================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 6, 2000
Chevron Corporation
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-368-2 94-0890210
--------------------------- ---------------------- -------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer No.)
of incorporation )
575 Market Street, San Francisco, CA 94105
-------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 894-7700
NONE
-----------------------------------------------------------
(Former name or former address, if changed since last report)
Item 5. Other Events.
------------
Chevron Corporation's Audited 1999 Financial Statements are attached
as Item 7, Exhibit 99.1.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
(c) Exhibits.
99.1 Chevron Corporation's Audited 1999 Financial Statements.
================================================================================
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: March 6, 2000
CHEVRON CORPORATION
By /s/ S.J. CROWE
-------------------------
S. J. Crowe, Comptroller
(Principal accounting Officer
and Duly Authorized Officer)
Exhibit 99.1
REPORT OF MANAGEMENT
TO THE STOCKHOLDERS OF CHEVRON CORPORATION
Management of Chevron is responsible for preparing the accompanying financial
statements and for ensuring their integrity and objectivity. The statements were
prepared in accordance with accounting principles generally accepted in the
United States and fairly represent the transactions and financial position of
the company. The financial statements include amounts that are based on
management's best estimates and judgments.
The company's statements have been audited by PricewaterhouseCoopers LLP,
independent accountants, selected by the Audit Committee and approved by the
stockholders. Management has made available to PricewaterhouseCoopers LLP all
the company's financial records and related data, as well as the minutes of
stockholders' and directors' meetings.
Management of the company has established and maintains a system of internal
accounting controls that is designed to provide reasonable assurance that assets
are safeguarded, transactions are properly recorded and executed in accordance
with management's authorization, and the books and records accurately reflect
the disposition of assets. The system of internal controls includes appropriate
division of responsibility. The company maintains an internal audit department
that conducts an extensive program of internal audits and independently assesses
the effectiveness of the internal controls.
The Audit Committee is composed of directors who are not officers or employees
of the company. It meets regularly with members of management, the internal
auditors and the independent accountants to discuss the adequacy of the
company's internal controls, its financial statements, and the nature, extent
and results of the audit effort. Both the internal auditors and the independent
accountants have free and direct access to the Audit Committee without the
presence of management.
/s/ David J. O'Reilly /s/ Martin R. Klitten /s/ Stephen J. Crowe
- --------------------- --------------------- ----------------------
David J. O'Reilly Martin R. Klitten Stephen J. Crowe
Chairman of the Board Vice President Comptroller
and Chief Executive Officer and Chief Financial Officer
February 23, 2000
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE STOCKHOLDERS
AND THE BOARD OF DIRECTORS OF CHEVRON CORPORATION
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, comprehensive income, stockholders' equity
and cash flows present fairly, in all material respects, the financial position
of Chevron Corporation and its subsidiaries at December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
San Francisco, California
February 23, 2000
1
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME
- --------------------------------
Year ended December 31
-----------------------------
Millions of dollars, except per-share amounts 1999 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Sales and other operating revenues* ....... $35,448 $29,943 $40,596
Income from equity affiliates .............. 526 228 688
Other income ............................... 612 386 679
- -----------------------------------------------------------------------------------
TOTAL REVENUES ...................................... 36,586 30,557 41,963
- -----------------------------------------------------------------------------------
COSTS AND OTHER DEDUCTIONS
Purchased crude oil and products ........... 17,982 14,036 20,223
Operating expenses ......................... 5,090 4,834 5,280
Selling, general and administrative expenses 1,404 2,239 1,533
Exploration expenses ....................... 538 478 493
Depreciation, depletion and amortization ... 2,866 2,320 2,300
Taxes other than on income* ................ 4,586 4,411 6,320
Interest and debt expense .................. 472 405 312
- -----------------------------------------------------------------------------------
TOTAL COSTS AND OTHER DEDUCTIONS .................... 32,938 28,723 36,461
- -----------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX EXPENSE .................... 3,648 1,834 5,502
INCOME TAX EXPENSE .................................. 1,578 495 2,246
===================================================================================
NET INCOME .......................................... $ 2,070 $ 1,339 $ 3,256
===================================================================================
NET INCOME PER SHARE OF COMMON STOCK - BASIC ........ $ 3.16 $ 2.05 $ 4.97
- DILUTED ...... $ 3.14 $ 2.04 $ 4.95
===================================================================================
<FN>
*Includes consumer excise taxes: .................... $ 3,910 $ 3,756 $ 5,587
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
- ----------------------------------------------
Year ended December 31
--------------------------------
Millions of dollars ................................. 1999 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME .......................................... $ 2,070 $ 1,339 $ 3,256
- -------------------------------------------------------------------------------------
Currency translation adjustment ............ (43) (1) (173)
Unrealized holding gain (loss) on securities 29 3 (4)
Minimum pension liability adjustment ....... (11) (15) 4
- -------------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME, NET OF TAX .............. (25) (13) (173)
- -------------------------------------------------------------------------------------
COMPREHENSIVE INCOME ................................ $ 2,045 $ 1,326 $ 3,083
=====================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
- --------------------------
At December 31
-----------------------
Millions of dollars 1999 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents ................................................... $ 1,345 $ 569
Marketable securities ....................................................... 687 844
Accounts and notes receivable (less allowance: 1999 - $36; 1998 - $27) ...... 3,688 2,813
Inventories:
Crude oil and petroleum products ................................... 585 600
Chemicals .......................................................... 526 559
Materials, supplies and other ...................................... 291 296
----------------------
1,402 1,455
Prepaid expenses and other current assets ................................... 1,175 616
- ----------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS ........................................................ 8,297 6,297
Long-term receivables ....................................................... 815 872
Investments and advances .................................................... 5,231 4,604
Properties, plant and equipment, at cost .................................... 54,212 51,337
Less: accumulated depreciation, depletion and amortization .................. 28,895 27,608
----------------------
25,317 23,729
Deferred charges and other assets ........................................... 1,008 1,038
- ----------------------------------------------------------------------------------------------------
TOTAL ASSETS ................................................................ $ 40,668 $ 36,540
====================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt ............................................................. $ 3,434 $ 3,165
Accounts payable ............................................................ 3,103 2,170
Accrued liabilities ......................................................... 1,210 1,202
Federal and other taxes on income ........................................... 718 226
Other taxes payable ......................................................... 424 403
- ----------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES ................................................... 8,889 7,166
Long-term debt .............................................................. 5,174 4,128
Capital lease obligations ................................................... 311 265
Deferred credits and other noncurrent obligations ........................... 1,739 2,560
Noncurrent deferred income taxes ............................................ 5,010 3,645
Reserves for employee benefit plans ......................................... 1,796 1,742
- ----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ........................................................... 22,919 19,506
- ----------------------------------------------------------------------------------------------------
Preferred stock (authorized 100,000,000 shares, $1.00 par value, none issued) - -
Common stock (authorized 1,000,000,000 shares,
$1.50 par value, 712,487,068 shares issued) ........................ 1,069 1,069
Capital in excess of par value .............................................. 2,215 2,097
Deferred compensation ....................................................... (646) (691)
Accumulated other comprehensive income ...................................... (115) (90)
Retained earnings ........................................................... 17,400 16,942
Treasury stock, at cost (1999 - 56,140,994 shares; 1998 - 59,460,666 shares) (2,174) (2,293)
- ----------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY .................................................. 17,749 17,034
- ----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................................. $ 40,668 $ 36,540
====================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
- ------------------------------------
Year ended December 31
-------------------------------------------
Millions of dollars 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ......................................................... $ 2,070 $ 1,339 $ 3,256
Adjustments
Depreciation, depletion and amortization ........................... 2,866 2,320 2,300
Dry hole expense related to prior years' expenditures .............. 126 40 31
Distributions (less than) greater than income from equity affiliates (258) 25 (353)
Net before-tax gains on asset retirements and sales ................ (471) (45) (344)
Net foreign currency losses (gains) ................................ 23 (20) (69)
Deferred income tax provision ...................................... 226 266 622
Net decrease (increase) in operating working capital(1) ............ 636 (809) (253)
(Decrease) increase in Cities Service provision .................... (149) 924 -
Cash settlement of Cities Service litigation ....................... (775) - -
Other, net ......................................................... 187 (309) (310)
- ------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES(2) ......................... 4,481 3,731 4,880
- ------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Capital expenditures ............................................... (4,366) (3,880) (3,899)
Proceeds from asset sales .......................................... 992 434 1,235
Net sales (purchases) of marketable securities(3)................... 262 (183) 101
Other, net ......................................................... 32 (230) (297)
- ------------------------------------------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES ............................... (3,080) (3,859) (2,860)
- ------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net borrowings (repayments) of short-term obligations .............. 219 1,713 (163)
Proceeds from issuances of long-term debt .......................... 1,221 224 26
Repayments of long-term debt and other financing obligations ....... (549) (388) (421)
Cash dividends paid ................................................ (1,625) (1,596) (1,493)
Net sales (purchases) of treasury shares ........................... 108 (261) 173
- ------------------------------------------------------------------------------------------------------------------
NET CASH USED FOR FINANCING ACTIVITIES ............................... (626) (308) (1,878)
- ------------------------------------------------------------------------------------------------------------------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS ....................................... 1 (10) (19)
- ------------------------------------------------------------------------------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS .............................. 776 (446) 123
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ....................... 569 1,015 892
- ------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT YEAR-END ................................ $ 1,345 $ 569 $ 1,015
==================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
(1) "Net decrease (increase) in operating working capital" is
composed of the following:
(Increase) decrease in accounts and notes receivable $ (810) $ 552 $ 474
Decrease (increase) in inventories 72 (116) (11)
(Increase) decrease in prepaid expenses and other current assets (43) (23) 59
Increase (decrease) in accounts payable and accrued liabilities 915 (807) (685)
Increase (decrease) in income and other taxes payable 502 (415) (90)
- ------------------------------------------------------------------------------------------------------------------
Net decrease (increase) in operating working capital $ 636 $ (809) $ (253)
==================================================================================================================
(2) "Net cash provided by operating activities" includes the following
cash payments for interest and income taxes:
Interest paid on debt (net of capitalized interest) $ 438 $ 407 $ 318
Income taxes paid $ 864 $ 654 $ 1,706
===================================================================================================================
(3) "Net sales (purchases) of marketable securities" consists of
the following gross amounts:
Marketable securities purchased $(2,812) $(2,679) $(2,724)
Marketable securities sold 3,074 2,496 2,825
- -------------------------------------------------------------------------------------------------------------------
Net sales (purchases) of marketable securities $ 262 $ (183) $ 101
===================================================================================================================
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
- ----------------------------------------------
1999 1998 1997
----------------------- ------------------------ ------------------------
Amounts in millions of dollars Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Balance at January 1 712,487,068 $ 1,069 712,487,068 $ 1,069 712,487,068 $ 1,069
Change during year - - - - - -
-----------------------------------------------------------------------------
Balance at December 31 712,487,068 $ 1,069 712,487,068 $ 1,069 712,487,068 $ 1,069
- ----------------------------------------------------------------------------------------------------------------
TREASURY STOCK AT COST
Balance at January 1 59,460,666 $(2,293) 56,555,871 $(1,977) 59,401,015 $(2,024)
Purchases 56,052 (5) 5,246,100 (398) 1,255,022 (95)
Reissuances (3,375,724) 124 (2,341,305) 82 (4,100,166) 142
-----------------------------------------------------------------------------
Balance at December 31 56,140,994 $(2,174) 59,460,666 $(2,293) 56,555,871 $(1,977)
- ----------------------------------------------------------------------------------------------------------------
CAPITAL IN EXCESS OF PAR
Balance at January 1 $ 2,097 $ 2,022 $ 1,874
Treasury stock transactions 118 75 148
------- ------- -------
Balance at December 31 $ 2,215 $ 2,097 $ 2,022
- ----------------------------------------------------------------------------------------------------------------
DEFERRED COMPENSATION
Balance at January 1 $ (691) $ (750) $ (800)
Net Reduction of ESOP debt and other 45 59 50
------- ------- -------
Balance at December 31 $ (646) $ (691) $ (750)
- ----------------------------------------------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE INCOME(1)
Balance at January 1 $ (90) $ (77) $ 96
Change during year (25) (13) (173)
------- ------- -------
Balance at December 31 $ (115) $ (90) $ (77)
- ----------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance at January 1 $16,942 $17,185 $15,408
Net Income 2,070 1,339 3,256
Cash dividends (per-share amounts
1999: $2.48; 1998: $2.44; 1997: $2.28) (1,625) (1,596) (1,493)
Tax benefit from dividends paid on
unallocated ESOP shares 13 14 14
------- ------- -------
Balance at December 31 $17,400 $16,942 $17,185
- ----------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY AT DECEMBER 31 $17,749 $17,034 $17,472
================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
(1) ACCUMULATED OTHER COMPREHENSIVE INCOME:
Currency Translation Unrealized Holding Minimum Pension
Adjustment Gain on Securities Liability Adjustment Total
- -----------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 1997 $ 118 $ 14 $ (36) $ 96
Change during year (173) (4) 4 (173)
- -----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 $ (55) $ 10 $ (32) $ (77)
Change during year (1) 3 (15) (13)
- -----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 $ (56) $ 13 $ (47) $ (90)
Change during year (43) 29 (11) (25)
- -----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 $ (99) $ 42 $ (58) $ (115)
=============================================================================================================================
</FN>
</TABLE>
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Millions of dollars, except per-share amounts
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Chevron Corporation is an international company that, through its subsidiaries
and affiliates, engages in fully integrated petroleum operations, chemicals
operations and coal mining in the United States and more than 100 countries.
Petroleum operations consist of exploring for, developing and producing crude
oil and natural gas; transporting crude oil, natural gas and products by
pipelines, marine vessels and motor equipment; refining crude oil into finished
petroleum products; and marketing crude oil, natural gas and refined petroleum
products. Chemicals operations include the manufacture and marketing of a wide
range of chemicals for industrial uses.
In preparing its consolidated financial statements, the company follows
accounting policies that are in accordance with accounting principles generally
accepted in the United States. This requires the use of estimates and
assumptions that affect the assets, liabilities, revenues and expenses reported
in the financial statements, as well as amounts included in the notes thereto,
including discussion and disclosure of contingent liabilities. While the company
uses its best estimates and judgments, actual results could differ from these
estimates as future confirming events occur.
The nature of the company's operations and the many countries in which it
operates subject it to changing economic, regulatory and political conditions.
Also, the company imports crude oil for its U.S. refining operations. The
company does not believe it is vulnerable to the risk of a near-term severe
impact as a result of any concentration of its activities.
Subsidiary and Affiliated Companies
The consolidated financial statements include the accounts of subsidiary
companies more than 50 percent owned. Investments in and advances to affiliates
in which the company has a substantial ownership interest of approximately 20
percent to 50 percent, or for which the company exercises significant influence
but not control over policy decisions, are accounted for by the equity method.
Under this accounting, remaining unamortized cost is increased or decreased by
the company's share of earnings or losses after dividends.
Oil and Gas Accounting
The successful efforts method is used for oil and gas exploration and production
activities.
Derivatives
Gains and losses on hedges of existing assets or liabilities are included in the
carrying amounts of those assets or liabilities and are ultimately recognized in
income as part of those carrying amounts. Gains and losses related to qualifying
hedges of firm commitments or anticipated transactions also are deferred and are
recognized in income or as adjustments of carrying amounts when the underlying
hedged transaction occurs. Cash flows associated with these derivatives are
reported with the underlying hedged transaction's cash flows. If, subsequent to
being hedged, underlying transactions are no longer likely to occur, the related
derivatives gains and losses are recognized currently in income. Gains and
losses on derivatives contracts that do not qualify as hedges are recognized
currently in "Other income."
Short-Term Investments
All short-term investments are classified as available for sale and are in
highly liquid debt or equity securities. Those investments that are part of the
company's cash management portfolio with original maturities of three months or
less are reported as cash equivalents. The balance of the short-term investments
is reported as "Marketable securities." Short-term investments are
marked-to-market with any unrealized gains or losses included in other
comprehensive income.
Inventories
Crude oil, petroleum products and chemicals are stated at cost, using a Last-In,
First-Out (LIFO) method. In the aggregate, these costs are below market.
Materials, supplies and other inventories generally are stated at average cost.
Properties, Plant and Equipment
All costs for development wells, related plant and equipment, and proved mineral
interests in oil and gas properties are capitalized. Costs of exploratory wells
are capitalized pending determination of whether the wells found proved
reserves. Costs of wells that are assigned proved reserves remain capitalized.
All other exploratory wells and costs are expensed.
Long-lived assets, including proved oil and gas properties, are assessed for
possible impairment by comparing their carrying values to the undiscounted
future net before-tax cash flows. Impaired assets are written down to their
estimated fair values, generally their discounted cash flows. For proved oil and
gas properties in the United States, the company generally performs the
impairment review on an individual field basis. Outside the United States,
reviews are performed on a country or concession basis. Impairment amounts are
recorded as incremental depreciation expense in the period in which the event
occurs.
Depreciation and depletion (including provisions for future abandonment and
restoration costs) of all capitalized costs of proved oil and gas producing
properties, except mineral interests, are expensed using the unit-of-production
method by individual fields as the proved developed reserves are produced.
Depletion expenses for capitalized costs of proved mineral interests are
recognized using the unit-of-production method by individual fields as the
related proved reserves are produced. Periodic valuation provisions for
impairment of capitalized costs of unproved mineral interests are expensed.
Depreciation and depletion expenses for coal are determined using the
unit-of-production method as the proved reserves are produced. The capitalized
costs of all other plant and equipment are depreciated or amortized over
estimated useful lives. In general, the declining-balance method is used to
depreciate plant and equipment in the United States; the straight-line method
generally is used to depreciate international plant and equipment and to
amortize all capitalized leased assets. Gains or losses are not recognized for
normal retirements of properties, plant and equipment subject to composite group
amortization or depreciation.
Gains or losses from abnormal retirements or sales are included in income.
Expenditures for maintenance, repairs and minor renewals to maintain facilities
in operating condition are expensed. Major replacements and renewals are
capitalized.
6
<PAGE>
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- Continued
Environmental Expenditures
Environmental expenditures that relate to current ongoing operations or to
conditions caused by past operations are expensed. Expenditures that create
future benefits or contribute to future revenue generation are capitalized.
Liabilities related to future remediation costs are recorded when environmental
assessments and/or cleanups are probable and the costs can be reasonably
estimated. Other than for assessments, the timing and magnitude of these
accruals are generally based on the company's commitment to a formal plan of
action, such as an approved remediation plan or the sale or disposal of an
asset. For the company's U.S. and Canadian marketing facilities, the accrual is
based on the probability that a future remediation commitment will be required.
For oil and gas and coal producing properties, a provision is made through
depreciation expense for anticipated abandonment and restoration costs at the
end of the property's useful life.
For Superfund sites, the company records a liability for its share of costs when
it has been named as a Potentially Responsible Party (PRP) and when an
assessment or cleanup plan has been developed. This liability includes the
company's own portion of the costs and also the company's portion of amounts for
other PRPs when it is probable that they will not be able to pay their share of
the cleanup obligation.
The company records the gross amount of its liability based on its best estimate
of future costs using currently available technology and applying current
regulations as well as the company's own internal environmental policies. Future
amounts are not discounted. Recoveries or reimbursements are recorded as an
asset when receipt is reasonably ensured.
Currency Translation
The U.S. dollar is the functional currency for the company's consolidated
operations as well as for substantially all operations of its equity method
companies. For those operations, all gains or losses from currency transactions
are currently included in income. The cumulative translation effects for the few
equity affiliates using functional currencies other than the U.S. dollar are
included in the currency translation adjustment in stockholders' equity.
Taxes
Income taxes are accrued for retained earnings of international subsidiaries and
corporate joint ventures intended to be remitted. Income taxes are not accrued
for unremitted earnings of international operations that have been, or are
intended to be, reinvested indefinitely.
Revenue Recognition
Revenues associated with sales of crude oil, natural gas, coal, petroleum and
chemicals products, and all other sources are recorded when title passes to the
customer, net of royalties, discounts and allowances, as applicable. Revenues
from natural gas production from properties in which Chevron has an interest
with other producers are recognized on the basis of the company's net working
interest (entitlement method).
Stock Compensation
The company applies Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for stock options and presents in Note 19 pro forma net income and
earnings per share data as if the accounting prescribed by SFAS No. 123,
"Accounting for Stock-Based Compensation," had been applied.
Note 2.SPECIAL ITEMS AND OTHER FINANCIAL INFORMATION
Net income is affected by transactions that are unrelated to or are not
necessarily representative of the company's ongoing operations for the periods
presented. These transactions, defined by management and designated "special
items," can obscure the underlying results of operations for a year as well as
affect comparability of results between years.
Listed below are categories of special items and their net increase (decrease)
to net income, after related tax effects.
<TABLE>
<CAPTION>
Year ended December 31
-------------------------
1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset write-offs and revaluations
Asset impairments
- Oil and gas properties ......... $(204) $ (50) $ (68)
- Coal assets .................... (34) - -
U.S. refining, marketing and
transportation assets ............ - (22) -
Chemicals assets .......................... (43) (19) (10)
Real estate assets ........................ - (9) -
Other ..................................... (65) (59) (8)
--------------------------
(346) (159) (86)
- -------------------------------------------------------------------------------
Asset dispositions, net
Pipeline interests ........................ 75 - -
Real estate ............................... 60 - -
Coal assets ............................... 60 - -
Marketable securities ..................... 30 - -
Oil and gas assets ........................ 17 (9) 240
Caltex interest in equity affiliate ....... (31) - -
Chemicals affiliate ....................... - - 33
U.K. refining and marketing exit .......... - - (72)
Domestic shipping assets .................. - - (18)
--------------------------
211 (9) 183
- -------------------------------------------------------------------------------
Prior-year tax adjustments ......................... 109 271 152
- -------------------------------------------------------------------------------
Environmental remediation provisions, net .......... (123) (39) (35)
- -------------------------------------------------------------------------------
Restructurings and reorganizations
Corporate ................................. (158) - -
Caltex affiliate .......................... (25) (43) (6)
Dynegy affiliate .......................... - - (54)
--------------------------
(183) (43) (60)
- -------------------------------------------------------------------------------
LIFO inventory gains (losses) ...................... 38 (25) 5
- -------------------------------------------------------------------------------
Other, net
Litigation and regulatory issues* ......... 78 (682) (24)
Settlement of insurance claims ............ - 105 7
Caltex write-off of start-up costs (SOP 98-5) - (25) -
Performance stock options ................. - - (66)
--------------------------
78 (602) (83)
- -------------------------------------------------------------------------------
Total special items, after tax ..................... $(216) $(606) $ 76
===============================================================================
<FN>
* 1999 and 1998 include effects related to Cities Service litigation.
</FN>
</TABLE>
7
<PAGE>
Note 2. SPECIAL ITEMS AND OTHER FINANCIAL INFORMATION - Continued
Other financial information is as follows.
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1999 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Total financing interest and debt costs $ 481 $ 444 $ 411
Less: capitalized interest ............ 9 39 99
------------------------
Interest and debt expense ............. 472 405 312
Research and development expenses ..... 182 187 179
Foreign currency (losses) gains* ...... $ (38) $ (47) $ 246
=================================================================
<FN>
*Includes $(15), $(68) and $177 in 1999, 1998 and 1997, respectively, for the
company's share of affiliates' foreign currency (losses) gains.
</FN>
</TABLE>
The excess of current cost (based on average acquisition costs for the year)
over the carrying value of inventories for which the LIFO method is used was
$871, $584 and $1,089 at December 31, 1999, 1998 and 1997, respectively.
Note 3. CUMULATIVE EFFECT ON NET INCOME FROM ACCOUNTING CHANGES
In April 1998, the AICPA released Statement of Position 98-5, "Reporting on the
Costs of Start-up Activities" (SOP 98-5), which introduced a broad definition of
items to expense as incurred for start-up activities, including new
products/services, entering new territories, initiating new processes or
commencing new operations. Chevron was substantially in compliance with the
pronouncement. However, Caltex capitalized these types of costs for certain
projects. Chevron recorded its $25 share of the charge associated with Caltex's
1998 implementation of SOP 98-5, effective January 1, 1998.
In 1998, Chevron changed its method of calculating certain Canadian deferred
income taxes, effective January 1, 1998. The benefit from this change was $32.
The net benefit to Chevron's 1998 net income from the cumulative effect of
adopting SOP 98-5 by Caltex and the change in Chevron's method of calculating
Canadian deferred taxes was immaterial.
Note 4. INFORMATION RELATING TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
The Consolidated Statement of Cash Flows excludes the following significant
noncash transactions.
During 1999, the company acquired the Rutherford-Moran Oil Corporation and
Petrolera Argentina San Jorge S.A. Only the net cash component of these
transactions is included as "Capital expenditures." Consideration for the
Rutherford-Moran transaction included 1.1 million shares of the company's
treasury stock valued at $91.
During 1997, the company's Venice, Louisiana, natural gas facility was
contributed to a partnership with Dynegy Inc. (Dynegy). An increase in
"Investments and advances" resulted primarily from the contribution of
properties, plant and equipment.
The major components of "Capital expenditures" in the Consolidated Statement of
Cash Flows and the reconciliation of this amount to total capital and
exploratory expenditures, are presented in the following table.
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Additions to properties,
plant and equipment ......................... $ 5,018 $ 3,678 $ 3,840
Additions to investments ............................. 449 306 153
Payments for other liabilities
and assets, net(1)........................... (1,101) (104) (94)
- --------------------------------------------------------------------------------------
Capital expenditures ................................. 4,366 3,880 3,899
Expensed exploration expenditures .................... 413 438 462
Payments of long-term debt
and other financing obligations(2)........... 572 2 6
- --------------------------------------------------------------------------------------
Capital and exploratory expenditures,
excluding equity affiliates ........ $ 5,351 $ 4,320 $ 4,367
======================================================================================
<FN>
(1) 1999 includes liabilities assumed in acquisitions of Rutherford-Moran Oil
Corporation and Petrolera Argentina San Jorge S.A
(2) 1999 includes obligations assumed in acquisition of Rutherford-Moran Oil
Corporation and other capital lease additions.
</FN>
</TABLE>
Note 5. STOCKHOLDERS' EQUITY
Retained earnings at December 31, 1999 and 1998, include $2,048 and $2,121,
respectively, for the company's share of undistributed earnings of equity
affiliates.
In 1998, the company declared a dividend distribution of one Right to purchase
Chevron Participating Preferred Stock. The Rights will be exercisable, unless
redeemed earlier by the company, if a person or group acquires, or obtains the
right to acquire, 10 percent or more of the outstanding shares of common stock
or commences a tender or exchange offer that would result in acquiring 10
percent or more of the outstanding shares of common stock, either event
occurring without the prior consent of the company. The amount of Chevron Series
A Participating Preferred Stock that the holder of a Right is entitled to
receive and the purchase price payable upon exercise of the Chevron Right are
both subject to adjustment. The person or group who had acquired 10 percent or
more of the outstanding shares of common stock without the prior consent of the
company would not be entitled to this purchase.
The Rights will expire in November 2008, or they may be redeemed by the company
at 1 cent per Right prior to that date. The Rights do not have voting or
dividend rights and, until they become exercisable, have no dilutive effect on
the earnings per share of the company. Five million shares of the company's
preferred stock have been designated Series A Participating Preferred Stock and
reserved for issuance upon exercise of the Rights. No event during 1999 made the
Rights exercisable. Rights associated with a 1988 dividend distribution expired
in 1998.
Note 6. FINANCIAL AND DERIVATIVE INSTRUMENTS
Off-Balance-Sheet Risk
The company utilizes a variety of derivative instruments, both financial and
commodity-based, as hedges to manage a small portion of its exposure to price
volatility stemming from its integrated petroleum activities. Relatively
straightforward and involving little complexity, the derivative instruments
consist mainly of futures contracts traded on the New York Mercantile Exchange
and the International Petroleum Exchange and of both crude and natural gas swap
contracts entered into principally with major financial institutions. The
futures contracts hedge anticipated
8
<PAGE>
Note 6. FINANCIAL AND DERIVATIVE INSTRUMENTS - Continued
crude oil purchases and sales and product sales, generally forecast to occur
within a 60- to 90-day period. Crude oil swaps are used to hedge sales
forecasted to occur within the next four years. The terms of the swap contracts
have maturities of the same period. Natural gas swaps are used primarily to
hedge firmly committed sales, and the terms of the swap contracts held at
year-end 1999 had an average remaining maturity of 58 months. Gains and losses
on these derivative instruments offset and are recognized in income concurrently
with the recognition of the underlying physical transactions.
In addition, the company in 1998 entered into managed programs using swaps and
options to take advantage of perceived opportunities for favorable price
movements in natural gas. The results of these programs were reflected in income
and were not material in 1998. The company enters into forward exchange
contracts, generally with terms of 90 days or less, as a hedge against some of
its foreign currency exposures, primarily anticipated purchase transactions
forecast to occur within 90 days.
The company enters into interest rate swaps as part of its overall strategy to
manage the interest rate risk on its debt. Under the terms of the swaps, net
cash settlements, based on the difference between fixed-rate and floating-rate
interest amounts calculated by reference to agreed notional principal amounts,
are made semiannually and are recorded monthly as "Interest and debt expense."
At December 31, 1999, there was one outstanding contract, with a remaining term
of five years and six months.
Concentrations of Credit Risk
The company's financial instruments that are exposed to concentrations of credit
risk consist primarily of its cash equivalents, marketable securities,
derivative financial instruments and trade receivables.
The company's short-term investments are placed with a wide array of financial
institutions with high credit ratings. This diversified investment policy limits
the company's exposure both to credit risk and to concentrations of credit risk.
Similar standards of diversity and creditworthiness are applied to the company's
counterparties in derivative instruments.
The trade receivable balances, reflecting the company's diversified sources of
revenue, are dispersed among the company's broad customer base worldwide. As a
consequence, concentrations of credit risk are limited. The company routinely
assesses the financial strength of its customers. Letters of credit, or
negotiated contracts when the financial strength of a customer is not considered
sufficient, are the principal securities obtained to support lines of credit.
Fair Value
Fair values are derived either from quoted market prices where available or, in
their absence, the present value of the expected cash flows. The fair values
reflect the cash that would have been received or paid if the instruments were
settled at year-end. At December 31, 1999 and 1998, the fair values of the
financial and derivative instruments were:
Long-term debt of $2,449 and $1,403 had estimated fair values of $2,430 and
$1,485.
The notional principal amounts of the interest rate swaps totaled $350 and $700,
with approximate fair values totaling $11 and $(21). The notional amounts of
these and other derivative instruments do not represent assets or liabilities of
the company but, rather, are the basis for the settlements under the contract
terms.
The company holds cash equivalents and U.S. dollar marketable securities in
domestic and offshore portfolios. Eurodollar bonds, floating-rate notes, time
deposits and commercial paper are the primary instruments held. Cash equivalents
and marketable securities had fair values of $1,762 and $1,206. Of these
balances, $1,075 and $362 classified as cash equivalents had average maturities
under 90 days, while the remainder, classified as marketable securities, had
average maturities of approximately three years and two years.
For other derivatives the contract or notional values were as follows: Crude oil
and products futures had net contract values of $143 and $33. Forward exchange
contracts had contract values of $123 and $180. Gas swap contracts are based on
notional gas volumes of approximately 44 and 67 billion cubic feet. Crude oil
swap contracts are based on notional crude volumes of approximately 9 million
barrels. Fair values for all of these derivatives were not material in 1999 and
1998. Deferred gains and losses that were accrued on the Consolidated Balance
Sheet were not material.
Note 7. SUMMARIZED FINANCIAL DATA - CHEVRON U.S.A. INC.
At December 31, 1999, Chevron U.S.A. Inc. was Chevron's principal operating
company, consisting primarily of its U.S. integrated petroleum operations
(excluding most of the domestic pipeline operations) and, effective February 1,
1998, the majority of its worldwide petrochemicals operations. In 1999, these
operations were conducted primarily by three divisions: Chevron U.S.A.
Production Company, Chevron Products Company and Chevron Chemical Company LLC.
Summarized financial information for Chevron U.S.A. Inc. and its consolidated
subsidiaries is presented below.
<TABLE>
<CAPTION>
Year ended December 31
---------------------------
1999 1998 1997
<S> <C> <C> <C>
Sales and other operating revenues $28,957 $24,440 $28,130
Total costs and other deductions ... 28,329 24,338 26,354
Net income ......................... 885 346 1,484
==================================================================
</TABLE>
<TABLE>
At December 31
-------------------
1999 1998*
- -------------------------------------------------
<S> <C> <C>
Current assets .... $ 3,889 $ 3,227
Other assets ...... 19,403 18,330
Current liabilities 4,676 3,809
Other liabilities . 8,455 6,541
Net equity ........ 10,161 11,207
=================================================
Memo: Total Debt $ 7,462 $ 3,546
<FN>
* Certain amounts have been reclassified to conform to current presentation.
</FN>
</TABLE>
The primary cause of the reduction in net equity from 1998 to 1999 was a return
of $2,000 of capital to Chevron Corporation in exchange for a loan.
Note 8. SUMMARIZED FINANCIAL DATA - CHEVRON TRANSPORT CORPORATION LIMITED
Effective July 1999, Chevron Transport Corporation, a Liberian corporation, was
merged into Chevron Transport Corporation Limited (CTC), a Bermuda corporation,
which assumed all of the assets and liabilities of
9
<PAGE>
Note 8. SUMMARIZED FINANCIAL DATA - CHEVRON TRANSPORT CORPORATION LIMITED -
Continued
Chevron Transport Corporation. CTC is an indirect, wholly owned subsidiary of
Chevron Corporation. CTC is the principal operator of Chevron's international
tanker fleet and is engaged in the marine transportation of oil and refined
petroleum products. Most of CTC's shipping revenue is derived by providing
transportation services to other Chevron companies. Chevron Corporation has
guaranteed this subsidiary's obligations in connection with certain debt
securities where CTC is deemed to be an issuer. In accordance with the
Securities and Exchange Commission's disclosure requirements, summarized
financial information for CTC and its consolidated subsidiaries is presented
below. This information was derived from the financial statements prepared on a
stand-alone basis in conformity with generally accepted accounting principles.
During 1999, CTC's parent contributed an additional $62 of paid-in capital.
Separate CTC financial statements and other disclosures are omitted, as such
information is not material to investors in the debt securities deemed issued by
CTC. There were no restrictions on CTC's ability to pay dividends or make loans
or advances at December 31, 1999.
<TABLE>
<CAPTION>
Year ended December 31
------------------------
1999 1998 1997
- --------------------------------------------------------------
<S> <C> <C> <C>
Sales and other operating revenues.. $ 504 $ 573 $ 544
Total costs and other deductions ... 572 580 557
Net (loss) income .................. (50) 17 28
==============================================================
</TABLE>
<TABLE>
<CAPTION>
At December 31
-----------------
1999 1998
- ------------------------------------------------------
<S> <C> <C>
Current assets ......... $184 $270
Other assets ........... 742 982
Current liabilities..... 580 898
Other liabilities ...... 264 284
Net equity ............. 82 70
======================================================
</TABLE>
Note 9. OPERATING SEGMENTS AND GEOGRAPHIC DATA
Chevron manages its exploration and production; refining, marketing and
transportation; and chemicals businesses separately. The company's primary
country of operation is the United States, its country of domicile. The
remainder of the company's operations is reported as International (outside the
United States), since its activities in no other country meet the requirements
for separate disclosure.
In February 2000, Chevron and Phillips Petroleum Company signed a letter of
intent and exclusivity agreement to combine most of their chemicals businesses
in a joint venture. Each company will own 50 percent of the joint venture, which
would have had 1999 sales of $6,000 and is expected to have total assets of
about $6,000. The combination is subject to final approval of the companies'
boards of directors, signing of definitive agreements and regulatory review, all
of which are expected to be completed by mid-2000.
Segment Earnings
The company evaluates the performance of its operating segments on an after-tax
basis, without considering the effects of debt financing interest expense or
investment interest income, both of which are managed by the corporation on a
worldwide basis. Corporate administrative costs and assets are not allocated to
the operating segments; instead, operating segments are billed only for direct
corporate services. Nonbillable costs remain as corporate center expenses.
After-tax segment operating earnings for the years 1999, 1998 and 1997 are
presented in the following table.
<TABLE>
<CAPTION>
Year ended December 31
------------------------------
1999 1998 1997
- --------------------------------------------------------------------
<S> <C> <C> <C>
EXPLORATION AND PRODUCTION
United States ............. $ 526 $ 365 $ 1,001
International ............. 1,093 707 1,252
- --------------------------------------------------------------------
TOTAL EXPLORATION
AND PRODUCTION ............ 1,619 1,072 2,253
- --------------------------------------------------------------------
REFINING, MARKETING
AND TRANSPORTATION
United States ............. 357 572 601
International ............. 74 28 298
- --------------------------------------------------------------------
TOTAL REFINING, MARKETING
AND TRANSPORTATION ........ 431 600 899
- --------------------------------------------------------------------
CHEMICALS
United States ............. 44 79 138
International ............. 65 43 90
- --------------------------------------------------------------------
TOTAL CHEMICALS .................... 109 122 228
- --------------------------------------------------------------------
TOTAL SEGMENT INCOME ............... 2,159 1,794 3,380
- --------------------------------------------------------------------
Interest Expense ................... (333) (270) (189)
Interest Income .................... 21 63 75
Other .............................. 223 (248) (10)
- --------------------------------------------------------------------
NET INCOME ................ $ 2,070 $ 1,339 $ 3,256
====================================================================
NET INCOME - UNITED STATES $ 976 $ 642 $ 1,622
NET INCOME - INTERNATIONAL $ 1,094 $ 697 $ 1,634
- --------------------------------------------------------------------
TOTAL NET INCOME .......... $ 2,070 $ 1,339 $ 3,256
====================================================================
</TABLE>
Segment Assets
Segment assets do not include intercompany investments or intercompany
receivables. "All Other" assets consist primarily of worldwide cash and
marketable securities, company real estate, information systems, and coal mining
assets. Segment assets at year-end 1999 and 1998 are as follows.
<TABLE>
<CAPTION>
At December 31
------------------
1999 1998
- ------------------------------------------------
<S> <C> <C>
EXPLORATION AND PRODUCTION
United States ..... $ 5,566 $ 6,026
International ..... 13,748 10,794
- ------------------------------------------------
TOTAL EXPLORATION
AND PRODUCTION .... 19,314 16,820
- ------------------------------------------------
REFINING, MARKETING
AND TRANSPORTATION
United States ..... 8,178 8,084
International ..... 3,609 3,559
- ------------------------------------------------
TOTAL REFINING, MARKETING
AND TRANSPORTATION 11,787 11,643
- ------------------------------------------------
CHEMICALS
United States ..... 3,303 3,045
International ..... 923 828
- ------------------------------------------------
TOTAL CHEMICALS ............ 4,226 3,873
- ------------------------------------------------
TOTAL SEGMENT ASSETS ....... 35,327 32,336
- ------------------------------------------------
ALL OTHER
United States ..... 3,821 2,467
International ..... 1,867 1,737
- ------------------------------------------------
TOTAL All OTHER ............ 5,688 4,204
- ------------------------------------------------
TOTAL ASSETS - UNITED STATES 20,868 19,622
TOTAL ASSETS - INTERNATIONAL 20,147 16,918
- ------------------------------------------------
TOTAL ASSETS ...... $41,015 $36,540
================================================
</TABLE>
10
<PAGE>
Note 9. OPERATING SEGMENTS AND GEOGRAPHIC DATA
- - Continued
Segment Income Taxes
Segment income tax expenses for the years 1999, 1998 and
1997 are as follows.
<TABLE>
<CAPTION>
Year ended December 31
-----------------------------
1999 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
EXPLORATION AND PRODUCTION
United States .......... $ 266 $ 164 $ 559
International .......... 1,341 595 1,488
- -----------------------------------------------------------------
TOTAL EXPLORATION
AND PRODUCTION ......... 1,607 759 2,047
- -----------------------------------------------------------------
REFINING, MARKETING
AND TRANSPORTATION
United States .......... 135 309 346
International .......... 41 54 6
- -----------------------------------------------------------------
TOTAL REFINING, MARKETING
AND TRANSPORTATION ..... 176 363 352
- -----------------------------------------------------------------
CHEMICALS
United States .......... (13) 25 77
International .......... 45 14 57
- -----------------------------------------------------------------
TOTAL CHEMICALS ................. 32 39 134
- -----------------------------------------------------------------
All Other .............. (237) (666) (287)
- -----------------------------------------------------------------
TOTAL INCOME TAX EXPENSE $ 1,578 $ 495 $ 2,246
=================================================================
</TABLE>
Segment Sales and Other Operating Revenues
Revenues for the exploration and production segments are derived primarily from
the production of crude oil and natural gas. Revenues for the refining,
marketing and transportation segments are derived from the refining and
marketing of petroleum products such as gasoline, jet fuel, gas oils, kerosene,
residual fuel oils and other products derived from crude oil. This segment also
generates revenues from the transportation and trading of crude oil and refined
products. Chemicals segment revenues are derived from the manufacture and sale
of petrochemicals, plastic resins, and lube oil and fuel additives.
"All Other" activities include corporate administrative costs, worldwide cash
management and debt financing activities, coal mining operations, insurance
operations, and real estate activities.
Reportable operating segment sales and other operating revenues, including
internal transfers, for the years 1999, 1998 and 1997 are presented in the table
that follows. Sales from the transfer of products between segments are at
estimated market prices.
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------
1999 1998(1) 1997(1)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EXPLORATION AND PRODUCTION
United States
Crude oil ...................................... $ - $ - $ (3)
Natural gas .................................... 1,578 1,599 1,978
Natural gas liquids ............................ 159 128 185
Other .......................................... 8 12 20
Intersegment ................................... 1,985 1,453 4,362
--------------------------------
Total United States ............................ 3,730 3,192 6,542
- --------------------------------------------------------------------------------------------
International
Refined products ............................... 2 1 2
Crude oil ...................................... 2,586 1,761 2,790
Natural gas .................................... 678 505 590
Natural gas liquids ............................ 116 89 170
Other .......................................... 205 130 116
Intersegment ................................... 2,876 1,984 2,810
--------------------------------
Total International ............................ 6,463 4,470 6,478
- --------------------------------------------------------------------------------------------
TOTAL EXPLORATION
AND PRODUCTION ............... 10,193 7,662 13,020
- --------------------------------------------------------------------------------------------
REFINING, MARKETING
AND TRANSPORTATION
United States
Refined products ............................... 12,765 10,148 12,586
Crude oil ...................................... 3,618 2,971 4,531
Natural gas liquids ............................ 133 100 158
Other .......................................... 654 622 592
Excise taxes ................................... 3,702 3,503 3,386
Intersegment ................................... 366 216 313
--------------------------------
Total United States ............................ 21,238 17,560 21,566
- --------------------------------------------------------------------------------------------
International
Refined products ............................... 975 1,312 2,998
Crude oil ...................................... 3,874 3,049 3,978
Natural gas liquids ............................ 24 5 40
Other .......................................... 248 299 390
Excise taxes ................................... 178 213 2,188
Intersegment ................................... 16 20 15
--------------------------------
Total International ............................ 5,315 4,898 9,609
- --------------------------------------------------------------------------------------------
TOTAL REFINING, MARKETING
AND TRANSPORTATION ........... 26,553 22,458 31,175
- --------------------------------------------------------------------------------------------
CHEMICALS
United States
Products ....................................... 2,794 2,468 2,933
Excise taxes ................................... 2 2 -
Intersegment ................................... 162 121 112
--------------------------------
Total United States ............................ 2,958 2,591 3,045
- --------------------------------------------------------------------------------------------
International
Products ....................................... 715 568 559
Other .......................................... 35 18 28
Excise taxes ................................... 28 38 13
Intersegment ................................... 1 1 2
--------------------------------
Total International ............................ 779 625 602
- --------------------------------------------------------------------------------------------
TOTAL CHEMICALS ....................... 3,737 3,216 3,647
- --------------------------------------------------------------------------------------------
ALL OTHER
United States - Coal .................................... 360 399 359
United States - Other ................................... 8 (1) 8
International ........................................... 3 4 1
Intersegment - United States ............................ 55 52 47
Intersegment - International ............................ 4 2 -
- --------------------------------------------------------------------------------------------
TOTAL ALL OTHER ....................... 430 456 415
- --------------------------------------------------------------------------------------------
Sales and Other Operating Revenues
- United States ................................ 28,349 23,793 31,567
- International ................................ 12,564 9,999 16,690
- --------------------------------------------------------------------------------------------
Total Segment Sales and
Other Operating Revenues ....................... 40,913 33,792 48,257
- --------------------------------------------------------------------------------------------
Elimination of Intersegment Sales ....................... (5,465) (3,849) (7,661)
- --------------------------------------------------------------------------------------------
Total Sales and
Other Operating Revenues ....................... $35,448 $29,943 $40,596
============================================================================================
<FN>
(1) Certain amounts have been restated to conform to the 1999 presentation
</FN>
</TABLE>
Other Segment Information
Investments in and earnings from affiliated companies are included in the
segments in which the affiliates operate. Dynegy Inc. is included in U.S.
exploration and production; P.T. Caltex Pacific Indonesia (CPI) and
Tengizchevroil (TCO) are included in International exploration and production;
and Caltex Corporation is included in International refining, marketing and
transportation. The company's other affiliates are not material to any segment's
assets or results of operations. Information on equity affiliates, including
carrying value and equity earnings, is included in Note 12.
Additions to long-lived assets and depreciation expense, by operating segment,
are included in Note 13.
11
<PAGE>
Note 10. LITIGATION
The company is a party, along with other oil companies, to numerous lawsuits and
claims, including actions challenging oil and gas royalty and severance tax
payments based on posted prices, and actions related to the use of the chemical
MTBE in certain oxygenated gasolines. In some of these actions, plaintiffs may
seek to recover large and sometimes unspecified amounts. In others, the
plaintiffs may seek to have the company perform specific actions, including
remediation of alleged damages. These matters may remain unresolved for several
years, and it is not practical to estimate a range of possible loss. Although
losses could be material with respect to earnings in any given period,
management believes that resolution of these matters will not result in any
significant liability to the company in relation to its consolidated financial
position or have a significant effect on its liquidity.
In a lawsuit in Los Angeles, Calif., brought in 1995, the company and five other
oil companies are contesting the validity of a patent granted to Unocal
Corporation (Unocal) for certain types of reformulated gasoline, which the
company sells in California during certain months of the year. The first two
phases of the trial were concluded in 1997, with the jury upholding the validity
of the patent and assessing damages at the rate of 5.75 cents per gallon of
gasoline produced in infringement of the patent between March 1 and July 1,
1996. In the third phase of the trial, the judge heard evidence to determine if
the patent was enforceable. In 1998, the judge ruled the patent was enforceable.
The defendants filed an appeal in January 1999 and oral arguments were made
before the court in July 1999. While the ultimate outcome of this matter cannot
be determined with certainty, the company believes Unocal's patent is invalid
and any unfavorable rulings should be reversed upon appeal. Unocal also has
filed for additional patents for alternate formulations. Should the jury's
finding and Unocal's patent ultimately be upheld, the company's financial
exposure includes royalties, plus interest, for past production of gasoline that
is ruled to have infringed the applicable patent and royalty payments for any
future production of gasoline that infringes this patent. The effect of
unfavorable rulings with respect to future reformulated gasoline production
would depend on the availability of alternate formulations and the industry's
ability to recover additional costs of production through prices charged to its
customers. The company believes that its ultimate exposure in this matter will
not materially affect its financial position or liquidity, although the costs of
resolution of any unfavorable ruling could be material with respect to earnings
in any given period.
Note 11. LEASE COMMITMENTS
Certain noncancelable leases are classified as capital leases, and the leased
assets are included as part of "Properties, plant and equipment." Other leases
are classified as operating leases and are not capitalized. Details of the
capitalized leased assets are as follows.
<TABLE>
<CAPTION>
At December 31
---------------------
1999 1998
- -------------------------------------------------------------
<S> <C> <C>
Exploration and Production .......... $ 86 $ 5
Refining, Marketing and Transportation 779 757
- -------------------------------------------------------------
Total ....................... 865 762
Less: accumulated amortization ....... 425 398
- -------------------------------------------------------------
Net capitalized leased assets ........ $ 440 $ 364
=============================================================
</TABLE>
Rental expenses incurred for operating leases during 1999, 1998 and 1997 were as
follows.
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------------
1999 1998 1997
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rentals ............ $465 $503 $443
Contingent rentals ......... 3 5 5
- ----------------------------------------------------------------------
Total ............. 468 508 448
Less: sublease rental income 3 3 5
- ----------------------------------------------------------------------
Net rental expense ......... $465 $505 $443
======================================================================
</TABLE>
At December 31, 1999, the future minimum lease payments under operating and
capital leases are as follows.
<TABLE>
<CAPTION>
At December 31
--------------------------
Operating Capital
Leases Leases
- ------------------------------------------------------------
<S> <C> <C>
Year
2000 $ 157 $ 81
2001 180 77
2002 180 72
2003 178 103
2004 177 46
Thereafter 312 889
- ------------------------------------------------------------
Total $1,184 1,268
=============================================
Less: amounts representing interest
and executory costs 625
- ------------------------------------------------------------
Net present values 643
Less: capital lease obligations
included in short-term debt 332
- ------------------------------------------------------------
Long-term capital lease obligations $ 311
============================================================
Future sublease rental income $ 1 $ -
============================================================
</TABLE>
Contingent rentals are based on factors other than the passage of time,
principally sales volumes at leased service stations. Certain leases include
escalation clauses for adjusting rentals to reflect changes in price indices,
renewal options ranging from one to 25 years, and/or options to purchase the
leased property during or at the end of the initial lease period for the fair
market value at that time.
Note 12. INVESTMENTS AND ADVANCES
Chevron owns 50 percent each of P.T. Caltex Pacific Indonesia, an exploration
and production company operating in Indonesia; Caltex Corporation, which,
through its subsidiaries and affiliates, conducts refining and marketing
activities in Asia, Africa, the Middle East, Australia and New Zealand; and
American Overseas Petroleum Limited, which, through its subsidiary, manages
certain of the company's operations in Indonesia. These companies and their
subsidiaries and affiliates are collectively called the Caltex Group.
Tengizchevroil (TCO) is a joint venture formed in 1993 to develop the Tengiz and
Korolev oil fields in Kazakhstan over a 40-year period. Chevron's ownership was
reduced from 50 percent to 45 percent in April 1997 through a sale of a portion
of its interest. The company has an obligation of $420, payable to the Republic
of Kazakhstan upon the attainment of a dedicated export system with the
capability of the greater of 260,000 barrels of oil per day or TCO's production
capacity. This amount was included in the value of the investment, as the
company believed at the time, and continues to believe, that its payment is
beyond a reasonable doubt given the original intent and continuing commitment
12
<PAGE>
Note 12. INVESTMENTS AND ADVANCES - Continued
of both parties to realizing the full potential of the venture over its 40-year
life.
Chevron owns 28 percent of Dynegy Inc., a gatherer, processor, transporter and
marketer of energy products in North America and the United Kingdom. These
products include natural gas, natural gas liquids, crude oil and electricity.
The market value of Chevron's shares of Dynegy common stock at December 31,
1999, was $1,133 based on quoted closing market prices. In February 2000, Dynegy
completed a merger with Illinova Corporation, an energy services holding company
in Illinois. Chevron increased its investment by $200 to maintain a 28 percent
ownership in the merged company.
The company received dividends and distributions of $268, $254 and $335 in 1999,
1998 and 1997, respectively, including $212, $167 and $207 from the Caltex
Group. During 1998, Dynegy repaid a $155 loan from Chevron, which is reflected
as a decrease in the company's investment in the affiliate.
The company's transactions with affiliated companies are summarized in the table
that follows. These are primarily for the purchase of Indonesian crude oil from
CPI, the sale of crude oil and products to Caltex Corporation's refining and
marketing companies, the sale of natural gas to Dynegy, and the purchase of
natural gas and natural gas liquids from Dynegy.
"Accounts and notes receivable" in the Consolidated Balance Sheet include $277
and $156 at December 31, 1999 and 1998, respectively, of amounts due from
affiliated companies. "Accounts payable" include $53 and $41 at December 31,
1999 and 1998, respectively, of amounts due to affiliated companies.
<TABLE>
<CAPTION>
Year ended December 31
--------------------------
1999 1998 1997
- -------------------------------------------------------------------
<S> <C> <C> <C>
Sales to Caltex Group .................. $ 687 $ 772 $1,335
Sales to Dynegy Inc. ................... 1,407 1,307 1,822
Sales to Fuel & Marine Marketing LLC* .. 234 22 -
Sales to other affiliates .............. 12 4 8
- -------------------------------------------------------------------
Total sales to affiliates .... $2,340 $2,105 $3,165
===================================================================
Purchases from Caltex Group ............ $ 867 $ 681 $ 932
Purchases from Dynegy Inc. ............. 785 642 854
Purchases from other affiliates ........ 6 2 16
- -------------------------------------------------------------------
Total purchases from affiliates $1,658 $1,325 $1,802
===================================================================
<FN>
* Affiliate formed in November 1998 owned 31 percent by Chevron.
</FN>
</TABLE>
Equity in earnings, together with investments in and advances to companies
accounted for using the equity method, and other investments accounted for at or
below cost, are as follows.
<TABLE>
<CAPTION>
Investments and Advances Equity in Earnings
-----------------------------------------------------
At December 31 Year ended December 31
-----------------------------------------------------
1999 1998 1999 1998 1997*
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Exploration and Production
Tengizchevroil ........ $1,722 $1,455 $ 177 $ 60 $ 169
Caltex Group .......... 455 452 139 107 171
Dynegy Inc. ........... 351 265 51 49 (17)
Other ................. 198 134 32 4 13
- ----------------------------------------------------------------------------------
Total Exploration
and Production 2,726 2,306 399 220 336
- ----------------------------------------------------------------------------------
Refining, Marketing and Transportation
Caltex Group .......... 1,683 1,751 56 (36) 252
Other ................. 379 124 70 24 57
- ----------------------------------------------------------------------------------
Total Refining,
Marketing and
Transportation 2,062 1,875 126 (12) 309
- ----------------------------------------------------------------------------------
Chemicals ............... 145 135 1 - 25
All Other ............... 31 74 - 20 18
- ----------------------------------------------------------------------------------
Total Equity Method ... $4,964 $4,390 $ 526 $ 228 $ 688
- ----------------------------------------------------------------------------------
Other at or Below Cost .. 267 214
Total Investments and
Advances .... $5,231 $4,604
==================================================================================
<FN>
* Reclassified to conform to the 1998 presentation.
</FN>
</TABLE>
The following tables summarize the combined financial information for the Caltex
Group and all of the other equity-method companies, together with Chevron's
share. Amounts shown for the affiliates are 100 percent.
<TABLE>
<CAPTION>
Caltex Group Other Affiliates Chevron's Share
----------------------------------------------------------------------------------------
Year ended December 31 1999 1998* 1997* 1999 1998 1997 1999 1998* 1997*
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues ................. $14,915 $11,506 $15,699 $20,645 $16,842 $16,574 $13,660 $11,194 $12,717
Total costs and other deductions 14,134 10,986 14,489 19,805 16,430 15,770 12,863 10,672 11,789
Net income ..................... 390 143 846 610 295 556 526 228 688
==========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Caltex Group Other Affiliates Chevron's Share
----------------------------------------------------------------------------------------
At December 31 ................. 1999 1998 1997 1999 1998 1997 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current assets ................. $ 4,928 $ 1,974 $ 2,521 $ 4,640 $ 3,326 $ 3,232 $ 3,962 $ 2,015 $ 2,289
Other assets ................... 5,381 7,683 7,193 10,255 8,868 6,713 6,009 6,663 5,971
Current liabilities ............ 3,395 2,840 2,991 3,709 2,723 2,565 2,665 2,162 2,232
Other liabilities .............. 2,638 2,420 2,131 8,362 7,147 5,448 2,342 2,126 1,740
Net equity ..................... 4,276 4,397 4,592 2,824 2,324 1,932 4,964 4,390 4,288
==========================================================================================================================
<FN>
*Caltex "Total revenues" and "Total costs and other deductions" have been
reclassified to net certain offsetting trading sale and purchase contracts. The
reclassifications conform to the 1999 presentation and have no impact on net
income.
</FN>
</TABLE>
Note 13. PROPERTIES, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
At December 31 Year ended December 31
---------------------------------------------------- ----------------------------------------------
Gross Investment at Cost Net Investment Additions at Cost(1) Depreciation Expense
--------------------------- ------------------------ ---------------------- ----------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Exploration and Production
United States $17,947 $18,372 $18,104 $4,709 $5,237 $5,052 $ 710 $1,000 $1,166 $1,130 $ 818 $ 887
International 15,876 12,755 11,752 9,465 7,148 6,691 3,251 1,221 1,310 851 730 634
- -------------------------------------------------------------------------------------------------------------------------------
Total Exploration
and Production 33,823 31,127 29,856 14,174 12,385 11,743 3,961 2,221 2,476 1,981 1,548 1,521
- -------------------------------------------------------------------------------------------------------------------------------
Refining, Marketing
and Transportation
United States 12,025 11,793 11,378 6,196 6,268 6,186 515 665 538 478 483 464
International 1,838 2,005 2,063 1,030 1,139 1,210 30 50 57 79 81 111
- -------------------------------------------------------------------------------------------------------------------------------
Total Refining, Marketing
and Transportation 13,863 13,798 13,441 7,226 7,407 7,396 545 715 595 557 564 575
- -------------------------------------------------------------------------------------------------------------------------------
Chemicals
United States 3,689 3,436 3,039 2,354 2,211 1,931 326 385 470 174 109 92
International 714 662 549 453 414 309 59 116 157 19 10 12
- -------------------------------------------------------------------------------------------------------------------------------
Total Chemicals 4,403 4,098 3,588 2,807 2,625 2,240 385 501 627 193 119 104
- -------------------------------------------------------------------------------------------------------------------------------
All Other(2) 2,123 2,314 2,348 1,110 1,312 1,292 103 202 110 135 89 100
- -------------------------------------------------------------------------------------------------------------------------------
Total United States 35,783 35,915 34,867 14,369 15,028 14,461 1,654 2,252 2,284 1,917 1,499 1,543
Total International 18,429 15,422 14,366 10,948 8,701 8,210 3,340 1,387 1,524 949 821 757
- -------------------------------------------------------------------------------------------------------------------------------
Total $54,212 $51,337 $49,233 $25,317 $23,729 $22,671 $4,994 $3,639 $3,808 $2,866 $2,320 $2,300
===============================================================================================================================
<FN>
(1) Net of dry hole expense related to prior years' expenditures of $126, $40 and $31 in 1999, 1998 and 1997, respectively.
(2) Primarily coal and real estate assets and management information systems.
</FN>
</TABLE>
Note 14. TAXES
<TABLE>
<CAPTION>
Year ended December 31
---------------------------
1999 1998 1997
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Taxes other than on income
United States
Excise taxes on products
and merchandise $3,704 $3,505 $3,386
Property and other
miscellaneous taxes 272 262 274
Payroll taxes .............. 119 129 123
Taxes on production ........ 94 92 118
- -------------------------------------------------------------------------
Total United States 4,189 3,988 3,901
- -------------------------------------------------------------------------
International
Excise taxes on products
and merchandise ... 206 251 2,201
Property and other
miscellaneous taxes 145 137 185
Payroll taxes .............. 32 26 23
Taxes on production ........ 14 9 10
- -------------------------------------------------------------------------
Total International 397 423 2,419
- -------------------------------------------------------------------------
Total taxes other than on income ............. $4,586 $4,411 $6,320
=========================================================================
</TABLE>
U.S. federal income tax expense was reduced by $89, $84 and $93 in 1999, 1998
and 1997, respectively, for low-income housing and other business tax credits.
In 1999, before-tax income, including related corporate and other charges, for
U.S. operations was $1,254, compared with $728 in 1998 and $2,054 in 1997. For
international operations, before-tax income was $2,394, $1,106 and $3,448 in
1999, 1998 and 1997, respectively.
The deferred income tax provisions included costs of $788, $470 and $304 related
to properties, plant and equipment in 1999, 1998 and 1997, respectively.
<TABLE>
<CAPTION>
Year ended December 31
------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxes on income
U.S. federal
Current .................... $ 135 $ (176) $ 369
Deferred ..................... 145 71 357
State and local ....................... (14) 20 81
- --------------------------------------------------------------------------------
Total United States . 266 (85) 807
- --------------------------------------------------------------------------------
International
Current ...................... 1,231 385 1,174
Deferred ..................... 81 195 265
- --------------------------------------------------------------------------------
Total International . 1,312 580 1,439
- --------------------------------------------------------------------------------
Total taxes on income $ 1,578 $ 495 $ 2,246
================================================================================
</TABLE>
The company's effective income tax rate varied from the U.S. statutory federal
income tax rate because of the following.
<TABLE>
<CAPTION>
Year ended December 31
-----------------------------
1999 1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory U.S. federal income tax rate .......... 35.0% 35.0% 35.0%
Effect of income taxes from international
operations in excess of taxes at the
U.S. statutory rate .................... 15.6 7.6 9.6
State and local taxes on income, net
of U.S. federal income tax benefit (0.2) 0.2 1.3
Prior-year tax adjustments ..................... - (4.5) (0.3)
Tax credits ..................................... (2.4) (4.6) (1.7)
Other ........................................... (2.2) (6.4) (1.7)
- ----------------------------------------------------------------------------------
Consolidated companies ........ 45.8 27.3 42.2
Effect of recording equity in income
of certain affiliated companies
on an after-tax basis .................. (2.5) (0.3) (1.4)
- ----------------------------------------------------------------------------------
Effective tax rate ............ 43.3% 27.0% 40.8%
==================================================================================
</TABLE>
13
<PAGE>
Note 14. TAXES - Continued
The increase in the 1999 effective tax rate from the prior year is primarily due
to increased foreign taxes on higher foreign earnings in 1999 compared with
1998. Additional increases in the effective tax rate in 1999 were from tax
credits as a smaller proportion of before-tax income in 1999 than 1998 and from
less beneficial prior-period tax adjustments on the 1998 tax return compared
with the 1997 tax return. The other effects on the 1999 effective tax rate
include settlement of outstanding issues, utilization of additional capital loss
benefits and permanent differences. These factors were slightly offset by the
effect of lower taxable income received from equity affiliates in 1999.
The company records its deferred taxes on a tax-jurisdiction basis and
classifies those net amounts as current or noncurrent based on the balance sheet
classification of the related assets or liabilities.
At December 31, 1999 and 1998, deferred taxes were classified in the
Consolidated Balance Sheet as follows.
<TABLE>
<CAPTION>
At December 31
-------------------
1999 1998
- --------------------------------------------------------------
<S> <C> <C>
Prepaid expenses and other current assets $ (546) $ (30)
Deferred charges and other assets ....... (195) (264)
Federal and other taxes on income ....... 1 -
Noncurrent deferred income taxes ........ 5,010 3,645
- --------------------------------------------------------------
Total deferred income taxes, net $ 4,270 $ 3,351
==============================================================
</TABLE>
The reported deferred tax balances are composed of the following deferred tax
liabilities (assets).
<TABLE>
<CAPTION>
At December 31
-------------------------
1999 1998
- -------------------------------------------------------------------
<S> <C> <C>
Properties, plant and equipment ....... $ 5,800 $ 5,150
Inventory ............................. 149 144
Miscellaneous ......................... 190 184
- -------------------------------------------------------------------
Total deferred tax liabilities 6,139 5,478
- -------------------------------------------------------------------
Abandonment/environmental reserves .... (611) (774)
Employee benefits ..................... (611) (592)
AMT/other tax credits ................. (588) (354)
Other accrued liabilities ............. (195) (408)
Miscellaneous ......................... (316) (294)
- -------------------------------------------------------------------
Total deferred tax assets .... (2,321) (2,422)
- -------------------------------------------------------------------
Deferred tax assets valuation allowance 452 295
- -------------------------------------------------------------------
Total deferred taxes, net .... $ 4,270 $ 3,351
===================================================================
</TABLE>
It is the company's policy for subsidiaries included in the U.S. consolidated
tax return to record income tax expense as though they filed separately, with
the parent recording the adjustment to income tax expense for the effects of
consolidation.
Undistributed earnings of international consolidated subsidiaries and affiliates
for which no deferred income tax provision has been made for possible future
remittances totaled approximately $4,602 at December 31, 1999. Substantially all
of this amount represents earnings reinvested as part of the company's ongoing
business. It is not practical to estimate the amount of taxes that might be
payable on the eventual remittance of such earnings. On remittance, certain
countries impose withholding taxes that, subject to certain limitations, are
then available for use as tax credits against a U.S. tax liability, if any. The
company estimates withholding taxes of approximately $187 would be payable upon
remittance of these earnings.
Note 15. SHORT-TERM DEBT
Redeemable long-term obligations consist primarily of tax-exempt variable-rate
put bonds that are included as current liabilities because they become
redeemable at the option of the bondholders during the year following the
balance sheet date.
The company has entered into interest rate swaps on a portion of its short-term
debt. At December 31, 1999 and 1998, the company had swapped notional amounts of
$350 and $700 of floating rate debt to fixed rates. The effect of these swaps on
the company's interest expense was not material.
<TABLE>
<CAPTION>
At December 31
--------------------------
1999 1998
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial paper(1) .......................... $ 5,265 $ 4,875
Current maturities of long-term debt ......... 127 123
Current maturities of long-term capital leases 35 33
Redeemable long-term obligations
Long-term debt ...................... 301 301
Capital leases ...................... 297 273
Notes payable(2).............................. 134 285
- --------------------------------------------------------------------------
Subtotal(3).......................... 6,159 5,890
Reclassified to long-term debt ............... (2,725) (2,725)
- --------------------------------------------------------------------------
Total short-term debt ............... $ 3,434 $ 3,165
==========================================================================
<FN>
(1) Weighted-average interest rates at December 31, 1999 and 1998, were 6.0
percent and 5.6 percent, respectively, including the effect of interest rate
swaps.
(2) Includes $10 guarantee of ESOP debt.
(3) Weighted-average interest rates at December 31, 1999 and 1998, were 5.8
percent for both years, including the effect of interest rate swaps.
</FN>
</TABLE>
Note 16. LONG-TERM DEBT
Chevron has three "shelf" registrations on file with the Securities and Exchange
Commission that together would permit the issuance of $2,800 of debt securities
pursuant to Rule 415 of the Securities Act of 1933.
At year-end 1999, the company had $4,750 of committed credit facilities with
banks worldwide, $2,725 of which had termination dates beyond one year. The
facilities support the company's commercial paper borrowings. Interest on
borrowings under the terms of specific agreements may be based on the London
Interbank Offered Rate, the Reserve Adjusted Domestic Certificate of Deposit
Rate, or bank prime rate. No amounts were outstanding under these credit
agreements during the year or at year-end.
At December 31, 1999 and 1998, the company classified $2,725 of short-term debt
as long-term. Settlement of these obligations is not expected to require the use
of working capital in 2000 as the company has both the intent and ability to
refinance this debt on a long-term basis.
Consolidated long-term debt maturing in each of the five years after December
31, 1999, is as follows: 2000-$127, 2001-$285, 2002-$172, 2003-$184 and
2004-$1,134.
14
<PAGE>
Note 16.LONG-TERM DEBT - Continued
<TABLE>
<CAPTION>
At December 31
--------------------
1999 1998
- ------------------------------------------------------------------------
<S> <C> <C>
8.11% amortizing notes due 2004(1) ................ $ 620 $ 690
6.625% notes due 2004 ............................. 495 -
7.327% amortizing notes due 2014(2)................ 430 -
7.45% notes due 2004 .............................. 349 349
7.61% amortizing bank loans due 2003 .............. 143 172
LIBOR-based bank loan due 2001 .................... 134 100
7.677% notes due 2016(2)........................... 90 -
7.627% notes due 2015(2)........................... 80 -
6.92% bank loans due 2005 ......................... 51 51
6.98% bank loans due 2004(2)....................... 25 -
6.22% notes due 2001(2)............................ 10 -
Other foreign currency obligations (6.0%)(3)....... 75 94
Other long-term debt (6.6%)(3)..................... 74 70
- ------------------------------------------------------------------------
Total including debt due within one year . 2,576 1,526
Debt due within one year ........ (127) (123)
Reclassified from short-term debt 2,725 2,725
- ------------------------------------------------------------------------
Total long-term debt .............................. $ 5,174 $ 4,128
========================================================================
<FN>
(1) Debt assumed from ESOP in 1999.
(2) Guarantee of ESOP debt.
(3) Less than $50 individually; weighted-average interest rates at December 31, 1999.
</FN>
</TABLE>
Note 17. OTHER COMPREHENSIVE INCOME
The components of changes in other comprehensive income and the related tax
effects are shown below.
<TABLE>
<CAPTION>
Year ended December 31
-------------------------
1999 1998 1997
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Currency translation adjustment
Before-tax change ................ $ (43) $ (1) $(173)
Tax benefit (expense) ............. - - -
------------------------
Change, net of tax ................ (43) (1) (173)
Unrealized holding gain (loss) on securities
Before-tax change ................. 60 3 (4)
Tax benefit (expense) ............. (31) - -
------------------------
Change, net of tax ................ 29 3 (4)
Minimum pension liability adjustment
Before-tax change ................. (16) (24) 6
Tax benefit (expense) ............. 5 9 (2)
------------------------
Change, net of tax ................ (11) (15) 4
- ----------------------------------------------------------------------
TOTAL OTHER COMPREHENSIVE INCOME
Before-tax change ............... $ 1 $ (22) $(171)
Tax benefit (expense) ............. (26) 9 (2)
------------------------
Change, net of tax ................ $ (25) $ (13) $(173)
=======================================================================
</TABLE>
Note 18. EMPLOYEE BENEFIT PLANS
Pension Plans
The company has defined benefit pension plans for most employees and provides
for certain health care and life insurance plans for active and qualifying
retired employees. The company's policy is to fund the minimum necessary to
satisfy requirements of the Employee Retirement Income Security Act for the
company's pension plans. The company's annual contributions for medical and
dental benefits are limited to the lesser of actual medical claims or a defined
fixed per-capita amount. Life insurance benefits are paid by the company, and
annual contributions are based on actual plan experience. Nonfunded pension and
postretirement benefits are paid directly when incurred; accordingly, these
payments are not reflected as changes in Plan assets in the table below.
The status of the company's pension plans and other postretirement benefit plans
for 1999 and 1998 is as follows.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
-----------------------------------------
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation at January 1 ................ $ 4,278 $ 4,069 $ 1,468 $ 1,362
Service cost .......................... 99 113 21 19
Interest cost ......................... 274 275 96 93
Plan participants' contributions ...... 1 1 - -
Plan amendments ....................... 60 - - -
Actuarial (gain) loss ................. (106) 248 (112) 72
Foreign currency exchange
rate changes ................. (33) (10) - -
Benefits paid ......................... (801) (418) (81) (78)
Special termination
benefits ..................... 205 - - -
------------------------------------------
Benefit obligation
at December 31 ........................ 3,977 4,278 1,392 1,468
- -------------------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets
at January 1 .......................... 4,741 4,454 - -
Actual return on plan assets .......... 720 675 - -
Foreign currency exchange
rate changes ................. (25) (6) - -
Employer contribution ................. 10 11 - -
Plan participants' contribution ....... 1 1 - -
Benefits paid ......................... (774) (394) - -
------------------------------------------
Fair value of plan assets
at December 31 ........................ 4,673 4,741 - -
- -------------------------------------------------------------------------------------------
Funded status .................................. 696 463 (1,392) (1,468)
Unrecognized net actuarial gain ....... (480) (155) (160) (46)
Unrecognized prior-service cost ....... 124 88 - -
Unrecognized net transitional
assets ....................... (44) (85) - -
- -------------------------------------------------------------------------------------------
Total recognized at December 31 ................ $ 296 $ 311 $(1,552) $(1,514)
===========================================================================================
Amounts recognized in the
Consolidated Balance Sheet
at December 31
Prepaid benefit cost ......... $ 495 $ 524 $ - $ -
Accrued benefit liability .... (298) (298) (1,552) (1,514)
Intangible asset ............. 10 12 - -
Accumulated other
comprehensive income(1) 89 73 - -
------------------------------------------
Net amount recognized .......................... $ 296 $ 311 $(1,552) $(1,514)
===========================================================================================
Weighted-average assumptions
as of December 31
Discount rate ................ 7.6% 6.7% 7.8% 6.8%
Expected return on plan assets 9.7% 9.1% - -
Rate of compensation increase 4.5% 4.6% 4.5% 4.5%
===========================================================================================
<FN>
(1) Accumulated other comprehensive income includes deferred income tax of $31
and $26 in 1999 and 1998, respectively.
</FN>
</TABLE>
15
<PAGE>
Note 18. EMPLOYEE BENEFIT PLANS - Continued
For measurement purposes, separate health care cost-trend rates were used for
pre-age 65 and post-age 65 retirees. The 2000 annual rates of change were
assumed to be 5.2 percent and 9.7 percent, respectively, before gradually
converging to the average ultimate rate of 5.0 percent in 2021 for both pre-age
65 and post-age 65. A one-percentage-point change in the assumed health care
rates would have had the following effects.
One-Percentage- One-Percentage-
Point Increase Point Decrease
- -----------------------------------------------------------------------
Effect on total service and interest
cost components $ 17 $ (19)
Effect on postretirement benefit
obligation $ 129 $(107)
=======================================================================
The components of net periodic benefit cost for 1999,
1998 and 1997 were:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------------------------------------
1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost ............... $ 99 $ 113 $ 106 $ 21 $ 19 $ 17
Interest cost .............. 274 275 274 96 93 90
Expected return on
plan assets ....... (394) (397) (371) - - -
Amortization of
transitional assets (35) (38) (40) - - -
Amortization of prior-
service costs ..... 16 14 14 - - -
Recognized actuarial
losses (gains) .... 1 4 4 2 (5) (11)
Settlement gains ........... (104) (11) (29) - - -
Curtailment losses ......... 7 - - - - -
Special termination
benefit recognition 205 - 13 - - -
------------------------------------------------
Net periodic benefit cost $ 69 $ (40) $ (29) $ 119 $ 107 $ 96
===============================================================================
</TABLE>
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for pension plans with accumulated benefit obligations in excess
of plan assets were $428, $368 and $80, respectively, at December 31, 1999, and
$408, $364 and $87, respectively at December 31, 1998.
Profit Sharing/Savings Plan
Eligible employees of the company and certain of its subsidiaries who have
completed one year of service may participate in the Profit Sharing/Savings
Plan. Charges to expense for the profit sharing part of the Profit
Sharing/Savings Plan were $86, $60 and $79 in 1999, 1998 and 1997, respectively.
Commencing in October 1997, the company's Savings Plus Plan contributions are
being funded with leveraged ESOP shares.
Employee Stock Ownership Plan (ESOP)
In December 1989, the company established a leveraged ESOP as part of the Profit
Sharing/Savings Plan. The ESOP Trust Fund borrowed $1,000 and purchased 28.2
million previously unissued shares of the company's common stock. In June 1999,
the ESOP borrowed $25 at 6.98 percent interest, using the proceeds to pay
interest due on the existing ESOP debt. In July 1999, the company's leveraged
ESOP issued notes of $620 at an average interest rate of 7.42 percent,
guaranteed by Chevron Corporation. The debt proceeds were paid to Chevron
Corporation in exchange for Chevron's assumption of the existing 8.11 percent
ESOP long-term debt of $620 million. The ESOP provides a partial prefunding of
the company's future commitments to the Profit Sharing/Savings Plan, which will
result in annual income tax savings for the company.
As permitted by AICPA Statement of Position 93-6, "Employers' Accounting for
Employee Stock Ownership Plans," the company has elected to continue its
practices, which are based on Statement of Position 76-3, "Accounting Practices
for Certain Employee Stock Ownership Plans" and subsequent consensus of the
Emerging Issues Task Force of the Financial Accounting Standards Board.
Accordingly, the debt of the ESOP is recorded as debt, and shares pledged as
collateral are reported as deferred compensation in the Consolidated Balance
Sheet and Statement of Stockholders' Equity. The company reports compensation
expense equal to the ESOP debt principal repayments less dividends received by
the ESOP. Interest incurred on the ESOP debt is recorded as interest expense.
Dividends paid on ESOP shares are reflected as a reduction of retained earnings.
All ESOP shares are considered outstanding for earnings-per-share computations.
The company recorded expense for the ESOP of $84, $58 and $53 in 1999, 1998 and
1997, respectively, including $49, $56 and $61 of interest expense related to
the ESOP debt. All dividends paid on the shares held by the ESOP are used to
service the ESOP debt. The dividends used were $33, $57 and $57 in 1999, 1998
and 1997, respectively.
The company made contributions to the ESOP of $64, $60 and $55 in 1999, 1998 and
1997, respectively, to satisfy ESOP debt service in excess of dividends received
by the ESOP. The ESOP shares were pledged as collateral for its debt. Shares are
released from a suspense account and allocated to the accounts of Plan
participants, based on the debt service deemed to be paid in the year in
proportion to the total of current year and remaining debt service. The charge
(credit) to compensation expense was $36, $2 and $(8) in 1999, 1998 and 1997,
respectively. The ESOP shares as of December 31, 1999 and 1998, were as follows.
Thousands 1999 1998
- ------------------------------------------
Allocated shares 10,785 10,819
Unallocated shares 12,963 14,087
- ------------------------------------------
Total ESOP shares 23,748 24,906
==========================================
Management Incentive Plans
The company has two incentive plans, the Management Incentive Plan (MIP) and the
Long-Term Incentive Plan (LTIP) for officers and other regular salaried
employees of the company and its subsidiaries who hold positions of significant
responsibility. The MIP is an annual cash incentive plan that links awards to
performance results of the prior year. The cash awards may be deferred by
conversion to stock units or, beginning with awards deferred in 1996, stock
units or other investment fund alternatives. Awards under the LTIP may take the
form of, but are not limited to, stock options, restricted stock, stock units
and nonstock grants. Charges to expense for the combined man-
16
<PAGE>
Note 18. EMPLOYEE BENEFIT PLANS - Continued
agement incentive plans, excluding expense related to LTIP stock options, which
is discussed in Note 19, "Stock Options," were $41, $28 and $55 in 1999, 1998
and 1997, respectively.
Chevron Success Sharing
The company has a program that provides eligible employees with an annual cash
bonus if the company achieves certain financial and safety goals. Until 2000,
the total maximum payout under the program was 8 percent of the employee's
annual salary. Charges for the program were $47, $51 and $116 in 1999, 1998 and
1997, respectively. In 2000, the maximum payout under the program increases to
10 percent.
Note 19. STOCK OPTIONS
The company applies APB Opinion No. 25 and related interpretations in accounting
for stock options awarded under its Broad-Based Employee Stock Option Programs
and its Long-Term Incentive Plan, which are described below.
Had compensation cost for the company's stock options been determined based on
the fair market value at the grant dates of the awards consistent with the
methodology prescribed by SFAS No. 123, the company's net income and earnings
per share for 1999, 1998 and 1997 would have been the pro forma amounts shown
below.
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------
<S> <C> <C> <C>
Net Income As reported $2,070 $1,339 $3,256
Pro forma $2,027 $1,294 $3,302
Earnings per share As reported - basic $3.16 $2.05 $4.97
- diluted $3.14 $2.04 $4.95
Pro forma - basic $3.09 $1.98 $5.04
- diluted $3.08 $1.97 $5.02
</TABLE>
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to awards granted
prior to 1995. In addition, certain options vest over several years, and awards
in future years, whose terms and conditions may vary, are anticipated.
Long-Term Incentive Plan
Stock options granted under the LTIP are generally awarded at market price on
the date of grant and are exercisable not earlier than one year and not later
than 10 years from the date of grant. However, a portion of the LTIP options
granted in 1996 had terms similar to the broad-based employee stock options,
which are described in the following table. The maximum number of shares of
common stock that may be granted each year is 1 percent of the total outstanding
shares of common stock as of January 1 of such year.
A summary of the status of stock options awarded under the company's LTIP,
excluding awards granted with terms similar to the broad-based employee stock
options, for 1999, 1998 and 1997 follows.
<TABLE>
<CAPTION>
Weighted-
Average
Options Exercise
(000s) Price
- -----------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1996 7,277 $44.84
- -----------------------------------------------------
Granted 1,801 80.78
Exercised (710) 38.65
Forfeited (115) 72.18
- -----------------------------------------------------
Outstanding at December 31, 1997 8,253 $52.83
- -----------------------------------------------------
Granted 1,872 79.13
Exercised (796) 40.47
Forfeited (106) 80.70
- -----------------------------------------------------
Outstanding at December 31, 1998 9,223 $58.91
- -----------------------------------------------------
Granted 1,830 89.88
Exercised (1,298) 44.29
Forfeited (152) 83.12
- -----------------------------------------------------
Outstanding at December 31, 1999 9,603 $66.41
=====================================================
Exercisable at December 31
1997 6,502 $45.31
1998 7,367 $53.82
1999 7,839 $61.13
=====================================================
</TABLE>
The weighted-average fair market value of options granted in 1999, 1998 and 1997
was $20.40, $21.10 and $17.64 per share, respectively. The fair market value of
each option on the date of grant was estimated using the Black-Scholes
option-pricing model with the following assumptions for 1999, 1998 and 1997,
respectively: risk-free interest rate of 5.5, 4.5 and 6.1 percent; dividend
yield of 3.0, 3.1 and 2.8 percent; volatility of 20.1, 28.6 and 15.2 percent and
expected life of seven years in all years.
As of December 31, 1999, 9,602,900 shares were under option at exercise prices
ranging from $31.9375 to $99.75 per share. The following table summarizes
information about stock options outstanding under the LTIP, excluding awards
granted with terms similar to the broad-based employee stock options, at
December 31, 1999.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------- ----------------------------
Weighted-
Average Weighted- Weighted-
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices (000s) Life (Years) Price (000s) Price
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$31 to $ 41 614 2.12 $34.55 614 $34.55
41 to 51 3,128 4.72 45.18 3,128 45.18
51 to 61 15 6.31 56.49 15 56.49
61 to 71 766 6.83 66.25 766 66.25
71 to 81 3,299 8.34 79.91 3,297 79.91
81 to 91 1,758 9.80 89.80 19 82.80
91 to 101 23 9.55 92.14 - -
- -----------------------------------------------------------------------------------------
$31 to $101 9,603 6.91 $66.41 7,839 $61.13
=========================================================================================
</TABLE>
Broad-Based Employee Stock Options
In 1996, the company granted to all eligible employees an option for 150 shares
of stock or equivalents at an exercise price of $51.875 per share. In addition,
a portion of the awards granted under the LTIP had terms similar to the
broad-based employee stock options. When the options were issued in February
1996, vesting was contingent upon one of two conditions being met: By Decem-
17
<PAGE>
Note 19. STOCK OPTIONS - Continued
ber 31, 1998, the price of Chevron stock closed at or above $75.00 per share for
three consecutive business days or, alternatively, the company had the highest
annual total stockholder return of its competitor group for the years 1994
through 1998. The options vested in June 1997 when the share price performance
condition was met.
Options for 7,204,800 shares, including similar-termed LTIP awards, were granted
in 1996. Forfeitures of options for 820,050 shares and exercises of 4,171,300
reduced the outstanding option shares to 2,213,450 at December 31, 1997. In
1998, exercises of 1,361,000 and forfeitures of 10,800 had reduced the
outstanding option shares to 841,650 at year-end 1998. In 1999, exercises of
740,725, forfeitures of 61,850 and expirations of 39,075 had reduced the
outstanding option shares to zero at March 31, 1999, the date of expiration.
Under APB Opinion No. 25, the company recorded expenses of $(2), $0 and $125 for
these options in 1999, 1998 and 1997, respectively.
The fair market value of each option share on the date of grant under SFAS No.
123 was estimated at $5.66 using a binomial option-pricing model with the
following assumptions: risk-free interest rate of 5.1 percent, dividend yield of
4.2 percent, expected life of three years and a volatility of 20.9 percent.
In 1998, the company announced a new broad-based Employee Stock Option Program
that granted to all eligible employees an option that varied from 100 to 300
shares of stock or equivalents, dependent on the employee's salary or job grade.
These options were to vest in two years or, if the company had the highest total
stockholder return among its competitor group for the years 1994 through 1998,
in one year. Since the stockholders' return performance condition was not met,
the options vested in February 2000. Options for 4,820,800 shares were awarded
at an exercise price of $76.3125 per share. Forfeitures of options for 854,550
shares reduced the outstanding option shares to 3,966,250 at December 31, 1999,
at which date none was exercisable. The options expire on February 11, 2008.
Under APB Opinion No. 25, the company recorded expenses of $4 and $2 for these
options in 1999 and 1998, respectively.
The fair value of each option share on the date of grant under SFAS No. 123 was
estimated at $19.08 using the average results of Black-Scholes models for the
preceding 10 years. The 10-year averages of each assumption used by the
Black-Sholes models were: risk-free interest rate of 7.0 percent, dividend yield
of 4.2 percent, expected life of seven years and a volatility of 24.7 percent.
Note 20. EARNINGS PER SHARE (EPS)
Basic EPS includes the effects of deferrals of salary and other compensation
awards that are invested in Chevron stock units by certain officers and
employees of the company. Diluted EPS includes the effects of these deferrals as
well as the dilutive effects of outstanding stock options awarded under the LTIP
and Broad-Based Employee Stock Option Program (see Note 19, "Stock Options").
The following table sets forth the computation of basic and diluted EPS.
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------------------------------------------------------------------------------
Net Shares Per-Share Net Shares Per-Share Net Shares Per-Share
Income (millions) Amount Income (millions) Amount Income (millions) Amount
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income $ 2,070 $ 1,339 $ 3,256
Weighted-average common
shares outstanding 655.5 653.7 655.0
Dividend equivalents paid
on Chevron stock units 3 3 2
Deferred awards held
as Chevron stock units 1.0 1.2 1.3
- --------------------------------------------------------------------------------------------------------------------------------
BASIC EPS COMPUTATION $ 2,073 656.5 $3.16 $ 1,342 654.9 $2.05 $ 3,258 656.3 $4.97
Dilutive effects of
stock options 3.0 2.2 2.1
- --------------------------------------------------------------------------------------------------------------------------------
DILUTED EPS COMPUTATION $ 2,073 659.5 $3.14 $ 1,342 657.1 $2.04 $ 3,258 658.4 $4.95
================================================================================================================================
</TABLE>
18
<PAGE>
Note 21.OTHER CONTINGENCIES AND COMMITMENTS
The U.S. federal income tax and California franchise tax liabilities of the
company have been settled through 1990 and 1991, respectively.
Settlement of open tax years, as well as tax issues in other countries where the
company conducts its businesses, is not expected to have a material effect on
the consolidated financial position or liquidity of the company and, in the
opinion of management, adequate provision has been made for income and franchise
taxes for all years under examination or subject to future examination.
At December 31, 1999, the company and its subsidiaries, as direct or indirect
guarantors, had contingent liabilities of $25 for notes of affiliated companies
and $362 for notes of others.
The company and its subsidiaries have certain contingent liabilities relating to
long-term unconditional purchase obligations and commitments, throughput
agreements and take-or-pay agreements, some of which relate to suppliers'
financing arrangements. The aggregate amounts of required payments under these
various commitments are: 2000-$228; 2001-$297; 2002-$270; 2003-$253; 2004-$225;
2005 and after-$1,029. Total payments under the agreements were $258 in 1999,
$201 in 1998 and $243 in 1997.
The company is subject to loss contingencies pursuant to environmental laws and
regulations that in the future may require the company to take action to correct
or ameliorate the effects on the environment of prior disposal or release of
chemical or petroleum substances, including MTBE, by the company or other
parties. Such contingencies may exist for various sites including, but not
limited to: Superfund sites and refineries, oil fields, service stations,
terminals, and land development areas, whether operating, closed or sold. The
amount of such future cost is indeterminable due to such factors as the unknown
magnitude of possible contamination, the unknown timing and extent of the
corrective actions that may be required, the determination of the company's
liability in proportion to other responsible parties, and the extent to which
such costs are recoverable from third parties. While the company has provided
for known environmental obligations that are probable and reasonably estimable,
the amount of future costs may be material to results of operations in the
period in which they are recognized. The company does not expect these costs to
have a material effect on its consolidated financial position or liquidity.
Also, the company does not believe its obligations to make such expenditures
have had, or will have, any significant impact on the company's competitive
position relative to other domestic or international petroleum or chemical
concerns.
The company believes it has no material market or credit risks to its
operations, financial position or liquidity as a result of its commodities and
other derivatives activities. However, the results of operations and financial
position of certain equity affiliates may be affected by their business
activities involving the use of derivative instruments.
The company's operations, particularly oil and gas exploration and production,
can be affected by changing economic, regulatory and political environments in
the various countries, including the United States, in which it operates. In
certain locations, host governments have imposed restrictions, controls and
taxes, and in others, political conditions have existed that may threaten the
safety of employees and the company's continued presence in those countries.
Internal unrest or strained relations between a host government and the company
or other governments may affect the company's operations. Those developments
have, at times, significantly affected the company's operations and related
results and are carefully considered by management when evaluating the level of
current and future activity in such countries.
Areas in which the company has significant operations include the United States,
Canada, Australia, United Kingdom, Norway, Congo, Angola, Nigeria, Democratic
Republic of Congo, Papua New Guinea, China, Indonesia, Venezuela, Thailand and
Argentina. The company's Caltex affiliates have significant operations in
Indonesia, Korea, Australia, Thailand, the Philippines, Singapore and South
Africa. The company's Tengizchevroil affiliate operates in Kazakhstan.
Note 22.EMPLOYEE TERMINATION BENEFITS AND OTHER RESTRUCTURING COSTS
The company recorded before-tax charges to income of $235 in 1999 for employee
termination benefits and other restructuring costs as part of a companywide
staff reduction program. The charge includes severance and other termination
benefits of $220 for 3,472 employees and $82 for employee and office relocation,
lease termination penalties, and other items. These charges were offset partly
by $67 of restructuring-related net pension settlement/curtailment gains for
payments made to terminated employees.
The staff reduction program affects primarily U.S.-based employees and is being
implemented in all of the company's operating segments across several business
functions. All identified employees will be separated by June 30, 2000.
Termination benefits for 3,070 of the 3,472 employees - accrued in accordance
with SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of
Defined Benefit Plans and for Termination Benefits" - are payable from the
assets of the company's U.S. and Canadian pension plans. Payments to other
employees are from company funds. Accrual and payment activity for the employee
termination benefits is presented in the following table.
<TABLE>
<CAPTION>
Restructuring Number of
Liability Employees
--------------------------------------------------------------
<S> <C> <C>
Balance at December 31, 1998 $ - -
Accruals 220 3,472
Cash Payments (135) 2,157
----------------------------
Balance at December 31, 1999 $ 85 1,315
==============================================================
</TABLE>
Of the $82 for relocations, lease termination penalties and other costs,
approximately 13 percent remained unpaid at the end of 1999. These charges and
the restructuring-related pension gains were classified mainly as either
"operating expense" or "selling, general and administrative expense." Items are
either accrued or recognized as incurred under the guidelines of EITF Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)"
or SFAS No. 88, as applicable.
The company's net income for 1999 also included its $25 share of a restructuring
charge recorded by Caltex.
19
<PAGE>
SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES
Unaudited
In accordance with Statement of Financial Accounting Standards No. 69,
"Disclosures About Oil and Gas Producing Activities" (SFAS No. 69), this section
provides supplemental information on oil and gas exploration and producing
activities of the company in six separate tables. Tables I through III provide
historical cost information pertaining to costs incurred in exploration,
property acquisitions and development; capitalized costs; and results of
operations. Tables IV through VI present information on the company's estimated
net proved reserve quantities, standardized measure of estimated discounted
future net cash flows related to proved reserves, and changes in estimated
discounted future net cash flows. The Africa geographic area includes activities
principally in Nigeria, Angola, Congo and Democratic Republic of Congo. The
"Other" geographic category includes activities in Australia, Argentina, the
United Kingdom North Sea, Canada, Papua New Guinea, Venezuela, China, Thailand
and other countries. Amounts shown for affiliated companies are Chevron's 50
percent equity share in P.T. Caltex Pacific Indonesia (CPI), an exploration and
production company operating in Indonesia, and its 45 percent (50 percent prior
to April 1997) equity share of Tengizchevroil (TCO), an exploration and
production partnership operating in the Republic of Kazakhstan.
<TABLE>
<CAPTION>
TABLE I - COSTS INCURRED IN EXPLORATION, PROPERTY ACQUISITIONS AND DEVELOPMENT(1)
Consolidated Companies Affiliated Companies
Millions of dollars U.S. Africa Other Total CPI TCO Worldwide
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Exploration
Wells $ 258 $ 40 $ 120 $ 418 $ 3 $ - $ 421
Geological and geophysical 37 25 85 147 17 - 164
Rentals and other 30 7 60 97 - - 97
- ----------------------------------------------------------------------------------------------------------------------------
Total exploration 325 72 265 662 20 - 682
- ----------------------------------------------------------------------------------------------------------------------------
Property acquisitions(2),(3)
Proved(4) 9 - 1,070 1,079 - - 1,079
Unproved 27 11 1,202 1,240 - - 1,240
- ----------------------------------------------------------------------------------------------------------------------------
Total property acquisitions 36 11 2,272 2,319 - - 2,319
- ----------------------------------------------------------------------------------------------------------------------------
Development 532 518 375 1,425 182 148 1,755
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS INCURRED $ 893 $ 601 $2,912 $4,406 $202 $148 $4,756
============================================================================================================================
YEAR ENDED DECEMBER 31, 1998
Exploration
Wells $ 350 $ 108 $ 101 $ 559 $ 3 $ - $ 562
Geological and geophysical 49 31 112 192 16 - 208
Rentals and other 44 23 53 120 - - 120
- ----------------------------------------------------------------------------------------------------------------------------
Total exploration 443 162 266 871 19 - 890
- ----------------------------------------------------------------------------------------------------------------------------
Property acquisitions(2)
Proved(4) 12 - - 12 - - 12
Unproved 58 - 14 72 - - 72
- ----------------------------------------------------------------------------------------------------------------------------
Total property acquisitions 70 - 14 84 - - 84
- ----------------------------------------------------------------------------------------------------------------------------
Development 680 561 411 1,652 156 120 1,928
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS INCURRED $1,193 $ 723 $ 691 $2,607 $175 $120 $2,902
============================================================================================================================
YEAR ENDED DECEMBER 31, 1997
Exploration
Wells $ 278 $ 99 $ 149 $ 526 $ 2 $ - $ 528
Geological and geophysical 39 31 59 129 16 - 145
Rentals and other 43 17 65 125 - - 125
- ----------------------------------------------------------------------------------------------------------------------------
Total exploration 360 147 273 780 18 - 798
- ----------------------------------------------------------------------------------------------------------------------------
Property acquisitions(2)
Proved(4) 3 6 75 84 - - 84
Unproved 101 - 23 124 - - 124
- ----------------------------------------------------------------------------------------------------------------------------
Total property acquisitions 104 6 98 208 - - 208
- ----------------------------------------------------------------------------------------------------------------------------
Development 918 461 529 1,908 159 152 2,219
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS INCURRED $1,382 $ 614 $ 900 $2,896 $177 $152 $3,225
============================================================================================================================
<FN>
(1) Includes costs incurred whether capitalized or charged to earnings. Excludes
support equipment expenditures.
(2) Proved amounts include wells, equipment and facilities associated with
proved reserves.
(3) Includes acquisition costs and related deferred income taxes for purchases
of Rutherford-Moran Oil Corporation and Petrolera Argentina San Jorge S.A.
(4) Does not include properties acquired through property exchanges.
</FN>
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
TABLE II - CAPITALIZED COSTS RELATED TO OIL AND GAS PRODUCING ACTIVITIES
Consolidated Companies Affiliated Companies
------------------------------------- ---------------------
Millions of dollars U.S. Africa Other Total CPI TCO Worldwide
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1999
Unproved properties .......................... $ 317 $ 69 $ 1,441 $ 1,827 $ - $ 378 $ 2,205
Proved properties and related producing assets 16,662 4,034 7,318 28,014 1,158 689 29,861
Support equipment ............................ 478 268 321 1,067 902 243 2,212
Deferred exploratory wells ................... 136 172 66 374 - - 374
Other uncompleted projects ................... 354 758 664 1,776 335 405 2,516
- ---------------------------------------------------------------------------------------------------------------------------
GROSS CAPITALIZED COSTS ...................... 17,947 5,301 9,810 33,058 2,395 1,715 37,168
- ---------------------------------------------------------------------------------------------------------------------------
Unproved properties valuation ................ 133 53 157 343 - - 343
Proved producing properties -
Depreciation and depletion .................. 11,953 1,993 3,071 17,017 681 99 17,797
Future abandonment and restoration .......... 835 371 208 1,414 60 10 1,484
Support equipment depreciation ............... 317 104 142 563 476 80 1,119
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated provisions ....................... 13,238 2,521 3,578 19,337 1,217 189 20,743
- ---------------------------------------------------------------------------------------------------------------------------
NET CAPITALIZED COSTS ........................ $ 4,709 $ 2,780 $ 6,232 $13,721 $ 1,178 $ 1,526 $16,425
===========================================================================================================================
AT DECEMBER 31, 1998
Unproved properties .......................... $ 390 $ 58 $ 235 $ 683 $ - $ 378 $ 1,061
Proved properties and related producing assets 16,759 3,672 6,253 26,684 1,015 629 28,328
Support equipment ............................ 472 182 307 961 768 232 1,961
Deferred exploratory wells ................... 51 51 91 193 - - 193
Other uncompleted projects ................... 700 893 383 1,976 408 245 2,629
- ---------------------------------------------------------------------------------------------------------------------------
GROSS CAPITALIZED COSTS ...................... 18,372 4,856 7,269 30,497 2,191 1,484 34,172
- ---------------------------------------------------------------------------------------------------------------------------
Unproved properties valuation ................ 151 49 110 310 - - 310
Proved producing properties -
Depreciation and depletion .................. 11,808 1,719 2,705 16,232 689 72 16,993
Future abandonment and restoration .......... 861 337 187 1,385 57 8 1,450
Support equipment depreciation ............... 315 90 127 532 373 67 972
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated provisions ....................... 13,135 2,195 3,129 18,459 1,119 147 19,725
- ---------------------------------------------------------------------------------------------------------------------------
NET CAPITALIZED COSTS ........................ $ 5,237 $ 2,661 $ 4,140 $12,038 $ 1,072 $ 1,337 $14,447
===========================================================================================================================
AT DECEMBER 31, 1997
Unproved properties .......................... $ 370 $ 58 $ 236 $ 664 $ - $ 378 $ 1,042
Proved properties and related producing assets 16,284 3,303 5,644 25,231 1,112 491 26,834
Support equipment ............................ 503 209 310 1,022 578 209 1,809
Deferred exploratory wells ................... 120 46 58 224 - - 224
Other uncompleted projects ................... 826 549 821 2,196 338 153 2,687
- ---------------------------------------------------------------------------------------------------------------------------
GROSS CAPITALIZED COSTS ...................... 18,103 4,165 7,069 29,337 2,028 1,231 32,596
- ---------------------------------------------------------------------------------------------------------------------------
Unproved properties valuation ................ 153 42 98 293 - - 293
Proved producing properties -
Depreciation and depletion .................. 11,657 1,459 2,521 15,637 626 51 16,314
Future abandonment and restoration .......... 926 304 177 1,407 44 6 1,457
Support equipment depreciation ............... 315 79 130 524 343 53 920
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated provisions ....................... 13,051 1,884 2,926 17,861 1,013 110 18,984
- ---------------------------------------------------------------------------------------------------------------------------
NET CAPITALIZED COSTS ........................ $ 5,052 $ 2,281 $ 4,143 $11,476 $ 1,015 $ 1,121 $13,612
===========================================================================================================================
</TABLE>
TABLE III - RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES (1)
The company's results of operations from oil and gas producing activities for
the years 1999, 1998 and 1997 are shown in the following table.
Net income from exploration and production activities as reported on page 10
reflects income taxes computed on an effective rate basis. In accordance with
SFAS No. 69, income taxes in Table III are based on statutory tax rates,
reflecting allowable deductions and tax credits. Interest income and expense is
excluded from the results reported in Table III and from the net income amounts
on page 10.
21
<PAGE>
<TABLE>
<CAPTION>
TABLE III - RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES (1) - Continued
Consolidated Companies Affiliated Companies
---------------------------------------- ----------------------
Millions of dollars U.S. Africa Other Iotal CPI TCO Worldwide
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Revenues from net production
Sales ................................... $ 1,449 $ 1,756 $ 1,415 $ 4,620 $ 24 $ 356 $ 5,000
Transfers ............................... 1,626 299 597 2,522 592 - 3,114
- --------------------------------------------------------------------------------------------------------------------------------
Total ......... 3,075 2,055 2,012 7,142 616 356 8,114
Production expenses ...................... (1,005) (340) (411) (1,756) (206) (88) (2,050)
Proved producing properties: depreciation,
depletion and abandonment provision ..... (764) (311) (433) (1,508) (109) (47) (1,664)
Exploration expenses ..................... (167) (97) (274) (538) (17) - (555)
Unproved properties valuation ............ (22) (5) (36) (63) - - (63)
Other income (expense)(2)................. (307) (53) 5 (355) (2) (9) (366)
- --------------------------------------------------------------------------------------------------------------------------------
Results before income taxes ............. 810 1,249 863 2,922 282 212 3,416
Income tax expense ....................... (275) (848) (416) (1,539) (143) (63) (1,745)
- --------------------------------------------------------------------------------------------------------------------------------
RESULTS OF PRODUCING OPERATIONS .......... $ 535 $ 401 $ 447 $ 1,383 $ 139 $ 149 $ 1,671
================================================================================================================================
YEAR ENDED DECEMBER 31, 1998
Revenues from net production
Sales ................................... $ 1,386 $ 1,118 $ 757 $ 3,261 $ 28 $ 176 $ 3,465
Transfers ............................... 1,185 212 458 1,855 454 - 2,309
- --------------------------------------------------------------------------------------------------------------------------------
Total ......... 2,571 1,330 1,215 5,116 482 176 5,774
Production expenses ...................... (1,172) (346) (304) (1,822) (153) (76) (2,051)
Proved producing properties: depreciation,
depletion and abandonment provision ..... (714) (301) (316) (1,331) (106) (40) (1,477)
Exploration expenses ..................... (213) (53) (212) (478) (16) - (494)
Unproved properties valuation ............ (20) (8) (16) (44) - - (44)
Other income (expense)(2)................. 96 48 85 229 2 (7) 224
- --------------------------------------------------------------------------------------------------------------------------------
Results before income taxes ............. 548 670 452 1,670 209 53 1,932
Income tax expense ....................... (178) (328) (323) (829) (102) (16) (947)
- --------------------------------------------------------------------------------------------------------------------------------
RESULTS OF PRODUCING OPERATIONS .......... $ 370 $ 342 $ 129 $ 841 $ 107 $ 37 $ 985
================================================================================================================================
YEAR ENDED DECEMBER 31, 1997
Revenues from net production
Sales ................................... $ 1,931 $ 1,782 $ 899 $ 4,612 $ 43 $ 283 $ 4,938
Transfers ............................... 1,799 273 656 2,728 634 - 3,362
- --------------------------------------------------------------------------------------------------------------------------------
Total ......... 3,730 2,055 1,555 7,340 677 283 8,300
Production expenses ...................... (1,272) (297) (278) (1,847) (197) (79) (2,123)
Proved producing properties: depreciation,
depletion and abandonment provision ..... (737) (256) (311) (1,304) (130) (37) (1,471)
Exploration expenses ..................... (227) (66) (200) (493) (16) - (509)
Unproved properties valuation ............ (16) (7) (10) (33) - - (33)
Other income (expense)(2)................. 87 (46) 196 237 10 (13) 234
- --------------------------------------------------------------------------------------------------------------------------------
Results before income taxes .............. 1,565 1,383 952 3,900 344 154 4,398
Income tax expense ...................... (555) (939) (365) (1,859) (173) (46) (2,078)
- --------------------------------------------------------------------------------------------------------------------------------
RESULTS OF PRODUCING OPERATIONS .......... $ 1,010 $ 444 $ 587 $ 2,041 $ 171 $ 108 $ 2,320
================================================================================================================================
<FN>
(1) The value of owned production consumed as fuel has been eliminated from
revenues and production expenses, and the related volumes have been deducted
from net production in calculating the unit average sales price and production
cost; this has no effect on the results of producing operations.
(2) Includes gas processing fees, net sulfur income, natural gas contract
settlements, currency transaction gains and losses, certain significant
impairment write-downs, miscellaneous expenses, etc. Also includes net income
from related oil and gas activities that do not have oil and gas reserves
attributed to them (e.g., equity earnings of Dynegy Inc., net income from
technical and operating service agreements).
</FN>
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
TABLE III - RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES (1),(2) - Continued
Consolidated Companies Affiliated Companies
--------------------------------- -------------------
Per-unit average sales price and production cost (1),(2) U.S. Africa Other Total CPI TCO Worldwide
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Average sales prices
Liquids, per barrel ................................... $15.73 $17.27 $17.69 $16.82 $13.40 $10.53 $15.90
Natural gas, per thousand cubic feet .................. 2.17 0.05 2.21 2.14 - 0.38 2.10
Average production costs, per barrel ................... 4.73 2.81 3.32 3.84 4.47 2.39 3.79
==============================================================================================================================
YEAR ENDED DECEMBER 31, 1998
Average sales prices
Liquids, per barrel ................................... $11.27 $11.49 $11.21 $11.34 $ 9.73 $ 5.53 $10.68
Natural gas, per thousand cubic feet .................. 2.02 .07 2.26 2.04 - .57 2.01
Average production costs, per barrel ................... 5.30 2.94 2.93 4.12 3.10 2.32 3.91
==============================================================================================================================
YEAR ENDED DECEMBER 31, 1997
Average sales prices
Liquids, per barrel ................................... $17.33 $18.15 $16.88 $17.53 $15.35 $10.69 $16.82
Natural gas, per thousand cubic feet .................. 2.42 - 2.35 2.40 - .51 2.35
Average production costs, per barrel ................... 5.47 2.61 2.89 4.17 4.48 2.78 4.22
==============================================================================================================================
Average sales price for liquids ($/Bbl)
December 1999 ......................................... $22.25 $24.88 $24.06 $23.68 $23.68 $11.55 $22.65
December 1998 ......................................... 8.86 9.55 9.04 9.17 8.33 3.69 8.58
December 1997 ......................................... 15.63 15.60 15.09 15.48 14.16 9.40 14.91
==============================================================================================================================
Average sales price for natural gas ($/MCF)
December 1999 ......................................... $ 2.20 $ 0.04 $ 2.41 $ 2.23 $ - $ 0.38 $ 2.18
December 1998 ......................................... 2.23 - 2.47 2.29 - .57 2.26
December 1997 ......................................... 2.25 - 2.76 2.31 - .63 2.26
==============================================================================================================================
<FN>
(1) The value of owned production consumed as fuel has been eliminated from
revenues and production expenses, and the related volumes have been deducted
from net production in calculating the unit average sales price and production
cost; this has no effect on the results of producing operations.
(2) Natural gas converted to crude oil equivalent gas (OEG) barrels at a rate of
6 MCF=1 OEG barrel.
</FN>
</TABLE>
TABLE IV - RESERVE QUANTITY INFORMATION
The company's estimated net proved underground oil and gas reserves and changes
thereto for the years 1999, 1998 and 1997 are shown in the following table.
Proved reserves are estimated by company asset teams composed of earth
scientists and reservoir engineers. These proved reserve estimates are reviewed
annually by the corporation's Reserves Advisory Committee to ensure that
rigorous professional standards and the reserves definitions prescribed by the
U.S. Securities and Exchange Commission are consistently applied throughout the
company.
Proved reserves are the estimated quantities that geologic and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions. Due to the
inherent uncertainties and the limited nature of reservoir data, estimates of
underground reserves are subject to change as additional information becomes
available.
Proved reserves do not include additional quantities recoverable beyond the term
of the lease or concession agreement that may result from extensions of
currently proved areas or from applying secondary or tertiary recovery processes
not yet tested and determined to be economic.
Proved developed reserves are the quantities expected to be recovered through
existing wells with existing equipment and operating methods.
"Net" reserves exclude royalties and interests owned by others and reflect
contractual arrangements and royalty obligations in effect at the time of the
estimate.
In June 1997, Chevron assumed operatorship under a risked service agreement for
Venezuela's Block LL-652, located in the northeast section of Lake Maracaibo.
Chevron is accounting for LL-652 as an oil and gas activity and, at December 31,
1999, had recorded 54 million barrels of proved crude oil reserves.
No reserve quantities have been recorded for the company's other service
agreement in Venezuela, which began in 1996, involving the Boscan Field.
23
<PAGE>
<TABLE>
<CAPTION>
TABLE IV - RESERVE QUANTITY INFORMATION - Continued
NET PROVED RESERVES OF CRUDE OIL, CONDENSATE NET PROVED RESERVES OF NATURAL GAS
AND NATURAL GAS LIQUIDS Millions of barrels Billions of cubic feet
-------------------------------------------------- --------------------------------------------------
Consolidated Companies Affiliates World- Consolidated Companies Affiliates World-
---------------------------- ----------- --------------------------- ------------
U.S. Africa Other Total CPI TCO wide U.S. Africa Other Total CPI TCO wide
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RESERVES AT
JANUARY 1, 1997 ........ 1,149 1,032 482 2,663 566 1,135 4,364 5,275 293 3,135 8,703 152 1,462 10,317
Changes attributable to:
Revisions ............. 8 (16) 38 30 37 92 159 (98) (67) 211 46 19 120 185
Improved recovery 139 72 7 218 27 - 245 111 - 1 112 5 - 117
Extensions
and discoveries .... 57 156 14 227 4 - 231 470 - 12 482 2 - 484
Purchases(1) .......... - - 51 51 - - 51 3 - 1 4 - - 4
Sales(2) .............. (32) - (1) (33) - (120) (153) (95) - (7) (102) - (156) (258)
Production ............. (125) (113) (72) (310) (56) (25) (391) (675) (3) (166) (844) (17) (25) (886)
- --------------------------------------------------------------------------------------------------------------------------------
RESERVES AT
DECEMBER 31, 1997 ...... 1,196 1,131 519 2,846 578 1,082 4,506 4,991 223 3,187 8,401 161 1,401 9,963
Changes attributable to:
Revisions (1) 106 28 133 110(3) 7 250 (151) 77 13 (61) 7 (17) (71)
Improved recovery 36 88 36 160 25 - 185 7 - - 7 12 - 19
Extensions
and discoveries 43 92 7 142 2 16 160 372 - 3 375 1 21 397
Purchases(1) 5 - 30 35 - - 35 32 - 5 37 - - 37
Sales(2) (12) - (22) (34) - - (34) (119) - (50) (169) - - (169)
Production (119) (117) (77) (313) (62) (30) (405) (635) (12) (175) (822) (30) (21) (873)
- --------------------------------------------------------------------------------------------------------------------------------
RESERVES AT
DECEMBER 31, 1998 1,148 1,300 521 2,969 653 1,075 4,697 4,497 288 2,983 7,768 151 1,384 9,303
Changes attributable to:
Revisions (23) 3 (24) (44) (98)(3) 115 (27) (426) 49 30 (347) 2 126 (219)
Improved recovery 44 62 20 126 30 - 156 7 - 8 15 1 - 16
Extensions
and discoveries 50 45 17 112 2 76 190 347 - 86 433 5 98 536
Purchases(1) 1 - 213 214 - - 214 35 - 372 407 - - 407
Sales(2) (33) - (2) (35) - - (35) (74) - - (74) - - (74)
Production (115) (120) (84) (319) (59) (33) (411) (598) (15) (248) (861) (25) (27) (913)
- --------------------------------------------------------------------------------------------------------------------------------
RESERVES AT
DECEMBER 31, 1999 1,072 1,290 661 3,023 528 1,233 4,784 3,788 322 3,231 7,341 134 1,581 9,056
================================================================================================================================
Developed reserves
- --------------------------------------------------------------------------------------------------------------------------------
At January 1, 1997 1,027 658 281 1,966 448 500 2,914 4,727 293 1,634 6,654 136 643 7,433
At December 31, 1997 1,025 721 293 2,039 435 532 3,006 4,391 223 1,695 6,309 145 688 7,142
At December 31, 1998 982 891 342 2,215 436 646 3,297 3,918 263 2,074 6,255 135 832 7,222
AT DECEMBER 31, 1999 905 940 489 2,334 340 790 3,464 3,345 272 2,243 5,860 131 1,011 7,002
================================================================================================================================
<FN>
(1) Includes reserves acquired through property exchanges.
(2) Includes reserves disposed of through property exchanges.
(3) Mainly includes crude reserves revisions associated with CPI's cost-recovery formula.
</FN>
</TABLE>
TABLE V - STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATED TO
PROVED OIL AND GAS RESERVES
The standardized measure of discounted future net cash flows, related to the
above proved oil and gas reserves, is calculated in accordance with the
requirements of SFAS No. 69. Estimated future cash inflows from production are
computed by applying year-end prices for oil and gas to year-end quantities of
estimated net proved reserves. Future price changes are limited to those
provided by contractual arrangements in existence at the end of each reporting
year. Future development and production costs are those estimated future
expenditures necessary to develop and produce year-end estimated proved reserves
based on year-end cost indices, assuming continuation of year-end economic
conditions. Estimated future income taxes are calculated by applying appropriate
year-end statutory tax rates. These rates reflect allowable deductions and tax
credits and are applied to estimated future pretax net cash flows, less the tax
basis of related assets. Discounted future net cash flows are calculated using
10 percent midperiod discount factors. Discounting requires a year-by-year
estimate of when future expenditures will be incurred and when reserves will be
produced.
The information provided does not represent management's estimate of the
company's expected future cash flows or value of proved oil and gas reserves.
Estimates of proved reserve quantities are imprecise and change over time as new
information becomes available. Moreover, probable and possible reserves, which
may become proved in the future, are excluded from the calculations. The
arbitrary valuation prescribed under SFAS No. 69 requires assumptions as to the
timing and amount of future development and production costs. The calculations
are made as of December 31 each year and should not be relied upon as an
indication of the company's future cash flows or value of its oil and gas
reserves.
24
<PAGE>
<TABLE>
<CAPTION>
TABLE V - STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATED TO PROVED OIL AND GAS RESERVES - Continued
Consolidated Companies Affiliated Companies
------------------------------------------------ ----------------------
Millions of dollars ................... U.S. Africa Other Total CPI TCO Worldwide
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1999
Future cash inflows from production ... $ 31,650 $ 31,830 $ 23,690 $ 87,170 $ 11,950 $ 24,380 $ 123,500
Future production and development costs (11,350) (6,030) (5,420) (22,800) (7,830) (4,900) (35,530)
Future income taxes ................... (7,050) (16,490) (6,200) (29,740) (1,820) (4,980) (36,540)
- ---------------------------------------------------------------------------------------------------------------------------------
Undiscounted future net cash flows .... 13,250 9,310 12,070 34,630 2,300 14,500 51,430
10 percent midyear annual discount for
timing of estimated cash flows ....... (5,480) (2,920) (4,590) (12,990) (900) (10,400) (24,290)
- ---------------------------------------------------------------------------------------------------------------------------------
STANDARDIZED MEASURE OF DISCOUNTED
FUTURE NET CASH FLOWS ................. $ 7,770 $ 6,390 $ 7,480 $ 21,640 $ 1,400 $ 4,100 $ 27,140
=================================================================================================================================
AT DECEMBER 31, 1998
Future cash inflows from production ... $ 19,810 $ 12,560 $ 13,010 $ 45,380 $ 6,020 $ 8,360 $ 59,760
Future production and development costs (12,940) (6,980) (4,930) (24,850) (4,470) (5,860) (35,180)
Future income taxes ................... (1,970) (2,110) (2,850) (6,930) (660) (200) (7,790)
- ---------------------------------------------------------------------------------------------------------------------------------
Undiscounted future net cash flows .... 4,900 3,470 5,230 13,600 890 2,300 16,790
10 percent midyear annual discount for
timing of estimated cash flows ....... (1,880) (1,070) (2,190) (5,140) (390) (1,990) (7,520)
- ---------------------------------------------------------------------------------------------------------------------------------
Standardized Measure of Discounted
Future Net Cash Flows ................ $ 3,020 $ 2,400 $ 3,040 $ 8,460 $ 500 $ 310 $ 9,270
=================================================================================================================================
AT DECEMBER 31, 1997
Future cash inflows from production ... $ 28,270 $ 16,560 $ 16,860 $ 61,690 $ 9,240 $ 10,890 $ 81,820
Future production and development costs (14,030) (4,810) (5,090) (23,930) (6,340) (6,550) (36,820)
Future income taxes ................... (4,710) (6,630) (4,330) (15,670) (1,390) (600) (17,660)
- ---------------------------------------------------------------------------------------------------------------------------------
Undiscounted future net cash flows .... 9,530 5,120 7,440 22,090 1,510 3,740 27,340
10 percent midyear annual discount for
timing of estimated cash flows ....... (3,910) (1,780) (3,290) (8,980) (650) (2,710) (12,340)
- ---------------------------------------------------------------------------------------------------------------------------------
Standardized Measure of Discounted
Future Net Cash Flows ................ $ 5,620 $ 3,340 $ 4,150 $ 13,110 $ 860 $ 1,030 $ 15,000
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
TABLE VI - CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS FROM PROVED RESERVES
Consolidated Companies Affiliated Companies Worldwide
------------------------------ -------------------------- --------------------------
Millions of dollars 1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRESENT VALUE AT JANUARY 1 $ 8,460 $13,110 $22,270 $ 810 $1,890 $2,850 $ 9,270 $15,000 $25,120
- ------------------------------------------------------------------------------------------------------------------------
Sales and transfers of oil and gas
produced, net of production costs (5,385) (3,294) (5,493) (679) (429) (684) (6,064) (3,723) (6,177)
Development costs incurred 1,425 1,652 1,908 330 276 311 1,755 1,928 2,219
Purchases of reserves 2,811 208 173 - - - 2,811 208 173
Sales of reserves (344) (347) (238) - - (140) (344) (347) (378)
Extensions, discoveries and improved
recovery, less related costs 2,886 813 2,161 385 49 104 3,271 862 2,265
Revisions of previous
quantity estimates (503) 262 535 84 280 980 (419) 542 1,515
Net changes in prices, development
and production costs 25,457 (11,321) (20,440) 6,938 (2,159) (3,521) 32,395 (13,480) (23,961)
Accretion of discount 1,165 2,096 3,673 135 289 516 1,300 2,385 4,189
Net change in income tax (14,332) 5,281 8,561 (2,503) 614 1,474 (16,835) 5,895 10,035
- ------------------------------------------------------------------------------------------------------------------------
Net change for the year 13,180 (4,650) (9,160) 4,690 (1,080) (960) 17,870 (5,730) (10,120)
- ------------------------------------------------------------------------------------------------------------------------
PRESENT VALUE AT DECEMBER 31 $21,640 $ 8,460 $13,110 $5,500 $ 810 $1,890 $27,140 $ 9,270 $15,000
========================================================================================================================
</TABLE>
The changes in present values between years, which can be significant, reflect
changes in estimated proved reserve quantities and prices and assumptions used
in forecasting production volumes and costs. Changes in the timing of production
are included with "Revisions of previous quantity estimates."
25
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY RESULTS AND STOCK MARKET DATA
- ---------------------------------------
Unaudited
1999 1998
-------------------------------------- ---------------------------------------
Millions of dollars, except per-share amounts 4TH Q 3RD Q 2ND Q 1ST Q 4TH Q 3RD Q 2ND Q 1ST Q
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Sales and other operating revenues (1) ...... $10,611 $ 9,965 $ 8,473 $ 6,399 $ 7,164 $ 7,561 $ 7,754 $ 7,464
Income (loss) from equity affiliates ........ 122 127 133 144 (66) 13 155 126
Other income ................................ 246 85 135 146 184 104 60 38
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES .............................. 10,979 10,177 8,741 6,689 7,282 7,678 7,969 7,628
- -------------------------------------------------------------------------------------------------------------------------------
COSTS AND OTHER DEDUCTIONS
Purchased crude oil and products,
operating and other expenses .............. 7,307 7,006 6,275 4,426 5,978 5,100 5,314 5,195
Depreciation, depletion and amortization .... 900 767 633 566 646 563 557 554
Taxes other than on income(1) ............... 1,184 1,181 1,143 1,078 1,115 1,145 1,140 1,011
Interest and debt expense ................... 138 116 113 105 109 103 99 94
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS AND OTHER DEDUCTIONS ............ 9,529 9,070 8,164 6,175 7,848 6,911 7,110 6,854
- -------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX .................... 1,450 1,107 577 514 (566) 767 859 774
INCOME TAX (CREDIT) EXPENSE ................. 641 525 227 185 (360) 306 282 267
- -------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) (2) ....................... $ 809 $ 582 $ 350 $ 329 $ (206) $ 461 $ 577 $ 507
===============================================================================================================================
NET INCOME (LOSS) PER SHARE - BASIC ......... $ 1.24 $ 0.88 $ 0.54 $ 0.50 $ (0.31) $ 0.70 $ 0.88 $ 0.78
- DILUTED ....... $ 1.23 $ 0.88 $ 0.53 $ 0.50 $ (0.31) $ 0.70 $ 0.88 $ 0.77
DIVIDENDS PAID PER SHARE .................... $ 0.65 $ 0.61 $ 0.61 $ 0.61 $ 0.61 $ 0.61 $ 0.61 $ 0.61
COMMON STOCK PRICE RANGE - HIGH ............. $96 15/16 $100 13/16 $104 15/16 $90 5/16 $89 7/16 $89 $86 13/16 $90 3/16
- LOW .............. $83 3/8 $85 9/16 $86 3/8 $73 1/8 $78 3/8 $73 $ 77 3/8 $67 3/4
===============================================================================================================================
<FN>
(1) Includes consumer excise taxes: $ 989 $ 1,023 $ 986 $ 912 $ 943 $ 973 $ 988 $ 852
(2) Special (charges) credits included
in Net Income (Loss): $ (10) $ (120) $ (134) $ 48 $ (709) $ 75 $ (43) $ 71
The company's common stock is listed on the New York Stock Exchange (trading
symbol: CHV), as well as on the Chicago, Pacific, London and Swiss stock
exchanges. It also is traded on the Boston, Cincinnati, Detroit and Philadelphia
stock exchanges. As of February 23, 2000, stockholders of record numbered
approximately 116,062.
There are no restrictions on the company's ability to pay dividends. Chevron has
made dividend payments to stockholders for 88 consecutive years.
</FN>
</TABLE>
26
<PAGE>
