After spending their first complete year as a merged entity, ChevronTexaco Corp. posted full-year 2002 net income of $1.1 billion ($1.07 per share — diluted), compared with $3.3 billion ($3.09 per share — diluted) in 2001. For the fourth quarter, the company — which tied the knot in October of 2001 (see Daily GPI, Sept. 10, 2001) — reported net income of $904 million ($0.85 per share diluted), compared with a net loss of $2.5 billion ($2.38 per share — diluted) in the year-ago quarter.

“Net income for both the fourth quarter and the full year was unsatisfactory,” said CEO Dave O’Reilly. “During 2002, we operated under weak global market conditions in our refining and marketing sector and recorded a number of special charges against income.”

Despite posting a profit, ChevronTexaco’s 4Q earnings came in short of the $1.28/share expectations of Thomson Financial/First Call analysts.

Excluding net charges for special items and merger effects in both quarters, operating earnings were $1.065 billion ($1.00 per share — diluted), up from $498 million ($0.47 per share — diluted) during 4Q 2001. In the 2002 fourth quarter, net charges from special items totaled $53 million, of which, $52 million related to the company’s share of Dynegy’s special items and $47 million related to environmental remediation matters. The company’s merger-related expenses also reduced earnings $108 million in the 2002 quarter. Special items and merger effects in the year-ago period reduced earnings by $3 billion.

ChevronTexaco said higher crude oil and natural gas prices during the fourth quarter boosted upstream results but weakened downstream activity. Exploration and production operating earnings of $1.2 billion showed a 125% increase from a year-ago quarter, while the refining, marketing and transportation segment went from earnings of $215 million in 4Q2001 to a loss of $151 million during 4Q2002. For the year, operating earnings from E&P dropped from $5.8 billion during 2001 to $4.9 billion for 2002, while downstream segment earnings dropped from $1.9 billion in 2001 to recording a $16 million loss in 2002.

“Stronger oil and natural gas prices had markedly different effects on our upstream and downstream sectors, O’Reilly said. “Profits were substantially higher than last year’s fourth quarter in our exploration and production operations. However, those same price increases resulted in higher feedstock costs and poor margins for our refining and marketing business.”

O’Reilly also noted the company’s successful deepwater exploration and appraisal activity during 2002, which has not yet resulted in the addition of proved reserves. He cited the Tahiti and Great White prospects in the Gulf of Mexico, Usan and Aparo in Nigeria and Negage in Angola as regions to watch.

ChevronTexaco noted that oil and gas reserves replacement for 2002 exceeds 100% for the tenth consecutive year. “We added 1.1 billion boe, or 114% of the volumes produced during the year,” O’Reilly said. He added that nearly 600 million barrels were gained through the company’s drilling activities. The reserves were gained through major discoveries and extensions in Africa, Australia, Europe and China. An additional 500 million barrels were added through improved recovery and expansion projects, primarily in Africa, Eurasia and California, he said.

Commenting on the company’s first full year as a merged entity, O’Reilly said, “We had many notable achievements directly related to the effective teamwork demonstrated by employees in our many businesses around the world. For example, we made excellent progress towards our target of an annual synergy savings rate of $2.2 billion before-tax. The rate itself has grown from our initial estimate of $1.2 billion at the time of the merger, and we expect to achieve our $2.2 billion goal on schedule by the end of the first quarter this year.”

Earlier in the week, ChevronTexaco said it had committed approximately $8.5 billion towards capital and exploratory expenditures for 2003, slightly less than the $9 billion spent in 2002 and considerably less than the $12 billion allocated in 2001 (see Daily GPI, Jan. 31).

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.