARBOR” PROVISIONS OF THE
PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This quarterly
report on Form 10-Q of Chevron Corporation contains forward-looking
statements relating to Chevron’s operations that are based on
management's current expectations, estimates and projections about
the petroleum, chemicals and other energy-related industries. Words
or phrases such as “anticipates,” “expects,” “intends,” “plans,”
“targets,” “forecasts,” “projects,” “believes,” “seeks,”
“schedules,” “estimates,” “positions,” “pursues,” “may,” “could,”
“should,” “will,” “budgets,” “outlook,” “trends,” “guidance,”
“focus,” “on schedule,” “on track,” “is slated,” “goals,”
“objectives,” “strategies,” “opportunities,” “poised,” “potential”
and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of
future performance and are subject to certain risks, uncertainties
and other factors, many of which are beyond the company’s control
and are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted
in such forward-looking statements. The reader should not place
undue reliance on these forward-looking statements, which speak
only as of the date of this report. Unless legally required,
Chevron undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Among the
important factors that could cause actual results to differ
materially from those in the forward-looking statements are:
changing crude oil and natural gas prices and demand for our
products; crude oil production quotas or other actions that might
be imposed by the Organization of Petroleum Exporting Countries and
other producing countries; public health crises, such as pandemics
(including coronavirus (COVID-19)) and epidemics, and any related
government policies and actions; changing economic, regulatory and
political environments in the various countries in which the
company operates; general domestic and international economic and
political conditions; changing refining, marketing and chemicals
margins; the company’s ability to realize anticipated cost savings,
expenditure reductions and efficiencies associated with enterprise
transformation initiatives; actions of competitors or regulators;
timing of exploration expenses; timing of crude oil liftings; the
competitiveness of alternate-energy sources or product substitutes;
technological developments; the results of operations and financial
condition of the company’s suppliers, vendors, partners and equity
affiliates, particularly during extended periods of low prices for
crude oil and natural gas during the COVID-19 pandemic; the
inability or failure of the company’s joint-venture partners to
fund their share of operations and development activities; the
potential failure to achieve expected net production from existing
and future crude oil and natural gas development projects;
potential delays in the development, construction or start-up of
planned projects; the potential disruption or interruption of the
company’s operations due to war, accidents, political events, civil
unrest, severe weather, cyber threats, terrorist acts, or other
natural or human causes beyond the company’s control; the potential
liability for remedial actions or assessments under existing or
future environmental regulations and litigation; significant
operational, investment or product changes required by existing or
future environmental statutes and regulations, including
international agreements and national or regional legislation and
regulatory measures to limit or reduce greenhouse gas emissions;
the potential liability resulting from pending or future
litigation; the company’s future acquisitions or dispositions of
assets or shares or the delay or failure of such transactions to
close based on required closing conditions; the potential for gains
and losses from asset dispositions or impairments; government
mandated sales, divestitures, recapitalizations, industry-specific
taxes, tariffs, sanctions, changes in fiscal terms or restrictions
on scope of company operations; foreign currency movements compared
with the U.S. dollar; material reductions in corporate liquidity
and access to debt markets; the receipt of required Board
authorizations to pay future dividends; the effects of changed
accounting rules under generally accepted accounting principles
promulgated by rule-setting bodies; the company’s ability to
identify and mitigate the risks and hazards inherent in operating
in the global energy industry; and the factors set forth under the
heading “Risk Factors” on pages 18 through 21
of the
company’s 2019 Annual Report on Form 10-K,
on pages 37 and 38 of this report and in subsequent filings with
the U.S. Securities and Exchange Commission. Other unpredictable or
unknown factors not discussed in this report could also have
material adverse effects on forward-looking
statements.
PART
I.
FINANCIAL
INFORMATION
|
|
|
Item
1.
|
Consolidated Financial Statements
|
CHEVRON
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31
|
|
|
2020
|
|
|
2019
|
|
|
|
(Millions of
dollars, except per share amounts)
|
|
Revenues and Other Income
|
|
|
|
|
Sales and other operating
revenues
|
$
|
29,705
|
|
|
$
|
34,189
|
|
|
Income from equity
affiliates
|
965
|
|
|
1,062
|
|
|
Other income
(loss)
|
831
|
|
|
(51
|
)
|
|
Total Revenues and Other Income
|
31,501
|
|
|
35,200
|
|
|
Costs and Other Deductions
|
|
|
|
|
Purchased crude oil and
products
|
15,509
|
|
|
19,703
|
|
|
Operating
expenses
|
5,291
|
|
|
4,886
|
|
|
Selling, general and
administrative expenses
|
683
|
|
|
984
|
|
|
Exploration
expenses
|
158
|
|
|
189
|
|
|
Depreciation, depletion and
amortization
|
4,288
|
|
|
4,094
|
|
|
Taxes other than on
income
|
1,167
|
|
|
1,061
|
|
|
Interest and debt
expense
|
162
|
|
|
225
|
|
|
Other components of net
periodic benefit costs
|
98
|
|
|
101
|
|
|
Total Costs and Other Deductions
|
27,356
|
|
|
31,243
|
|
|
Income Before Income Tax Expense
|
4,145
|
|
|
3,957
|
|
|
Income Tax Expense (Benefit)
|
564
|
|
|
1,315
|
|
|
Net Income (Loss)
|
3,581
|
|
|
2,642
|
|
|
Less: Net income (loss)
attributable to noncontrolling interests
|
(18
|
)
|
|
(7
|
)
|
|
Net Income (Loss) Attributable to Chevron Corporation
|
$
|
3,599
|
|
|
$
|
2,649
|
|
|
Per Share of Common Stock
|
|
|
|
|
Net Income (Loss) Attributable to Chevron Corporation
|
|
|
|
|
- Basic
|
$
|
1.93
|
|
|
$
|
1.40
|
|
|
- Diluted
|
$
|
1.93
|
|
|
$
|
1.39
|
|
|
Weighted Average Number of Shares Outstanding (000s)
|
|
|
|
|
- Basic
|
1,862,273
|
|
|
1,888,002
|
|
|
- Diluted
|
1,865,649
|
|
|
1,900,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying
notes to consolidated financial statements.
3
CHEVRON
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31
|
|
|
2020
|
|
2019
|
|
|
(Millions of
dollars)
|
|
Net Income (Loss)
|
$
|
3,581
|
|
|
$
|
2,642
|
|
|
Currency translation
adjustment
|
(19
|
)
|
|
(4
|
)
|
|
Unrealized holding gain
(loss) on securities
|
|
|
|
|
Net gain (loss) arising
during period
|
(3
|
)
|
|
(1
|
)
|
|
Defined benefit
plans
|
|
|
|
|
Actuarial gain
(loss)
|
|
|
|
|
Amortization to net income of
net actuarial loss and settlements
|
166
|
|
|
125
|
|
|
Actuarial gain (loss) arising
during period
|
—
|
|
|
(3
|
)
|
|
Prior service credits
(cost)
|
|
|
|
|
Amortization to net income of
net prior service costs and curtailments
|
(3
|
)
|
|
(4
|
)
|
|
Prior service (costs) credits
arising during period
|
—
|
|
|
—
|
|
|
Defined benefit plans
sponsored by equity affiliates - benefit (cost)
|
2
|
|
|
2
|
|
|
Income (taxes) benefit on
defined benefit plans
|
(37
|
)
|
|
(30
|
)
|
|
Total
|
128
|
|
|
90
|
|
|
Other Comprehensive Gain (Loss), Net of Tax
|
106
|
|
|
85
|
|
|
Comprehensive Income
|
3,687
|
|
|
2,727
|
|
|
Comprehensive loss (income)
attributable to noncontrolling interests
|
18
|
|
|
7
|
|
|
Comprehensive Income (Loss) Attributable to Chevron
Corporation
|
$
|
3,705
|
|
|
$
|
2,734
|
|
See accompanying
notes to consolidated financial statements.
4
CHEVRON
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEET
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
At March
31,
2020
|
|
At December
31,
2019
|
|
|
|
(Millions of dollars)
|
|
Assets
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
8,492
|
|
|
$
|
5,686
|
|
|
Marketable
securities
|
|
50
|
|
|
63
|
|
|
Accounts and notes
receivable, net
|
|
10,167
|
|
|
13,325
|
|
|
Inventories:
|
|
|
|
|
|
Crude oil and petroleum
products
|
|
4,425
|
|
|
3,722
|
|
|
Chemicals
|
|
494
|
|
|
492
|
|
|
Materials, supplies and
other
|
|
1,655
|
|
|
1,634
|
|
|
Total
inventories
|
|
6,574
|
|
|
5,848
|
|
|
Prepaid expenses and other
current assets
|
|
3,279
|
|
|
3,407
|
|
|
Total Current Assets
|
|
28,562
|
|
|
28,329
|
|
|
Long-term receivables,
net
|
|
1,243
|
|
|
1,511
|
|
|
Investments and
advances
|
|
39,693
|
|
|
38,688
|
|
|
Properties, plant and
equipment, at cost
|
|
326,412
|
|
|
326,722
|
|
|
Less: Accumulated
depreciation, depletion and amortization
|
|
177,192
|
|
|
176,228
|
|
|
Properties, plant and
equipment, net
|
|
149,220
|
|
|
150,494
|
|
|
Deferred charges and other
assets
|
|
10,516
|
|
|
10,532
|
|
|
Goodwill
|
|
4,454
|
|
|
4,463
|
|
|
Assets held for
sale
|
|
2,989
|
|
|
3,411
|
|
|
Total Assets
|
|
$
|
236,677
|
|
|
$
|
237,428
|
|
|
Liabilities and Equity
|
|
|
|
|
|
Short-term
debt
|
|
$
|
8,688
|
|
|
$
|
3,282
|
|
|
Accounts payable
|
|
11,006
|
|
|
14,103
|
|
|
Accrued
liabilities
|
|
6,263
|
|
|
6,589
|
|
|
Federal and other taxes on
income
|
|
1,534
|
|
|
1,554
|
|
|
Other taxes
payable
|
|
744
|
|
|
1,002
|
|
|
Total Current Liabilities
|
|
28,235
|
|
|
26,530
|
|
|
Long-term debt
|
|
23,663
|
|
|
23,691
|
|
|
Deferred credits and other
noncurrent obligations
|
|
18,677
|
|
|
20,445
|
|
|
Noncurrent deferred income
taxes
|
|
13,457
|
|
|
13,688
|
|
|
Noncurrent employee benefit
plans
|
|
7,731
|
|
|
7,866
|
|
|
Total Liabilities*
|
|
$
|
91,763
|
|
|
$
|
92,220
|
|
|
Preferred stock (authorized
100,000,000 shares; $1.00 par value; none issued)
|
|
—
|
|
|
—
|
|
|
Common stock (authorized
6,000,000,000 shares, $0.75 par value; 2,442,676,580 shares
issued at March 31, 2020 and December 31, 2019)
|
|
1,832
|
|
|
1,832
|
|
|
Capital in excess of par
value
|
|
17,275
|
|
|
17,265
|
|
|
Retained
earnings
|
|
176,113
|
|
|
174,945
|
|
|
Accumulated other
comprehensive losses
|
|
(4,884
|
)
|
|
(4,990
|
)
|
|
Deferred compensation and
benefit plan trust
|
|
(240
|
)
|
|
(240
|
)
|
|
Treasury stock, at cost
(575,697,930 and 560,508,479 shares at March 31, 2020 and December
31, 2019, respectively)
|
|
(46,166
|
)
|
|
(44,599
|
)
|
|
Total Chevron Corporation Stockholders’ Equity
|
|
143,930
|
|
|
144,213
|
|
|
Noncontrolling
interests
|
|
984
|
|
|
995
|
|
|
Total Equity
|
|
144,914
|
|
|
145,208
|
|
|
Total Liabilities and Equity
|
|
$
|
236,677
|
|
|
$
|
237,428
|
|
|
___________________________
|
|
|
|
|
|
* Refer to Note 13,
“Other Contingencies and
Commitments” beginning on page
17.
|
See accompanying
notes to consolidated financial statements.
5
CHEVRON
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31
|
|
|
2020
|
|
2019
|
|
|
(Millions of
dollars)
|
|
Operating Activities
|
|
|
|
|
Net Income
(Loss)
|
$
|
3,581
|
|
|
$
|
2,642
|
|
|
Adjustments
|
|
|
|
|
Depreciation, depletion and
amortization
|
4,288
|
|
|
4,094
|
|
|
Dry hole expense
|
50
|
|
|
86
|
|
|
Distributions less than
income from equity affiliates
|
(639
|
)
|
|
(513
|
)
|
|
Net before-tax losses (gains)
on asset retirements and sales
|
(226
|
)
|
|
80
|
|
|
Net foreign currency
effects
|
(403
|
)
|
|
141
|
|
|
Deferred income tax
provision
|
58
|
|
|
73
|
|
|
Net decrease (increase) in
operating working capital
|
(1,096
|
)
|
|
(1,210
|
)
|
|
Decrease (increase) in
long-term receivables
|
239
|
|
|
66
|
|
|
Net decrease (increase) in
other deferred charges
|
(43
|
)
|
|
(62
|
)
|
|
Cash contributions to
employee pension plans
|
(213
|
)
|
|
(326
|
)
|
|
Other
|
(874
|
)
|
|
(14
|
)
|
|
Net Cash Provided by Operating Activities
|
4,722
|
|
|
5,057
|
|
|
Investing Activities
|
|
|
|
|
Capital
expenditures
|
(3,133
|
)
|
|
(2,953
|
)
|
|
Proceeds and deposits related
to asset sales and returns of investment
|
374
|
|
|
294
|
|
|
Net maturities of
(investments in) time deposits
|
—
|
|
|
950
|
|
|
Net sales (purchases) of
marketable securities
|
—
|
|
|
2
|
|
|
Net repayment (borrowing) of
loans by equity affiliates
|
(399
|
)
|
|
(321
|
)
|
|
Net Cash Used for Investing Activities
|
(3,158
|
)
|
|
(2,028
|
)
|
|
Financing Activities
|
|
|
|
|
Net borrowings (repayments)
of short-term obligations
|
8,167
|
|
|
936
|
|
|
Proceeds from issuances of
long-term debt
|
—
|
|
|
—
|
|
|
Repayments of long-term debt
and other financing obligations
|
(2,809
|
)
|
|
(2,506
|
)
|
|
Cash dividends - common
stock
|
(2,402
|
)
|
|
(2,244
|
)
|
|
Distributions to
noncontrolling interests
|
(5
|
)
|
|
(6
|
)
|
|
Net sales (purchases) of
treasury shares
|
(1,573
|
)
|
|
(15
|
)
|
|
Net Cash Provided by (Used for) Financing Activities
|
1,378
|
|
|
(3,835
|
)
|
|
Effect of Exchange Rate Changes on Cash, Cash Equivalents and
Restricted Cash
|
(163
|
)
|
|
20
|
|
|
Net Change in Cash, Cash Equivalents and Restricted
Cash
|
2,779
|
|
|
(786
|
)
|
|
Cash, Cash Equivalents and Restricted Cash at January
1
|
6,911
|
|
|
10,481
|
|
|
Cash, Cash Equivalents and Restricted Cash at March 31
|
$
|
9,690
|
|
|
$
|
9,695
|
|
|
|
|
|
|
See accompanying
notes to consolidated financial statements.
6
CHEVRON
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Millions of
dollars)
|
|
|
Accumulated
|
Treasury
|
Chevron
Corp.
|
Non-
|
|
|
|
Common
|
Retained
|
Other
Comp.
|
Stock
|
Stockholders'
|
Controlling
|
Total
|
|
Three Months Ended March 31
|
Stock(1)
|
Earnings
|
Income
(Loss)
|
(at
cost)
|
Equity
|
Interests
|
Equity
|
|
Balance at December 31, 2018
|
$
|
18,704
|
|
$
|
180,987
|
|
$
|
(3,544
|
)
|
$
|
(41,593
|
)
|
$
|
154,554
|
|
$
|
1,088
|
|
$
|
155,642
|
|
|
Treasury stock
transactions
|
34
|
|
—
|
|
—
|
|
—
|
|
34
|
|
—
|
|
34
|
|
|
Net income (loss)
|
—
|
|
2,649
|
|
—
|
|
—
|
|
2,649
|
|
(7
|
)
|
2,642
|
|
|
Cash dividends
|
—
|
|
(2,244
|
)
|
—
|
|
—
|
|
(2,244
|
)
|
(6
|
)
|
(2,250
|
)
|
|
Stock dividends
|
—
|
|
(1
|
)
|
—
|
|
—
|
|
(1
|
)
|
—
|
|
(1
|
)
|
|
Other comprehensive
income
|
—
|
|
—
|
|
85
|
|
—
|
|
85
|
|
—
|
|
85
|
|
|
Purchases of treasury
shares
|
—
|
|
—
|
|
—
|
|
(538
|
)
|
(538
|
)
|
—
|
|
(538
|
)
|
|
Issuances of treasury
shares
|
—
|
|
—
|
|
—
|
|
510
|
|
510
|
|
—
|
|
510
|
|
|
Other changes,
net
|
—
|
|
(4
|
)
|
—
|
|
—
|
|
(4
|
)
|
(2
|
)
|
(6
|
)
|
|
Balance at March 31, 2019
|
$
|
18,738
|
|
$
|
181,387
|
|
$
|
(3,459
|
)
|
$
|
(41,621
|
)
|
$
|
155,045
|
|
$
|
1,073
|
|
$
|
156,118
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
$
|
18,857
|
|
$
|
174,945
|
|
$
|
(4,990
|
)
|
$
|
(44,599
|
)
|
$
|
144,213
|
|
$
|
995
|
|
$
|
145,208
|
|
|
Treasury stock
transactions
|
10
|
|
—
|
|
—
|
|
—
|
|
10
|
|
—
|
|
10
|
|
|
Net income (loss)
|
—
|
|
3,599
|
|
—
|
|
—
|
|
3,599
|
|
(18
|
)
|
3,581
|
|
|
Cash dividends
|
—
|
|
(2,402
|
)
|
—
|
|
—
|
|
(2,402
|
)
|
(5
|
)
|
(2,407
|
)
|
|
Stock dividends
|
—
|
|
(1
|
)
|
—
|
|
—
|
|
(1
|
)
|
—
|
|
(1
|
)
|
|
Other comprehensive
income
|
—
|
|
—
|
|
106
|
|
—
|
|
106
|
|
—
|
|
106
|
|
|
Purchases of treasury
shares
|
—
|
|
—
|
|
—
|
|
(1,751
|
)
|
(1,751
|
)
|
—
|
|
(1,751
|
)
|
|
Issuances of treasury
shares
|
—
|
|
—
|
|
—
|
|
184
|
|
184
|
|
—
|
|
184
|
|
|
Other changes,
net
|
—
|
|
(28
|
)
|
—
|
|
—
|
|
(28
|
)
|
12
|
|
(16
|
)
|
|
Balance at March 31, 2020
|
$
|
18,867
|
|
$
|
176,113
|
|
$
|
(4,884
|
)
|
$
|
(46,166
|
)
|
$
|
143,930
|
|
$
|
984
|
|
$
|
144,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Number of
Shares)
|
Common Stock
- 2020
|
|
Common Stock
- 2019
|
|
Three Months Ended March 31
|
Issued(2)
|
|
Treasury
|
|
Outstanding
|
|
|
Issued(2)
|
|
Treasury
|
|
Outstanding
|
|
|
Balance at December 31
|
2,442,676,580
|
|
(560,508,479
|
)
|
1,882,168,101
|
|
|
2,442,676,580
|
|
(539,838,890
|
)
|
1,902,837,690
|
|
|
Purchases
|
—
|
|
(17,501,102
|
)
|
(17,501,102
|
)
|
|
—
|
|
(4,710,696
|
)
|
(4,710,696
|
)
|
|
Issuances
|
—
|
|
2,311,651
|
|
2,311,651
|
|
|
—
|
|
6,599,067
|
|
6,599,067
|
|
|
Balance at March 31
|
2,442,676,580
|
|
(575,697,930
|
)
|
1,866,978,650
|
|
|
2,442,676,580
|
|
(537,950,519
|
)
|
1,904,726,061
|
|
_________________________________________________
|
|
|
(1)
|
Beginning and
ending balances for all periods include capital in excess of par,
common stock issued at par for $1,832,
and $(240)
associated with
Chevron's Benefit Plan Trust. Changes reflect capital in excess of
par.
|
|
|
|
(2)
|
Beginning and ending total
issued share balances include 14,168,000
shares associated
with Chevron's Benefit Plan Trust for all periods.
|
See accompanying
notes to consolidated financial statements.
7
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 1.
General
Basis of
Presentation The accompanying consolidated
financial statements of Chevron Corporation and its subsidiaries
(together, Chevron or the company) have not been audited by an
independent registered public accounting firm. In the opinion of
the company’s management, the interim data includes all adjustments
necessary for a fair statement of the results for the interim
periods. These adjustments were of a normal recurring nature. The
results for the three-month period ended
March 31, 2020, are not necessarily
indicative of future financial results. The term “earnings” is
defined as net income attributable to Chevron.
Certain notes and
other information have been condensed or omitted from the interim
financial statements presented in this Quarterly Report on Form
10-Q. Therefore, these financial statements should be read in
conjunction with the company’s 2019 Annual Report on Form
10-K.
Impact of
the novel coronavirus (COVID-19) pandemic The outbreak of COVID-19 and
decreases in commodity prices resulting from oversupply and
government-imposed travel restrictions have caused a significant
decrease in the demand for our products and has created disruptions
and volatility in the global marketplace beginning in the first
quarter 2020, which negatively affected our results of operations
and cash flows. These conditions have persisted into the second
quarter, including a further collapse in commodity prices, and are
expected to negatively affect our results of operations and cash
flows. There remains a continuing uncertainty regarding the length
and impact of the COVID-19 pandemic and associated reductions in
demand for our products, on the energy industry and the outlook for
our business.
Note
2.
Changes in Accumulated Other Comprehensive Losses
The change in
Accumulated Other Comprehensive Losses (AOCL) presented on the
Consolidated Balance Sheet and the impact of significant amounts
reclassified from AOCL on information presented in the Consolidated
Statement of Income for the
three months ended
March 31, 2020 and 2019 are reflected in the table
below.
Changes in
Accumulated Other Comprehensive Income (Loss) by
Component(1)
(Millions of
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency
Translation Adjustment
|
|
Unrealized
Holding Gains (Losses) on Securities
|
|
Derivatives
|
|
Defined
Benefit Plans
|
|
Total
|
|
Balance at
December 31, 2018
|
|
$
|
(124
|
)
|
|
$
|
(10
|
)
|
|
$
|
(2
|
)
|
|
$
|
(3,408
|
)
|
|
$
|
(3,544
|
)
|
|
Components of
Other Comprehensive Income (Loss):
|
|
|
|
|
|
|
|
|
Before
Reclassifications
|
|
(4
|
)
|
|
(1
|
)
|
|
—
|
|
|
(4
|
)
|
|
(9
|
)
|
|
Reclassifications
|
|
—
|
|
|
—
|
|
|
—
|
|
|
94
|
|
|
94
|
|
|
Net Other
Comprehensive Income (Loss)
|
|
(4
|
)
|
|
(1
|
)
|
|
—
|
|
|
90
|
|
|
85
|
|
|
Balance at
March 31, 2019
|
|
$
|
(128
|
)
|
|
$
|
(11
|
)
|
|
$
|
(2
|
)
|
|
$
|
(3,318
|
)
|
|
$
|
(3,459
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2019
|
|
$
|
(142
|
)
|
|
$
|
(8
|
)
|
|
$
|
—
|
|
|
$
|
(4,840
|
)
|
|
$
|
(4,990
|
)
|
|
Components of
Other Comprehensive Income (Loss):
|
|
|
|
|
|
|
|
Before
Reclassifications
|
|
(19
|
)
|
|
(3
|
)
|
|
—
|
|
|
2
|
|
|
(20
|
)
|
|
Reclassifications(2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
126
|
|
|
126
|
|
|
Net Other
Comprehensive Income (Loss)
|
|
(19
|
)
|
|
(3
|
)
|
|
—
|
|
|
128
|
|
|
106
|
|
|
Balance at
March 31, 2020
|
|
$
|
(161
|
)
|
|
$
|
(11
|
)
|
|
$
|
—
|
|
|
$
|
(4,712
|
)
|
|
$
|
(4,884
|
)
|
_______________________________
|
|
|
(1)
|
All amounts are net of
tax.
|
|
|
|
(2)
|
Refer to Note
9, Employee Benefits for
reclassified components totaling $163
million that are included in employee
benefit costs for the three months
ended
March 31,
2020.
Related income taxes for the same period, totaling
$37
million, are reflected in “Income Tax
Expense” on the Consolidated Statement of Income. All other
reclassified amounts were insignificant.
|
Note
3.
New Accounting Standards
Financial
Instruments - Credit Losses (Topic 326) Effective January 1, 2020,
Chevron adopted Accounting Standards Update (ASU) 2016-13 and its
related amendments. For additional information on the company's
expected credit losses, refer to Note 17 beginning on page
22.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note
4.
Information Relating to the Consolidated Statement of Cash
Flows
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31
|
|
|
2020
|
|
2019
|
|
|
(Millions of
dollars)
|
|
Net decrease
(increase) in operating working capital was composed of the
following:
|
|
Decrease (increase) in
accounts and notes receivable
|
$
|
2,986
|
|
|
$
|
473
|
|
|
Decrease (increase) in
inventories
|
(733
|
)
|
|
(1,098
|
)
|
|
Decrease (increase) in
prepaid expenses and other current assets
|
120
|
|
|
(667
|
)
|
|
Increase (decrease) in
accounts payable and accrued liabilities
|
(3,268
|
)
|
|
(160
|
)
|
|
Increase (decrease) in income
and other taxes payable
|
(201
|
)
|
|
242
|
|
|
Net decrease
(increase) in operating working capital
|
$
|
(1,096
|
)
|
|
$
|
(1,210
|
)
|
|
Net cash provided
by operating activities includes the following cash
payments:
|
|
Interest on debt (net of
capitalized interest)
|
$
|
106
|
|
|
$
|
186
|
|
|
Income
taxes
|
981
|
|
|
757
|
|
|
Proceeds and
deposits related to asset sales and returns of investment consisted
of the following gross amounts:
|
|
|
|
|
Proceeds and deposits related
to asset sales
|
$
|
363
|
|
|
$
|
276
|
|
|
Returns of investment from
equity affiliates
|
11
|
|
|
18
|
|
|
Proceeds and
deposits related to asset sales and returns of
investment
|
$
|
374
|
|
|
$
|
294
|
|
|
Net maturities of
(investments in) time deposits consisted of the following gross
amounts:
|
|
Investments in time
deposits
|
$
|
—
|
|
|
$
|
—
|
|
|
Maturities of time
deposits
|
—
|
|
|
950
|
|
|
Net
maturities of (investments in) time deposits
|
$
|
—
|
|
|
$
|
950
|
|
|
Net sales
(purchases) of marketable securities consisted of the following
gross amounts:
|
|
Marketable securities
purchased
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
Marketable securities
sold
|
—
|
|
|
3
|
|
|
Net sales
(purchases) of marketable securities
|
$
|
—
|
|
|
$
|
2
|
|
|
Net repayment
(borrowing) of loans by equity affiliates consisted of the
following gross amounts:
|
|
|
|
|
Borrowing of loans by equity
affiliates
|
$
|
(425
|
)
|
|
$
|
(350
|
)
|
|
Repayment of loans by equity
affiliates
|
26
|
|
|
29
|
|
|
Net
repayment (borrowing) of loans by equity affiliates
|
$
|
(399
|
)
|
|
$
|
(321
|
)
|
|
Net borrowings
(repayments) of short-term obligations consisted of the following
gross and net amounts:
|
|
|
|
|
Proceeds from issuances of
short-term obligations
|
$
|
4,952
|
|
|
$
|
359
|
|
|
Repayments of short-term
obligations
|
(1,010
|
)
|
|
(134
|
)
|
|
Net borrowings (repayments)
of short-term obligations with three months or less
maturity
|
4,225
|
|
|
711
|
|
|
Net
borrowings (repayments) of short-term obligations
|
$
|
8,167
|
|
|
$
|
936
|
|
|
Net sales (purchases) of
treasury shares consists of the following gross and net
amounts:
|
|
|
|
|
Shares issued for share-based
compensation plans
|
$
|
178
|
|
|
$
|
523
|
|
|
Shares purchased under share
repurchase and deferred compensation plans
|
(1,751
|
)
|
|
(538
|
)
|
|
Net sales
(purchases) of treasury shares
|
$
|
(1,573
|
)
|
|
$
|
(15
|
)
|
The Consolidated
Statement of Cash Flows excludes changes to the Consolidated
Balance Sheet that did not affect cash.
The “Other” line
in the Operating Activities section includes changes in
postretirement benefits obligations and other long-term
liabilities.
The company paid
dividends of $1.29
per share of
common stock in first quarter
2020. This compares to dividends
of $1.19
per share paid in
the corresponding year-ago period.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The major
components of “Capital expenditures” and the reconciliation of this
amount to the reported capital and exploratory expenditures,
including equity affiliates, are presented in the following
table:
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31
|
|
|
2020
|
|
2019
|
|
|
(Millions of
dollars)
|
|
Additions to
properties, plant and equipment
|
$
|
3,071
|
|
|
$
|
2,865
|
|
|
Additions to
investments
|
13
|
|
|
14
|
|
|
Current-year dry hole
expenditures
|
49
|
|
|
74
|
|
|
Payments for other assets and
liabilities, net
|
—
|
|
|
—
|
|
|
Capital
expenditures
|
3,133
|
|
|
2,953
|
|
|
Expensed exploration
expenditures
|
108
|
|
|
103
|
|
|
Assets acquired through
finance lease obligations and other financing
obligations
|
—
|
|
|
146
|
|
|
Payments for other assets and
liabilities, net
|
—
|
|
|
—
|
|
|
Capital and exploratory
expenditures, excluding equity affiliates
|
3,241
|
|
|
3,202
|
|
|
Company's share of
expenditures by equity affiliates
|
1,183
|
|
|
1,532
|
|
|
Capital and
exploratory expenditures, including equity affiliates
|
$
|
4,424
|
|
|
$
|
4,734
|
|
The table below
quantifies the beginning and ending balances of restricted cash and
restricted cash equivalents in the Consolidated Balance
Sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March
31
|
|
At December
31
|
|
|
2020
|
|
2019
|
|
2019
|
|
2018
|
|
|
(Millions of
dollars)
|
|
Cash and Cash
Equivalents
|
$
|
8,492
|
|
|
$
|
8,699
|
|
|
$
|
5,686
|
|
|
$
|
9,342
|
|
|
Restricted cash included in
“Prepaid expenses and other current assets”
|
434
|
|
|
195
|
|
|
452
|
|
|
341
|
|
|
Restricted cash included in
“Deferred charges and other assets”
|
764
|
|
|
801
|
|
|
773
|
|
|
798
|
|
|
Total Cash,
Cash Equivalents and Restricted Cash
|
$
|
9,690
|
|
|
$
|
9,695
|
|
|
$
|
6,911
|
|
|
$
|
10,481
|
|
Additional
information related to “Restricted Cash” is included on page
20
in Note
14
under the heading
“Restricted Cash.”
Note
5.
Summarized Financial Data — Tengizchevroil LLP
Chevron has
a 50
percent equity ownership interest in
Tengizchevroil LLP (TCO). Summarized financial information
for 100
percent of TCO is presented in the
following table:
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31
|
|
|
2020
|
|
2019
|
|
|
(Millions of
dollars)
|
|
Sales and other
operating revenues
|
$
|
3,296
|
|
|
$
|
4,107
|
|
|
Costs and other
deductions
|
1,957
|
|
|
2,002
|
|
|
Net income
attributable to TCO
|
$
|
938
|
|
|
$
|
1,481
|
|
Note
6.
Summarized Financial Data — Chevron Phillips Chemical Company
LLC
Chevron has
a 50
percent equity ownership interest in
Chevron Phillips Chemical Company LLC (CPChem). Summarized
financial information for 100
percent of CPChem is presented in the
table below:
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31
|
|
|
2020
|
|
2019
|
|
|
(Millions of
dollars)
|
|
Sales and other
operating revenues
|
$
|
2,195
|
|
|
$
|
2,377
|
|
|
Costs and other
deductions
|
1,812
|
|
|
2,004
|
|
|
Net income
attributable to CPChem
|
$
|
337
|
|
|
$
|
449
|
|
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note
7.
Summarized Financial Data — Chevron U.S.A. Inc.
Chevron U.S.A.
Inc. (CUSA) is a major subsidiary of Chevron Corporation. CUSA and
its subsidiaries manage and operate most of Chevron’s U.S.
businesses. Assets include those related to the exploration and
production of crude oil, natural gas and natural gas liquids and
those associated with refining, marketing, and supply and
distribution of products derived from petroleum, excluding most of
the regulated pipeline operations of Chevron. CUSA also holds the
company’s investment in the Chevron Phillips Chemical Company LLC
joint venture, which is accounted for using the equity
method.
The summarized
financial information for CUSA and its consolidated subsidiaries is
as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31
|
|
|
2020
|
|
2019
|
|
|
(Millions of
dollars)
|
|
Sales and other
operating revenues
|
$
|
22,039
|
|
|
$
|
25,942
|
|
|
Costs and other
deductions
|
21,281
|
|
|
25,757
|
|
|
Net income
attributable to CUSA
|
$
|
860
|
|
|
$
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March
31,
2020
|
|
At December
31,
2019
|
|
|
(Millions of
dollars)
|
|
Current
assets
|
$
|
10,773
|
|
|
$
|
13,059
|
|
|
Other
assets
|
51,449
|
|
|
50,796
|
|
|
Current
liabilities
|
16,143
|
|
|
18,291
|
|
|
Other
liabilities
|
12,630
|
|
|
12,565
|
|
|
Total CUSA net
equity
|
$
|
33,449
|
|
|
$
|
32,999
|
|
|
Memo: Total
debt
|
$
|
3,219
|
|
|
$
|
3,222
|
|
Note
8.
Operating Segments and Geographic Data
Although each
subsidiary of Chevron is responsible for its own affairs, Chevron
Corporation manages its investments in these subsidiaries and their
affiliates. The investments are grouped into two
business
segments, Upstream and Downstream, representing the company’s
“reportable segments” and “operating segments.” Upstream operations
consist primarily of exploring for, developing and producing crude
oil and natural gas; liquefaction, transportation and
regasification associated with liquefied natural gas (LNG);
transporting crude oil by major international oil export pipelines;
processing, transporting, storage and marketing of natural gas; and
a gas-to-liquids plant. Downstream operations consist primarily of
refining of crude oil into petroleum products; marketing of crude
oil and refined products; transporting of crude oil and refined
products by pipeline, marine vessel, motor equipment and rail car;
and manufacturing and marketing of commodity petrochemicals,
plastics for industrial uses, and fuel and lubricant additives.
“All Other” activities of the company include worldwide cash
management and debt financing activities, corporate administrative
functions, insurance operations, real estate activities and
technology companies.
The company’s
segments are managed by “segment managers” who report to the “chief
operating decision maker” (CODM). The segments represent components
of the company that engage in activities (a) from which revenues
are earned and expenses are incurred; (b) whose operating results
are regularly reviewed by the CODM, which makes decisions about
resources to be allocated to the segments and assesses their
performance; and (c) for which discrete financial information is
available.
The company’s
primary country of operation is the United States of America, its
country of domicile. Other components of the company’s operations
are reported as “International” (outside the United
States).
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Segment
Earnings The company evaluates the
performance of its operating segments on an after-tax basis,
without considering the effects of debt financing interest expense
or investment interest income, both of which are managed by the
company on a worldwide basis. Corporate administrative costs and
assets are not allocated to the operating segments. However,
operating segments are billed for the direct use of corporate
services. Nonbillable costs remain at the corporate level in “All
Other.” Earnings by major operating area for the
three-month
periods ended March 31, 2020 and 2019, are presented in
the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31
|
|
|
|
2020
|
|
2019
|
|
Segment
Earnings
|
|
(Millions of
dollars)
|
|
Upstream
|
|
|
|
|
|
United States
|
|
$
|
241
|
|
|
$
|
748
|
|
|
International
|
|
2,679
|
|
|
2,375
|
|
|
Total
Upstream
|
|
2,920
|
|
|
3,123
|
|
|
Downstream
|
|
|
|
|
|
United
States
|
|
450
|
|
|
217
|
|
|
International
|
|
653
|
|
|
35
|
|
|
Total
Downstream
|
|
1,103
|
|
|
252
|
|
|
Total
Segment Earnings
|
|
4,023
|
|
|
3,375
|
|
|
All
Other
|
|
|
|
|
|
Interest
expense
|
|
(154
|
)
|
|
(214
|
)
|
|
Interest
income
|
|
23
|
|
|
50
|
|
|
Other
|
|
(293
|
)
|
|
(562
|
)
|
|
Net Income
Attributable to Chevron Corporation
|
|
$
|
3,599
|
|
|
$
|
2,649
|
|
Segment
Assets Segment assets do not include
intercompany investments or intercompany receivables. “All Other”
assets consist primarily of worldwide cash, cash equivalents, time
deposits and marketable securities; real estate; information
systems; technology companies; and assets of the corporate
administrative functions. Segment assets at March 31,
2020,
and December 31,
2019, are
as follows:
|
|
|
|
|
|
|
|
|
|
|
At March
31,
2020
|
|
At December
31,
2019
|
|
Segment
Assets
|
(Millions of
dollars)
|
|
Upstream
|
|
|
|
|
United
States
|
$
|
35,974
|
|
|
$
|
35,926
|
|
|
International
|
143,779
|
|
|
145,648
|
|
|
Goodwill
|
4,454
|
|
|
4,463
|
|
|
Total
Upstream
|
184,207
|
|
|
186,037
|
|
|
Downstream
|
|
|
|
|
United
States
|
24,532
|
|
|
25,197
|
|
|
International
|
15,870
|
|
|
16,955
|
|
|
Total
Downstream
|
40,402
|
|
|
42,152
|
|
|
Total
Segment Assets
|
224,609
|
|
|
228,189
|
|
|
All
Other
|
|
|
|
|
United
States
|
5,688
|
|
|
3,475
|
|
|
International
|
6,380
|
|
|
5,764
|
|
|
Total All
Other
|
12,068
|
|
|
9,239
|
|
|
Total Assets
— United States
|
66,194
|
|
|
64,598
|
|
|
Total Assets
— International
|
166,029
|
|
|
168,367
|
|
|
Goodwill
|
4,454
|
|
|
4,463
|
|
|
Total
Assets
|
$
|
236,677
|
|
|
$
|
237,428
|
|
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Segment
Sales and Other Operating Revenues Segment sales and other
operating revenues, including internal transfers, for the
three-month
periods ended March 31, 2020 and 2019, are presented in
the following table. Products are transferred between operating
segments at internal product values that approximate market prices.
Revenues for the upstream segment are derived primarily from the
production and sale of crude oil and natural gas, as well as the
sale of third-party production of natural gas. Revenues for the
downstream segment are derived from the refining and marketing of
petroleum products such as gasoline, jet fuel, gas oils,
lubricants, residual fuel oils and other products derived from
crude oil. This segment also generates revenues from the
manufacture and sale of fuel and lubricant additives and the
transportation and trading of refined products and crude oil. “All
Other” activities include revenues from insurance operations, real
estate activities and technology companies.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31
|
|
|
|
2020
|
|
2019
|
|
Sales and
Other Operating Revenues
|
|
(Millions of
dollars)
|
|
Upstream
|
|
|
|
|
|
United
States
|
|
$
|
4,466
|
|
|
$
|
5,882
|
|
|
International
|
|
9,013
|
|
|
9,369
|
|
|
Subtotal
|
|
13,479
|
|
|
15,251
|
|
|
Intersegment
Elimination — United States
|
|
(2,812
|
)
|
|
(3,519
|
)
|
|
Intersegment
Elimination — International
|
|
(2,541
|
)
|
|
(3,292
|
)
|
|
Total
Upstream
|
|
8,126
|
|
|
8,440
|
|
|
Downstream
|
|
|
|
|
|
United
States
|
|
11,186
|
|
|
12,388
|
|
|
International
|
|
12,173
|
|
|
14,507
|
|
|
Subtotal
|
|
23,359
|
|
|
26,895
|
|
|
Intersegment
Elimination — United States
|
|
(1,260
|
)
|
|
(947
|
)
|
|
Intersegment
Elimination — International
|
|
(585
|
)
|
|
(265
|
)
|
|
Total
Downstream
|
|
21,514
|
|
|
25,683
|
|
|
All
Other
|
|
|
|
|
|
United
States
|
|
210
|
|
|
222
|
|
|
International
|
|
2
|
|
|
2
|
|
|
Subtotal
|
|
212
|
|
|
224
|
|
|
Intersegment
Elimination — United States
|
|
(145
|
)
|
|
(156
|
)
|
|
Intersegment
Elimination — International
|
|
(2
|
)
|
|
(2
|
)
|
|
Total All
Other
|
|
65
|
|
|
66
|
|
|
Sales and
Other Operating Revenues
|
|
|
|
|
|
United
States
|
|
15,862
|
|
|
18,492
|
|
|
International
|
|
21,188
|
|
|
23,878
|
|
|
Subtotal
|
|
37,050
|
|
|
42,370
|
|
|
Intersegment
Elimination — United States
|
|
(4,217
|
)
|
|
(4,622
|
)
|
|
Intersegment
Elimination — International
|
|
(3,128
|
)
|
|
(3,559
|
)
|
|
Total Sales
and Other Operating Revenues
|
|
$
|
29,705
|
|
|
$
|
34,189
|
|
Note
9.
Employee Benefits
Chevron has
defined benefit pension plans for many employees. The company
typically prefunds defined benefit plans as required by local
regulations or in certain situations where prefunding provides
economic advantages. In the United States, all qualified plans are
subject to the Employee Retirement Income Security Act minimum
funding standard. The company does not typically fund U.S.
nonqualified pension plans that are not subject to funding
requirements under laws and regulations because contributions to
these pension plans may be less economic and investment returns may
be less attractive than the company’s other investment
alternatives.
The company also
sponsors other postretirement employee benefit (OPEB) plans that
provide medical and dental benefits, as well as life insurance for
some active and qualifying retired employees. The plans are
unfunded, and the company and the retirees share the costs. For the
company’s main U.S. medical plan, the increase to the
pre-
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Medicare company
contribution for retiree medical coverage is limited to no more
than 4
percent each
year. Certain life insurance benefits are paid by the
company.
The components of
net periodic benefit costs for 2020 and 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31
|
|
|
|
2020
|
|
2019
|
|
|
(Millions of
dollars)
|
|
Pension
Benefits
|
|
|
|
|
|
United
States
|
|
|
|
|
|
Service
cost
|
|
$
|
124
|
|
|
$
|
101
|
|
|
Interest
cost
|
|
88
|
|
|
99
|
|
|
Expected return
on plan assets
|
|
(162
|
)
|
|
(141
|
)
|
|
Amortization of
prior service costs (credits)
|
|
1
|
|
|
—
|
|
|
Amortization of
actuarial losses (gains)
|
|
96
|
|
|
60
|
|
|
Settlement
losses
|
|
60
|
|
|
60
|
|
|
Total United
States
|
|
207
|
|
|
179
|
|
|
International
|
|
|
|
|
|
Service
cost
|
|
32
|
|
|
35
|
|
|
Interest
cost
|
|
43
|
|
|
51
|
|
|
Expected return
on plan assets
|
|
(52
|
)
|
|
(58
|
)
|
|
Amortization of
prior service costs (credits)
|
|
2
|
|
|
3
|
|
|
Amortization of
actuarial losses (gains)
|
|
10
|
|
|
5
|
|
|
Settlement
losses
|
|
—
|
|
|
1
|
|
|
Total
International
|
|
35
|
|
|
37
|
|
|
Net Periodic
Pension Benefit Costs
|
|
$
|
242
|
|
|
$
|
216
|
|
|
Other
Benefits*
|
|
|
|
|
|
Service
cost
|
|
$
|
9
|
|
|
$
|
9
|
|
|
Interest
cost
|
|
18
|
|
|
24
|
|
|
Amortization of
prior service costs (credits)
|
|
(6
|
)
|
|
(7
|
)
|
|
Amortization of
actuarial losses (gains)
|
|
—
|
|
|
(1
|
)
|
|
Net Periodic
Other Benefit Costs
|
|
$
|
21
|
|
|
$
|
25
|
|
_
___________________________________
* Includes costs
for U.S. and international OPEB plans. Obligations for plans
outside the United States are not significant relative to the
company’s total OPEB obligation.
Through
March 31,
2020, a
total of $213
million was contributed to employee
pension plans (including $134
million to the U.S. plans).
Total contributions for the full year are currently estimated to
be $1.0
billion ($750
million for the U.S. plans and
$250
million for the international plans).
Contribution amounts are dependent upon plan investment returns,
changes in pension obligations, regulatory requirements and other
economic factors. Additional funding may ultimately be required if
investment returns are insufficient to offset increases in plan
obligations.
During the
first three months
of
2020, the company
contributed $41
million to its OPEB plans. The
company anticipates contributing approximately $133
million during the remainder
of 2020.
Note
10.
Assets Held For Sale
At
March 31,
2020, the
company classified $2.99
billion of net properties, plant and
equipment as “Assets held for sale” on the Consolidated Balance
Sheet. These assets are associated with upstream operations that
are anticipated to be sold in the next 12 months. The revenues and
earnings contributions of these assets in 2019 and the first
three
months of 2020 were not material. In April
2020, the company completed the sale of its interest in the
Azeri-Chirag-Gunashli fields and Baku-Tbilisi-Ceyhan pipeline in
Azerbaijan, representing approximately half the value of the net
properties, plant and equipment held for sale at March 31,
2020.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note
11.
Income Taxes
The income tax
expense decreased between quarterly periods from
$1.32
billion in 2019 to
$564
million in 2020. Income before income
tax expense increased $190
million from $3.96
billion in 2019 to
$4.15
billion in 2020 primarily due to
higher downstream margins, production, foreign exchange and asset
sales gains, partially offset by the impact of lower prices. The
company’s effective tax rate changed between quarterly periods
from 33
percent in 2019
to 14
percent in 2020.
The reduction in the effective tax rate is primarily due to the
resolution of international uncertain tax positions and foreign
exchange and asset sale gains that were included in income before
tax but collectively did not have significant tax impacts. In
addition, the change in the effective tax rate is also impacted by
the consequence of the mix effect resulting from the absolute level
of earnings or losses and whether they arose in higher or lower tax
rate jurisdictions.
Tax positions for
Chevron and its subsidiaries and affiliates are subject to income
tax audits by many tax jurisdictions throughout the world. For the
company’s major tax jurisdictions, examinations of tax returns for
certain prior tax years had not been completed as of
March 31,
2020. For
these jurisdictions, the latest years for which income tax
examinations had been finalized were as follows: United States
— 2013, Nigeria —
2007, Australia —
2009
and Kazakhstan
— 2012.
The company
engages in ongoing discussions with tax authorities regarding the
resolution of tax matters in the various jurisdictions. Both
the outcomes for these tax matters and the timing of resolution
and/or closure of the tax audits are highly
uncertain. However, it is reasonably possible that
developments regarding tax matters in certain tax jurisdictions may
result in significant increases or decreases in the company’s total
unrecognized tax benefits within the next 12 months. Given the number of
years that still remain subject to examination and the number of
matters being examined in the various tax jurisdictions, the
company is unable to estimate the range of possible adjustments to
the balance of unrecognized tax benefits.
Note
12.
Litigation
MTBE
Chevron and many
other companies in the petroleum industry have used methyl tertiary
butyl ether (MTBE) as a gasoline additive. Chevron is a party
to six
pending lawsuits
and claims, the majority of which involve numerous other petroleum
marketers and refiners. Resolution of these lawsuits and claims may
ultimately require the company to correct or ameliorate the alleged
effects on the environment of prior release of MTBE by the company
or other parties. Additional lawsuits and claims related to the use
of MTBE, including personal-injury claims, may be filed in the
future. The company’s ultimate exposure related to pending lawsuits
and claims is not determinable. The company no longer uses MTBE in
the manufacture of gasoline in the United States.
Ecuador
Background
Chevron is a
defendant in civil litigation proceedings stemming from a lawsuit
filed in the Superior Court for the province of Nueva Loja in Lago
Agrio, Ecuador in May 2003 by plaintiffs who claim to be
representatives of residents of an area where an oil production
consortium formerly operated. The lawsuit alleged harm to the
environment from the consortium’s oil production activities and
sought monetary damages and other relief. Texaco Petroleum Company
(Texpet), a subsidiary of Texaco Inc., was a minority member of the
consortium from 1967 until 1992, with state-owned Petroecuador as
the majority partner. Since 1992, Petroecuador has been the sole
owner and operator in the concession area. After the termination of
the consortium and following an independent third-party
environmental audit of the concession area, in 1995, Texpet entered
into a formal agreement with the Republic of Ecuador and
Petroecuador under which Texpet agreed to remediate specific sites
assigned by the government in proportion to Texpet’s minority share
of the consortium. Pursuant to that agreement, Texpet conducted
a three-year remediation program.
After certifying that the assigned sites were properly remediated,
in 1998, Ecuador granted Texpet and all related corporate entities
a full release from any and all environmental liability arising
from the consortium operations.
Chevron defended
itself in the Lago Agrio lawsuit on the grounds that the claims
lacked both legal and factual merit. As to matters of law, Chevron
asserted that the court lacked jurisdiction, the plaintiffs sought
to improperly
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
apply a 1999 law
retroactively, the claims were time-barred, and the lawsuit was
barred by releases signed by the Republic of Ecuador, Petroecuador,
and the pertinent provincial and municipal governments. With regard
to the facts, the company asserted that the evidence confirmed
Texpet’s remediation was properly conducted and that any remaining
environmental impacts reflected Petroecuador’s failure to timely
fulfill its own legal obligation to remediate the concession area
and Petroecuador’s conduct after it assumed control over
operations. In February 2011, the provincial court rendered a
judgment against Chevron, awarding approximately
$8.6
billion in damages, plus
approximately $900
million for the plaintiffs’
representatives, and approximately $8.6
billion in additional punitive
damages unless the company issued a public apology within
15
days, which Chevron did not do.
In January 2012, an appellate panel affirmed the judgment and
ordered that Chevron pay an additional 0.10%
in attorneys’
fees. In November 2013, Ecuador’s National Court of Justice
ratified the judgment but nullified the $8.6
billion punitive damage assessment,
resulting in a judgment of $9.5
billion. In December 2013, Chevron
appealed the decision to Ecuador’s highest Constitutional Court,
which rejected Chevron’s appeal in July 2018. No further appeals
are available in Ecuador.
The Lago Agrio
plaintiffs’ lawyers have sought to enforce the judgment in Ecuador
and other jurisdictions. In May 2012, they filed a recognition and
enforcement action against Chevron Corporation, Chevron Canada
Limited and another subsidiary (which was later dismissed as a
party) in the Superior Court of Justice in Ontario, Canada. In
September 2015, the Supreme Court of Canada ruled that the Ontario
Superior Court of Justice had jurisdiction over Chevron Corporation
and Chevron Canada Limited for purposes of the action. In January
2017, the Superior Court ruled that Chevron Canada Limited and
Chevron Corporation are separate legal entities with separate
rights and obligations, and dismissed the action against Chevron
Canada Limited. In May 2018, the Court of Appeal for Ontario upheld
the dismissal of Chevron Canada Limited. The Supreme Court of
Canada denied the plaintiffs’ application for leave to appeal in
April 2019, rendering the dismissal of Chevron Canada Limited
final. In July 2019, by consent of the parties, the Ontario
Superior Court dismissed the recognition and enforcement action
against Chevron Corporation with prejudice and with costs in favor
of Chevron. In June 2012, the plaintiffs filed a recognition and
enforcement action against Chevron Corporation in the Superior
Court of Justice in Brasilia, Brazil. In May 2015, the Brazilian
public prosecutor issued an opinion recommending that the court
reject the plaintiffs’ action on grounds including that the Lago
Agrio judgment was procured through fraud and corruption and
violated Brazilian and international public order. In November
2017, the Superior Court of Justice dismissed the plaintiffs’
recognition and enforcement action on jurisdictional grounds, and
in June 2018 the dismissal became final in Brazil. In October 2012,
the provincial court in Ecuador issued an ex parte embargo order
purporting to order the seizure of assets belonging to separate
Chevron subsidiaries in Ecuador, Argentina and Colombia. In
November 2012, at the request of the plaintiffs, a court in
Argentina issued a freeze order against Chevron Argentina S.R.L.
and another Chevron subsidiary. In January 2013, an appellate court
upheld the freeze order, but in June 2013, the Supreme Court of
Argentina revoked the freeze order in its entirety. In December
2013, Chevron was served with the plaintiffs’ complaint seeking
recognition and enforcement of the judgment in Argentina.
In April
2016, the public prosecutor in Argentina issued an opinion
recommending rejection of the plaintiffs’ request to recognize the
Ecuadorian judgment in Argentina. In November 2017, the National
Court, First Instance, dismissed the complaint on jurisdictional
grounds and the Federal Civil Court of
Appeals affirmed the dismissal in July 2018. The plaintiffs’ appeal
to the Supreme Court of Argentina remains pending. Chevron
continues to believe the Ecuadorian judgment is illegitimate and
unenforceable because it is the product of fraud and corruption,
and contrary to the law and all legitimate scientific evidence.
Chevron cannot predict the timing or outcome of any pending or
threatened enforcement action, but expects to continue a vigorous
defense against any imposition of liability and to contest and
defend any and all enforcement actions.
In
February 2011, Chevron filed a civil lawsuit in the U.S.
District Court for the Southern District of New York against the
Lago Agrio plaintiffs and several of their lawyers and supporters,
asserting violations of the Racketeer Influenced and Corrupt
Organizations (RICO) Act and state law. In March 2014, the District
Court entered a judgment in favor of Chevron, finding that the
Ecuadorian judgment had been procured through fraud, bribery and
corruption, and prohibiting the RICO defendants from seeking to
enforce the Lago Agrio judgment in the United States or profiting
from their illegal acts. In August 2016, the U.S. Court
of Appeals for the Second Circuit issued a unanimous decision
affirming the New York judgment in full. In June 2017, the U.S.
Supreme Court
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
denied the RICO
defendants’ petition for a Writ of
Certiorari, rendering the New York judgment in favor of Chevron
final.
Chevron and
Texpet filed an arbitration claim in September 2009 against
the Republic of Ecuador before an arbitral tribunal administered by
the Permanent Court of Arbitration in The Hague, under the Rules of
the United Nations Commission on International Trade Law. The claim
alleged violations of Ecuador’s obligations under the United
States-Ecuador Bilateral Investment Treaty (BIT) and breaches of
the settlement and release agreements between Ecuador and Texpet.
In January 2012, the Tribunal issued its First Interim
Measures Award requiring Ecuador to take all measures at its
disposal to suspend or cause to be suspended the enforcement or
recognition within and outside of Ecuador of any judgment against
Chevron in the Lago Agrio case pending further order of the
Tribunal. In February 2012, the Tribunal issued a Second Interim
Award mandating that Ecuador take all measures necessary to suspend
or cause to be suspended enforcement and recognition proceedings
within and outside of Ecuador. Also in February 2012, the Tribunal
issued a Third Interim Award confirming its jurisdiction to hear
Chevron and Texpet’s claims. In February 2013, the Tribunal issued
its Fourth Interim Award in which it declared that Ecuador had
violated the First and Second Interim Awards. The Tribunal divided
the merits phase of the arbitration into three phases. In September
2013, after the conclusion of Phase One, the Tribunal issued its
First Partial Award, finding that the settlement agreements between
Ecuador and Texpet applied to both Texpet and Chevron and released
them from public environmental claims arising from the consortium’s
operations, but did not preclude individual claims for personal
harm. In August 2018, the Tribunal issued its Phase Two award,
again in favor of Chevron and Texpet. The Tribunal unanimously held
that the Lago Agrio judgment was procured through fraud, bribery
and corruption and was based on public claims that Ecuador had
settled and released. According to the Tribunal, the Ecuadorian
judgment “violates international public policy” and “should not be
recognized or enforced by the courts of other States.” The Tribunal
found that: (i) Ecuador breached its obligations under the
settlement agreements releasing Texpet and its affiliates from
public environmental claims; (ii) Ecuador committed a denial of
justice under international law and violated the U.S.-Ecuador BIT
due to the fraud and corruption in the Lago Agrio litigation; and
(iii) Texpet satisfied its environmental remediation obligations
through the remediation program that Ecuador supervised and
approved. The Tribunal ordered Ecuador to: (a) take immediate steps
to remove the status of enforceability from the Ecuadorian
judgment; (b) take measures to “wipe out all the consequences” of
Ecuador’s “internationally wrongful acts in regard to the
Ecuadorian judgment;” and (c) compensate Chevron for any injuries
resulting from the Ecuadorian judgment. The final Phase Three of
the arbitration, at which damages for Chevron’s injuries will be
determined, was set for hearing in March 2021. Ecuador filed in the
District Court of The Hague a request to set aside the Tribunal’s
Interim Awards and its First Partial Award, and in January 2016
that court denied Ecuador’s request. In July 2017, the Appeals
Court of the Netherlands denied
Ecuador’s appeal, and in April 2019, the Supreme Court of the
Netherlands upheld the decision of the Appeals Court and finally
rejected Ecuador’s challenges to the Tribunal’s Interim Awards and
its First Partial Award. In December 2018, Ecuador filed in the
District Court of The Hague a request to set aside the Tribunal’s
Phase Two Award.
Management’s
Assessment The ultimate outcome of the
foregoing matters, including any financial effect on Chevron,
remains uncertain. Management does not believe an estimate of a
reasonably possible loss (or a range of loss) can be made in this
case. Due to the defects associated with the Ecuadorian judgment,
management does not believe the judgment has any utility in
calculating a reasonably possible loss (or a range of loss).
Moreover, the highly uncertain legal environment surrounding the
case provides no basis for management to estimate a reasonably
possible loss (or a range of loss).
Note
13.
Other Contingencies and Commitments
Income
Taxes The
company calculates its income tax expense and liabilities
quarterly. These liabilities generally are subject to audit and are
not finalized with the individual taxing authorities until several
years after the end of the annual period for which income taxes
have been calculated. Refer to Note 11 on page 15 for a discussion of the
periods for which tax returns have been audited for the company’s
major tax jurisdictions.
Settlement of
open tax years, as well as other tax issues in countries where the
company conducts its businesses, are not expected to have a
material effect on the consolidated financial position or liquidity
of the company and,
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
in the opinion of
management, adequate provision has been made for income taxes for
all years under examination or subject to future
examination.
Guarantees
The company and
its subsidiaries have certain contingent liabilities with respect
to guarantees, direct or indirect, of debt of affiliated companies
or third parties. Under the terms of the guarantee arrangements,
the company would generally be required to perform should the
affiliated company or third party fail to fulfill its obligations
under the arrangements. In some cases, the guarantee arrangements
may have recourse provisions that would enable the company to
recover any payments made under the terms of the guarantees from
assets provided as collateral.
Indemnifications In
the acquisition of Unocal, the company assumed certain indemnities
relating to contingent environmental liabilities associated with
assets that were sold in 1997. The acquirer of those assets shared
in certain environmental remediation costs up to a maximum
obligation of $200
million, which had been reached at
December 31, 2009. Under the indemnification agreement, after
reaching the $200
million obligation, Chevron is solely
responsible until April 2022, when the indemnification expires. The
environmental conditions or events that are subject to these
indemnities must have arisen prior to the sale of the assets in
1997.
Although the
company has provided for known obligations under this indemnity
that are probable and reasonably estimable, the amount of
additional future costs may be material to results of operations in
the period in which they are recognized. The company does not
expect these costs will have a material effect on its consolidated
financial position or liquidity.
Off-Balance-Sheet
Obligations The company and its
subsidiaries have certain contingent liabilities with respect to
long-term unconditional purchase obligations and commitments,
including throughput and take-or-pay agreements, some of which may
relate to suppliers’ financing arrangements. The agreements
typically provide goods and services, such as pipeline and storage
capacity, utilities, and petroleum products, to be used or sold in
the ordinary course of the company’s business.
Environmental
The company is
subject to loss contingencies pursuant to laws, regulations,
private claims and legal proceedings related to environmental
matters that are subject to legal settlements or that in the future
may require the company to take action to correct or ameliorate the
effects on the environment of prior release of chemicals or
petroleum substances, including MTBE, by the company or other
parties. Such contingencies may exist for various sites, including,
but not limited to, federal Superfund sites and analogous sites
under state laws, refineries, crude oil fields, service stations,
terminals, land development areas, and mining activities, whether
operating, closed or divested. These future costs are not fully
determinable due to factors such as the unknown magnitude of
possible contamination, the unknown timing and extent of the
corrective actions that may be required, the determination of the
company’s liability in proportion to other responsible parties, and
the extent to which such costs are recoverable from third
parties.
Although the
company has provided for known environmental obligations that are
probable and reasonably estimable, the amount of additional future
costs may be material to results of operations in the period in
which they are recognized. The company does not expect these costs
will have a material effect on its consolidated financial position
or liquidity. Also, the company does not believe its obligations to
make such expenditures have had, or will have, any significant
impact on the company’s competitive position relative to other U.S.
or international petroleum or chemical companies.
Other
Contingencies Governmental and other
entities in California and other jurisdictions have filed legal
proceedings against fossil fuel producing companies, including
Chevron, purporting to seek legal and equitable relief to address
alleged impacts of climate change. Further such proceedings are
likely to be filed by other parties. The unprecedented legal
theories set forth in these proceedings entail the possibility of
damages liability and injunctions against the production of all
fossil fuels that, while we believe remote, could have a material
adverse effect on the Company’s results of operations and financial
condition. Management believes that these proceedings are legally
and factually meritless and detract from constructive efforts to
address the important policy issues presented by climate change,
and will vigorously defend against such proceedings.
Seven coastal
parishes and the State of Louisiana have filed 43
separate lawsuits
in Louisiana against numerous oil and gas companies seeking damages
for coastal erosion in or near oil fields located within
Louisiana’s coastal
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
zone under
Louisiana’s State and Local Coastal Resources Management Act
(SLCRMA). Chevron entities are defendants in 39
of these cases.
The lawsuits allege that the defendants' historical operations were
conducted without necessary permits or failed to comply with
permits obtained and seek damages and other relief, including the
costs of restoring coastal wetlands allegedly impacted by oil field
operations. Plaintiffs’ SLCRMA theories are unprecedented; thus,
there remains significant uncertainty about the scope of the claims
and alleged damages and any potential effects on the company’s
results of operations and financial condition. Management believes
that the claims lack legal and factual merit and will continue to
vigorously defend against such proceedings.
Chevron has
interests in Venezuelan crude oil production assets, including
those operated by independent equity affiliates. During the
first
quarter 2020, net oil equivalent
production in Venezuela averaged 41,000
barrels per day,
none of which was upgraded to synthetic crude. The operating
environment in Venezuela has been deteriorating for some time. In
January 2019, the United States government issued sanctions against
the Venezuelan national oil company, Petroleos de Venezuela, S.A.
(PdVSA), which is the company’s partner in the equity affiliates.
The company is conducting its business pursuant to general licenses
and guidance issued coincident with the sanctions. In late July
2019, the United States government renewed General License 8A with
the issuance of General License 8B, subsequently superseded by
General License 8C issued on August 5, 2019. The authorization
provided to Chevron under General License 8C was extended by
General License 8D on October 21, 2019 and General License 8E
issued by the United States government on January 17, 2020. General
License 8E was replaced and superseded by General License 8F on
April 21, 2020. General License 8F authorizes the company to
perform transactions and activities that are necessary for limited
maintenance of essential operations, contracts, or other
agreements, to ensure safety or the preservation of assets in
Venezuela, and is effective until December 1, 2020. The company is
evaluating the impacts of the revised authorizations granted by
General License 8F on its activities in Venezuela. The company
continues to evaluate the carrying value of its Venezuelan
investments in line with its accounting policies. Future events
related to the company’s activities in Venezuela may result in
significant impacts on the company's results of operation in
subsequent periods.
At
March 31,
2020, the
carrying value of the company’s investments was
approximately $2.8
billion, and for the
three-month
period
ended March 31,
2020, the
company recognized earnings of $114
million for its share of net income
from the equity affiliates, and for foreign exchange losses and
other costs incurred in support of the company's operations in
Venezuela. First quarter earnings were due to the exemption of 2019
Venezuela income tax for oil companies that was announced in late
January 2020. Please see Note 13, "Investments and Advances," on
page 71 in the company's 2019 Annual Report on Form 10-K for
further information on the company’s investments in equity
affiliates in Venezuela.
Chevron receives
claims from and submits claims to customers; trading partners;
joint venture partners; U.S. federal, state and local regulatory
bodies; governments; contractors; insurers; suppliers; and
individuals. The amounts of these claims, individually and in the
aggregate, may be significant and take lengthy periods to resolve,
and may result in gains or losses in future periods.
The company and
its affiliates also continue to review and analyze their operations
and may close, decommission, sell, exchange, acquire or restructure
assets to achieve operational or strategic benefits and to improve
competitiveness and profitability. These activities, individually
or together, may result in significant gains or losses in future
periods.
Note
14.
Fair Value Measurements
The three levels
of the fair value hierarchy of inputs the company uses to measure
the fair value of an asset or liability are described as
follows:
Level 1: Quoted
prices (unadjusted) in active markets for identical assets and
liabilities. For the company, Level 1 inputs include
exchange-traded futures contracts for which the parties are willing
to transact at the exchange-quoted price and marketable securities
that are actively traded.
Level 2: Inputs
other than Level 1 that are observable, either directly or
indirectly. For the company, Level 2 inputs include quoted prices
for similar assets or liabilities, prices obtained through
third-party broker quotes and prices that can be corroborated with
other observable inputs for substantially the complete term of a
contract.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Level 3:
Unobservable inputs. The company does not use Level 3 inputs for
any of its recurring fair value measurements. Level 3 inputs may be
required for the determination of fair value associated with
certain nonrecurring measurements of nonfinancial assets and
liabilities.
The fair value
hierarchy for assets and liabilities measured at fair value on a
recurring basis at March 31,
2020,
and December 31,
2019, is
as follows:
Assets and
Liabilities Measured at Fair Value on a Recurring
Basis
(Millions of
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31,
2020
|
|
At December
31, 2019
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Marketable
Securities
|
$
|
50
|
|
|
$
|
50
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
63
|
|
|
$
|
63
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Derivatives
|
502
|
|
|
366
|
|
|
136
|
|
|
—
|
|
|
11
|
|
|
1
|
|
|
10
|
|
|
—
|
|
|
Total Assets
at Fair Value
|
$
|
552
|
|
|
$
|
416
|
|
|
$
|
136
|
|
|
$
|
—
|
|
|
$
|
74
|
|
|
$
|
64
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
Derivatives
|
32
|
|
|
12
|
|
|
20
|
|
|
—
|
|
|
74
|
|
|
26
|
|
|
48
|
|
|
—
|
|
|
Total
Liabilities at Fair Value
|
$
|
32
|
|
|
$
|
12
|
|
|
$
|
20
|
|
|
$
|
—
|
|
|
$
|
74
|
|
|
$
|
26
|
|
|
$
|
48
|
|
|
$
|
—
|
|
Marketable
Securities The company calculates fair
value for its marketable securities based on quoted market prices
for identical assets. The fair values reflect the cash that would
have been received if the instruments were sold at
March 31, 2020.
Derivatives
The company
records its derivative instruments — other than any commodity
derivative contracts that are designated as normal purchase and
normal sale — on the Consolidated Balance Sheet at fair value, with
the offsetting amount to the Consolidated Statement of Income.
Derivatives classified as Level 1 include futures, swaps and
options contracts traded in active markets such as the New York
Mercantile Exchange. Derivatives classified as Level 2 include
swaps, options and forward contracts principally with financial
institutions and other oil and gas companies, the fair values of
which are obtained from third-party broker quotes, industry pricing
services and exchanges. The company obtains multiple sources of
pricing information for the Level 2 instruments. Since this pricing
information is generated from observable market data, it has
historically been very consistent. The company does not materially
adjust this information.
Assets carried at
fair value at
March 31, 2020, and
December 31, 2019, are as
follows:
Cash and
Cash Equivalents The company holds cash
equivalents in U.S. and non-U.S. portfolios. The instruments
classified as cash equivalents are primarily bank time deposits
with maturities of
90 days or less, and money
market funds. “Cash and cash equivalents” had carrying/fair values
of $8.5
billion and $5.7
billion at March 31,
2020,
and December 31,
2019,
respectively. The instruments held in “Time deposits” are bank time
deposits with maturities greater than 90
days and had
carrying/fair values of zero
at both
March 31,
2020 and
December 31, 2019. The fair values of cash and cash equivalents are
classified as Level 1 and reflect the cash that would have been
received if the instruments were settled at March 31,
2020.
Restricted
Cash had a
carrying/fair value of $1.2
billion at both March 31,
2020,
and December 31,
2019.
At March 31,
2020,
restricted cash is classified as Level 1 and includes restricted
funds related to certain upstream decommissioning activities, tax
items and refundable deposits related to pending asset sales, which
are reported in “Prepaid expenses and other current assets” and
“Deferred charges and other assets” on the Consolidated Balance
Sheet.
Long-Term
Debt had a
net carrying value, excluding amounts reclassified from short-term
debt and finance lease obligations, of $13.6
billion and $13.7
billion at March 31,
2020,
and
December 31, 2019, respectively. The fair
value of long-term debt at
March 31, 2020, and
December 31, 2019 was $14.3
billion for both reporting periods.
Long-term debt primarily includes corporate issued bonds,
classified as Level 1 and are $13.5
billion for the period. The fair
value of other long-term debt classified as Level 2 is
$0.8
billion.
The carrying
values of other short-term financial assets and liabilities on the
Consolidated Balance Sheet approximate their fair values. Fair
value remeasurements of other financial instruments at
March 31, 2020, and December 31,
2019, were
not material.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The fair value
hierarchy for assets and liabilities measured at fair value on a
nonrecurring basis at
March 31, 2020, is as follows:
Assets and
Liabilities Measured at Fair Value on a Nonrecurring
Basis
(Millions of
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31,
2020
|
|
|
|
|
|
|
|
|
|
|
Before-Tax
Loss
|
|
|
Total
|
|
Level
1
|
|
Level
2
|
|
Level
3
|
|
|
Properties, plant and
equipment, net (held and used)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Properties, plant and
equipment, net (held for sale)
|
738
|
|
|
—
|
|
|
738
|
|
|
—
|
|
|
74
|
|
|
Investments and
advances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total Assets
at Fair Value
|
$
|
738
|
|
|
$
|
—
|
|
|
$
|
738
|
|
|
$
|
—
|
|
|
$
|
74
|
|
Properties,
plant and equipment The company did not have any
individually material impairments of long-lived assets measured at
fair value on a nonrecurring basis to report in
first quarter
2020.
Investments
and advances The company did not have any
material impairments of investments and advances measured at fair
value on a nonrecurring basis to report in
first quarter
2020.
Note
15.
Financial and Derivative Instruments
The company’s
derivative instruments principally include crude oil, natural gas
and refined product futures, swaps, options, and forward contracts.
None of the company’s derivative instruments are designated as
hedging instruments, although certain of the company’s affiliates
make such a designation. The company’s derivatives are not material
to the company’s consolidated financial position, results of
operations or liquidity. The company believes it has no material
market or credit risks to its operations, financial position or
liquidity as a result of its commodities and other derivatives
activities.
The company uses
derivative commodity instruments traded on the New York Mercantile
Exchange and on electronic platforms of the Inter-Continental
Exchange and Chicago Mercantile Exchange. In addition, the company
enters into swap contracts and option contracts principally with
major financial institutions and other oil and gas companies in the
“over-the-counter” markets, which are governed by International
Swaps and Derivatives Association agreements and other master
netting arrangements.
Derivative
instruments measured at fair value at March 31,
2020,
and December 31,
2019, and
their classification on the Consolidated Balance Sheet and
Consolidated Statement of Income are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Balance Sheet: Fair Value of Derivatives Not Designated as Hedging
Instruments
(Millions of
dollars)
|
|
Type
of
Contract
|
|
Balance Sheet
Classification
|
|
At March
31,
2020
|
|
At December
31,
2019
|
|
Commodity
|
|
Accounts and notes
receivable, net
|
|
$
|
491
|
|
|
$
|
11
|
|
|
Commodity
|
|
Long-term receivables,
net
|
|
11
|
|
|
—
|
|
|
Total Assets
at Fair Value
|
|
$
|
502
|
|
|
$
|
11
|
|
|
Commodity
|
|
Accounts payable
|
|
$
|
31
|
|
|
$
|
74
|
|
|
Commodity
|
|
Deferred credits and other
noncurrent obligations
|
|
1
|
|
|
—
|
|
|
Total
Liabilities at Fair Value
|
|
$
|
32
|
|
|
$
|
74
|
|
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statement of Income: The Effect of Derivatives Not Designated as
Hedging Instruments
(Millions of
dollars)
|
|
Type
of
|
|
|
|
Gain /
(Loss)
Three Months Ended
March 31
|
|
Contract
|
|
Statement of
Income Classification
|
|
2020
|
|
2019
|
|
Commodity
|
|
Sales and other operating
revenues
|
|
$
|
461
|
|
|
$
|
(238
|
)
|
|
Commodity
|
|
Purchased crude oil and
products
|
|
(4
|
)
|
|
(7
|
)
|
|
Commodity
|
|
Other income
|
|
—
|
|
|
—
|
|
|
|
|
|
|
$
|
457
|
|
|
$
|
(245
|
)
|
The table below
represents gross and net derivative assets and liabilities subject
to netting agreements on the Consolidated Balance Sheet at
March 31,
2020,
and December 31,
2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Balance Sheet: The Effect of Netting Derivative Assets and
Liabilities
(Millions of
dollars)
|
|
|
|
Gross Amount
Recognized
|
|
Gross Amounts
Offset
|
|
Net Amounts
Presented
|
|
Gross
Amounts Not Offset
|
|
Net
Amount
|
|
At March 31,
2020
|
|
|
|
|
|
|
Derivative
Assets
|
|
$
|
6,259
|
|
|
$
|
5,757
|
|
|
$
|
502
|
|
|
$
|
—
|
|
|
$
|
502
|
|
|
Derivative
Liabilities
|
|
$
|
5,789
|
|
|
$
|
5,757
|
|
|
$
|
32
|
|
|
$
|
—
|
|
|
$
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December
31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
Assets
|
|
$
|
656
|
|
|
$
|
645
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
Derivative
Liabilities
|
|
$
|
719
|
|
|
$
|
645
|
|
|
$
|
74
|
|
|
$
|
—
|
|
|
$
|
74
|
|
Derivative assets
and liabilities are classified on the Consolidated Balance Sheet as
accounts and notes receivable, long-term receivables, accounts
payable, and deferred credits and other noncurrent obligations.
Amounts not offset on the Consolidated Balance Sheet represent
positions that do not meet all the conditions for "a right of
offset."
Note
16.
Revenue
“Sales and other
operating revenue” on the Consolidated Statement of Income
primarily arise from contracts with customers. Related receivables
are included in “Accounts and notes receivable, net” on the
Consolidated Balance Sheet, net of the current expected credit
losses. The net balance of these receivables was
$6.6
billion and $9.2
billion at March 31,
2020,
and December 31,
2019,
respectively. Other items included in “Accounts and notes
receivable, net” represent amounts due from partners for their
share of joint venture operating and project costs and amounts due
from others, primarily related to derivatives, leases, buy/sell
arrangements and product exchanges, which are accounted for outside
the scope of ASC 606.
Note
17.
Financial Instruments - Credit Losses
Chevron adopted
Accounting Standards Update (ASU) 2016-13, Financial
Instruments - Credit Losses, and its related amendments at
the effective date of January 1, 2020. The standard replaces the
“incurred loss model” and requires an estimate of expected credit
losses, measured over the contractual life of a financial
instrument, that considers forecast of future economic conditions
in addition to information about past events and current
conditions. The cumulative-effect adjustment to the opening
retained earnings at January 1, 2020 is a reduction of
$25
million, representing a decrease to
the net accounts and notes receivable balances shown on the
company’s consolidated balance sheet on page 5. As of March 31,
2020, Chevron’s expected credit loss allowance balance was
$918
million with a majority of the
allowance relating to non-trade receivable balances. While the
company has always regularly assessed customers for credit risk and
reviewed past due receivable balances for probable loss, the new
standard requires recognizing an expected credit loss for all
receivable balances which has resulted in the adjustment
noted.
The majority of
the company’s receivable balance is concentrated in trade
receivables, with a balance of $8.6
billion as of March 31, 2020, which
reflects the company’s diversified sources of revenues and is
dispersed across the company’s broad worldwide customer base. As a
result, the company believes the concentration of
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
credit risk is
limited. The company routinely assesses the financial strength of
its customers. When the financial strength of a customer is not
considered sufficient, alternative risk mitigation measures may be
deployed, including requiring pre-payments, letters of credit or
other acceptable forms of collateral. Once credit is extended and a
receivable balance exists, the company applies a quantitative
calculation to current trade receivable balances that reflects
credit risk predictive analysis, including probability of default,
loss given default and exposure of default which takes into
consideration current and forward-looking market data as well as
the company’s historical loss data. This statistical approach
becomes the basis of the company’s expected credit loss allowance
for current trade receivables with payment terms that are typically
short-term in nature, with most due in less than 90 days. A
comprehensive review of credit risk was completed in the first
quarter of 2020 in response to the COVID-19 pandemic and the
significant reduction in crude prices resulting from decreased
demand associated with government-mandated travel restrictions.
Following the first quarter review, existing allowances were deemed
appropriate.
Chevron's
non-trade receivable balance was $3.7
billion as of March 31, 2020, which
includes receivables from certain governments in their capacity as
joint venture partners. Joint venture partner balances that are
paid as per contract terms or not yet due are subject to the
statistical analysis described above while past due balances are
subject to additional qualitative management quarterly review. This
management review includes review of reasonable and supportable
repayment forecasts. Non-trade receivables also include employee
and tax receivables that are deemed immaterial and low risk. Equity
affiliate loans are also considered non-trade and balances are
reviewed quarterly.
|
|
|
Item
2.
|
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
|
First Quarter
2020 Compared
with
First Quarter
2019
Key Financial Results
|
|
|
|
|
|
|
|
|
|
|
Earnings by
Business Segment
|
|
|
|
Three Months
Ended
March 31
|
|
|
|
2020
|
|
2019
|
|
|
|
(Millions of
dollars)
|
|
Upstream
|
|
|
|
|
|
United States
|
|
$
|
241
|
|
|
$
|
748
|
|
|
International
|
|
2,679
|
|
|
2,375
|
|
|
Total
Upstream
|
|
2,920
|
|
|
3,123
|
|
|
Downstream
|
|
|
|
|
|
United States
|
|
450
|
|
|
217
|
|
|
International
|
|
653
|
|
|
35
|
|
|
Total
Downstream
|
|
1,103
|
|
|
252
|
|
|
Total
Segment Earnings
|
|
4,023
|
|
|
3,375
|
|
|
All
Other
|
|
(424
|
)
|
|
(726
|
)
|
|
Net Income
Attributable to Chevron Corporation (1)
(2)
|
|
$
|
3,599
|
|
|
$
|
2,649
|
|
|
__________________________________________
|
|
|
|
|
|
(1) Includes
foreign currency effects.
|
|
$
|
514
|
|
|
$
|
(137
|
)
|
|
(2) Income
net of tax; also referred to as “earnings” in the discussions that
follow.
|
|
|
|
|
Net income
attributable to Chevron Corporation for first quarter
2020
was
$3.60
billion ($1.93 per share — diluted),
compared with $2.65 billion
($1.39 per share — diluted) in
the first
quarter of 2019.
Upstream
earnings
in first
quarter 2020 were $2.92 billion
compared
to $3.12
billion in
the corresponding 2019 period. The decrease was
mainly due to lower crude oil and natural gas prices, partially
offset by favorable foreign currency effects, higher crude oil
production and natural gas sales volumes, and favorable tax
items.
Downstream
earnings
in first
quarter 2020 were $1.10 billion
compared
with $252
million in
the corresponding 2019 period. The increase was
mainly due to higher margins on refined product sales, partially
offset by higher operating expenses.
Refer to
pages 29
through 31 for additional discussion of
results by business segment and “All Other” activities for
first quarter 2020 versus the same period
in 2019.
Business Environment and Outlook
Chevron
Corporation* is a global energy company with substantial business
activities in the following countries: Angola, Argentina,
Australia, Bangladesh, Brazil, Canada, China, Colombia, Indonesia,
Kazakhstan, Myanmar, Mexico, Nigeria, the Partitioned Zone between
Saudi Arabia and Kuwait, the Philippines, Republic of Congo,
Singapore, South Korea, Thailand, the United Kingdom, the United
States, and Venezuela.
Earnings of the
company depend mostly on the profitability of its upstream business
segment. The most significant factor affecting the results of
operations for the upstream segment is the price of crude oil,
which is determined in global markets outside of the company’s
control. In the company’s downstream business, crude oil is the
largest cost component of refined products. It is the company’s
objective to deliver competitive results and stockholder value in
any business environment. Periods of sustained lower prices could
result in the impairment or write-off of specific assets in future
periods and cause the company to adjust operating expenses and
capital and exploratory expenditures, along with other measures
intended to improve financial performance. Similarly, impairments
or write-offs may occur as a result of managerial decisions not to
progress certain projects in the company's portfolio.
_____________________
*
Incorporated in
Delaware in 1926 as Standard Oil Company of California, the company
adopted the name Chevron Corporation in 1984 and ChevronTexaco
Corporation in 2001. In 2005, ChevronTexaco Corporation changed its
name to Chevron Corporation. As used in this report, the term
“Chevron” and such terms as “the company,” “the corporation,”
“our,” “we,” “us” and "its" may refer to Chevron Corporation, one
or more of its consolidated subsidiaries, or all of them taken as a
whole, but unless stated otherwise they do not include “affiliates”
of Chevron — i.e., those companies generally owned
50 percent or less. All of these terms are used for
convenience only and are not intended as a precise description of
any of the separate companies, each of which manages its own
affairs.
24
Response to Market Conditions and COVID-19 During the first quarter of
2020, travel restrictions and other constraints on economic
activity were implemented in many locations around the world to
limit the spread of the COVID-19 virus. As a result, demand
for our products has fallen steeply and commodity prices, including
crude oil and natural gas, have followed suit. The drop in
commodity prices is expected to negatively impact the company’s
future financial and operating results. Due to the rapidly changing
environment, there continues to be uncertainty and unpredictability
around the impact of the COVID-19 pandemic on our results, which
could be material.
Chevron entered
this crisis well positioned with a strong balance sheet, flexible
capital program and low cash flow breakeven price. Accordingly, to
protect its long-term health and value, the company is responding
to these market conditions by adjusting items it can control. The
company has lowered planned 2020 capital expenditures by up to 30
percent from its original budget to as low as $14 billion and
intends to reduce operating costs by $1 billion compared to 2019.
Additionally, the company has suspended its share repurchase
program. Together, these actions are consistent with our financial
priorities: to protect the dividend, to prioritize capital spend
that drives long-term value and to maintain a strong balance sheet.
The company expects to continue to have sufficient liquidity and
access to both commercial paper and debt capital markets due to its
strong balance sheet and investment grade credit ratings, which
have been recently reaffirmed. Additionally, the company has access
to nearly $10 billion in committed credit facilities.
The effective tax
rate for the company can change substantially during periods of
significant earnings volatility. This is due to the mix effects
that are impacted both by the absolute level of earnings or losses
and whether they arise in higher or lower tax rate jurisdictions.
As a result, a decline or increase in the effective tax rate in one
period may not be indicative of expected results in future periods.
Note 11 provides the company’s
effective income tax rate for the first quarter
of 2020 and
2019.
Refer to the
“Cautionary Statement Relevant to Forward-Looking Information” on
page 2 of this report and to “Risk
Factors” on pages 18 through 21
of the
company’s 2019 Annual Report on Form 10-K
and on pages 37 and 38 of this report for a discussion of some of
the inherent risks that could materially impact the company’s
results of operations or financial condition.
The company
continually evaluates opportunities to dispose of assets that are
not expected to provide sufficient long-term value or to acquire
assets or operations complementary to its asset base to help
augment the company’s financial performance and value growth. Asset
dispositions and restructurings may result in significant gains or
losses in future periods. The company’s asset sale program for 2018
through 2020 is targeting before-tax proceeds of $5-10 billion.
Proceeds related to asset sales were $5.2 billion from January 2018
through March 2020, with additional proceeds
received in April associated with the Azerbaijan asset
sale.
The company
closely monitors developments in the financial and credit markets,
the level of worldwide economic activity, and the implications for
the company of movements in prices for crude oil and natural gas.
Management takes these developments into account in the conduct of
daily operations and for business planning.
Management's
commentary related to earnings trends for the company’s major
business areas is as follows:
Upstream Earnings for the upstream
segment are closely aligned with industry prices for crude oil and
natural gas. Crude oil and natural gas prices are subject to
external factors over which the company has no control, including
product demand connected with global economic conditions, industry
production and inventory levels, technology advancements,
production quotas or other actions imposed by the Organization of
Petroleum Exporting Countries (OPEC) or other producers, actions of
regulators, weather-related damage and disruptions, competing fuel
prices, natural and human causes beyond the company's control such
as the COVID-19 pandemic, and regional supply interruptions or
fears thereof that may be caused by military conflicts, civil
unrest or political uncertainty. Any of these factors could also
inhibit the company’s production capacity in an affected region.
The company closely monitors developments in the countries in which
it operates and holds investments, and seeks to manage risks in
operating its facilities and businesses. The longer-term trend in
earnings for the upstream segment is also a function of other
factors, including the company’s ability to find or acquire and
efficiently produce crude oil and natural gas, changes in fiscal
terms of contracts, and changes in tax and other applicable laws
and regulations.
The company is
actively managing its schedule of work, contracting, procurement,
and supply chain activities to effectively manage costs, ensure
supply chain resiliency and continuity, and support operational
goals. Third party costs for capital, exploration, and operating
expenses associated with ongoing operations can be subject to
external factors beyond the company’s control including, but not
limited to: the general level of inflation, tariffs or other taxes
imposed on goods or services, and commoditized prices charged by
the industry’s material and service providers. Chevron utilizes
contracts with various pricing mechanisms, so there may be a lag
before the company’s costs reflect the changes in market
trends.
The spot markets
for many services and materials are softening in response to the
broad economic impact of the COVID-19 pandemic, including the
drastic reductions in demand for petroleum products, including
gasoline and jet fuel, among others, and in crude oil and natural
gas prices, which have resulted in significant reductions in
economic activity and associated spending in the energy sector.
Commodity prices have fallen below break-even levels in many
regions, and as a result, some of the more highly-leveraged
producers may be forced to file for bankruptcy protection (Chapter
11 re-organization or even Chapter 7 insolvency proceedings under
the U.S. Bankruptcy Code), further stressing suppliers, especially
those who entered this price-cycle under financial pressure. The
extent to which the costs of goods and services could go down may
be constrained by low supply sector margins, decisions by suppliers
to reduce capacity, and actions by banks and other financial
institutions. Chevron is actively monitoring the financial heal