Chevron 2007 Annual Report Download - page 32

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Millions of dollars, except per-share amounts 2007 2006 2005
Net Income $ 18,688 $ 17,138 $ 14,099
Per Share Amounts:
Net Income – Basic $ 8.83 $ 7.84 $ 6.58
– Diluted $ 8.77 $ 7.80 $ 6.54
Dividends $ 2.26 $ 2.01 $ 1.75
Sales and Other
Operating Revenues $ 214,091 $ 204,892 $ 193,641
Return on:
Average Capital Employed 23.1% 22.6% 21.9%
Average Stockholders’ Equity 25.6% 26.0% 26.1%
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Millions of dollars 2007 2006 2005
Upstream – Exploration and Production
United States $ 4,532 $ 4,270 $ 4,168
International 10,284 8,872 7,556
Total Upstream 14,816 13,142 11,724
Downstream – Refining, Marketing
and Transportation
United States 966 1,938 980
International 2,536 2,035 1,786
Total Downstream 3,502 3,973 2,766
Chemicals 396 539 298
All Other (26) (516) (689)
Net Income* $ 18,688 $ 17,138 $ 14,099
*Includes Foreign Currency Effects: $ (352) $ (219) $ (61)
Refer to the “Results of Operations” section beginning on
page 34 for a detailed discussion of financial results by major
operating area for the three years ending December 31, 2007.
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Chevron is a global energy company with significant busi-
ness activities in the following countries: Angola, Argentina,
Australia, Azerbaijan, Bangladesh, Brazil, Cambodia,
Canada, Chad, China, Colombia, Democratic Republic of
the Congo, Denmark, France, India, Indonesia, Kazakhstan,
Myanmar, the Netherlands, Nigeria, Norway, the Partitioned
Neutral Zone between Saudi Arabia and Kuwait, the
Philippines, Qatar, Republic of the Congo, Singapore, South
Africa, South Korea, Thailand, Trinidad and Tobago, the
United Kingdom, the United States, Venezuela and Vietnam.
Current and future earnings of the company depend
largely on the profitability of its upstream (exploration and
production) and downstream (refining, marketing and trans-
portation) business segments. The single biggest factor that
affects the results of operations for both segments is move-
ment in the price of crude oil. In the downstream business,
crude oil is the largest cost component of refined products.
The overall trend in earnings is typically less affected by
results from the company’s chemicals business and other
activities and investments. Earnings for the company in any
period may also be influenced by events or transactions that
are infrequent and/or unusual in nature.
Chevron and the oil and gas industry at large continue
to experience an increase in certain costs that exceeds the
general trend of inflation in many areas of the world. This
increase in costs is affecting the company’s operating expenses
and capital expenditures, particularly for the upstream
business. The company’s operations, especially upstream,
can also be affected by changing economic, regulatory and
political environments in the various countries in which it
operates, including the United States. Civil unrest, acts of
violence or strained relations between a government and the
company or other governments may impact the company’s
operations or investments. Those developments have at times
significantly affected the company’s operations and results
and are carefully considered by management when evaluating
the level of current and future activity in such countries.
To sustain its long-term competitive position in the
upstream business, the company must develop and replenish
an inventory of projects that offer adequate financial returns
for the investment required. Identifying promising areas for
exploration, acquiring the necessary rights to explore for and
to produce crude oil and natural gas, drilling successfully,
and handling the many technical and operational details in
a safe and cost-effective manner are all important factors in
this effort. Projects often require long lead times and large
capital commitments. In the current environment of higher
commodity prices, certain governments have sought to rene-
gotiate contracts or impose additional costs on the company.
Other governments may attempt to do so in the future. The
company will continue to monitor these developments, take
them into account in evaluating future investment oppor-
tunities, and otherwise seek to mitigate any risks to the
company’s current operations or future prospects.
The company also continually evaluates opportunities
to dispose of assets that are not expected to provide sufficient
long-term value, or to acquire assets or operations comple-
mentary to its asset base to help augment the company’s
growth. Asset sales during 2007 included the company’s
31 percent ownership interest in a refinery and related assets
in the Netherlands; fuels marketing businesses in Bel-
gium, Luxembourg, the Netherlands and Uruguay; and the
investment in common stock of Dynegy Inc. Other asset dis-
positions and restructurings may occur in future periods and
could result in significant gains or losses.
Comments related to earnings trends for the company’s
major business areas are as follows:
Management’s Discussion and Analysis of
Financial Condition and Results of Operations