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Chevron Reports Third Quarter Net Income of $7.9 Billion, Up From $3.7 Billion in Third Quarter 2007

Chevron Corporation (NYSE:CVX) today reported net income of $7.9 billion ($3.85 per share – diluted) for the third quarter 2008, compared with $3.7 billion ($1.75 per share – diluted) a year earlier. For the first nine months of 2008, net income was $19.0 billion ($9.23 per share – diluted), up from $13.8 billion ($6.45 per share – diluted) for the same period in 2007.

Sales and other operating revenues in the third quarter 2008 were $76 billion, compared with $54 billion a year ago. For the first nine months of 2008, sales and other operating revenues were $222 billion, versus $154 billion in the corresponding 2007 period.

Earnings Summary
		Three Months Ended Sept. 30								Nine Months Ended Sept. 30
Millions of dollars			2008				2007				2008				2007
Income by Business Segment
Upstream – Exploration and Production		$	6,182			$	3,431			$	18,558			$	9,977
Downstream – Refining, Marketing and Transportation			1,831				377				1,349				3,298
Chemicals			70				103				154				327
All Other			(190	)			(193	)			(1,025	)			211
Net Income1		$	7,893			$	3,718			$	19,036			$	13,813
1 Includes foreign currency effects		$	303			$	(92	)		$	384			$	(350	)

“Earnings for our upstream operations benefited from prices for crude oil that were significantly higher than in last year’s third quarter,” said Chairman and CEO Dave O’Reilly. “This improvement in earnings was tempered, however, by effects of the September hurricanes in the Gulf of Mexico.”

O’Reilly said facilities shut in due to the hurricanes caused a decline of approximately 150,000 barrels of oil-equivalent production per day in September. In addition, hurricane-related expenses in the third quarter reduced upstream income by about $400 million. This expense impact was nearly offset, however, by gains on upstream asset sales in the period.

“Earnings for our downstream operations also increased from a year ago, due mainly to improved margins on the sale of refined products,” O’Reilly added. “Margins were weak in last year’s third quarter, and our downstream business in the United States operated at a loss for that period.”

The company reported capital and exploratory expenditures of $5.5 billion for the 2008 third quarter, compared with $5.2 billion a year earlier. Common stock buybacks in the 2008 quarter totaled $2 billion.

Looking ahead, O’Reilly commented, “Our disciplined capital spending and tight control over costs remain extremely important in today’s uncertain economic climate. Our strong balance sheet enables Chevron to continue investing in attractive projects that increase the production of oil and gas and improve the efficiency of our refinery network.”

In additional comments on the upstream business, O’Reilly cited recent milestones and achievements in a number of areas of operations that included:

• Kazakhstan – Completed the second phase of a major expansion of production operations and processing facilities at the 50 percent-owned Tengizchevroil affiliate, increasing total crude-oil production capacity from 400,000 barrels per day to 540,000.
• Nigeria – Started production offshore at the 68 percent-owned and operated Agbami Field, with total oil production currently averaging about 100,000 barrels per day and expected to achieve a total maximum of 250,000 barrels per day by the end of 2009.
• Middle East – Signed an agreement with the Kingdom of Saudi Arabia to extend to 2039 the company’s operation of the Kingdom’s 50 percent interest in oil and gas resources of the onshore area of the Partitioned Neutral Zone between the Kingdom and the State of Kuwait.
• Australia – Started production from Train 5 of the one-sixth-owned North West Shelf Venture onshore liquefied-natural-gas facility in West Australia, increasing export capacity by up to 4.4 million metric tons annually to 16.3 million.
• Canada – Finalized agreements with the government of Newfoundland and Labrador to develop the 27 percent-owned Hebron heavy-oil project off the eastern coast.

As part of the downstream strategy to focus on areas of market strength, O’Reilly said the company recently announced plans to sell marketing-related businesses in Brazil, Nigeria, Benin, Cameroon, Republic of the Congo, Côte d’Ivoire and Togo.

UPSTREAM – EXPLORATION AND PRODUCTION

Worldwide oil-equivalent production averaged 2.44 million barrels per day in the third quarter 2008, compared with 2.59 million barrels per day in the corresponding 2007 period. The decline was associated with the impact of higher prices on volumes recoverable under certain production-sharing and variable-royalty contracts outside the United States, as well as production that was shut in during September 2008 because of the hurricanes in the Gulf of Mexico.

U.S. Upstream
		Three Months Ended Sept. 30						Nine Months Ended Sept. 30
Millions of Dollars		2008			2007			2008			2007
Income		$	2,187		$	1,135		$	5,977		$	3,154

U.S. upstream income of $2.2 billion in the third quarter 2008 increased about $1 billion from the year-ago period, driven by higher prices for crude oil and natural gas. The benefit of higher prices was partially offset by the impact of lower oil-equivalent production, mainly the result of production in the Gulf of Mexico that was shut in during September because of hurricanes Gustav and Ike.

The 2008 quarter also included approximately $400 million of expenses associated with damage to facilities in the Gulf of Mexico caused by the hurricanes. Largely offsetting these expenses were gains of about $350 million on asset sales.

The average sales price per barrel of crude oil and natural gas liquids was $107 in the third quarter 2008, up from $67 in the corresponding 2007 period. The average sales price per thousand cubic feet of natural gas increased $3.21 between quarters to $8.64.

Net oil-equivalent production was 647,000 barrels per day in the 2008 third quarter, down about 13 percent from a year earlier. More than half the decline was due to the hurricanes. The net liquids component of production was down 11 percent at 409,000 barrels per day, and net natural-gas production declined 16 percent to 1.4 billion cubic feet per day.

At the beginning of October, approximately 120,000 barrels per day of oil-equivalent production in the Gulf of Mexico, or about two-thirds of the average daily oil-equivalent production prior to the hurricanes, remained offline. About half, or 90,000 barrels per day, remains shut-in at the end of October. The company estimates 90 percent of the production will be restored by the fourth quarter of 2009. Less than 10,000 barrels per day are expected to be permanently shut-in.

International Upstream
		Three Months Ended Sept. 30							Nine Months Ended Sept. 30
Millions of Dollars		2008			2007				2008			2007
Income1		$	3,995		$	2,296			$	12,581		$	6,823
1 Includes foreign currency effects		$	316		$	(99	)		$	229		$	(329	)

International upstream earnings of $4 billion in the third quarter 2008 increased $1.7 billion from the year-ago period due primarily to higher prices for crude oil and natural gas. Partially offsetting the benefit of higher prices were a reduction in crude-oil sales volumes due to timing of certain cargo liftings and higher operating expenses. Foreign currency effects benefited earnings by $316 million in the 2008 quarter, compared with a $99 million reduction to earnings a year earlier.

The average sales price per barrel of crude oil and natural gas liquids was $103 in the 2008 quarter, up from $67 a year earlier. The average sales price per thousand cubic feet of natural gas increased $1.59 between periods to $5.37.

Net oil-equivalent production of 1.8 million barrels per day in the 2008 third quarter was about 3 percent lower than the year-ago quarter. Absent the impact of higher prices on cost-recovery and variable royalty volumes, oil-equivalent production increased about 2 percent between periods. The net liquids component of production declined about 8 percent from a year ago to 1.2 million barrels per day, while natural-gas production increased 10 percent to 3.6 billion cubic feet per day.

DOWNSTREAM – REFINING, MARKETING AND TRANSPORTATION

U.S. Downstream
		Three Months Ended Sept. 30							Nine Months Ended Sept. 30
Millions of Dollars		2008			2007				2008			2007
Income / (Loss)		$	1,014		$	(110	)		$	336		$	1,021

U.S. downstream earned $1 billion in the third quarter 2008, compared with a loss of $110 million a year earlier. The recovery in earnings was mainly the result of significantly higher margins on the sale of refined products and improved refinery operations.

Refinery crude-input of 922,000 barrels per day in the third quarter 2008 was 123,000 higher than the corresponding 2007 period. The increase was primarily due to significantly less planned and unplanned downtime in this year’s third quarter.

Refined-product sales volumes declined 2 percent from the third quarter of 2007 to 1.4 million barrels per day on lower gasoline and fuel-oil sales. Branded gasoline sales volumes were down 7 percent between quarters to 601,000 barrels per day.

International Downstream
		Three Months Ended Sept. 30						Nine Months Ended Sept. 30
Millions of Dollars		2008			2007			2008			2007
Income1		$	817		$	487		$	1,013		$	2,277
1 Includes foreign currency effects		$	63		$	5		$	220		$	(25	)

International downstream income of $817 million increased $330 million from the 2007 quarter. Margins on the sale of refined products were higher in most areas. Last year’s third quarter included a $265 million gain on asset sales in Europe. Foreign currency effects benefited earnings by $63 million in the 2008 quarter, compared with $5 million a year earlier.

Refinery crude-input was 976,000 barrels per day, about 6 percent lower than the third quarter of 2007 due mainly to an increase in planned and unplanned downtime at various affiliate refineries.

Refined-product sales volumes of 2 million barrels per day in the 2008 third quarter declined 1 percent from a year earlier on lower sales of gas oil and kerosene and the impact of 2007 asset sales in Europe.

CHEMICALS

		Three Months Ended Sept. 30							Nine Months Ended Sept. 30
Millions of Dollars		2008				2007			2008				2007
Income1		$	70			$	103		$	154			$	327
1 Includes foreign currency effects		$	(5	)		$	3		$	(5	)		$	2

Chemical operations earned $70 million in the third quarter of 2008, compared with $103 million in the year-ago period. Earnings of the 50 percent-owned Chevron Phillips Chemical Company LLC (CPChem) and Chevron’s Oronite subsidiary were both lower between periods. CPChem earnings declined on lower sales volumes of commodity chemicals and higher operating expenses. For the Oronite subsidiary, margins on sales of lubricant additives and fuel additives were lower between periods.

ALL OTHER

		Three Months Ended Sept. 30								Nine Months Ended Sept. 30
Millions of Dollars		2008				2007				2008				2007
(Charges) Income – Net1		$	(190	)		$	(193	)		$	(1,025	)		$	211
1 Includes foreign currency effects		$	(71	)		$	(1	)		$	(60	)		$	2

All Other consists of mining operations, power generation businesses, worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities, alternative fuels and technology companies, and the company’s interest in Dynegy Inc. prior to its sale in May 2007.

Net charges in the third quarter 2008 were $190 million, compared with $193 million in the year-ago period. Foreign currency effects increased net charges by $71 million in the 2008 quarter, compared with $1 million last year. Other net charges were lower in the 2008 period.

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