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Chevron Corp – ‘10-K’ for 12/31/02

On:  Monday, 3/17/03, at 5:23pm ET   ·   For:  12/31/02   ·   Accession #:  950149-3-567   ·   File #:  1-00368

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 3/17/03  Chevron Corp                      10-K       12/31/02   24:2.1M                                   Bowne - San Francisco/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                       HTML   1.82M 
 2: EX-3.2      Articles of Incorporation/Organization or By-Laws     10     43K 
 3: EX-10.12    Material Contract                                     11     51K 
 4: EX-12.1     Exibit 12.1                                         HTML     28K 
 5: EX-21.1     Subsidiaries of the Registrant                      HTML     42K 
 6: EX-23.1     Consent of Experts or Counsel                       HTML     11K 
 7: EX-23.2     Consent of Experts or Counsel                       HTML     12K 
 8: EX-24.1     Power of Attorney                                      1      9K 
17: EX-24.10    Power of Attorney                                      1      9K 
18: EX-24.11    Power of Attorney                                      1      9K 
19: EX-24.12    Power of Attorney                                      1      9K 
20: EX-24.13    Power of Attorney                                      1      9K 
21: EX-24.14    Power of Attorney                                      1      9K 
22: EX-24.15    Power of Attorney                                      1      9K 
23: EX-24.16    Power of Attorney                                      1      9K 
 9: EX-24.2     Power of Attorney                                      1      9K 
10: EX-24.3     Power of Attorney                                      1      9K 
11: EX-24.4     Power of Attorney                                      1      9K 
12: EX-24.5     Power of Attorney                                      1      9K 
13: EX-24.6     Power of Attorney                                      1      9K 
14: EX-24.7     Power of Attorney                                      1      9K 
15: EX-24.8     Power of Attorney                                      1      9K 
16: EX-24.9     Power of Attorney                                      1      9K 
24: EX-99.1     Miscellaneous Exhibit                               HTML      9K 

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission file number 1-368-2

6001 Bollinger Canyon Road,

Registrant’s telephone number, including area code (925) 842-1000

575 Market Street, San Francisco, California 94105

Securities registered pursuant to Section 12(b) of the Act:

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ    No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    þ

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    þ

     Aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter — $93,724,828,928 (As of June 30, 2002)

Number of Shares of Common Stock outstanding as of February 28, 2003 — 1,068,317,395

DOCUMENTS INCORPORATED BY REFERENCE

     Notice of the 2003 Annual Meeting and 2003 Proxy Statement, to be filed pursuant to Rule 14a-6(b) under the Securities Exchange Act of 1934, in connection with the company’s 2003 Annual Meeting of Stockholders (in Part III)

Table of Contents

TABLE OF CONTENTS

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CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION

      This Annual Report on Form 10-K of ChevronTexaco Corporation contains forward-looking statements relating to ChevronTexaco’s operations that are based on management’s current expectations, estimates and projections about the petroleum, chemicals and other energy-related industries. Words such as “anticipates,” “expects,” “intends,” “plans,” “targets,” “projects,” “believes,” “seeks,” “estimates” and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Unless legally required, ChevronTexaco undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

      Among the factors that could cause actual results to differ materially are crude oil and natural gas prices; refining margins and marketing margins; chemicals prices and competitive conditions affecting supply and demand for aromatics, olefins and additives products; actions of competitors; the competitiveness of alternate energy sources or product substitutes; technological developments; the results of operations and financial condition of equity affiliates; the ability of the company’s Dynegy equity affiliate to successfully execute its recapitalization and restructuring plans and the results of Dynegy’s re-audit of its 1999-2001 financial statements; inability or failure of the company’s joint-venture partners to fund their share of operations and development activities; potential failure to achieve expected production from existing and future oil and gas development projects; potential delays in the development, construction or start-up of planned projects; potential disruption or interruption of the company’s production or manufacturing facilities due to accidents, political events, severe weather or war; potential liability for remedial actions under existing or future environmental regulations and litigation; significant investment or product changes under existing or future environmental regulations (including, particularly, regulations and litigation dealing with gasoline composition and characteristics); potential liability resulting from pending or future litigation; and the possibility of changed accounting rules under generally accepted accounting principles promulgated by rule-setting bodies. In addition, such statements could be affected by general domestic and international economic and political conditions. Unpredictable or unknown factors not discussed herein also could have material adverse effects on forward-looking statements.

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PART I

Item 1.     Business

Summary Description of ChevronTexaco

      ChevronTexaco Corporation¹, a Delaware corporation, manages its investments in subsidiaries and affiliates, and provides administrative, financial and management support to U.S. and foreign subsidiaries that engage in fully integrated petroleum operations, chemicals operations, coal mining, power and energy services. The company operates in the United States and approximately 180 other countries. Petroleum operations consist of exploring for, developing and producing crude oil and natural gas; refining crude oil into finished petroleum products; marketing crude oil, natural gas and the many products derived from petroleum; and transporting crude oil, natural gas and petroleum products by pipelines, marine vessels, motor equipment and rail car. Chemicals operations include the manufacture and marketing, by an affiliate, of commodity petrochemicals and plastics for industrial uses, and the manufacture and marketing, by a consolidated subsidiary, of fuel and lubricating oil additives.

      In this report, exploration and production of crude oil, natural gas liquids and natural gas may be referred to as “E&P” or “upstream” activities. Refining, marketing and transportation may be referred to as “RM&T” or “downstream” activities. A list of the company’s major subsidiaries is presented on pages E-4 to E-6 of this Annual Report on Form 10-K. As of December 31, 2002, ChevronTexaco had 53,014 employees (excluding 13,024 service station employees), down about 2,700 from year-end 2001. Approximately 29,000, or 44 percent, of the company’s employees, including service station employees, were employed in U.S. operations, of which approximately 3,700 were unionized.

Overview of Petroleum Industry

      Petroleum industry operations and profitability are influenced by many factors, over some of which individual petroleum companies have little control. Governmental policies, particularly in the areas of taxation, energy and the environment, have a significant impact on petroleum activities, regulating where and how companies conduct their operations and formulate their products and, in some cases, limiting their profits directly. Prices for crude oil and natural gas, petroleum products and petrochemicals are determined by supply and demand for these commodities. The members of the Organization of Petroleum Exporting Countries (OPEC) are typically the world’s swing producers of crude oil, and their production levels are a major factor in determining worldwide supply. Demand for crude oil and its products and for natural gas is largely driven by the conditions of local, national and worldwide economies, although weather patterns and taxation relative to other energy sources also play a significant part. Natural gas is generally produced and consumed on a country or regional basis. Variations in the components of refined products sales due to seasonality are not primary drivers of changes in the company’s overall earnings.

      Strong competition exists in all sectors of the petroleum and petrochemical industries. There is competition within the industries and also with other industries in supplying the energy, fuel and chemical needs of industry and individual consumers. ChevronTexaco competes with fully integrated major

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Operating Environment

      Refer to pages FS-2 and FS-3 of this Annual Report on Form 10-K in Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion on the company’s current business environment and outlook.

Texaco Merger Transaction

      On October 9, 2001, Texaco Inc. (Texaco) became a wholly owned subsidiary of Chevron Corporation (Chevron) pursuant to a merger transaction, and Chevron changed its name to ChevronTexaco Corporation. The combination was accounted for as a pooling of interests, and each share of Texaco common stock was converted on a tax-free basis into the right to receive 0.77 shares of ChevronTexaco common stock. In the merger, ChevronTexaco issued approximately 425 million shares of common stock, representing about 40 percent of the outstanding ChevronTexaco common stock after the merger. Further discussion of the

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ChevronTexaco Strategic Direction

      ChevronTexaco’s primary objective is to achieve sustained financial returns that will enable it to outperform its competitors. The company has set as a goal to generate the highest total stockholder return among a designated peer group for the five-year period 2000-2004. British Petroleum, ExxonMobil and Royal Dutch Shell — among the world’s largest integrated petroleum companies — comprise the company’s designated competitor peer group for this purpose. The company had the second highest total stockholder return in this peer group for the 2000-2002 period.

      As a foundation for attaining this goal, the company has established four key priorities:

      Supporting these four priorities is a focus on:

      The Corporate Strategic Plan builds on this framework with strategies focused on appropriately balancing financial returns and growth. The company is currently conducting a rigorous evaluation of its entire portfolio of assets and expects to finalize this review later this year. As a result of this evaluation, the company anticipates exploring potential asset transactions to increase the efficiency and profitability of continuing operations and enhancing the economic value of its asset base. The company expects that its worldwide exploration and production business will continue to be its most important business, with development of its large proved and unproved natural gas reserves constituting perhaps the largest opportunity over time to expand the company’s base of production and to capture economic value from emerging natural gas market opportunities. The company is also seeking to deliver improved and competitive returns from its worldwide downstream businesses.

     (b) Description of Business and Properties

      The company’s largest business segments are exploration and production, and refining, marketing and transportation. Chemicals is also a significant segment, conducted mainly by the company’s affiliate — Chevron Phillips Chemical Company LLC (CPChem). The petroleum activities of the company are widely dispersed geographically. The company has petroleum operations in North America, South America, Europe, Africa, Middle East, Central and Far East Asia, and Australia.

      CPChem has operations in the United States, Puerto Rico, Belgium, China, South Korea, Singapore, Saudi Arabia, Qatar and Mexico. ChevronTexaco’s wholly owned Oronite fuel and lube oil additives business has operations in the United States, Mexico, France, the Netherlands, Singapore, India, Japan and Brazil.

      An equity affiliate, Dynegy Inc. (Dynegy), owns operating divisions engaged in power generation, natural gas liquids and regulated energy delivery. ChevronTexaco owns approximately 26 percent of Dynegy’s common stock and also holds $1.5 billion aggregate principal amount of Dynegy’s preferred stock. Until recently, Dynegy also conducted a large electricity and natural gas trading and marketing business, as well as broadband trading. ChevronTexaco sold essentially all of its U.S. natural gas production to Dynegy, which then sold it into the market. Following the collapse of the merchant energy sector in 2002, Dynegy experienced a marked reduction in liquidity. Its debt ratings were downgraded and a sharp decline in its stock price

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      Tabulations of segment sales and other operating revenues, earnings, income taxes and assets, by United States and International geographic areas, for the years 2000 to 2002, may be found in Note 10 to the consolidated financial statements beginning on page FS-31 of this Annual Report on Form 10-K. In addition, similar comparative data for the company’s investments in and income from equity affiliates and property, plant and equipment are contained in Notes 13 and 14 on pages FS-34 to FS-36.

      The company’s worldwide operations can be affected significantly by changing economic, tax, regulatory and political environments in the various countries in which it operates, including the United States. Environmental regulations and government policies concerning economic development, energy and taxation may have a significant effect on the company’s operations. Management evaluates the economic and political risk of initiating, maintaining or expanding operations in any geographical area. The company monitors political events worldwide and the possible threat these may pose to its activities — particularly the company’s oil and gas exploration and production operations — and the safety of the company’s employees. The company is carefully monitoring the potential for disruption of its operations in the event of hostilities in Iraq. Approximately five percent of the company’s worldwide net oil-equivalent production for 2002 came from the Partitioned Neutral Zone (PNZ), which is located between the Kingdom of Saudi Arabia and the State of Kuwait.

     Capital and Exploratory Expenditures

      A discussion of the company’s capital and exploratory expenditures is contained on page FS-9 to FS-10 of this Annual Report on Form 10-K.

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     Petroleum — Exploration and Production

      The following table summarizes the company’s and its affiliates’ net production of crude oil and natural gas liquids, and natural gas, and oil-equivalent production for 2002 and 2001.

Net Production⁽¹⁾ Of Crude Oil And Natural Gas Liquids And Natural Gas

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      In 2002, ChevronTexaco conducted its exploration and production operations in the United States and approximately 25 other countries. Worldwide net crude oil and natural gas liquids production, including that of affiliates but excluding volumes produced under operating service agreements, decreased by about 3 percent from the 2001 levels. Net worldwide production of natural gas, including affiliates, decreased about 1 percent in 2002.

      Net liquids and natural gas production in the United States was down about 2 percent and 11 percent, respectively. The decline in U.S. natural gas production in 2002 reflected decreases in the Gulf of Mexico, primarily attributable to declines in mature fields. Early in 2001, production from a number of fields was accelerated via increased drilling at a time of high natural gas prices. In addition to normal field declines, production disruptions caused by tropical storms in the Gulf of Mexico reduced net crude oil and natural gas liquids production by 10,000 barrels per day and 60 million cubic feet of natural gas per day on an annualized basis.

      International net liquids production, including affiliates, decreased about 4 percent, while net natural gas production rose 15 percent from 2001. In Nigeria, the decline in net liquids production between years was primarily attributable to OPEC production constraints. In Indonesia, about 25,000 barrels per day of the year to year decline was attributable to changes in certain production-sharing contract terms and 10,000 barrels per day was related to the expiration of a production sharing agreement. The increase in international natural gas volumes occurred primarily in the Philippines, due to a full year of new production from the Malampaya Field.

      For the past five years, the company’s worldwide oil-equivalent production has followed a downward trend with 2002 production at 91 percent of 1998 levels, equivalent to an average annual decline rate between 1 and 2 percent. During this time period, increases in international oil-equivalent production have been more than offset by decreases in the United States.

      For 2003, the company currently anticipates lower oil-equivalent production rates in the United States as a result of lower capital expenditures in recent years and natural field declines. The company expects this to be more than offset by capacity increases in international areas resulting in worldwide oil-equivalent production capacity in 2003 slightly higher than actual production levels achieved in 2002. The ultimate level of production in 2003 remains uncertain due to unanticipated production interruptions, OPEC constraints and other economic factors.

Acreage

      At December 31, 2002, the company owned or had under lease or similar agreements undeveloped and developed oil and gas properties located throughout the world. The geographical distribution of the company’s acreage is shown in the next table.

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Acreage⁽¹⁾ At December 31, 2002

      Refer to Table IV on page FS-51 of this Annual Report on Form 10-K for data about the company’s average sales price per unit of oil and gas produced, as well as the average production cost per unit for 2002, 2001 and 2000. The following table summarizes gross and net productive wells at year-end 2002 for the company and its affiliates.

Productive Oil And Gas Wells At December 31, 2002

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Reserves and Contract Obligations

      Table V on pages FS-51 and FS-52 of this Annual Report on Form 10-K sets forth the company’s net proved oil and gas reserves, by geographic area, as of December 31, 2002, 2001 and 2000. During 2003, the company will file estimates of oil and gas reserves with the Department of Energy, Energy Information Agency. Those estimates are consistent with the reserve data reported on page FS-52 of this Annual Report on Form 10-K.

      In 2002, ChevronTexaco’s worldwide oil and equivalent-gas (OEG) barrels of net proved reserves additions exceeded production, with a replacement rate of 114 percent of net production, including sales and acquisitions. Excluding sales and acquisitions, the replacement rate was 112 percent of net production. In Africa, the reserves replacement rate increased to 521 percent, compared with 268 percent in 2001, due primarily to reserves additions in West Africa. In the United States, the addition of reserve quantities for the Kern River Field in California’s San Joaquin Valley, due to improved recovery from reservoir management, was more than offset by downward revisions in gas fields in the Mid-Continent, CO₂ projects in the Permian Basin, and a number of fields in the Gulf of Mexico. The following table summarizes the company’s net additions to net proved reserves of crude oil and natural gas liquids, and natural gas, compared with net production during 2002.

Reserves Replacement — 2002

      The company sells crude oil and natural gas from its producing operations under a variety of contractual arrangements. Most contracts generally commit the company to sell quantities based on production from specified properties, but certain gas sales contracts specify delivery of fixed and determinable quantities. During 2002, Dynegy purchased substantially all natural gas and natural gas liquids produced by the company in the United States, excluding Alaska, and supplied natural gas and natural gas liquids feedstocks to the company’s U.S. refineries and chemical plants. The company reached an agreement with Dynegy to terminate existing natural gas purchase and sale contracts and other related contracts at the end of January 2003. See page FS-8 for further information on Dynegy. Outside the United States, the company is contractually committed to deliver approximately 400 billion cubic feet of natural gas through 2005 from Australian, Colombian and Philippine reserves, and approximately 1,300 billion cubic feet of natural gas from 2006 through 2020 from Australian and Philippine reserves. The company believes it can satisfy these contracts from quantities available from production of the company’s proved developed Australian, Colombian and Philippine reserves. The contracts discussed above include variable-pricing terms.

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Development Activities

      Details of the company’s development expenditures and costs of proved property acquisitions for 2002, 2001 and 2000 are presented in Table I on page FS-48 of this Annual Report on Form 10-K.

      The table below summarizes the company’s net interest in productive and dry development wells completed in each of the past three years and the status of the company’s development wells drilling at December 31, 2002. A “development well” is a well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive. “Wells drilling” include wells temporarily suspended.

Development Well Activity

Exploration Activities

      The following table summarizes the company’s net interests in productive and dry exploratory wells completed in each of the last three years and the number of exploratory wells drilling at December 31, 2002. “Exploratory wells” are wells drilled to find and produce oil or gas in unproved areas and include delineation wells, which are wells drilled to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir or to extend a known reservoir beyond the proved area. “Wells drilling” include wells temporarily suspended. The company had $450 million of suspended exploratory wells included in properties, plant and equipment at year-end 2002, a decrease of $238 million from 2001. Decreases in Nigeria, Angola and China were partially offset by increases in the United States. The wells are suspended pending a final determination of the commercial potential of the related oil and gas deposits. The ultimate disposition of these well costs is dependent on: (1) decisions on additional major capital expenditures, (2) the results of additional exploratory drilling that is underway or firmly planned, and in some cases, (3) securing final regulatory approvals for development.

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Exploratory Well Activity