“Operationally, we had an excellent quarter,” said Chairman and Chief executive Officer Dave O’Reilly, “with oil production and refinery inputs both higher than a year ago and operating expenses lower. However, upstream earnings declined sharply on lower prices for crude oil and natural gas. Downstream profits improved mainly on gains from asset sales, while margins on the sale of refined products recovered only slightly from a depressed level in last year’s first quarter.”
O’Reilly said production increases in the first quarter included volumes from start-up of deepwater projects last year at Agbami in Nigeria and Blind Faith in the US and from expansion activities completed in 2008 at Tengiz in Kazakhstan.
Deepwater production start-ups in 2009 are scheduled at 58 percent-owned Tahiti in the U.S. Gulf of Mexico, 31 percent-owned Tombua-Landana in Angola and 52% owned Frade in Brazil. Total maximum oil-equivalent production is estimated at 135,000 barrels per day from Tahiti by the end of 2009, while Tombua-Landana and Frade are expected to reach maximums of 100,000 barrels per day and 90,000 barrels per day, respectively, in 2011.
O’Reilly said operational successes in the first quarter of this year also included a deepwater oil discovery in the U.S. Gulf of Mexico at the 55 percent-owned Buckskin prospect and completion of an exploration and appraisal program for the Wheatstone and Iago field’s offshore northwest Australia. Chevron has a 100 percent interest in Wheatstone and a two-thirds interest in Iago. Resources from Wheatstone and Iago are expected to support the construction of a two-train LNG plant and domestic natural-gas plant.
Upstream – Exploration And Production
Worldwide oil-equivalent production was 2.66 million barrels per day in the first quarter 2009, up 64,000 barrels per day from the corresponding 2008 period. The increase was driven by the effect of production start-ups during 2008 and the impact of lower prices on cost-recovery and variable-royalty volumes in certain production contracts outside the US. Production quotas imposed by OPEC curtailed company production by about 50,000 barrels per day. At the end of the period, approximately 35,000 barrels per day of production remained offline in the Gulf of Mexico due to damage caused by hurricanes last September, with restoration of the volumes to occur as repairs to third-party pipelines and producing facilities are completed.
US upstream earnings of $21 million in the first quarter of 2009 were down $1.6 billion from the year-ago period on sharply lower prices for crude oil and natural gas and a decline in natural-gas production. The 2009 quarter also included about $100 million of write-offs associated with exploration activities.
The company’s average sales price per barrel of crude oil and natural gas liquids was $36 in the 2009 quarter, down $51 from a year earlier. The average price of natural gas of $4.14 per thousand cubic feet in 2009 was $3.41 lower.
Net oil-equivalent production of 671,000 barrels per day in the 2009 period was down 44,000. The lower volumes were mainly due to production shut in as a result of last year’s hurricanes and normal field declines. Partially offsetting these effects was an increase of 35,000 barrels per day between periods that was associated with the late-2008 start-up of the Blind Faith project in the Gulf of Mexico. The net liquids component of production was up about 1 percent to 441,000 barrels per day between periods. Net natural gas production of 1.38 billion cubic feet per day in the 2009 quarter declined 17 percent, with nearly half the decline associated with the hurricane effects.
International upstream earnings of $1.2 billion decreased $2.3 billion from the first quarter 2008 due mainly to lower prices for crude oil. A benefit between periods from higher sales volumes in various regions was largely offset by higher depreciation expenses. Foreign-exchange effects increased income by $33 million in the 2009 period but reduced earnings $167 million a year earlier.
The average sales price for crude oil and natural gas liquids in the 2009 quarter declined about $47 per barrel to $39. The price of natural gas decreased 62 cents to $4.21 per thousand cubic feet.
Net oil-equivalent production of 1.99 million barrels per day in the 2009 first quarter was 108,000 higher than a year ago. The increase included about 150,000 barrels per day of production associated with the mid-2008 start-up at Agbami in Nigeria and the expansion project at Tengiz in Kazakhstan. The impact of lower prices on cost-recovery volumes and other contractual provisions affecting Chevron’s share of production resulted in a net increase of about 50,000 barrels per day between periods. These effects were partially offset by OPEC-related curtailments of about 50,000 barrels per day and lower natural gas production in Thailand. The net liquids component of production increased about 10 percent from a year ago to 1.38 million barrels per day, while net natural gas production declined about 3 percent to 3.64 billion cubic feet per day.
