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Chevron Joins the 1Q99 Loss Crowd

Chevron Joins the 1Q99 Loss Crowd

Chevron announced Thursday it lost 35% of its profits compared to the same period in 1998. The company reported a net income of $329 million or $0.50/diluted share versus $507 million or $0.77/diluted share in 1998's first quarter. The oil and gas company sold oil at an average of under $10/barrel (a 20% drop form 1Q98 prices) and gas at an average of $1.63/Mcf (a 22% drop from 1Q 98).

Although second quarter prices are improving from last quarter's weakness, Ken Derr, Chevron's CEO, said the company will reduce costs wherever possible.

"Although we are pleased with the recent improvement in crude oil and natural gas prices," Derr commented, "we remain focused on efforts across the company to significantly reduce our cost structure for the long-term. Compared with the 1998 first quarter, we reduced operating and exploration expenses by approximately $80 million-a positive first step in removing $500 million from our overall cost structure."

Derr said one of the reorganizations will involve Chevron's Permian Basin and Gulf of Mexico shelf exploration and production (E&P) operations, but did not elaborate.

Chevron's U.S. natural gas production for the quarter was 1.7 Bcf/d, down from 1.8 Bcf/d in the same period last year. Derr said the drop was caused by field declines and prior-year property sales. The company's U.S. E&P net income of $47 million was down 56% from 1998's first quarter performance.

One bright spot for Chevron was the success of its refining, marketing and transportation operations which accrued a net income of $82 million compared to $45 million in 1Q98.

"Our U.S. refining, marketing and transportation first quarter operating results improved compared with last year, mainly reflecting higher sales margins and higher refined products sales volumes. The margins benefited from less downtime and lower expenses from planned maintenance at our refineries than the first quarter 1998," Derr added.

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