Chevron 2004 Annual Report Download - page 33

CHEVRONTEXACO CORPORATION 2004 ANNUAL REPORT 31
Income฀from฀continuing฀operations฀in฀2004฀of฀nearly฀
$3.9฀billion฀was฀about฀$700฀million฀higher฀than฀in฀2003.฀
Nearly฀$400฀million฀of฀the฀increase฀represented฀the฀difference฀
in฀the฀effect฀on฀earnings฀in฀the฀respective฀periods฀from฀special฀
items,฀which฀are฀discussed฀below.฀The฀remaining฀$300฀million฀
improvement฀was฀composed฀of฀about฀a฀$1฀billion฀benefit฀from฀
higher฀crude฀oil฀and฀natural฀gas฀prices฀that฀was฀largely฀offset฀by฀
the฀effects฀of฀lower฀production.
Income฀from฀continuing฀operations฀in฀2003฀was฀about฀
$3.2฀billion,฀up฀approximately฀$1.5฀billion฀from฀2002.฀The฀benefit฀
of฀higher฀prices฀between฀periods฀was฀about฀$1.7฀billion฀and฀was฀
partially฀offset฀by฀the฀effect฀of฀lower฀production.
The฀company’s฀average฀liquids฀realization฀in฀2004฀was฀
$34.12฀per฀barrel,฀compared฀with฀$26.66฀in฀2003฀and฀$21.34฀in฀
2002.฀The฀average฀natural฀gas฀realization฀was฀$5.51฀per฀thousand฀
cubic฀feet฀in฀2004,฀compared฀with฀$5.01฀and฀$2.89฀in฀2003฀and฀
2002,฀respectively.฀
Net฀oil-equivalent฀production฀averaged฀817,000฀barrels฀per฀
day฀in฀2004,฀down฀12฀percent฀from฀2003฀and฀19฀percent฀from฀2002.฀
The฀lower฀production฀in฀2004฀included฀the฀effects฀of฀about฀30,000฀
barrels฀per฀day฀associated฀with฀property฀sales฀and฀21,000฀barrels฀
per฀day฀of฀production฀shut฀in฀as฀a฀result฀of฀damages฀to฀facilities฀
from฀Hurricane฀Ivan฀in฀the฀third฀quarter.฀Adjusting฀for฀the฀effects฀
of฀property฀sales฀and฀storms฀in฀all฀periods฀presented,฀oil-equiva-
lent฀production฀in฀2004฀declined฀about฀7฀percent฀from฀2003฀and฀
14฀percent฀from฀2002,฀mainly฀as฀a฀result฀of฀normal฀field฀declines฀
that฀do฀not฀typically฀reverse.฀
The฀net฀liquids฀component฀of฀oil-equivalent฀production฀for฀
2004฀averaged฀505,000฀barrels฀per฀day,฀a฀decline฀of฀10฀percent฀
from฀2003฀and฀16฀percent฀from฀2002.฀Excluding฀the฀effects฀of฀
property฀sales฀and฀storms,฀net฀liquids฀production฀in฀2004฀declined฀
5฀percent฀and฀11฀percent฀from฀2003฀and฀2002,฀respectively.฀
Net฀natural฀gas฀production฀averaged฀1.9฀billion฀cubic฀feet฀
per฀day฀in฀2004,฀16฀percent฀lower฀than฀2003฀and฀22฀percent฀lower฀
than฀2002.฀Adjusting฀for฀the฀effects฀of฀property฀sales฀and฀storms,฀
2004฀net฀natural฀gas฀production฀declined฀10฀percent฀in฀2003฀and฀
17฀percent฀in฀2002.฀
Refer฀to฀the฀“Selected฀Operating฀Data”฀table฀on฀page฀34฀for฀the฀
three-year฀comparative฀production฀volumes฀in฀the฀United฀States.฀
Segment฀income฀in฀2004฀included฀special฀gains฀of฀$366฀
million฀from฀property฀sales,฀partially฀offset฀by฀special฀charges฀
of฀$55฀million฀resulting฀from฀an฀adverse฀litigation฀matter.฀Net฀
special฀charges฀of฀$64฀million฀in฀2003฀were฀composed฀of฀charges฀
of฀$103฀million฀for฀asset฀impairments,฀associated฀mainly฀with฀the฀
write-down฀of฀assets฀in฀anticipation฀of฀sale;฀charges฀of฀$38฀mil-
lion฀for฀restructuring฀and฀reorganization,฀mainly฀for฀employee฀
severance฀costs;฀and฀gains฀of฀$77฀million฀from฀property฀sales.฀
Special฀charges฀in฀2002฀totaled฀$214฀million,฀which฀included฀
$183฀million฀for฀the฀impairment฀of฀a฀number฀of฀fields฀caused฀by฀
the฀write-down฀of฀proved฀reserves฀and฀$31฀million฀for฀costs฀of฀
environmental฀remediation.
International฀Upstream฀–฀Exploration฀and฀Production
Millions฀of฀dollars  2003 2002
Income From Continuing Operations1  $ 3,199 $ 2,823
Income From Discontinued Operations   21 16
Cumulative Effect of Accounting
Change   145 –
  $ 3,365 $ 2,839
1 Includes Foreign Currency Effects:  $ (319) $ 90
2 Includes Special-Item Gains (Charges):
Asset Dispositions
Continuing Operations  $ 32 $ –
Discontinued Operations  – –
Asset Impairments/Write-offs  (30) (100)
Restructuring and Reorganizations   (22) –
Tax Adjustments  118 (37)
Total  $ 98 $ (137)
Income฀from฀continuing฀operations฀of฀$5.6฀billion฀in฀2004฀
increased฀about฀$2.4฀billion฀from฀2003.฀Approximately฀$1.1฀bil-
lion฀of฀the฀increase฀was฀associated฀with฀higher฀prices฀for฀crude฀
oil฀and฀natural฀gas.฀Approximately฀$750฀million฀of฀the฀increase฀
was฀the฀result฀of฀the฀effects฀of฀special฀items฀in฀each฀period,฀which฀
are฀discussed฀below.฀Another฀$400฀million฀resulted฀from฀lower฀
income-tax฀expense฀between฀periods,฀including฀a฀benefit฀of฀about฀
$200฀million฀in฀2004฀as฀a฀result฀of฀changes฀in฀income฀tax฀laws.฀
Otherwise,฀the฀benefit฀of฀about฀$200฀million฀in฀lower฀foreign฀cur-
rency฀losses฀was฀largely฀offset฀by฀higher฀transportation฀costs.
Income฀from฀continuing฀operations฀of฀$3.2฀billion฀in฀2003฀
was฀nearly฀$400฀million฀higher฀than฀in฀2002.฀Higher฀crude฀oil฀
and฀natural฀gas฀prices฀accounted฀for฀an฀increase฀of฀about฀$900฀mil-
lion,฀which฀was฀partially฀offset฀by฀$400฀million฀from฀the฀effect฀
of฀foreign฀currency฀changes฀and฀about฀$100฀million฀of฀higher฀
income฀tax-expense.฀
Net฀oil-equivalent฀production฀of฀1.7฀million฀barrels฀per฀day฀
in฀2004฀–฀including฀other฀produced฀volumes฀of฀140,000฀net฀bar-
rels฀per฀day฀from฀oil฀sands฀and฀production฀under฀an฀operating฀
service฀agreement฀–฀declined฀about฀1฀percent฀from฀2003฀and฀
2฀percent฀from฀2002.฀Excluding฀the฀lower฀production฀associated฀
with฀property฀sales฀and฀reduced฀volumes฀associated฀with฀cost-
recovery฀provisions฀of฀certain฀production-sharing฀agreements,฀
2004฀net฀oil-equivalent฀production฀increased฀nearly฀3฀percent฀
from฀2003฀and฀1฀percent฀from฀2002฀–฀primarily฀from฀higher฀oil-
equivalent฀production฀in฀Chad,฀Kazakhstan฀and฀Venezuela.
The฀net฀liquids฀component฀of฀oil-equivalent฀production,฀
including฀volumes฀produced฀from฀oil฀sands฀and฀under฀an฀operating฀
service฀agreement,฀declined฀about฀1฀percent฀from฀the฀produc-
tion฀level฀in฀2003฀and฀about฀3฀percent฀from฀2002.฀Excluding฀
the฀effects฀of฀property฀sales฀and฀lower฀cost-recovery฀volumes฀
under฀certain฀production-sharing฀agreements,฀2004฀net฀liquids฀
0
1200
900
600
300
0100 02 03 


Millions of dollars
United States
International
Exploration฀expenses฀declined฀
after฀the฀October฀2001฀merger,฀
reflecting,฀in฀part,฀the฀high-
grading฀of฀the฀combined฀explo-
ration฀portfolio.

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10.0
8.0
6.0
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
Billions of dollars
Earnings฀increased฀significantly฀
in฀2004฀on฀higher฀prices฀for฀
crude฀oil฀and฀natural฀gas.฀Par-
tially฀offsetting฀were฀the฀effects฀
of฀lower฀production฀volumes.
�Before฀the฀cumulative฀effect฀of฀฀
changes฀in฀accounting฀principles฀
but฀including฀discontinued฀
operations
United States
International
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