Chevron Corporation (NYSE:CVX) Q4 2014 Earnings Conference Call - Final Transcript

Jan 30, 2015 • 11:00 am ET


Chevron Corporation (NYSE:CVX) Q4 2014 Earnings Conference Call - Final Transcript


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John Watson

and resource capture standpoint with 35 discoveries at a 66% success rate. We added 1.4 billion oil equivalent barrels with significant conventional and unconventional adds. We had two potential hub class discoveries in the deepwater Gulf of Mexico and we announced the transaction yesterday to consolidate holdings around one of them. Our one year reserve replacement ratio was 89% taking our five year replacement ratio to 96%.

With that I'll turn it over to Pat, who'll take you through our financial results. Pat?

Pat Yarrington

All right. Thanks, John. Slide 4 provides an overview of our financial performance. The Company's fourth quarter earnings were $3.5 billion or $1.85 per diluted share. For the year earnings were $19.2 billion, this equates to a $10.14 per diluted share. Return on capital employed was a 11% and our debt ratio at year-end was 15%. 2014 marked the 27th consecutive that we've increased our dividend payment. Given the change in market conditions, we are suspending our share repurchase program for 2015.

Turning to Slide 5. Cash generated from operations was $6.5 billion for the fourth quarter. For the full year, cash from operations totaled $31.5 billion. Cash capital expenditures were $9.7 billion for the quarter and $35.4 billion for the full year. At year end, our cash and cash equivalents totaled more than $13 billion giving us a net debt position of about $15 billion.

Slide 6 compares current quarter earnings with the same period last year. Fourth quarter 2014 earnings were approximately $1.5 billion lower than fourth quarter 2013 result. Upstream earnings decreased to $2.2 billion between quarters. Lower crude realizations and asset impairments driven by the sharp decline in crude oil prices during the second half of the year and higher DD&A charges were partially offset by higher gains on asset sales and lower exploration expenses. Downstream results increased by $1.1 billion driven by stronger international refining and marketing margins, higher gains on asset sales and favorable timing effects. The decrease in the other segment primarily reflected higher corporate charges and tax items.

Turning to Slide 7. I'll now compare results for the fourth quarter of 2014 with the third quarter of 2014. Fourth quarter earnings were $2.1 billion lower than third quarter results. Upstream earnings decreased by approximately 2 billion reflecting lower realizations and asset impairments partially offset by higher gains on asset sales and more favorable foreign exchange effect. Downstream earnings increased by a 130 million driven by favorable timing effects and gains on asset sales partially offset by higher operating expenses and a one-time economic buyout of a legacy pension obligation. The decrease in the other segment largely reflected higher corporate charges.

Moving to Slide 8. Our US upstream earnings for both the fourth quarter were about 500 million lower than third quarter results. Lower liquids realizations decreased earnings by 600 million consistent with the approximate 25% decline in the US liquids price indicators between periods. The decline in prices also triggered impairments of several smaller assets which negatively affected earnings