CHEVRON CORPORATION Second Quarter 2020 Compared with Second Quarter 2019
And Six Months 2020 Compared with Six Months 2019Key Financial Results
Earnings by Business Segment
Three Months Ended Six Months Ended
June 30 June 30
2020 2019 2020 2019
(Millions of
(Millions of dollars) dollars)
Upstream
United States $ (2,066) $ 896 $ (1,825) $ 1,644
International (4,023) 2,587 (1,344) 4,962
Total Upstream (6,089) 3,483 (3,169) 6,606
Downstream
United States (988) 465 (538) 682
International (22) 264 631 299
Total Downstream (1,010) 729 93 981
Total Segment Earnings (7,099) 4,212 (3,076) 7,587
All Other (1,171) 93 (1,595) (633)
Net Income (Loss) Attributable to Chevron Corporation (1) (2) $ (8,270) $ 4,305 $ (4,671) $ 6,954
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(1) Includes foreign currency effects.$ (437) $ 15 $ 77 $
(122)
(2) Income (loss) net of tax; also referred to as "earnings" in the discussions that follow.
Net loss attributable toChevron Corporation for second quarter 2020 was$8.27 billion ($(4.44) per share - diluted), compared with earnings of$4.31 billion ($2.27 per share - diluted) in the corresponding 2019 period. The net loss attributable toChevron Corporation for the first six months of 2020 was$4.67 billion ($(2.51) per share - diluted), compared with earnings of$6.95 billion ($3.66 per share - diluted) in the first six months of 2019. Upstream reported a loss of$6.09 billion in second quarter 2020 compared to earnings of$3.48 billion in the corresponding 2019 period. The decrease was driven by net special item charges of$4.7 billion , sharply lower crude oil realizations and lower crude oil and natural gas volumes. Upstream reported a loss of$3.17 billion for the first six months of 2020 compared with earnings of$6.61 billion a year earlier. The decrease was driven by net special item charges of$4.0 billion , sharply lower crude oil realizations and natural gas realizations. Downstream reported a loss of$1.01 billion in second quarter 2020 compared with earnings of$729 million in the corresponding 2019 period. The decrease was primarily due to lower margins on refined product sales and lower sales volumes. Earnings for the first six months of 2020 were$93 million compared with$981 million in the corresponding 2019 period. The decrease was primarily due to lower sales volumes, lower equity earnings from 50 percent-ownedChevron Phillips Chemical Company LLC (CPChem) and higher operating expenses. Refer to pages 31 through 33 for additional discussion of results by business segment and "All Other" activities for second quarter and first six months 2020 versus the same periods in 2019. Business Environment and OutlookChevron Corporation * is a global energy company with substantial business activities in the following countries:Angola ,Argentina ,Australia ,Bangladesh ,Brazil ,Canada ,China ,Colombia ,Indonesia ,Kazakhstan ,Myanmar ,Mexico ,Nigeria , thePartitioned Zone betweenSaudi Arabia andKuwait , the _____________________ * Incorporated inDelaware in 1926 asStandard Oil Company of California , the company adopted the nameChevron Corporation in 1984 andChevronTexaco Corporation in 2001. In 2005,ChevronTexaco Corporation changed its name toChevron Corporation . As used in this report, the term "Chevron" and such terms as "the company," "the corporation," "our," "we," "us" and "its" may refer toChevron Corporation , one or more of its consolidated subsidiaries, or all of them taken as a whole, but unless stated otherwise they do not include "affiliates" ofChevron - i.e., those companies generally owned 50 percent or less. All of these terms are used for convenience only and are not intended as a precise description of any of the separate companies, each of which manages its own affairs. 25
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Philippines ,Republic of Congo ,Singapore ,South Korea ,Thailand , theUnited Kingdom ,the United States , andVenezuela . Earnings of the company depend mostly on the profitability of its upstream business segment. The most significant factor affecting the results of operations for the upstream segment is the price of crude oil, which is determined in global markets outside of the company's control. In the company's downstream business, crude oil is the largest cost component of refined products. It is the company's objective to deliver competitive results and stockholder value in any business environment. Periods of sustained lower prices could result in the impairment or write-off of specific assets in future periods and cause the company to adjust operating expenses, including employee reductions, and capital and exploratory expenditures, along with other measures intended to improve financial performance. Similarly, impairments or write-offs have occurred, and may occur in the future, as a result of managerial decisions not to progress certain projects in the company's portfolio. Response to Market Conditions and COVID-19 During the second quarter of 2020, travel restrictions and other constraints on economic activity continued in many locations around the world to limit the spread of the COVID-19 virus. As a result, demand for our products fell steeply and commodity prices, including crude oil and natural gas, have followed suit. The drop in commodity prices negatively impacted the company's second quarter 2020 financial and operating results. While demand and commodity prices have shown signs of recovery, they are not back to pre-pandemic levels, and financial results may continue to be depressed in future quarters. Due to the rapidly changing environment, there continues to be uncertainty and unpredictability around the extent to which the COVID-19 pandemic will impact our results, which could be material.Chevron entered this crisis well positioned with a strong balance sheet, flexible capital program and low cash flow breakeven price. To protect its long-term health and value, the company is responding to these market conditions by adjusting items it can control. The company has lowered planned 2020 capital expenditures by up to 30 percent from its original budget to as low as$14 billion and intends to reduce 2020 operating costs by$1 billion compared to 2019. The company is undertaking an enterprise-wide transformation that includes the capture of cost efficiencies. As part of this restructuring, employee reduction programs were announced. Additionally, the company suspended its share repurchase program inMarch 2020 . Taken together, these actions are consistent with our financial priorities: to protect the dividend, to prioritize capital spend that drives long-term value and to maintain a strong balance sheet. The company expects to continue to have sufficient liquidity and access to both commercial paper and debt capital markets due to its strong balance sheet and investment grade credit ratings, which have been recently reaffirmed. Additionally, the company has access to nearly$10 billion in committed credit facilities. The effective tax rate for the company can change substantially during periods of significant earnings volatility. This is due to the mix effects that are impacted both by the absolute level of earnings or losses and whether they arise in higher or lower tax rate jurisdictions. As a result, a decline or increase in the effective tax rate in one period may not be indicative of expected results in future periods. Note 11 provides details of the company's effective income tax rate. Refer to the "Cautionary Statement Relevant to Forward-Looking Information" on page 2 of this report and to "Risk Factors" on pages 18 through 21 of the company's 2019 Annual Report on Form 10-K and on pages 41 to 43 of this report for a discussion of some of the inherent risks that could materially impact the company's results of operations or financial condition. The company continually evaluates opportunities to dispose of assets that are not expected to provide sufficient long-term value or to acquire assets or operations complementary to its asset base to help augment the company's financial performance and value growth. Asset dispositions and restructurings may result in significant gains or losses in future periods. The company's asset sale program for 2018 through 2020 is targeting before-tax proceeds of$5-10 billion . Proceeds related to asset sales were$6.6 billion fromJanuary 2018 throughJune 2020 . The company closely monitors developments in the financial and credit markets, the level of worldwide economic activity, and the implications for the company of movements in prices for crude oil and natural gas. 26
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Management takes these developments into account in the conduct of daily operations and for business planning. Management's commentary related to earnings trends for the company's major business areas is as follows: Upstream Earnings for the upstream segment are closely aligned with industry prices for crude oil and natural gas. Crude oil and natural gas prices are subject to external factors over which the company has no control, including product demand connected with global economic conditions, industry production and inventory levels, technology advancements, production quotas or other actions imposed by theOrganization of Petroleum Exporting Countries (OPEC) or other producers, actions of regulators, weather-related damage and disruptions, competing fuel prices, natural and human causes beyond the company's control such as the COVID-19 pandemic, and regional supply interruptions or fears thereof that may be caused by military conflicts, civil unrest or political uncertainty. Any of these factors could also inhibit the company's production capacity in an affected region. The company closely monitors developments in the countries in which it operates and holds investments, and seeks to manage risks in operating its facilities and businesses. The longer-term trend in earnings for the upstream segment is also a function of other factors, including the company's ability to find or acquire and efficiently produce crude oil and natural gas, changes in fiscal terms of contracts, and changes in tax and other applicable laws and regulations. The company is actively managing its schedule of work, contracting, procurement, and supply chain activities to effectively manage costs, ensure supply chain resiliency and continuity, and support operational goals. Third party costs for capital, exploration, and operating expenses associated with ongoing operations can be subject to external factors beyond the company's control including, but not limited to: the general level of inflation, tariffs or other taxes imposed on goods or services, and market based prices charged by the industry's material and service providers.Chevron utilizes contracts with various pricing mechanisms, so there may be a lag before the company's costs reflect the changes in market trends. The spot markets for many materials and services have fallen in response to the broader economic impact of the COVID-19 pandemic. Crude oil and natural gas prices have yet to return to pre-pandemic levels, and therefore spending in the energy sector has continued to retreat. Commodity prices remain below break-even levels in many regions, and as a result, more highly-leveraged producers may be forced to file for bankruptcy protection (Chapter 11 re-organization or even Chapter 7 insolvency proceedings under theU.S. Bankruptcy Code), further stressing suppliers, especially those who entered this price-cycle under financial pressure. The extent to which the costs of goods and services could go down may be constrained by low supply sector margins, decisions by suppliers to reduce capacity, and actions by banks and other financial institutions.Chevron is actively monitoring and engaging key suppliers to mitigate any potential business impacts. Capital and exploratory expenditures and operating expenses could also be affected by damage to production facilities caused by severe weather or civil unrest, delays in construction, or other factors. [[Image Removed: cvx-20200630_g1.jpg]] The chart above shows the trend in benchmark prices for Brent crude oil, West Texas Intermediate (WTI) crude oil, andU.S. Henry Hub natural gas. The Brent price averaged$64 per barrel for the full-year 2019. 27
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During the second quarter 2020, Brent averaged$30 per barrel and ended July at about$43 . The WTI price averaged$57 per barrel for the full-year 2019. During the second quarter 2020, WTI averaged$28 per barrel and ended July at about$40 . The majority of the company's equity crude production is priced based on the Brent benchmark. (See page 37 for the company's averageU.S. and international crude oil sales prices.) Crude prices sharply declined at the end of the first quarter due to surplus supply as demand decreased due to government-imposed travel restrictions and other constraints on economic activity. In the second quarter the supply/demand balance improved primarily due to production cuts and demand growth, increasing prices. In contrast to price movements in the global market for crude oil, price changes for natural gas are more closely aligned with seasonal supply-and-demand and infrastructure conditions in local markets. Inthe United States , prices at Henry Hub averaged$1.76 per thousand cubic feet (MCF) for the first six months of 2020, compared with$2.73 during the first six months of 2019. At the end ofJuly 2020 , the Henry Hub spot price was$1.80 per MCF. Outsidethe United States , price changes for natural gas depend on a wide range of supply, demand and regulatory circumstances.Chevron sells natural gas into the domestic pipeline market in most locations. In some locations,Chevron has invested in long-term projects to produce and liquefy natural gas for transport by tanker to other markets. The company's long-term contract prices for liquefied natural gas (LNG) are typically linked to crude oil prices. Most of the equity LNG offtake from the operated Australian LNG projects is committed under binding long-term contracts, with the remainder to be sold in the Asian spot LNG market. The Asian spot market reflects the supply and demand for LNG in thePacific Basin and is not directly linked to crude oil prices. International natural gas sales realizations averaged$5.11 per MCF during the first six months of 2020, compared with$6.00 per MCF in the same period last year. (See page 37 for the company's average natural gas sales prices for theU.S. and international regions.) The company's worldwide net oil-equivalent production in the first six months of 2020 averaged 3.111 million barrels per day, 2 percent higher than the year-ago period. About 14 percent of the company's net oil-equivalent production in the first six months of 2020 occurred in theOPEC -member countries ofAngola ,Nigeria ,Republic of Congo andVenezuela .OPEC quotas did not materially reduce the company's net crude oil production in second quarter 2020.OPEC quotas had no effect on the company's net crude oil production for second quarter 2019. The company expects 2020 production to be relatively flat compared to 2019. This estimate is subject to many factors and uncertainties, including quotas or other actions that may be imposed byOPEC members and other countries; price effects on entitlement volumes; changes in fiscal terms or restrictions on the scope of company operations; delays in construction; reservoir performance; greater-than-expected declines in production from mature fields; start-up or ramp-up of projects; fluctuations in demand for natural gas in various markets; weather conditions that may shut in production; civil unrest; changing geopolitics; delays in completion of maintenance turnarounds; storage constraints or economic conditions that could lead to shut-in production; or other disruptions to operations. The outlook for future production levels is also affected by the size and number of economic investment opportunities and the time lag between initial exploration and the beginning of production. The company has increased its investment emphasis on short-cycle projects, but these too are under pressure in the current market environment. In thePartitioned Zone betweenSaudi Arabia andKuwait , production was shut-in beginning inMay 2015 . InDecember 2019 , the governments ofSaudi Arabia andKuwait signed a memorandum of understanding to allow production to restart in thePartitioned Zone . Inmid-February 2020 , pre-startup activities commenced, and production resumed inJuly 2020 . The financial effects from the loss of production in 2019 and first half 2020 were not significant.Chevron has interests in Venezuelan crude oil production assets, including those operated by independent equity affiliates. While the operating environment inVenezuela has been deteriorating for some time, the equity affiliates have conducted activities consistent with the authorization provided pursuant to general licenses issued bythe United States government. It remains uncertain when the environment inVenezuela will stabilize, but the company remains committed to its people, assets and operations inVenezuela . Refer to 28
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Note 13 on page 18 under the heading "Other Contingencies" for more information on the company's activities inVenezuela . Response to Market Conditions and COVID-19: Upstream In the second quarter 2020, travel restrictions and other constraints on economic activity aimed at combating the spread of COVID-19 continued, which caused demand for oil and gas to remain low. This has resulted in lower price realizations across all commodities. While critical asset integrity and reliability activities continue, deferral of non-essential work and demobilization of non-essential personnel have continued in locations with high infection rates to reduce the COVID-19 exposure risk to our workforce. In some countries where the virus infection rates are low, for exampleAustralia andChina , the workforce has returned to the office. Despite the challenges posed by the pandemic, progress continues on the future growth wellhead pressure management project (FGP-WPMP) at Tengiz. To mitigate the risk from the pandemic, the project construction workforce was demobilized to 20 percent of planned levels, which has slowed the overall construction pace. Extended rotations, testing and isolation protocols have been established for personnel arriving and departing from the site to minimize the spread of the virus. It is too early to provide meaningful information regarding the impact of these measures on project cost and schedule, as they will be dependent upon when activity can be safely ramped-up and sustained. While infection levels inKazakhstan remain high, management is committed to progressing the project in a safe and responsible manner. Facility maintenance turnarounds are being adjusted and, in certain cases, deferred to later in 2020 or into 2021. In some cases, turnarounds have been extended in duration and reduced in scope to mitigate the risk of the virus. New production coming online will be significantly reduced in future periods as drilling and completion activities are scaled back, most notably in thePermian Basin ,Gulf of Mexico , andArgentina . As a result of the reduction in capital expenditures across the business, some exploration activities and projects not yet in execution phase have been deferred, which may impact production in future years. Production levels have been curtailed as a result of reductions imposed by OPEC+ nations inKazakhstan ,Nigeria andAngola . Additionally, reductions have been implemented by operators of assets where the company has non-operated interests or where production has been curtailed due to market conditions, most notably inThailand andthe United States . Production curtailments of approximately 165 thousand barrels of oil equivalent per day were recorded in the second quarter. In the third quarter, we expect curtailments to be approximately 150 thousand barrels of oil equivalent per day. Decreased capital expenditures for 2020 will result in reductions toChevron's proved reserve quantities and delays in timing of additional proved reserves being recognized. The company currently estimates the lower planned capital spend will result in an approximately 10 percent downward revision to proved reserves quantities, primarily in thePermian Basin andAustralia . Should the current low commodity prices persist, it is expected that proved reserve quantities would decrease for oil and gas properties where economic limits are negatively impacted. Lower prices will positively impact proved reserves due to entitlement effects. The impact of the reduction in capital expenditures, changes in commodity prices, and their combined effect on proved reserves will be assessed at the end of the year in line withChevron's annual reserves process. Regulatory and in-country conditions, which are rapidly changing, could impact logistics and material movement and remain a risk to business continuity. We are taking precautionary measures to reduce the risk of exposure to and spread of the COVID-19 virus through screening, testing and, when appropriate, quarantining workforce and visitors upon arrival to our operated facilities. Refer to the "Results of Operations" section on pages 31 and 32 for additional discussion of the company's upstream business. Downstream Earnings for the downstream segment are closely tied to margins on the refining, manufacturing and marketing of products that include gasoline, diesel, jet fuel, lubricants, fuel oil, fuel and lubricant additives, and petrochemicals. Industry margins are sometimes volatile and can be affected by the global and regional supply-and-demand balance for refined products and petrochemicals, and by changes in the price of crude oil, other refinery and petrochemical feedstocks, and natural gas. Industry margins can also be influenced by inventory levels, geopolitical events, costs of materials and services, refinery or chemical plant 29
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capacity utilization, maintenance programs, and disruptions at refineries or chemical plants resulting from unplanned outages due to severe weather, fires or other operational events. Other factors affecting profitability for downstream operations include the reliability and efficiency of the company's refining, marketing and petrochemical assets, the effectiveness of its crude oil and product supply functions, and the volatility of tanker-charter rates for the company's shipping operations, which are driven by the industry's demand for crude oil and product tankers. Other factors beyond the company's control include the general level of inflation and energy costs to operate the company's refining, marketing and petrochemical assets, and changes in tax laws and regulations. The company's most significant marketing areas are theWest Coast andGulf Coast ofthe United States andAsia .Chevron operates or has significant ownership interests in refineries in each of these areas. Response to Market Conditions and COVID-19: Downstream Beginning in March and continuing into the second quarter 2020, demand for the company's products (primarily jet fuel and motor gasoline) deteriorated as a result of travel restrictions and other constraints on economic activity implemented in many countries to combat the spread of the COVID-19 virus. Product prices also fell sharply in the second quarter 2020, and although economic activity has somewhat rebounded from lows experienced in April, refining margins were at or near historic lows due to lower demand and pressure from a global oil product surplus for much of the second quarter.Chevron took steps to maximize diesel production, given the decline in jet fuel and motor gasoline demand, to fuel transportation that keeps global supply chains moving. The company is also prioritizing equity crudes into its refining system where possible and actively monitoring supply and demand dynamics as every region is experiencing different recovery trends. The company is adjusting the schedule for planned maintenance activity across its refining network and idling certain processing units to adjust for lower demand, reduce costs, manage inventories and, most importantly, protect the safety of employees and contractors. To preserve cash and support balance sheet strength, the 2020 downstream organic capital spending program was reduced by approximately$800 million . As of lateJuly 2020 ,Chevron's refining crude utilization was approximately 75 percent and sales were down year-over-year approximately 60 percent for jet fuel, 10 percent for motor gasoline, and 5 percent for diesel. It is unclear how long these conditions will persist, but the company will continue to take actions necessary to protect the health and well-being of people, the environment and its operations as conditions evolve. Refer to the "Results of Operations" section on pages 32 and 33 for additional discussion of the company's downstream operations. All Other consists of worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities and technology companies. Operating Developments Noteworthy operating developments in recent months included the following: •Australia - Completed the acquisition ofPuma Energy (Australia) Holdings Pty Ltd. •Azerbaijan - Completed the sale of the company's interest in the Azeri-Chirag-Gunashli fields andBaku -Tbilisi -Ceyhan pipeline inApril 2020 . •Colombia - Completed the sale of the company's interest in the offshore Chuchupa and onshore Ballena natural gas fields inApril 2020 . Results of Operations Business Segments The following section presents the results of operations and variances on an after-tax basis for the company's business segments - Upstream and Downstream - as well as for "All Other." (Refer to Note 8, beginning on page 11, for a discussion of the company's "reportable segments," as defined under the accounting standards for segment reporting.) 30
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Upstream
Three Months Ended Six Months Ended
June 30 June 30
2020 2019 2020 2019
(Millions of dollars)
U.S. Upstream Earnings $ (2,066) $ 896 $ (1,825) $ 1,644
U.S. upstream operations reported a loss of $2.07 billion in second quarter
2020, compared with earnings of $896 million from a year earlier. Included in
the current quarter were charges of $1.32 billion for special items, including
impairments and write-offs of $1.20 billion and severance charges of $120
million . Sharply lower crude oil realizations of $1.59 billion also contributed
to the decrease in earnings between periods.
U.S. upstream operations reported a loss of $1.83 billion for the first six
months of 2020, compared with earnings of $1.64 billion from a year earlier. The
decrease is due to the drastic decline in crude oil realizations of $2.08
billion and second quarter 2020 special items of $1.32 billion as detailed
above.
The average realization per barrel for U.S. crude oil and natural gas liquids in
second quarter 2020 was $19 compared with $52 a year earlier. The average
realization per barrel for U.S. crude oil and natural gas liquids in the first
six months of 2020 was $29 , compared with $50 a year earlier. The average
natural gas realization in second quarter 2020 was $0.81 per thousand cubic
feet, compared with $0.68 in the 2019 period. The average natural gas
realization in the first six months of 2020 was $0.70 per thousand cubic feet,
compared with $1.17 in the 2019 period.
Net oil-equivalent production of 991,000 barrels per day in second quarter 2020
was up 93,000 barrels per day, or 10 percent, from a year earlier. Production
increases from shale and tight properties in the Permian Basin in Texas and New
Mexico were partially offset by normal field declines and the effects of
production curtailments due to market conditions. Net oil-equivalent production
of 1.03 million barrels per day in the first six months of 2020 was up 136,000
barrels per day, or 15 percent, from a year earlier. Production increases from
shale and tight properties in the Permian Basin in Texas and New Mexico were
partially offset by normal field declines and the effects of production
curtailments due to market conditions.
The net liquids component of oil-equivalent production of 747,000 barrels per
day in second quarter 2020 was up 5 percent from the corresponding 2019 period.
The net liquids component of oil-equivalent production of 775,000 barrels per
day in the 2020 six-month period was up 11 percent from the 2019 period. Net
natural gas production was 1.46 billion cubic feet per day in second quarter
2020, an increase of 29 percent from the 2019 comparative period. Net natural
gas production was 1.51 billion cubic feet per day in the first six months of
2020, an increase of 32 percent from the 2019 period.
Three Months Ended Six Months Ended
June 30 June 30
2020 2019 2020 2019
(Millions of dollars)
International Upstream Earnings* $ (4,023) $ 2,587 $ (1,344) $ 4,962
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* Includes foreign currency effects $ (262) $ 22 $ 206 $ (146)
International upstream operations reported a loss of $4.02 billion in second
quarter 2020, compared with earnings of $2.59 billion a year ago. Special items
included in second quarter 2020 include charges of $3.9 billion for impairments,
write-offs and severance accruals, and earnings of $0.7 billion associated with
a gain on the Azerbaijan sale and tax items. Sharply lower crude oil
realizations of $2.12 billion , and lower crude oil and natural gas volumes of
$330 million and $240 million , respectively, also contributed to the decrease in
earnings between periods. Foreign currency effects had an unfavorable impact on
earnings of $284 million between periods.
International upstream operations reported a loss of $1.34 billion in the first
six months of 2020 compared with earnings of $4.96 billion a year earlier.
Special items included in the first half of 2020 include charges of $3.9 billion
for impairments, write-offs and severance accruals and earnings of $1.4 billion
associated with gains on asset sales and tax items. Sharply lower crude oil
realizations of $2.98 billion and lower crude oil
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volumes of$510 million also contributed to the decrease in earnings between periods. Foreign currency effects had a favorable impact on earnings of$352 million between periods. The average realization per barrel of crude oil and natural gas liquids in second quarter 2020 was$21 , compared with$62 a year earlier. The average realization per barrel of crude oil and natural gas liquids in the first six months of 2020 was$33 , compared with$60 a year earlier. The average natural gas realization in second quarter 2020 was$4.48 per thousand cubic feet, compared with$5.43 in the 2019 period. The average natural gas realization in the first six months of 2020 was$5.11 per thousand cubic feet, compared with$6.00 in the 2019 period. International net oil-equivalent production of 2.00 million barrels per day in second quarter 2020 decreased 189,000 barrels per day, or 9 percent, from the corresponding 2019 period. The decrease is due to production curtailments associated with market conditions and OPEC+ restrictions combined with asset sale related decreases of 100,000 barrels per day. Partially offsetting these items were higher production entitlement effects. International net oil-equivalent production of 2.08 million barrels per day in the first six months of 2020 was down 86,000 barrels per day, or 4 percent, from a year earlier. The decrease is due to asset sale related decreases of 97,000 barrels per day, and production curtailments associated with market conditions and OPEC+ restrictions, partially offset by production entitlement effects. The net liquids component of oil-equivalent production of 1.08 million barrels per day in second quarter 2020 decreased 7 percent from the 2019 period. The net liquids component of oil-equivalent production of 1.12 million barrels per day in the first six months of 2020 decreased 4 percent from the 2019 period. Net natural gas production of 5.52 billion cubic feet per day in second quarter 2020 decreased 11 percent from the 2019 period. Net natural gas production of 5.79 billion cubic feet per day in the first six months of 2020 decreased 4 percent from the 2019 period. Downstream Three Months Ended Six Months Ended June 30 June 30 2020 2019 2020 2019 (Millions of dollars) U.S. Downstream Earnings$ (988) $ 465 $ (538) $ 682U.S. downstream operations reported a loss of$988 million in second quarter 2020, compared with earnings of$465 million a year earlier. The decrease was mainly due to lower margins on refined product sales of$740 million , lower sales volumes of$500 million , lower earnings from 50 percent-ownedChevron Phillips Chemical Company LLC (CPChem) of$200 million and severance accruals of$80 million , partially offset by lower maintenance and transportation costs of$80 million .U.S. downstream operations reported a loss of$538 million for the first six months of 2020 compared with earnings of$682 million a year earlier. The decrease was primarily due to lower sales volumes of$410 million , lower margins on refined product sales of$360 million , lower earnings from 50 percent-owned CPChem of$260 million , and higher operating expense of$180 million , including severance charges of$80 million . Refinery crude oil input in second quarter 2020 decreased 39 percent to 581,000 barrels per day and for the first six months of 2020, crude oil input decreased 15 percent to 773,000 barrels per day. The decrease for both comparative periods was due to the company's cut in refinery runs in response to demand destruction from the impact of the COVID-19 pandemic and the weak refining margin environment. Refined product sales of 827,000 barrels per day were down 35 percent from second quarter 2019, mainly due to gasoline, jet fuel and diesel demand destruction associated with the COVID-19 pandemic. Refined product sales of 993,000 barrels per day in the six-month period were down 20 percent from the corresponding 2019 period, mainly due to jet fuel, gasoline and diesel demand destruction associated with the COVID-19 pandemic. 32
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Three Months Ended Six Months Ended
June 30 June 30
2020 2019 2020 2019
(Millions of dollars)
International Downstream Earnings* $ (22) $ 264 $ 631 $ 299
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* Includes foreign currency effects$ (23) $ (9) $ 37 $ 22 International downstream operations reported a loss of$22 million in second quarter 2020, compared with earnings of$264 million a year earlier. The decrease in earnings was largely due to lower margins on refined product sales of$200 million and severance charges of$60 million , partially offset by reductions in shutdown and transportation costs which were both lower by$20 million . Foreign currency effects had an unfavorable impact on earnings of$14 million between periods. Earnings for the first six months of 2020 were$631 million , compared with$299 million a year earlier. The increase in earnings was largely due to higher margins on refined product sales of$410 million , partially offset by severance charges of$60 million . Foreign currency effects had a favorable impact on earnings of$15 million between periods. Refinery crude oil input of 589,000 barrels per day in second quarter 2020 decreased 2 percent from the year-ago period. For the first six months of 2020, crude input was 612,000 barrels per day, down 3 percent from the year-ago period. Total refined product sales of 1.10 million barrels per day in second quarter 2020 were down 13 percent from the year-ago period, mainly due to gasoline, jet fuel and diesel demand destruction associated with the COVID-19 pandemic. Total refined product sales for the first six months of 2020 of 1.19 million barrels per day were down 11 percent from the year-ago period, mainly due to jet fuel, gasoline and diesel demand destruction associated with the COVID-19 pandemic. All Other Three Months Ended Six Months Ended June 30 June 30 2020 2019 2020 2019 (Millions of dollars) Earnings/(Charges)*$ (1,171) $ 93 $ (1,595) $ (633) ______________________ * Includes foreign currency effects$ (152) $ 2 $ (166) $ 2 All Other consists of worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities and technology companies. Net charges in second quarter 2020 were$1.17 billion , compared with net earnings of$93 million in the year-ago period. The increase in net charges between periods was mainly due to absence of theAnadarko termination fee that was received in second quarter 2019, along with severance charges that were recorded in the current period. Foreign currency effects increased net charges by$154 million between periods. Net charges for the first six months of 2020 were$1.60 billion , compared with$633 million a year earlier. The change between periods was mainly due to the absence of theAnadarko termination fee that was received in second quarter 2019 and severance charges, partially offset by lower employee costs and lower interest expense. Foreign currency effects increased net charges by$168 million between periods. 33
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