Chevron 2004 Annual Report Download - page 34

32 CHEVRONTEXACO CORPORATION 2004 ANNUAL REPORT
Management’s Discussion and Analysis of Financial Condition and Results of Operations
production฀increased฀about฀1฀percent฀from฀2003฀and฀decreased฀
about฀1฀percent฀from฀2002.
The฀net฀natural฀gas฀component฀of฀oil-equivalent฀production฀
was฀up฀1฀percent฀from฀2003฀and฀6฀percent฀from฀2002.฀During฀
2004,฀production฀increases฀in฀Angola,฀Kazakhstan,฀Denmark฀and฀
Australia฀were฀partially฀offset฀by฀declines฀associated฀with฀asset฀
sales.฀In฀2003,฀areas฀with฀production฀increases฀included฀Australia,฀
Kazakhstan,฀the฀Philippines฀and฀the฀United฀Kingdom.
Refer฀to฀the฀“Selected฀Operating฀Data”฀table฀on฀page฀34฀for฀
the฀three-year฀comparative฀of฀international฀production฀volumes.
Special-item฀gains฀in฀2004฀included฀$585฀million฀from฀the฀
sale฀of฀producing฀properties฀in฀western฀Canada฀and฀$266฀million฀
from฀the฀sale฀of฀other฀nonstrategic฀assets,฀including฀the฀company’s฀
operations฀in฀the฀Democratic฀Republic฀of฀the฀Congo฀and฀a฀Cana-
dian฀natural-gas฀processing฀business.฀In฀2003,฀net฀special฀gains฀of฀
$98฀million฀included฀benefits฀of฀$150฀million฀related฀to฀income฀
taxes฀and฀property฀sales,฀partially฀offset฀by฀asset฀impairments฀
in฀advance฀of฀sale฀and฀charges฀for฀employee฀termination฀costs.฀
In฀2002,฀special฀charges฀of฀$137฀million฀included฀$100฀million฀
for฀asset฀impairments฀resulting฀from฀the฀write-down฀of฀proved฀
reserves฀for฀fields฀in฀Africa฀and฀Canada.
฀U.S.฀Downstream฀–฀Refining,฀Marketing฀and฀Transportation
Millions฀of฀dollars  2003 2002
  $ 482 $ (398)
*Includes Special-Item Gains (Charges):
Asset Dispositions   $ 37 $ –
Asset Impairments/Write-offs  – (66)
Environmental Remediation Provisions  (132) (92)
Restructuring and Reorganizations   (28) –
Litigation Provisions  – (57)
Total   $ (123) $ (215)
The฀earnings฀improvement฀in฀2004฀from฀both฀2003฀and฀
2002฀was฀associated฀mainly฀with฀higher฀margins฀for฀refined฀
products.฀Margins฀in฀2004฀were฀the฀highest฀in฀recent฀years.฀Mar-
gins฀in฀2002฀were฀very฀depressed,฀and฀at฀one฀point฀hovered฀near฀
their฀12-year฀lows.
Sales฀volumes฀for฀refined฀products฀of฀approximately฀1.5฀mil-
lion฀barrels฀per฀day฀in฀2004฀increased฀about฀5฀percent฀from฀2003.฀
The฀increase฀between฀periods฀was฀primarily฀from฀higher฀sales฀of฀
gasoline,฀diesel฀fuel฀and฀fuel฀oil.฀Branded฀gasoline฀sales฀volumes฀
of฀567,000฀barrels฀per฀day฀increased฀2฀percent฀from฀2003.฀The฀
sales฀improvement฀partially฀reflected฀the฀reintroduction฀of฀the฀
Texaco฀brand฀in฀the฀Southeast.฀In฀
2003,฀sales฀volumes฀for฀refined฀
products฀declined฀about฀10฀percent฀
from฀the฀prior฀year.฀Industry฀
demand฀in฀2003฀was฀weaker฀for฀
branded฀gasoline,฀diesel฀and฀jet฀
fuels฀and฀sales฀were฀lower฀under฀
certain฀supply฀contracts.฀
Refer฀to฀the฀“Selected฀Operating฀
Data”฀table฀on฀page฀34฀for฀the฀three-
year฀comparative฀refined-product฀
sales฀volumes฀in฀the฀United฀States.฀
In฀2003,฀net฀special฀charges฀of฀
$123฀million฀included฀$160฀million฀
for฀environmental฀remediation฀and฀
employee฀severance฀costs฀associ-
ated฀with฀the฀global฀downstream฀
restructuring฀and฀reorganization.฀
These฀charges฀were฀partially฀offset฀
by฀gains฀on฀asset฀sales.฀In฀2002,฀
special฀charges฀of฀$215฀million฀
included฀amounts฀for฀environmental฀
remediation,฀the฀write-down฀of฀the฀
El฀Paso฀refinery฀in฀advance฀of฀sale฀
and฀a฀litigation฀matter.
International฀Downstream฀–฀
Refining,฀Marketing฀and฀Transportation
Millions฀of฀dollars  2003 2002
  $ 685 $ 31
1 Includes Foreign Currency Effects:  $ (141) $ (176)
2 Includes Special-Item Gains (Charges):
Asset Dispositions   $ (24) $ –
Asset Impairments/Write-offs  (123) (136)
Restructuring and Reorganizations  (42) –
Total   $ (189) $ (136)
The฀international฀downstream฀segment฀includes฀the฀com-
pany’s฀consolidated฀refining฀and฀marketing฀businesses,฀non-U.S.฀
marine฀operations,฀non-U.S.฀supply฀and฀trading฀activities,฀and฀
equity฀earnings฀of฀affiliates,฀primarily฀in฀the฀Asia-Pacific฀region.฀
Earnings฀of฀nearly฀$2฀billion฀in฀2004฀improved฀significantly฀
from฀2003฀and฀2002,฀mainly฀the฀result฀of฀higher฀average฀margins฀
for฀refined฀products฀for฀both฀company฀and฀affiliate฀operations฀and฀
higher฀earnings฀from฀international฀shipping฀operations.฀Margins฀in฀
0
2100
1800
1500
1200
900
600
300




Thousands of barrels per day
Gasoline
Jet Fuel
Gas Oils & Kerosene
Residual Fuel Oil
Other
Refined฀products฀sales฀volumes฀in-฀
creased฀about฀5฀percent฀from฀2003,฀
with฀higher฀sales฀of฀most฀products.
�Includes฀equity฀in฀affiliates

0100 02 03 
-0.5
3.5
3.0
2.5
0.0
0.5
2.0
1.0
1.5
0100 02 03 




Billions of dollars
United States
International
Downstream฀earnings฀improved฀
significantly฀due฀to฀higher฀
industry฀demand฀and฀improved฀
margins฀for฀refined฀products฀
worldwide.

0
2800
2100
1400
700
0100 02 03 




Thousands of barrels per day
Refined฀products฀sales฀volumes฀
increased฀about฀4฀percent฀from฀
2003.
�Includes฀equity฀in฀affiliates
Gasoline
Jet Fuel
Gas Oils & Kerosene
Residual Fuel Oil
Other
