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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-00368
Chevron Corporation
(Exact name of registrant as specified in its charter)
|
| | | | |
Delaware | | 94-0890210 | | 6001 Bollinger Canyon Road, San Ramon, California 94583-2324 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | | (Address of principal executive offices) (Zip Code) |
Registrant’s telephone number, including area code: (925) 842-1000
NONE
(Former name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
| | | | | | | |
Large accelerated filer þ | | Accelerated filer o |
Non-accelerated filer o | | Smaller reporting company o |
| | Emerging growth company o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Securities registered pursuant to Section 12(b) of the Act:
|
| | | | |
Title of each class | | Trading Symbol | | Name of each exchange on which registered |
Common stock, par value $.75 per share | | CVX | | New York Stock Exchange, Inc. |
There were 1,904,726,061 shares of the Company's common stock outstanding on March 31, 2019.
TABLE OF CONTENTS
|
| | |
| | Page No. |
| | |
FINANCIAL INFORMATION |
| | |
| | |
| | |
| | |
| | |
| Consolidated Statement of Equity for the Three Months Ended March 31, 2019, and 2018 | |
| | 8-25 |
| | 26-37 |
| | |
| | |
OTHER INFORMATION |
| | |
| | |
| | |
Item 5. | Other Information | |
| | |
| |
CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION
FOR THE PURPOSE OF “SAFE HARBOR” PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This quarterly report on Form 10-Q of Chevron Corporation contains forward-looking statements relating to Chevron’s operations that are based on management’s current expectations, estimates and projections about the petroleum, chemicals and other energy-related industries. Words or phrases such as “anticipates,” “expects,” “intends,” “plans,” “targets,” “forecasts,” “projects,” “believes,” “seeks,” “schedules,” “estimates,” “positions,” “pursues,” “may,” “could,” “should,” “will,” “budgets,” “outlook,” “trends,” “guidance,” “focus,” “on schedule,” “on track,” “is slated,” “goals,” “objectives,” “strategies,” “opportunities,” “poised” and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond the company’s control and are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Unless legally required, Chevron undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Key factors that could cause actual results to differ materially from those projected in the forward-looking statements include, among others: changing crude oil and natural gas prices; changing refining, marketing and chemicals margins; the company's ability to realize anticipated cost savings and expenditure reductions; actions of competitors or regulators; timing of exploration expenses; timing of crude oil liftings; the competitiveness of alternate-energy sources or product substitutes; technological developments; the results of operations and financial condition of the company's suppliers, vendors, partners and equity affiliates, particularly during extended periods of low prices for crude oil and natural gas; the inability or failure of the company’s joint-venture partners to fund their share of operations and development activities; the potential failure to achieve expected net production from existing and future crude oil and natural gas development projects; potential delays in the development, construction or start-up of planned projects; the potential disruption or interruption of the company’s operations due to war, accidents, political events, civil unrest, severe weather, cyber threats and terrorist acts, crude oil production quotas or other actions that might be imposed by the Organization of Petroleum Exporting Countries, or other natural or human causes beyond the company's control; changing economic, regulatory and political environments in the various countries in which the company operates; general domestic and international economic and political conditions; the potential liability for remedial actions or assessments under existing or future environmental regulations and litigation; significant operational, investment or product changes required by existing or future environmental statutes and regulations, including international agreements and national or regional legislation and regulatory measures to limit or reduce greenhouse gas emissions; the potential liability resulting from pending or future litigation; the ability to successfully receive the requisite approvals and consummate the proposed acquisition of Anadarko Petroleum Corporation; the ability to successfully integrate the operations of Chevron and Anadarko and achieve the anticipated benefits from the transaction; the company’s other future acquisitions or dispositions of assets or shares or the delay or failure of such transactions to close based on required closing conditions; the potential for gains and losses from asset dispositions or impairments; government-mandated sales, divestitures, recapitalizations, industry-specific taxes, tariffs, sanctions, changes in fiscal terms or restrictions on scope of company operations; foreign currency movements compared with the U.S. dollar; material reductions in corporate liquidity and access to debt markets; the effects of changed accounting rules under generally accepted accounting principles promulgated by rule-setting bodies; the company's ability to identify and mitigate the risks and hazards inherent in operating in the global energy industry; and the factors set forth under the heading “Risk Factors” on pages 18 through 21 of the company’s 2018 Annual Report on Form 10-K and in other filings with the U.S. Securities and Exchange Commission. Other unpredictable or unknown factors not discussed in this report could also have material adverse effects on forward-looking statements.
PART I.
FINANCIAL INFORMATION
| |
Item 1. | Consolidated Financial Statements |
CHEVRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
|
| | | | | | | |
| Three Months Ended March 31 |
| 2019 | | 2018 |
| (Millions of dollars, except per-share amounts) |
Revenues and Other Income | |
Sales and other operating revenues | $ | 34,189 |
| | $ | 35,968 |
|
Income from equity affiliates | 1,062 |
| | 1,637 |
|
Other income (loss) | (51 | ) | | 159 |
|
Total Revenues and Other Income | 35,200 |
| | 37,764 |
|
Costs and Other Deductions | | | |
Purchased crude oil and products | 19,703 |
| | 21,233 |
|
Operating expenses | 4,886 |
| | 4,701 |
|
Selling, general and administrative expenses | 984 |
| | 723 |
|
Exploration expenses | 189 |
| | 158 |
|
Depreciation, depletion and amortization | 4,094 |
| | 4,289 |
|
Taxes other than on income | 1,061 |
| | 1,344 |
|
Interest and debt expense | 225 |
| | 159 |
|
Other components of net periodic benefit costs | 101 |
| | 84 |
|
Total Costs and Other Deductions | 31,243 |
| | 32,691 |
|
Income Before Income Tax Expense | 3,957 |
| | 5,073 |
|
Income Tax Expense | 1,315 |
| | 1,414 |
|
Net Income | 2,642 |
| | 3,659 |
|
Less: Net income (loss) attributable to noncontrolling interests | (7 | ) | | 21 |
|
Net Income Attributable to Chevron Corporation | $ | 2,649 |
| | $ | 3,638 |
|
Per Share of Common Stock: | | | |
Net Income Attributable to Chevron Corporation | | | |
— Basic | $ | 1.40 |
| | $ | 1.92 |
|
— Diluted | $ | 1.39 |
| | $ | 1.90 |
|
Weighted Average Number of Shares Outstanding (000s) | | | |
— Basic | 1,888,002 |
| | 1,895,990 |
|
— Diluted | 1,900,748 |
| | 1,913,218 |
|
| | | |
|
| | |
See accompanying notes to consolidated financial statements.
3
CHEVRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
|
| | | | | | | |
| Three Months Ended March 31 |
| 2019 | | 2018 |
| (Millions of dollars) |
Net Income | $ | 2,642 |
| | $ | 3,659 |
|
Currency translation adjustment | (4 | ) | | 10 |
|
Unrealized holding gain (loss) on securities: | | | |
Net gain (loss) arising during period | (1 | ) | | (1 | ) |
Defined benefit plans: | | | |
Actuarial gain (loss): | | | |
Amortization to net income of net actuarial and settlement losses | 125 |
| | 157 |
|
Actuarial gain (loss) arising during period | (3 | ) | | (1 | ) |
Prior service cost: | | | |
Amortization to net income of net prior service costs (credits) | (4 | ) | | (4 | ) |
Defined benefit plans sponsored by equity affiliates | 2 |
| | 8 |
|
Income tax expense on defined benefit plans | (30 | ) | | (39 | ) |
Total | 90 |
| | 121 |
|
Other Comprehensive Gain, Net of Tax | 85 |
| | 130 |
|
Comprehensive Income | 2,727 |
| | 3,789 |
|
Comprehensive loss (income) attributable to noncontrolling interests | 7 |
| | (21 | ) |
Comprehensive Income Attributable to Chevron Corporation | $ | 2,734 |
| | $ | 3,768 |
|
See accompanying notes to consolidated financial statements.
4
CHEVRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
|
| | | | | | | | |
| | At March 31 2019 | | At December 31 2018 |
| | (Millions of dollars) |
ASSETS |
Cash and cash equivalents | | $ | 8,699 |
| | $ | 9,342 |
|
Time deposits | | — |
| | 950 |
|
Marketable securities | | 56 |
| | 53 |
|
Accounts and notes receivable, net | | 14,928 |
| | 15,050 |
|
Inventories | | | | |
Crude oil and petroleum products | | 4,481 |
| | 3,383 |
|
Chemicals | | 488 |
| | 487 |
|
Materials, supplies and other | | 1,754 |
| | 1,834 |
|
Total inventories | | 6,723 |
| | 5,704 |
|
Prepaid expenses and other current assets | | 3,265 |
| | 2,922 |
|
Total Current Assets | | 33,671 |
| | 34,021 |
|
Long-term receivables, net | | 2,019 |
| | 1,942 |
|
Investments and advances | | 36,360 |
| | 35,546 |
|
Properties, plant and equipment, at cost | | 336,701 |
| | 340,244 |
|
Less: Accumulated depreciation, depletion and amortization | | 169,969 |
| | 171,037 |
|
Properties, plant and equipment, net | | 166,732 |
| | 169,207 |
|
Deferred charges and other assets | | 10,866 |
| | 6,766 |
|
Goodwill | | 4,507 |
| | 4,518 |
|
Assets held for sale | | 2,654 |
| | 1,863 |
|
Total Assets | | $ | 256,809 |
| | $ | 253,863 |
|
LIABILITIES AND EQUITY |
Short-term debt | | $ | 7,023 |
| | $ | 5,726 |
|
Accounts payable | | 14,230 |
| | 13,953 |
|
Accrued liabilities | | 5,880 |
| | 4,927 |
|
Federal and other taxes on income | | 1,971 |
| | 1,628 |
|
Other taxes payable | | 847 |
| | 937 |
|
Total Current Liabilities | | 29,951 |
| | 27,171 |
|
Long-term debt | | 26,064 |
| | 28,733 |
|
Deferred credits and other noncurrent obligations | | 22,197 |
| | 19,742 |
|
Noncurrent deferred income taxes | | 16,099 |
| | 15,921 |
|
Noncurrent employee benefit plans | | 6,380 |
| | 6,654 |
|
Total Liabilities* | | 100,691 |
| | 98,221 |
|
Preferred stock (authorized 100,000,000 shares, $1.00 par value, none issued) | | — |
| | — |
|
Common stock (authorized 6,000,000,000 shares; $0.75 par value; 2,442,676,580 shares issued at March 31, 2019, and December 31, 2018) | | 1,832 |
| | 1,832 |
|
Capital in excess of par value | | 17,146 |
| | 17,112 |
|
Retained earnings | | 181,387 |
| | 180,987 |
|
Accumulated other comprehensive loss | | (3,459 | ) | | (3,544 | ) |
Deferred compensation and benefit plan trust | | (240 | ) | | (240 | ) |
Treasury stock, at cost (537,950,519 and 539,838,890 shares at March 31, 2019, and December 31, 2018, respectively) | | (41,621 | ) | | (41,593 | ) |
Total Chevron Corporation Stockholders’ Equity | | 155,045 |
| | 154,554 |
|
Noncontrolling interests | | 1,073 |
| | 1,088 |
|
Total Equity | | 156,118 |
| | 155,642 |
|
Total Liabilities and Equity | | $ | 256,809 |
| | $ | 253,863 |
|
___________________________ | | | | |
* Refer to Note 13, "Other Contingencies and Commitments" beginning on page 21. |
See accompanying notes to consolidated financial statements.
5
CHEVRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
|
| | | | | | | |
| Three Months Ended March 31 |
| 2019 | | 2018 |
| (Millions of dollars) |
Operating Activities | | | |
Net Income (Loss) | $ | 2,642 |
| | $ | 3,659 |
|
Adjustments | | | |
Depreciation, depletion and amortization | 4,094 |
| | 4,289 |
|
Dry hole expense | 86 |
| | 45 |
|
Distributions less than income from equity affiliates | (513 | ) | | (998 | ) |
Net before-tax loss (gain) on asset retirements and sales | 80 |
| | (12 | ) |
Net foreign currency effects | 141 |
| | 63 |
|
Deferred income tax provision | 73 |
| | 383 |
|
Net decrease (increase) in operating working capital | (1,210 | ) | | (2,104 | ) |
Decrease (increase) in long-term receivables | 66 |
| | 128 |
|
Net decrease (increase) in other deferred charges | (62 | ) | | (12 | ) |
Cash contributions to employee pension plans | (326 | ) | | (149 | ) |
Other | (14 | ) | | (249 | ) |
Net Cash Provided by Operating Activities | 5,057 |
| | 5,043 |
|
Investing Activities | | | |
Capital expenditures | (2,953 | ) | | (2,997 | ) |
Proceeds and deposits related to asset sales and returns of investment | 294 |
| | 111 |
|
Net maturities of (investments in) time deposits | 950 |
| | — |
|
Net sales (purchases) of marketable securities | 2 |
| | (29 | ) |
Net repayment (borrowing) of loans by equity affiliates | (321 | ) | | 26 |
|
Net Cash Used for Investing Activities | (2,028 | ) | | (2,889 | ) |
Financing Activities | | | |
Net borrowings (repayments) of short-term obligations | 936 |
| | 3,214 |
|
Proceeds from issuance of long-term debt | — |
| | 73 |
|
Repayments of long-term debt and other financing obligations | (2,506 | ) | | (2,331 | ) |
Cash dividends — common stock | (2,244 | ) | | (2,124 | ) |
Distributions to noncontrolling interests | (6 | ) | | (11 | ) |
Net sales (purchases) of treasury shares | (15 | ) | | 566 |
|
Net Cash Used for Financing Activities | (3,835 | ) | | (613 | ) |
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | 20 |
| | 33 |
|
Net Change in Cash, Cash Equivalents and Restricted Cash | (786 | ) | | 1,574 |
|
Cash, Cash Equivalents and Restricted Cash at January 1 | 10,481 |
| | 5,943 |
|
Cash, Cash Equivalents and Restricted Cash at March 31 | $ | 9,695 |
| | $ | 7,517 |
|
| | | |
See accompanying notes to consolidated financial statements.
6
CHEVRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EQUITY
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | |
| | | Accumulated | Treasury | Chevron Corp. | Non- | |
| Common | Retained | Other Comp. | Stock | Stockholders' | Controlling | Total |
(Millions of dollars) | Stock(1) | Earnings | Income (Loss) | (at cost) | Equity | Interests | Equity |
Balance at December 31, 2017 | $ | 18,440 |
| $ | 174,106 |
| $ | (3,589 | ) | $ | (40,833 | ) | $ | 148,124 |
| $ | 1,195 |
| $ | 149,319 |
|
Treasury stock transactions | 115 |
| — |
| — |
| — |
| 115 |
| — |
| 115 |
|
Net income (loss) | — |
| 3,638 |
| — |
| — |
| 3,638 |
| 21 |
| 3,659 |
|
Cash dividends | — |
| (2,124 | ) | — |
| — |
| (2,124 | ) | (11 | ) | (2,135 | ) |
Stock dividends | — |
| (1 | ) | — |
| — |
| (1 | ) | — |
| (1 | ) |
Other comprehensive income | — |
| — |
| 130 |
| — |
| 130 |
| — |
| 130 |
|
Purchases of treasury shares | — |
| — |
| — |
| (1 | ) | (1 | ) | — |
| (1 | ) |
Issuances of treasury shares | — |
| — |
| — |
| 475 |
| 475 |
| — |
| 475 |
|
Other changes, net | — |
| — |
| — |
| — |
| — |
| 5 |
| 5 |
|
Balance at March 31, 2018 | $ | 18,555 |
| $ | 175,619 |
| $ | (3,459 | ) | $ | (40,359 | ) | $ | 150,356 |
| $ | 1,210 |
| $ | 151,566 |
|
| | | | | | | |
Balance at December 31, 2018 | $ | 18,704 |
| $ | 180,987 |
| $ | (3,544 | ) | $ | (41,593 | ) | $ | 154,554 |
| $ | 1,088 |
| $ | 155,642 |
|
Treasury stock transactions | 34 |
| — |
| — |
| — |
| 34 |
| — |
| 34 |
|
Net income (loss) | — |
| 2,649 |
| — |
| — |
| 2,649 |
| (7 | ) | 2,642 |
|
Cash dividends | — |
| (2,244 | ) | — |
| — |
| (2,244 | ) | (6 | ) | (2,250 | ) |
Stock dividends | — |
| (1 | ) | — |
| — |
| (1 | ) | — |
| (1 | ) |
Other comprehensive income | — |
| — |
| 85 |
| — |
| 85 |
| — |
| 85 |
|
Purchases of treasury shares | — |
| — |
| — |
| (538 | ) | (538 | ) | — |
| (538 | ) |
Issuances of treasury shares | — |
| — |
| — |
| 510 |
| 510 |
| — |
| 510 |
|
Other changes, net | — |
| (4 | ) | — |
| — |
| (4 | ) | (2 | ) | (6 | ) |
Balance at March 31, 2019 | $ | 18,738 |
| $ | 181,387 |
| $ | (3,459 | ) | $ | (41,621 | ) | $ | 155,045 |
| $ | 1,073 |
| $ | 156,118 |
|
| | | | | | | |
| Common Stock - 2019 | | Common Stock - 2018 |
(Thousands of shares) | Issued(2) |
| Treasury |
| Outstanding |
| | Issued(2) |
| Treasury |
| Outstanding |
|
Balance at December 31 | 2,442,677 |
| (539,839 | ) | 1,902,838 |
| | 2,442,677 |
| (537,975 | ) | 1,904,702 |
|
Purchases | — |
| (4,711 | ) | (4,711 | ) | | — |
| (7 | ) | (7 | ) |
Issuances | — |
| 6,599 |
| 6,599 |
| | — |
| 6,262 |
| 6,262 |
|
Balance at March 31 | 2,442,677 |
| (537,951 | ) | 1,904,726 |
| | 2,442,677 |
| (531,720 | ) | 1,910,957 |
|
_________________________________________________
See accompanying notes to consolidated financial statements.
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Interim Financial Statements
The accompanying consolidated financial statements of Chevron Corporation and its subsidiaries (together, Chevron or the company) have not been audited by an independent registered public accounting firm. In the opinion of the company’s management, the interim data includes all adjustments necessary for a fair statement of the results for the interim periods. These adjustments were of a normal recurring nature. The results for the three-month period ended March 31, 2019, are not necessarily indicative of future financial results. The term “earnings” is defined as net income attributable to Chevron.
Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the company’s 2018 Annual Report on Form 10-K.
Note 2. Changes in Accumulated Other Comprehensive Losses
The change in Accumulated Other Comprehensive Losses (AOCL) presented on the Consolidated Balance Sheet and the impact of significant amounts reclassified from AOCL on information presented in the Consolidated Statement of Income for the three months ended March 31, 2019 and 2018 are reflected in the table below.
Changes in Accumulated Other Comprehensive Income (Loss) by Component(1)
|
| | | | | | | | | | | | | | | | | | | | |
| | |
(Millions of dollars) | | Currency Translation Adjustment | | Unrealized Holding Gains (Losses) on Securities | | Derivatives | | Defined Benefit Plans | | Total |
Balance at December 31, 2017 | | $ | (105 | ) | | $ | (5 | ) | | $ | (2 | ) | | $ | (3,477 | ) | | $ | (3,589 | ) |
Components of Other Comprehensive Income (Loss): | | | | | | |
Before Reclassifications | | 10 |
| | (1 | ) | | — |
| | 5 |
| | 14 |
|
Reclassifications | | — |
| | — |
| | — |
| | 116 |
| | 116 |
|
Net Other Comprehensive Income (Loss) | | 10 |
| | (1 | ) | | — |
| | 121 |
| | 130 |
|
Balance at March 31, 2018 | | $ | (95 | ) | | $ | (6 | ) | | $ | (2 | ) | | $ | (3,356 | ) | | $ | (3,459 | ) |
| | | | | | | | | | |
Balance at December 31, 2018 | | $ | (124 | ) | | $ | (10 | ) | | $ | (2 | ) | | $ | (3,408 | ) | | $ | (3,544 | ) |
Components of Other Comprehensive Income (Loss): | | | | | | |
Before Reclassifications | | (4 | ) | | (1 | ) | | — |
| | (4 | ) | | (9 | ) |
Reclassifications(2) | | — |
| | — |
| | — |
| | 94 |
| | 94 |
|
Net Other Comprehensive Income (Loss) | | (4 | ) | | (1 | ) | | — |
| | 90 |
| | 85 |
|
Balance at March 31, 2019 | | $ | (128 | ) | | $ | (11 | ) | | $ | (2 | ) | | $ | (3,318 | ) | | $ | (3,459 | ) |
_______________________________
| |
(1) | All amounts are net of tax. |
| |
(2) | Refer to Note 9, Employee Benefits for reclassified components totaling $121 million that are included in employee benefit costs for the three months ended March 31, 2019. Related income taxes for the same period, totaling $27 million, are reflected in "Income Tax Expense" on the Consolidated Statement of Income. All other reclassified amounts were insignificant. |
Note 3. New Accounting Standards
Leases (Topic 842) Effective January 1, 2019, Chevron adopted Accounting Standards Update (ASU) 2016-02 and its related amendments. For additional information on the company's leases, refer to Note 10 beginning on page 14.
Financial Instruments - Credit Losses (Topic 326) In June 2016, the FASB issued ASU 2016-13, which becomes effective for the company beginning January 1, 2020. The standard requires companies to use forward-looking information to calculate credit loss estimates. The company is evaluating the effect of the standard on its consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 4. Information Relating to the Consolidated Statement of Cash Flows
|
| | | | | | | |
| Three Months Ended March 31 |
(Millions of dollars) | 2019 |
| | 2018 |
|
Net decrease (increase) in operating working capital was composed of the following: |
Decrease (increase) in accounts and notes receivable | $ | 473 |
| | $ | (335 | ) |
Decrease (increase) in inventories | (1,098 | ) | | (543 | ) |
Decrease (increase) in prepaid expenses and other current assets | (667 | ) | | (608 | ) |
Increase (decrease) in accounts payable and accrued liabilities | (160 | ) | | (807 | ) |
Increase (decrease) in income and other taxes payable | 242 |
| | 189 |
|
Net decrease (increase) in operating working capital | $ | (1,210 | ) | | $ | (2,104 | ) |
Net cash provided by operating activities includes the following cash payments: |
Interest on debt (net of capitalized interest) | $ | 186 |
| | $ | 105 |
|
Income taxes | 757 |
| | 843 |
|
Proceeds and deposits related to asset sales and returns of investment consisted of the following gross amounts: |
Proceeds and deposits related to asset sales | $ | 276 |
| | $ | 31 |
|
Returns of investment from equity affiliates | 18 |
| | 80 |
|
Proceeds and deposits related to asset sales and returns of investment | $ | 294 |
| | $ | 111 |
|
Net maturities of (investments in) time deposits consisted of the following gross amounts: |
Investments in time deposits | $ | — |
| | $ | — |
|
Maturities of time deposits | 950 |
| | — |
|
Net maturities of (investments in) time deposits | $ | 950 |
| | $ | — |
|
Net sales (purchases) of marketable securities consisted of the following gross amounts: |
Marketable securities purchased | $ | (1 | ) | | $ | (29 | ) |
Marketable securities sold | 3 |
| | — |
|
Net sales (purchases) of marketable securities | $ | 2 |
| | $ | (29 | ) |
Net repayment (borrowing) of loans by equity affiliates consisted of the following gross amounts: |
Borrowing of loans by equity affiliates | $ | (350 | ) | | $ | — |
|
Repayment of loans by equity affiliates | 29 |
| | 26 |
|
Net repayment (borrowing) of loans by equity affiliates | $ | (321 | ) | | $ | 26 |
|
Net borrowings (repayments) of short-term obligations consisted of the following gross and net amounts: |
Proceeds from issuances of short-term obligations | $ | 359 |
| | $ | 658 |
|
Repayments of short-term obligations | (134 | ) | | (1,377 | ) |
Net borrowings (repayments) of short-term obligations with three months or less maturity | 711 |
| | 3,933 |
|
Net borrowings (repayments) of short-term obligations | $ | 936 |
| | $ | 3,214 |
|
| | | |
The Consolidated Statement of Cash Flows excludes changes to the Consolidated Balance Sheet that did not affect cash.
"Other" includes changes in postretirement benefits obligations and other long-term liabilities.
The “Net sales (purchases) of treasury shares” represents the cost of common shares acquired less the cost of shares issued for share-based compensation plans. Purchases totaled $538 million for the first three months in 2019 and $1 million for the first three months in 2018. During the first three months in 2019, the company purchased 4.7 million shares under its share repurchase program for $537 million. No purchases were made under the company's share repurchase program in the first three months of 2018.
The company paid dividends of $1.19 per share of common stock in first quarter 2019. This compares to dividends of $1.12 per share paid in the corresponding year-ago period.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The major components of “Capital expenditures” and the reconciliation of this amount to the reported capital and exploratory expenditures, including equity affiliates, are presented in the following table:
|
| | | | | | | |
| Three Months Ended March 31 |
(Millions of dollars) | 2019 |
| | 2018 |
|
Additions to properties, plant and equipment | $ | 2,865 |
| | $ | 2,937 |
|
Additions to investments | 14 |
| | 15 |
|
Current-year dry hole expenditures | 74 |
| | 45 |
|
Payments for other liabilities and assets, net | — |
| | — |
|
Capital expenditures | 2,953 |
| | 2,997 |
|
Expensed exploration expenditures | 103 |
| | 113 |
|
Assets acquired through finance lease obligations and other financing obligations | 146 |
| | — |
|
Capital and exploratory expenditures, excluding equity affiliates | 3,202 |
| | 3,110 |
|
Company's share of expenditures by equity affiliates | 1,532 |
| | 1,295 |
|
Capital and exploratory expenditures, including equity affiliates | $ | 4,734 |
| | $ | 4,405 |
|
The table below quantifies the beginning and ending balances of restricted cash and restricted cash equivalents in the Consolidated Balance Sheet:
|
| | | | | | | | | | | | | | | |
| At March 31 | | At December 31 |
| 2019 | | 2018 | | 2018 | | 2017 |
| (Millions of dollars) | | (Millions of dollars) |
Cash and Cash Equivalents | $ | 8,699 |
| | $ | 6,466 |
| | $ | 9,342 |
| | $ | 4,813 |
|
Restricted cash included in "Prepaid expenses and other current assets" | 195 |
| | 316 |
| | 341 |
| | 405 |
|
Restricted cash included in "Deferred charges and other assets" | 801 |
| | 735 |
| | 798 |
| | 725 |
|
Total Cash, Cash Equivalents and Restricted Cash | $ | 9,695 |
| | $ | 7,517 |
| | $ | 10,481 |
| | $ | 5,943 |
|
Additional information related to "Restricted Cash" is included on page 23 in Note 14 under the heading "Restricted Cash."
Note 5. Assets Held For Sale
At March 31, 2019, the company classified $2.65 billion of net properties, plant and equipment as “Assets held for sale” on the Consolidated Balance Sheet. These assets are primarily associated with upstream operations that are anticipated to be sold in the next 12 months. The revenues and earnings contributions of these assets in 2018 and the first three months of 2019 were not material.
Note 6. Summarized Financial Data — Tengizchevroil LLP
Chevron has a 50 percent equity ownership interest in Tengizchevroil LLP (TCO). Summarized financial information for 100 percent of TCO is presented in the following table:
|
| | | | | | | |
| Three Months Ended March 31 |
| 2019 | | 2018 |
| (Millions of dollars) |
Sales and other operating revenues | $ | 4,107 |
| | $ | 4,325 |
|
Costs and other deductions | 2,002 |
| | 1,942 |
|
Net income attributable to TCO | 1,481 |
| | 1,679 |
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 7. Summarized Financial Data — Chevron U.S.A. Inc.
Chevron U.S.A. Inc. (CUSA) is a major subsidiary of Chevron Corporation. CUSA and its subsidiaries manage and operate most of Chevron’s U.S. businesses. Assets include those related to the exploration and production of crude oil, natural gas and natural gas liquids and those associated with refining, marketing, and supply and distribution of products derived from petroleum, excluding most of the regulated pipeline operations of Chevron. CUSA also holds the company’s investment in the Chevron Phillips Chemical Company LLC joint venture, which is accounted for using the equity method.
The summarized financial information for CUSA and its consolidated subsidiaries is as follows:
|
| | | | | | | |
| Three Months Ended March 31 |
| 2019 | | 2018 |
| (Millions of dollars) |
Sales and other operating revenues | $ | 25,942 |
| | $ | 28,058 |
|
Costs and other deductions | 25,757 |
| | 27,596 |
|
Net income attributable to CUSA | 181 |
| | 697 |
|
| | | |
|
| | | | | | | |
| At March 31 2019 | | At December 31 2018 |
| (Millions of dollars) |
Current assets | $ | 14,910 |
| | $ | 12,819 |
|
Other assets | 58,896 |
| | 55,814 |
|
Current liabilities | 19,980 |
| | 16,376 |
|
Other liabilities | 14,763 |
| | 12,906 |
|
Total CUSA net equity | $ | 39,063 |
| | $ | 39,351 |
|
Memo: Total debt | $ | 3,192 |
| | $ | 3,049 |
|
Note 8. Operating Segments and Geographic Data
Although each subsidiary of Chevron is responsible for its own affairs, Chevron Corporation manages its investments in these subsidiaries and their affiliates. The investments are grouped into two business segments, Upstream and Downstream, representing the company’s “reportable segments” and “operating segments.” Upstream operations consist primarily of exploring for, developing and producing crude oil and natural gas; liquefaction, transportation and regasification associated with liquefied natural gas (LNG); transporting crude oil by major international oil export pipelines; processing, transporting, storage and marketing of natural gas; and a gas-to-liquids plant. Downstream operations consist primarily of refining of crude oil into petroleum products; marketing of crude oil and refined products; transporting of crude oil and refined products by pipeline, marine vessel, motor equipment and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives. All Other activities of the company include worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities and technology companies.
The company’s segments are managed by “segment managers” who report to the “chief operating decision maker” (CODM). The segments represent components of the company that engage in activities (a) from which revenues are earned and expenses are incurred; (b) whose operating results are regularly reviewed by the CODM, which makes decisions about resources to be allocated to the segments and assesses their performance; and (c) for which discrete financial information is available.
The company’s primary country of operation is the United States of America, its country of domicile. Other components of the company’s operations are reported as “International” (outside the United States).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 company on a worldwide basis. Corporate administrative costs and assets are not allocated to the operating segments. However, operating segments are billed for the direct use of corporate services. Nonbillable costs remain at the corporate level in “All Other.” Earnings by major operating area for the three-month periods ended March 31, 2019 and 2018, are presented in the following table:
|
| | | | | | | |
| Three Months Ended March 31 |
Segment Earnings | 2019 | | 2018 |
| (Millions of dollars) |
Upstream | | | |
United States | $ | 748 |
| | $ | 648 |
|
International | 2,375 |
| | 2,704 |
|
Total Upstream | 3,123 |
| | 3,352 |
|
Downstream | | | |
United States | 217 |
| | 442 |
|
International | 35 |
| | 286 |
|
Total Downstream | 252 |
| | 728 |
|
Total Segment Earnings | 3,375 |
| | 4,080 |
|
All Other | | | |
Interest expense | (214 | ) | | (149 | ) |
Interest income | 50 |
| | 19 |
|
Other | (562 | ) | | (312 | ) |
Net Income Attributable to Chevron Corporation | $ | 2,649 |
| | $ | 3,638 |
|
Segment Assets Segment assets do not include intercompany investments or intercompany receivables. “All Other” assets consist primarily of worldwide cash, cash equivalents, time deposits and marketable securities; real estate; information systems; technology companies; and assets of the corporate administrative functions. Segment assets at March 31, 2019, and December 31, 2018, are as follows:
|
| | | | | | | |
Segment Assets | At March 31 2019 | | At December 31 2018 |
| (Millions of dollars) |
Upstream | | | |
United States | $ | 44,772 |
| | $ | 42,594 |
|
International | 152,615 |
| | 153,861 |
|
Goodwill | 4,507 |
| | 4,518 |
|
Total Upstream | 201,894 |
| | 200,973 |
|
Downstream | | | |
United States | 25,358 |
| | 23,866 |
|
International | 17,401 |
| | 15,622 |
|
Total Downstream | 42,759 |
| | 39,488 |
|
Total Segment Assets | 244,653 |
| | 240,461 |
|
All Other | | | |
United States | 5,108 |
| | 5,100 |
|
International | 7,048 |
| | 8,302 |
|
Total All Other | 12,156 |
| | 13,402 |
|
Total Assets — United States | 75,238 |
| | 71,560 |
|
Total Assets — International | 177,064 |
| | 177,785 |
|
Goodwill | 4,507 |
| | 4,518 |
|
Total Assets | $ | 256,809 |
| | $ | 253,863 |
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Segment Sales and Other Operating Revenues Segment sales and other operating revenues, including internal transfers, for the three-month periods ended March 31, 2019 and 2018, are presented in the following table. Products are transferred between operating segments at internal product values that approximate market prices. Revenues for the upstream segment are derived primarily from the production and sale of crude oil and natural gas, as well as the sale of third-party production of natural gas. Revenues for the downstream segment are derived from the refining and marketing of petroleum products such as gasoline, jet fuel, gas oils, lubricants, residual fuel oils and other products derived from crude oil. This segment also generates revenues from the manufacture and sale of fuel and lubricant additives and the transportation and trading of refined products and crude oil. “All Other” activities include revenues from insurance operations, real estate activities and technology companies.
|
| | | | | | | |
| Three Months Ended March 31 |
Sales and Other Operating Revenues | 2019 | | 2018 |
| (Millions of dollars) |
Upstream | | | |
United States | $ | 5,882 |
| | $ | 4,577 |
|
International | 9,369 |
| | 8,656 |
|
Subtotal | 15,251 |
| | 13,233 |
|
Intersegment Elimination — United States | (3,519 | ) | | (2,757 | ) |
Intersegment Elimination — International | (3,292 | ) | | (3,215 | ) |
Total Upstream | 8,440 |
| | 7,261 |
|
Downstream | | | |
United States | 12,388 |
| | 13,042 |
|
International | 14,507 |
| | 15,935 |
|
Subtotal | 26,895 |
| | 28,977 |
|
Intersegment Elimination — United States | (947 | ) | | (3 | ) |
Intersegment Elimination — International | (265 | ) | | (328 | ) |
Total Downstream | 25,683 |
| | 28,646 |
|
All Other | | | |
United States | 222 |
| | 227 |
|
International | 2 |
| | 3 |
|
Subtotal | 224 |
| | 230 |
|
Intersegment Elimination — United States | (156 | ) | | (166 | ) |
Intersegment Elimination — International | (2 | ) | | (3 | ) |
Total All Other | 66 |
| | 61 |
|
Sales and Other Operating Revenues | | | |
United States | 18,492 |
| | 17,846 |
|
International | 23,878 |
| | 24,594 |
|
Subtotal | 42,370 |
| | 42,440 |
|
Intersegment Elimination — United States | (4,622 | ) | | (2,926 | ) |
Intersegment Elimination — International | (3,559 | ) | | (3,546 | ) |
Total Sales and Other Operating Revenues | $ | 34,189 |
| | $ | 35,968 |
|
Note 9. Employee Benefits
Chevron has defined benefit pension plans for many employees. The company typically prefunds defined benefit plans as required by local regulations or in certain situations where prefunding provides economic advantages. In the United States, all qualified plans are subject to the Employee Retirement Income Security Act minimum funding standard. The company does not typically fund U.S. nonqualified pension plans that are not subject to funding requirements under laws and regulations because contributions to these pension plans may be less economic and investment returns may be less attractive than the company’s other investment alternatives.
The company also sponsors other postretirement employee benefit (OPEB) plans that provide medical and dental benefits, as well as life insurance for some active and qualifying retired employees. The plans are unfunded, and the company and the retirees share the costs. For the company’s main U.S. medical plan, the increase to the pre-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Medicare company contribution for retiree medical coverage is limited to no more than 4 percent each year. Certain life insurance benefits are paid by the company.
The components of net periodic benefit costs for 2019 and 2018 are as follows:
|
| | | | | | | |
| Three Months Ended March 31 |
| 2019 | | 2018 |
| (Millions of dollars) |
Pension Benefits | | | |
United States | | | |
Service cost | $ | 101 |
| | $ | 120 |
|
Interest cost | 99 |
| | 92 |
|
Expected return on plan assets | (141 | ) | | (159 | ) |
Amortization of prior service costs (credits) | — |
| | 1 |
|
Amortization of actuarial losses (gains) | 60 |
| | 76 |
|
Settlement losses | 60 |
| | 66 |
|
Total United States | 179 |
| | 196 |
|
International | | | |
Service cost | 35 |
| | 40 |
|
Interest cost | 51 |
| | 46 |
|
Expected return on plan assets | (58 | ) | | (66 | ) |
Amortization of prior service costs (credits) | 3 |
| | 2 |
|
Amortization of actuarial losses (gains) | 5 |
| | 11 |
|
Settlement losses | 1 |
| | — |
|
Total International | 37 |
| | 33 |
|
Net Periodic Pension Benefit Costs | $ | 216 |
| | $ | 229 |
|
Other Benefits* | | | |
Service cost | $ | 9 |
| | $ | 13 |
|
Interest cost | 24 |
| | 21 |
|
Amortization of prior service costs (credits) | (7 | ) | | (7 | ) |
Amortization of actuarial losses (gains) | (1 | ) | |
|