Chevron 2009 Annual Report Download - page 12

10 Chevron Corporation 2009 Annual Report
FS-PB
Key Financial Results
Millions of dollars, except per-share amounts 2009 2008 2007
Net Income Attributable to
Chevron Corporation $ 10,483 $ 23,931 $ 18,688
Per Share Amounts:
Net Income Attributable to
Chevron Corporation
– Basic $ 5.26 $ 11.74 $ 8.83
– Diluted $ 5.24 $ 11.67 $ 8.77
Dividends $ 2.66 $ 2.53 $ 2.26
Sales and Other
Operating Revenues $ 167,402 $ 264,958 $ 214,091
Return on:
Capital Employed 10.6% 26.6% 23.1%
Stockholders’ Equity 11.7% 29.2% 25.6%
Earnings by Major Operating Area
Millions of dollars 2009 2008 2007
Upstream – Exploration and Production
United States $ 2,216 $ 7,126 $ 4,532
International 8,215 14,584 10,284
Total Upstream 10,431 21,710 14,816
Downstream – Refining, Marketing
and Transportation
United States (273) 1,369 966
International 838 2,060 2,536
Total Downstream 565 3,429 3,502
Chemicals 409 182 396
All Other (922) (1,390) (26)
Net Income Attributable to
Chevron Corporation(1),(2) $ 10,483 $ 23,931 $ 18,688
(1) Includes foreign currency effects: $ (744) $ 862 $ (352)
(2) Also referred to as “earnings” in the discussions that follow.
Refer to the “Results of Operations” section beginning
on page 14 for a discussion of financial results by major
operating area for the three years ended December 31, 2009.
Business Environment and Outlook
Chevron is a global energy company with significant
business activities in the following countries: Angola,
Argentina, Australia, Azerbaijan, Bangladesh, Brazil,
Cambodia, Canada, Chad, China, Colombia, Democratic
Republic of the Congo, Denmark, Indonesia, Kazakhstan,
Myanmar, the Netherlands, Nigeria, Norway, the Partitioned
Zone between Saudi Arabia and Kuwait, the Philippines,
Republic of the Congo, Singapore, South Africa, South Korea,
Thailand, Trinidad and Tobago, the United Kingdom,
the United States, Venezuela and Vietnam.
Earnings of the company depend largely on the profit-
ability of its upstream (exploration and production) and
downstream (refining, marketing and transportation) busi-
ness segments. The single biggest factor that affects the
results of operations for both segments is movement 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 invest-
ments. Earnings for the company in any period may also be
influenced by events or transactions that are infrequent or
unusual in nature.
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 care-
fully 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 replen-
ish an inventory of projects that offer attractive 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 suc-
cessfully, 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. From time to time, certain
governments have sought to renegotiate contracts or impose
additional costs on the company. Governments may attempt
to do so in the future. The company will continue to moni-
tor these developments, take them into account in evaluating
future investment opportunities, and otherwise seek to miti-
gate 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
financial performance and growth. Refer to the “Results of
Operations” section beginning on page 14 for discussions of
net gains on asset sales during 2009. Asset dispositions and
restructurings may also occur in future periods and could
result in significant gains or losses.
In recent years, Chevron and the oil and gas industry at
large experienced an increase in certain costs that exceeded
the general trend of inflation in many areas of the world.
This increase in costs affected the company’s operating
expenses and capital programs for all business segments, but
particularly for upstream. Softening of these cost pressures
started in late 2008 and continued through most of 2009.
Costs began to level out in the fourth quarter 2009. The
company continues to actively manage its schedule of work,
Management’s Discussion and Analysis of
Financial Condition and Results of Operations