Chevron 2006 Annual Report Download - page 32

30 CHEVRON CORPORATION 2006 ANNUAL REPORT
is expected to add 100,000 barrels per day of mining and
upgrading capacity at an estimated total project cost of $10
billion. Completion of the expansion is planned for 2010,
increasing total capacity of the project to approximately
255,000 barrels per day. The company holds a 20 percent
nonoperated working interest in AOSP.
Nigeria In May 2006, the company announced the dis-
covery of crude oil at the nonoperated Uge-1 exploration well
in the 20 percent-owned offshore Oil Prospecting License
214. Future drilling is contingent primarily on the outcome
of ongoing technical studies.
Norway In April 2006, the company was awarded the
rights to six blocks in the 19th Norwegian Licensing Round.
The 40 percent-owned blocks are located in the Nordkapp
East Basin in the Norwegian Barents Sea. A 3-D seismic sur-
vey was acquired and is planned to be processed in 2007.
Thailand In early 2006, the company signed two petro-
leum exploration concessions in the Gulf of Thailand. Chevron
has a 71 percent operated interest in one concession, which is in
the proximity of the company’s Tantawan and Plamuk fi elds.
Initial drilling in the concession is scheduled during 2007.
Drilling is projected by 2009 for the other concession, in which
Chevron has a 16 percent nonoperated working interest.
United Kingdom In June 2006, the company produced
the fi rst crude oil from the 85 percent-owned and operated
Area C in the Captain Field. The project reached maximum
production of 14,000 barrels of crude oil per day in Septem-
ber 2006.
In early 2007, the company was awarded eight operated
exploration blocks and two nonoperated blocks west of Shet-
land Islands in the 24th United Kingdom Offshore Licensing
Round.
Vietnam In April 2006, the company signed a 30-year
production-sharing contract with Vietnam Oil and Gas
Corporation for Block 122 offshore eastern Vietnam. The
company has a 50 percent interest in this block and has
undertaken a three-year work program for seismic acquisition
and drilling of an exploratory well.
Downstream
United States In December 2006, the company completed
the expansion of the Fluid Catalytic Cracking Unit at the
company’s refi nery in Pascagoula, Mississippi, increasing the
refi nery’s gasoline manufacturing capacity by about 10 per-
cent. The company also submitted an environmental permit
application for construction of facilities to increase gasoline
output by another 15 percent.
India In April 2006, the company acquired a 5 percent
interest in Reliance Petroleum Limited, a company formed
by Reliance Industries Limited to construct, own and oper-
ate a refi nery in Jamnagar, India. The new refi nery would be
the world’s sixth largest, designed for a crude oil processing
capacity of 580,000 barrels per day. Chevron and Reliance
Industries also signed two memoranda of understanding
to jointly pursue other downstream and upstream business
opportunities. If discussions pursuant to the memoranda of
understanding lead to defi nitive agreements, Chevron may
increase its equity stake in Reliance Petroleum to 29 percent.
Other
Biofuels In May 2006, the company announced that it
had completed the acquisition of a 22 percent interest in
Galveston Bay Biodiesel L.P., which is building one of the
fi rst large-scale biodiesel plants in the United States. The fol-
lowing month, the company entered into a research alliance
with the Georgia Institute of Technology to pursue advanced
technology aimed at making cellulosic biofuels and hydro-
gen into transportation fuels. In September, the company
announced a research collaboration with the University of
California–Davis aimed at converting cellulosic biomass into
transportation fuels.
Common Stock Dividends and Stock Repurchase Program
In April 2006, the company increased its quarterly common
stock dividend by 15.5 percent to $0.52 per share. In Novem-
ber, the company completed its second $5 billion common
stock buyback program since 2004 and in December autho-
rized the acquisition of up to $5 billion of additional shares
over a period of up to three years.
RESULTS OF OPERATIONS
Major Operating Areas The following section presents the
results of operations for the company’s business segments
– upstream, downstream and chemicals – as well as for “all
other,” which includes mining, power generation businesses,
and the various companies and departments that are managed
at the corporate level. Income is also presented for the U.S.
and international geographic areas of the upstream and down-
stream business segments. (Refer to Note 8, beginning on page
62, for a discussion of the company’s “reportable segments,”
as defi ned in FASB No. 131, Disclosures About Segments of
an Enterprise and Related Information.) This section should
also be read in conjunction with the discussion in “Business
Environment and Outlook” on pages 26 through 29.
U.S. Upstream – Exploration and Production
Millions of dollars 2006 2005 2004
Income From Continuing Operations $ 4,270 $ 4,168 $ 3,868
Income From Discontinued Operations – – 70
Tota l Income $ 4,270 $ 4,168 $ 3,938
U.S. upstream income of $4.3 billion in 2006 increased
approximately $100 million from 2005. Earnings in 2006
benefi ted about $850 million from higher average prices on
oil-equivalent production and the effect of seven additional
months of production from the Unocal properties that were
acquired in August 2005. Substantially offsetting these
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS