ChevronTexaco splashes into red ink; merger charges drag already weak results

Allen Baker

ChevronTexaco Corp. reported a loss of $2.52 billion for the fourth quarter of last year, taking more than $3 billion in special and merger-related charges.

But even without the charges, the San Francisco-based company’s operating earnings plunged 88 percent, from $2.29 billion to $498 million.

For the year, the nation’s second-largest oil company reported profits of $3.29 billion, down 57 percent from the results of the two now-merged companies in 2000.

Company officials said lower prices for oil and gas fueled the decline, along with reduced margins in refining from the economic slowdown. Chemicals also continued weak.

ChevronTexaco collected an average of $16.95 a barrel for crude in the fourth quarter, down 39 percent. Natural gas brought $2.27 per thousand cubic feet, a decline of 60 percent.

Exploration and production earnings for the fourth quarter were barely a fourth of their total in the 2000 period — $544 million compared with $2.05 billion. Refining and marketing brought in $215 million, less than half of the $498 million in the year-ago period. Chemicals showed a loss of $261 million, a bit worse than the $252 million in red ink a year earlier.

Liquids production declined a bit to 2.014 million barrels daily from 2.020 million. Daily gas production also dropped slightly, to 4,371 million cubic feet from 4,434 million a year earlier. For the U.S., gas production was down 12 percent to 2,530 million cubic feet daily, while 619,000 barrels of oil were lifted, a decline of 5 percent. The gas decline was partly a result of changed accounting methods after the merger, the company said.

The big writedowns for special items totaled $1.85 billion. Most of that, $1.4 billion, was a result of changing values for the company’s oil and gas reserves. A major part of that was a $1.02 billion charge to write down the reserves at the company’s Midway Sunset field in California, because steam injection there isn’t bringing up as much oil as expected.

As for the merger-related charges of $1.17 billion, $700 million was allocated to costs of layoffs and various pension and medical insurance costs as the company slimmed its workforce. Closures and relocations cost about $300 million, and selling assets as a result of the merger meant booking $150 in losses.

On a brighter note, the company said it replaced 120 percent of 2001 production, mostly with new reserves outside the United States.

For the fourth quarter, revenues totaled $21.5 billion, down 33 percent from the $32.3 billion in the 2000 quarter. Annual revenues declined to $106 billion from $119 billion.

The company spent $12.0 billion on capital investments and exploration, up from $9.5 billion in 2000. But much of that was a result of capital infusions for the Dynegy energy trading company. ChevronTexaco owns about a quarter of Dynegy’s shares.