Although it took a hit for uninsured Gulf of Mexico hurricane losses and despite lower domestic natural gas prices, Chevron Corp. reported net income of $4.4 billion, $1.97/diluted share, for the second quarter 2006, compared with $3.7 billion, $1.76/share, in the year-ago period, a nearly 19% increase.

Sales and other operating revenues in the second quarter 2006 were $52 billion, up $5 billion from the same period in 2005. The increase was mainly attributable to higher prices for crude oil and refined products and the inclusion of revenues related to the former Unocal operations acquired in August 2005. For the first six months of 2006, net income was $8.3 billion, $3.77/share, compared with $6.4 billion, $3.04/share, in the 2005 first half, an increase of nearly 30%.

The average U.S. second-quarter natural gas sales price decreased about 7% to $5.90/Mcf, while outside the United States the average natural gas price of $3.80/Mcf was 27% higher than a year earlier. U.S. net natural gas production averaged 1.8 Bcf/d, up 13%.

“The earnings improvement in the second quarter was driven mainly by our upstream business outside the United States,” said CEO Dave O’Reilly. “Worldwide upstream results in this year’s quarter benefited from both higher prices for crude oil and a 10% increase in oil-equivalent production.” O’Reilly noted that U.S. upstream results in the 2006 quarter included charges of about $300 million (13 cents/share) for uninsured costs associated with the dismantlement or repair of infrastructure damaged by last year’s hurricanes in the Gulf of Mexico.

For the company’s downstream business, O’Reilly said profits of approximately $1 billion were up slightly from the second quarter 2005 on improved results in the United States. Contributing to the U.S. earnings improvement were greater average margins for refined products and a greater refinery-utilization rate. The company’s U.S. fuels refinery network operated at 100% of its crude oil capacity in the 2006 quarter.

“Our recurring strong cash flows from operations funded $4 billion of capital and exploratory expenditures in the second quarter of this year,” O’Reilly said. “We also retired $1.7 billion of debt during the quarter that was assumed with last year’s acquisition of Unocal and purchased $1.3 billion of our common shares in the open market. We expect to complete our $5 billion stock buyback program by the end of the year. Earnings for the past 12 months resulted in a 24% return on capital employed for the period.”

U.S. upstream income of $901 million in the second quarter decreased 7% from the 2005 period. Net charges of approximately $300 million were recorded in the 2006 quarter for additional uninsured costs related to the dismantlement or repair of wells and facilities that were damaged in last year’s hurricanes in the Gulf of Mexico. Other operating expenses were also higher in this year’s quarter. These effects were partially offset by the benefits of higher prices for crude oil and higher oil-equivalent production between periods.

Net oil-equivalent production increased 4% to 768,000 bbl/d in the 2006 quarter due to volumes added from the former Unocal operations. The net liquids component of production was down about 1% to 463,000 barrels per day.

Capital and exploratory expenditures in the first six months of 2006 were $7.4 billion, compared with $4.2 billion in the corresponding 2005 period. Included in these expenditures were approximately $800 million and $700 million for the company’s share of equity affiliate expenditures in 2006 and 2005, respectively. Upstream expenditures represented 77% of the company wide total in 2006.

©Copyright 2006Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.