Chevron 2004 Annual Report Download - page 36

34 CHEVRONTEXACO CORPORATION 2004 ANNUAL REPORT
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Explanations฀follow฀for฀variations฀between฀years฀for฀the฀
amounts฀in฀the฀table฀above฀–฀after฀consideration฀of฀the฀effects฀of฀
special฀gains฀and฀charges฀–฀as฀well฀as฀for฀other฀income฀statement฀
categories.฀Refer฀to฀the฀preceding฀segment฀discussions฀in฀this฀sec-
tion฀for฀information฀relating฀to฀special฀gains฀and฀charges.
Sales฀and฀other฀operating฀revenues฀were฀$151฀billion฀in฀2004,฀
compared฀with฀$120฀billion฀in฀2003฀and฀$98฀billion฀in฀2002.฀Rev-
enues฀increased฀in฀2004฀and฀2003฀primarily฀from฀higher฀prices฀
for฀crude฀oil,฀natural฀gas฀and฀refined฀products฀worldwide.฀
Income฀(loss)฀from฀equity฀affiliates฀increased฀in฀2004฀and฀
2003,฀as฀earnings฀improved฀for฀a฀number฀of฀affiliates,฀including฀
downstream฀affiliates฀in฀the฀Asia-Pacific฀area,฀Tengizchevroil,฀
CPChem,฀Dynegy฀and฀the฀Caspian฀Pipeline฀Consortium.
Other฀income฀in฀2004฀included฀net฀gains฀of฀$1.6฀billion,฀
primarily฀from฀upstream฀property฀sales,฀compared฀with฀gains฀
of฀$286฀million฀and฀$94฀million฀in฀2003฀and฀2002,฀respectively.฀
Interest฀income฀increased฀to฀$199฀million฀in฀2004,฀compared฀
with฀about฀$120฀million฀in฀2003฀and฀2002,฀as฀a฀result฀of฀higher฀
balances฀of฀cash฀and฀marketable฀securities.฀Foreign฀currency฀
losses฀were฀$60฀million,฀$199฀million฀and฀$5฀million฀in฀2004,฀
2003฀and฀2002,฀respectively.฀
Purchased฀crude฀oil฀and฀products฀were฀$94฀billion฀in฀2004,฀
an฀increase฀of฀32฀percent฀from฀2003,฀due฀mainly฀to฀higher฀prices฀
and฀increased฀purchases฀of฀crude฀oil฀and฀products.฀Crude฀oil฀and฀
product฀purchases฀increased฀about฀25฀percent฀in฀2003,฀primarily฀
due฀to฀significantly฀higher฀prices฀for฀crude฀oil,฀natural฀gas฀and฀
refined฀products.
Operating,฀selling,฀general฀and฀administrative฀expenses฀of฀
$14฀billion฀increased฀from฀$13฀billion฀in฀2003.฀The฀increases฀in฀
2004฀included฀costs฀for฀chartering฀of฀crude฀oil฀tankers฀and฀other฀
transportation฀expenses.฀During฀2003,฀operating,฀selling,฀general฀
and฀administrative฀expenses฀increased฀nearly฀$1฀billion,฀primar-
ily฀from฀higher฀freight฀rates฀for฀international฀shipping฀operations฀
and฀higher฀costs฀associated฀with฀employee฀pension฀plans฀and฀
other฀employee-benefit฀expenses.
Exploration฀expenses฀were฀$697฀million฀in฀2004,฀$570฀mil-
lion฀in฀2003฀and฀$591฀million฀in฀2002.฀In฀2004,฀amounts฀were฀
higher฀for฀international฀operations,฀primarily฀for฀seismic฀costs฀
and฀expenses฀associated฀with฀evaluating฀the฀feasibility฀of฀different฀
project฀alternatives.
Depreciation,฀depletion฀and฀amortization฀expenses฀did฀not฀
change฀materially฀between฀years฀after฀consideration฀of฀the฀effects฀
of฀special-item฀charges.
Interest฀and฀debt฀expense฀was฀$406฀million฀in฀2004,฀com-
pared฀with฀$474฀million฀in฀2003฀and฀$565฀million฀in฀2002.฀The฀
lower฀amount฀in฀2004฀reflected฀lower฀average฀debt฀balances.฀The฀
decline฀between฀2003฀and฀2002฀reflected฀lower฀average฀interest฀
rates฀on฀commercial฀paper฀and฀other฀variable-rate฀debt฀and฀lower฀
average฀debt฀levels.
Taxes฀other฀than฀on฀income฀were฀$19.8฀billion,฀$17.9฀billion฀
and฀$16.7฀billion฀in฀2004,฀2003฀and฀2002,฀respectively.฀The฀
increase฀in฀2004฀and฀2003฀primarily฀reflected฀the฀weakening฀
U.S.฀dollar฀on฀foreign฀currency-denominated฀duties฀in฀the฀
company’s฀European฀downstream฀operations.
Income฀tax฀expense฀corresponded฀to฀effective฀tax฀rates฀of฀
37฀percent฀in฀2004,฀43฀percent฀in฀2003฀and฀45฀percent฀in฀2002฀after฀
taking฀into฀account฀the฀effect฀of฀net฀special฀items.฀Refer฀also฀to฀
Note฀17฀on฀page฀66฀to฀the฀Consolidated฀Financial฀Statements.
Merger-related฀expenses฀were฀$576฀million฀in฀2002.฀No฀
merger-related฀expenses฀were฀reported฀in฀2004฀or฀2003,฀reflecting฀
the฀completion฀of฀merger฀integration฀activities฀in฀2002.

 2003 2002
  
Net Crude Oil and Natural Gas
Liquids Production (MBPD)  562 602
Net Natural Gas Production (MMCFPD)3  2,228 2,405
Net Oil-Equivalent Production (MBOEPD)   933 1,003
Natural Gas Sales (MMCFPD)  4,304 5,891
Natural Gas Liquids Sales (MBPD)  194 241
Revenues From Net Production
Liquids ($/Bbl)  $ 26.66 $ 21.34
Natural Gas ($/MCF)   $ 5.01 $ 2.89

Net Crude and Natural Gas
Liquids Production (MBPD)  1,246 1,295
Net Natural Gas Production (MMCFPD)3  2,064 1,971
Net Oil-Equivalent Production (MBOEPD)4   1,704 1,720
Natural Gas Sales (MMCFPD)  1,951 3,131
Natural Gas Liquids Sales (MBPD)   107 131
Revenues From Liftings
Liquids ($/Bbl)  $ 26.79 $ 23.06
Natural Gas ($/MCF)   $ 2.64 $ 2.14


U.S.  933 1,003
International  1,704 1,720
Total  2,637 2,723

 
Gasoline Sales (MBPD)  669 680
Other Refined Products Sales (MBPD)  767 920
Total5  1,436 1,600
Refinery Input (MBPD)6  951 979

 
Gasoline Sales (MBPD)  643 620
Other Refined Products Sales (MBPD)  1,659 1,555
Total7  2,302 2,175
Refinery Input (MBPD)  1,040 1,100
1 Includes equity in affiliates.
2 MBPD = Thousands of barrels per day; MMCFPD = Millions of cubic feet per day;
MBOEPD = Thousands of barrels of oil equivalents per day; Bbl = Barrel; MCF =
Thousands of cubic feet. Oil-equivalent gas (OEG) conversion ratio is 6,000 cubic
feet of gas = 1 barrel of oil.
3 Includes natural gas consumed on lease:
United States  65 64
International  268 256
4 Other produced volumes include:
Athabasca Oil Sands – Net  15 –
Boscan Operating Service Agreement  99 97
 114 97
5 Includes volume for buy/sell contracts:  90 101
6 The company sold its interest in the El Paso
Refinery in August 2003.
7 Includes volume for buy/sell contracts:  104 96