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Management’s Discussion and Analysis of
Financial Condition and Results of Operations
14 Chevron Corporation 2012 Annual Report
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Kurdistan Region of Iraq In third quarter 2012,
Chevron acquired an 80 percent interest and operatorship in
the Rovi and Sarta blocks.
Lithuania In October 2012, Chevron acquired a 50
percent interest in a company with exploration interests in a
shale gas block.
Morocco In January 2013, the company announced that
it had signed agreements to explore three oshore areas.
Nigeria In February 2012, production commenced at
the deepwater Usan project.
Sierra Leone In September 2012, the company was
awarded a 55 percent interest and operatorship in two deep-
water exploration blocks.
Suriname In November 2012, the company acquired a
50 percent interest in two oshore exploration blocks.
Ukraine In second quarter 2012, the company bid suc-
cessfully for the right to exclusively negotiate a 50 percent
interest and operatorship in a shale gas block.
United Kingdom In July 2012, the company initiated
front-end engineering and design (FEED) for the deepwater
Rosebank project west of the Shetland Islands.
United States In October 2012, the company acquired
additional acreage in New Mexico. A major portion of the
acreage is located in the Delaware Basin, where the company
is already one of the largest leaseholders.
In second quarter 2012, the company successfully bid
for additional shelf and deepwater exploration acreage in the
central Gulf of Mexico. In fourth quarter 2012, the company
submitted high bids for additional deepwater acreage in the
western Gulf of Mexico.
In rst quarter 2012, production commenced at the
Caesar/Tonga project in the deepwater Gulf of Mexico.
Downstream
Caribbean During 2012, the company completed the sale of
its fuels marketing and aviation businesses in eight countries
in the Caribbean.
Europe During rst quarter 2012, the company com-
pleted the sale of its fuels marketing, nished lubricants and
aviation businesses in Spain.
Saudi Arabia In October 2012, the company’s 50
percent-owned Chevron Phillips Chemical Company LLC
announced that its 35 percent-owned Saudi Polymers Com-
pany began commercial production at its new petrochemical
facility in Al-Jubail.
South Korea During 2012, the company’s 50 percent-
owned GS Caltex aliate completed the sale of certain power
and other assets.
United States In third quarter 2012, the company com-
pleted the sale of its idled Perth Amboy, New Jersey, renery,
which had been operating as a terminal.
In April 2012, the company’s 50 percent-owned Chevron
Phillips Chemical Company LLC announced the execution
of FEED contracts for an ethane cracker at its Cedar Bayou
facility in Baytown, Texas, and two polyethylene facilities
near its Sweeny facility in Old Ocean, Texas.
Other
Common Stock Dividends e quarterly common stock
dividend was increased by 11.1 percent in April 2012 to $0.90
per common share, making 2012 the 25th consecutive year
that the company increased its annual dividend payment.
Common Stock Repurchase Program e company
purchased $5.0 billion of its common stock in 2012 under its
share repurchase program. e program began in 2010 and
has no set term or monetary limits.
Results of Operations
Major Operating Areas e following section presents the
results of operations for the company’s business segments –
Upstream and Downstream – as well as for “All Other.”
Earnings are also presented for the U.S. and international
geographic areas of the Upstream and Downstream business
segments. Refer to Note 10, beginning on page 44, for a
discussion of the company’s “reportable segments,” as dened
in accounting standards forsegment reporting (Accounting
Standards Codication (ASC) 280). is section should also
be read in conjunction with the discussion in “Business
Environment and Outlook” on pages 10 through 13.
U.S. Upstream
Millions of dollars 2012 2011 2010
Earnings $ 5,332 $ 6,512 $ 4,122
U.S. upstream earnings of $5.3 billion in 2012 decreased
$1.2 billion from 2011, primarily due to lower natural gas
and crude oil realizations of $340 million and $200 million,
respectively, lower crude oil production of $240 million, and
lower gains on asset sales of $180 million.
U.S. upstream earnings of $6.5 billion in 2011 increased
$2.4 billion from 2010. e benet of higher crude oil realiza-
tions increased earnings by $2.8 billion between periods.
Partly osetting this eect were lower net oil-equivalent pro-
duction, which decreased earnings by about $400 million,
and higher operating expenses of $200 million.
e company’s average realization for U.S. crude oil and
natural gas liquids in 2012 was $95.21 per barrel, compared
with $97.51 in 2011 and $71.59 in 2010. e average natural
gas realization was $2.64 per thousand cubic feet in 2012,
compared with $4.04 and $4.26 in 2011 and 2010,
respectively.