filings.toolsItem 1. Consolidated Financial Statements
96K characters. Original on sec.gov ·
Item 1. Consolidated Financial Statements
CHEVRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| (Millions of dollars, except per-share amounts) | |||||||||||||||||||||||
| Revenues and Other Income | |||||||||||||||||||||||
| Sales and other operating revenues | $ | 42,552 | $ | 23,997 | $ | 109,745 | $ | 69,628 | |||||||||||||||
| Income (loss) from equity affiliates | 1,647 | 510 | 4,000 | (1,040) | |||||||||||||||||||
| Other income (loss) | 511 | (56) | 591 | 858 | |||||||||||||||||||
| Total Revenues and Other Income | 44,710 | 24,451 | 114,336 | 69,446 | |||||||||||||||||||
| Costs and Other Deductions | |||||||||||||||||||||||
| Purchased crude oil and products | 23,834 | 13,448 | 62,031 | 37,101 | |||||||||||||||||||
| Operating expenses | 5,353 | 4,604 | 15,219 | 15,425 | |||||||||||||||||||
| Selling, general and administrative expenses | 657 | 832 | 2,743 | 3,084 | |||||||||||||||||||
| Exploration expenses | 158 | 117 | 357 | 1,170 | |||||||||||||||||||
| Depreciation, depletion and amortization | 4,304 | 4,017 | 13,112 | 15,022 | |||||||||||||||||||
| Taxes other than on income | 2,075 | 1,091 | 5,061 | 3,223 | |||||||||||||||||||
| Interest and debt expense | 174 | 164 | 557 | 498 | |||||||||||||||||||
| Other components of net periodic benefit costs | 100 | 222 | 602 | 419 | |||||||||||||||||||
| Total Costs and Other Deductions | 36,655 | 24,495 | 99,682 | 75,942 | |||||||||||||||||||
| Income (Loss) Before Income Tax Expense | 8,055 | (44) | 14,654 | (6,496) | |||||||||||||||||||
| Income Tax Expense (Benefit) | 1,940 | 165 | 4,047 | (1,591) | |||||||||||||||||||
| Net Income (Loss) | 6,115 | (209) | 10,607 | (4,905) | |||||||||||||||||||
| Less: Net income (loss) attributable to noncontrolling interests | 4 | (2) | 37 | (27) | |||||||||||||||||||
| Net Income (Loss) Attributable to Chevron Corporation | $ | 6,111 | $ | (207) | $ | 10,570 | $ | (4,878) | |||||||||||||||
| Per Share of Common Stock | |||||||||||||||||||||||
| Net Income (Loss) Attributable to Chevron Corporation | |||||||||||||||||||||||
| - Basic | $ | 3.19 | $ | (0.12) | $ | 5.52 | $ | (2.63) | |||||||||||||||
| - Diluted | $ | 3.19 | $ | (0.12) | $ | 5.51 | $ | (2.63) | |||||||||||||||
| Weighted Average Number of Shares Outstanding (000s) | |||||||||||||||||||||||
| - Basic | 1,918,006 | 1,853,533 | 1,916,174 | 1,856,363 | |||||||||||||||||||
| - Diluted | 1,921,095 | 1,853,533 | 1,919,666 | 1,856,363 | |||||||||||||||||||
See accompanying notes to consolidated financial statements.
CHEVRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| (Millions of dollars) | |||||||||||||||||||||||
| Net Income (Loss) | $ | 6,115 | $ | (209) | $ | 10,607 | $ | (4,905) | |||||||||||||||
| Currency translation adjustment | (15) | 17 | (31) | 5 | |||||||||||||||||||
| Unrealized holding gain (loss) on securities | |||||||||||||||||||||||
| Net gain (loss) arising during period | (3) | (1) | (1) | (5) | |||||||||||||||||||
| Derivatives | |||||||||||||||||||||||
| Net derivatives loss on hedge transactions | (4) | — | (6) | — | |||||||||||||||||||
| Reclassification to net income | 2 | — | 2 | — | |||||||||||||||||||
| Income taxes on derivatives transactions | 1 | — | 1 | — | |||||||||||||||||||
| Total | (1) | — | (3) | — | |||||||||||||||||||
| Defined benefit plans | |||||||||||||||||||||||
| Actuarial gain (loss) | |||||||||||||||||||||||
| Amortization to net income of net actuarial loss and settlements | 189 | 293 | 866 | 628 | |||||||||||||||||||
| Actuarial gain (loss) arising during period | (336) | — | 681 | — | |||||||||||||||||||
| Prior service credits (cost) | |||||||||||||||||||||||
| Amortization to net income of net prior service costs and curtailments | (5) | (5) | (13) | (13) | |||||||||||||||||||
| Prior service (costs) credits arising during period | — | — | 3 | — | |||||||||||||||||||
| Defined benefit plans sponsored by equity affiliates - benefit (cost) | 7 | 5 | 47 | 14 | |||||||||||||||||||
| Income (taxes) benefit on defined benefit plans | 41 | (66) | (355) | (146) | |||||||||||||||||||
| Total | (104) | 227 | 1,229 | 483 | |||||||||||||||||||
| Other Comprehensive Gain (Loss), Net of Tax | (123) | 243 | 1,194 | 483 | |||||||||||||||||||
| Comprehensive Income (Loss) | 5,992 | 34 | 11,801 | (4,422) | |||||||||||||||||||
| Comprehensive loss (income) attributable to noncontrolling interests | (4) | 2 | (37) | 27 | |||||||||||||||||||
| Comprehensive Income (Loss) Attributable to Chevron Corporation | $ | 5,988 | $ | 36 | $ | 11,764 | $ | (4,395) |
See accompanying notes to consolidated financial statements.
CHEVRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
| At September 30, 2021 | At December 31, 2020 | |||||||||||||
| (Millions of dollars) | ||||||||||||||
| Assets | ||||||||||||||
| Cash and cash equivalents | $ | 5,998 | $ | 5,596 | ||||||||||
| Marketable securities | 34 | 31 | ||||||||||||
| Accounts and notes receivable (less allowance: 2021 - $285; 2020 - $284) | 16,567 | 11,471 | ||||||||||||
| Inventories: | ||||||||||||||
| Crude oil and petroleum products | 3,937 | 3,576 | ||||||||||||
| Chemicals | 621 | 457 | ||||||||||||
| Materials, supplies and other | 1,571 | 1,643 | ||||||||||||
| Total inventories | 6,129 | 5,676 | ||||||||||||
| Prepaid expenses and other current assets | 3,409 | 3,304 | ||||||||||||
| Total Current Assets | 32,137 | 26,078 | ||||||||||||
| Long-term receivables (less allowance: 2021 - $432; 2020 - $387) | 644 | 589 | ||||||||||||
| Investments and advances | 41,097 | 39,052 | ||||||||||||
| Properties, plant and equipment, at cost | 328,572 | 345,232 | ||||||||||||
| Less: Accumulated depreciation, depletion and amortization | 180,627 | 188,614 | ||||||||||||
| Properties, plant and equipment, net | 147,945 | 156,618 | ||||||||||||
| Deferred charges and other assets | 11,743 | 11,950 | ||||||||||||
| Goodwill | 4,402 | 4,402 | ||||||||||||
| Assets held for sale | 1,980 | 1,101 | ||||||||||||
| Total Assets | $ | 239,948 | $ | 239,790 | ||||||||||
| Liabilities and Equity | ||||||||||||||
| Short-term debt | $ | 291 | $ | 1,548 | ||||||||||
| Accounts payable | 15,308 | 10,950 | ||||||||||||
| Accrued liabilities | 6,938 | 7,812 | ||||||||||||
| Federal and other taxes on income | 1,467 | 921 | ||||||||||||
| Other taxes payable | 1,184 | 952 | ||||||||||||
| Total Current Liabilities | 25,188 | 22,183 | ||||||||||||
| Long-term debt | 37,056 | 42,767 | ||||||||||||
| Deferred credits and other noncurrent obligations | 20,298 | 20,328 | ||||||||||||
| Noncurrent deferred income taxes | 13,546 | 12,569 | ||||||||||||
| Noncurrent employee benefit plans | 7,138 | 9,217 | ||||||||||||
| Total Liabilities***** | $ | 103,226 | $ | 107,064 | ||||||||||
| Preferred stock (authorized 100,000,000 shares; $1.00 par value; none issued) | — | — | ||||||||||||
| Common stock (authorized 6,000,000,000 shares, $0.75 par value; 2,442,676,580 shares issued at September 30, 2021 and December 31, 2020) | 1,832 | 1,832 | ||||||||||||
| Capital in excess of par value | 17,062 | 16,829 | ||||||||||||
| Retained earnings | 163,044 | 160,377 | ||||||||||||
| Accumulated other comprehensive losses | (4,418) | (5,612) | ||||||||||||
| Deferred compensation and benefit plan trust | (240) | (240) | ||||||||||||
| Treasury stock, at cost (514,990,661 and 517,490,263 shares at September 30, 2021 and December 31, 2020, respectively) | (41,418) | (41,498) | ||||||||||||
| Total Chevron Corporation Stockholders’ Equity | 135,862 | 131,688 | ||||||||||||
| Noncontrolling interests (includes redeemable noncontrolling interest of $131 and $120 at September 30, 2021 and December 31, 2020, respectively) | 860 | 1,038 | ||||||||||||
| Total Equity | 136,722 | 132,726 | ||||||||||||
| Total Liabilities and Equity | $ | 239,948 | $ | 239,790 | ||||||||||
| * Refer to Note 12, “Other Contingencies and Commitments” beginning on page 16. | ||||||||||||||
See accompanying notes to consolidated financial statements.
CHEVRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
| Nine Months Ended September 30 | |||||||||||
| 2021 | 2020 | ||||||||||
| (Millions of dollars) | |||||||||||
| Operating Activities | |||||||||||
| Net Income (Loss) | $ | 10,607 | $ | (4,905) | |||||||
| Adjustments | |||||||||||
| Depreciation, depletion and amortization | 13,112 | 15,022 | |||||||||
| Dry hole expense | 55 | 848 | |||||||||
| Distributions more (less) than income from equity affiliates | (2,162) | 2,249 | |||||||||
| Net before-tax losses (gains) on asset retirements and sales | (401) | (625) | |||||||||
| Net foreign currency effects | (25) | 190 | |||||||||
| Deferred income tax provision | 472 | (3,180) | |||||||||
| Net decrease (increase) in operating working capital | (1,459) | (21) | |||||||||
| Decrease (increase) in long-term receivables | (33) | 84 | |||||||||
| Net decrease (increase) in other deferred charges | (167) | (145) | |||||||||
| Cash contributions to employee pension plans | (1,403) | (895) | |||||||||
| Other | 1,133 | (283) | |||||||||
| Net Cash Provided by Operating Activities | 19,729 | 8,339 | |||||||||
| Investing Activities | |||||||||||
| Capital expenditures | (5,450) | (6,855) | |||||||||
| Proceeds and deposits related to asset sales and returns of investment | 586 | 1,979 | |||||||||
| Net sales (purchases) of marketable securities | (1) | 35 | |||||||||
| Net repayment (borrowing) of loans by equity affiliates | 389 | (1,434) | |||||||||
| Net Cash Used for Investing Activities | (4,476) | (6,275) | |||||||||
| Financing Activities | |||||||||||
| Net borrowings (repayments) of short-term obligations | (3,627) | (606) | |||||||||
| Proceeds from issuances of long-term debt | — | 12,237 | |||||||||
| Repayments of long-term debt and other financing obligations | (3,305) | (3,941) | |||||||||
| Cash dividends - common stock | (7,612) | (7,186) | |||||||||
| Net contributions from (distributions to) noncontrolling interests | (34) | (10) | |||||||||
| Net sales (purchases) of treasury shares | (245) | (1,545) | |||||||||
| Net Cash Provided by (Used for) Financing Activities | (14,823) | (1,051) | |||||||||
| Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | (142) | (133) | |||||||||
| Net Change in Cash, Cash Equivalents and Restricted Cash | 288 | 880 | |||||||||
| Cash, Cash Equivalents and Restricted Cash at January 1 | 6,737 | 6,911 | |||||||||
| Cash, Cash Equivalents and Restricted Cash at September 30 | $ | 7,025 | $ | 7,791 | |||||||
See accompanying notes to consolidated financial statements.
CHEVRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EQUITY
(Unaudited)
| (Millions of dollars) | Accumulated | Treasury | Chevron Corp. | Non- | |||||||||||||||||||
| Common | Retained | Other Comp. | Stock | Stockholders’ | Controlling | Total | |||||||||||||||||
| Three Months Ended September 30 | Stock**(1)** | Earnings | Income (Loss) | (at cost) | Equity | Interests | Equity | ||||||||||||||||
| Balance at June 30, 2020 | $ | 18,889 | $ | 166,122 | $ | (4,750) | $ | (46,143) | $ | 134,118 | $ | 268 | $ | 134,386 | |||||||||
| Treasury stock transactions | 21 | — | — | — | 21 | — | 21 | ||||||||||||||||
| Net income (loss) | — | (207) | — | — | (207) | (2) | (209) | ||||||||||||||||
| Cash dividends | — | (2,390) | — | — | (2,390) | — | (2,390) | ||||||||||||||||
| Stock dividends | — | (1) | — | — | (1) | — | (1) | ||||||||||||||||
| Other comprehensive income | — | — | 243 | — | 243 | — | 243 | ||||||||||||||||
| Purchases of treasury shares | — | — | — | — | — | — | — | ||||||||||||||||
| Issuances of treasury shares | — | — | — | 5 | 5 | — | 5 | ||||||||||||||||
| Other changes, net | — | (15) | — | — | (15) | (2) | (17) | ||||||||||||||||
| Balance at September 30, 2020 | $ | 18,910 | $ | 163,509 | $ | (4,507) | $ | (46,138) | $ | 131,774 | $ | 264 | $ | 132,038 | |||||||||
| Balance at June 30, 2021 | $ | 18,636 | $ | 159,640 | $ | (4,295) | $ | (40,799) | $ | 133,182 | $ | 729 | $ | 133,911 | |||||||||
| Treasury stock transactions | 18 | — | — | — | 18 | — | 18 | ||||||||||||||||
| NBLX acquisition | — | — | — | — | — | — | — | ||||||||||||||||
| Net income (loss) | — | 6,111 | — | — | 6,111 | 4 | 6,115 | ||||||||||||||||
| Cash dividends | — | (2,571) | — | — | (2,571) | (25) | (2,596) | ||||||||||||||||
| Stock dividends | — | (1) | — | — | (1) | — | (1) | ||||||||||||||||
| Other comprehensive income | — | — | (123) | — | (123) | — | (123) | ||||||||||||||||
| Purchases of treasury shares | — | — | — | (625) | (625) | — | (625) | ||||||||||||||||
| Issuances of treasury shares | — | — | — | 6 | 6 | — | 6 | ||||||||||||||||
| Other changes, net | — | (135) | — | — | (135) | 152 | 17 | ||||||||||||||||
| Balance at September 30, 2021 | $ | 18,654 | $ | 163,044 | $ | (4,418) | $ | (41,418) | $ | 135,862 | $ | 860 | $ | 136,722 | |||||||||
| Nine Months Ended September 30 | |||||||||||||||||||||||
| Balance at December 31, 2019 | $ | 18,857 | $ | 174,945 | $ | (4,990) | $ | (44,599) | $ | 144,213 | $ | 995 | $ | 145,208 | |||||||||
| Treasury stock transactions | 53 | — | — | — | 53 | — | 53 | ||||||||||||||||
| Net income (loss) | — | (4,878) | — | — | (4,878) | (27) | (4,905) | ||||||||||||||||
| Cash dividends | — | (7,186) | — | — | (7,186) | (10) | (7,196) | ||||||||||||||||
| Stock dividends | — | (2) | — | — | (2) | — | (2) | ||||||||||||||||
| Other comprehensive income | — | — | 483 | — | 483 | — | 483 | ||||||||||||||||
| Purchases of treasury shares | — | — | — | (1,751) | (1,751) | — | (1,751) | ||||||||||||||||
| Issuances of treasury shares | — | — | — | 212 | 212 | — | 212 | ||||||||||||||||
| Other changes, net | — | 630 | — | — | 630 | (694) | (64) | ||||||||||||||||
| Balance at September 30, 2020 | $ | 18,910 | $ | 163,509 | $ | (4,507) | $ | (46,138) | $ | 131,774 | $ | 264 | $ | 132,038 | |||||||||
| Balance at December 31, 2020 | $ | 18,421 | $ | 160,377 | $ | (5,612) | $ | (41,498) | $ | 131,688 | $ | 1,038 | $ | 132,726 | |||||||||
| Treasury stock transactions | 95 | — | — | — | 95 | — | 95 | ||||||||||||||||
| NBLX acquisition | 138 | (148) | — | 377 | 367 | (321) | 46 | ||||||||||||||||
| Net income (loss) | — | 10,570 | — | — | 10,570 | 37 | 10,607 | ||||||||||||||||
| Cash dividends | — | (7,612) | — | — | (7,612) | (51) | (7,663) | ||||||||||||||||
| Stock dividends | — | (2) | — | — | (2) | — | (2) | ||||||||||||||||
| Other comprehensive income | — | — | 1,194 | — | 1,194 | — | 1,194 | ||||||||||||||||
| Purchases of treasury shares | — | — | — | (633) | (633) | — | (633) | ||||||||||||||||
| Issuances of treasury shares | — | — | — | 336 | 336 | — | 336 | ||||||||||||||||
| Other changes, net | — | (141) | — | — | (141) | 157 | 16 | ||||||||||||||||
| Balance at September 30, 2021 | $ | 18,654 | $ | 163,044 | $ | (4,418) | $ | (41,418) | $ | 135,862 | $ | 860 | $ | 136,722 | |||||||||
| (Number of Shares) | Common Stock - 2021 | Common Stock - 2020 | |||||||||||||||||||||
| Three Months Ended September 30 | Issued**(2)** | Treasury | Outstanding | Issued**(2)** | Treasury | Outstanding | |||||||||||||||||
| Balance at June 30 | 2,442,676,580 | (508,764,636) | 1,933,911,944 | 2,442,676,580 | (575,408,748) | 1,867,267,832 | |||||||||||||||||
| Purchases | — | (6,321,791) | (6,321,791) | — | (2,220) | (2,220) | |||||||||||||||||
| Issuances | — | 95,766 | 95,766 | — | 57,836 | 57,836 | |||||||||||||||||
| Balance at September 30 | 2,442,676,580 | (514,990,661) | 1,927,685,919 | 2,442,676,580 | (575,353,132) | 1,867,323,448 | |||||||||||||||||
| Nine Months Ended September 30 | |||||||||||||||||||||||
| Balance at December 31 | 2,442,676,580 | (517,490,263) | 1,925,186,317 | 2,442,676,580 | (560,508,479) | 1,882,168,101 | |||||||||||||||||
| Purchases | — | (6,395,387) | (6,395,387) | — | (17,503,545) | (17,503,545) | |||||||||||||||||
| Issuances | — | 8,894,989 | 8,894,989 | — | 2,658,892 | 2,658,892 | |||||||||||||||||
| Balance at September 30 | 2,442,676,580 | (514,990,661) | 1,927,685,919 | 2,442,676,580 | (575,353,132) | 1,867,323,448 |
(1)Beginning and ending balances for all periods include capital in excess of par, common stock issued at par for $1,832, and $(240) associated with Chevron’s Benefit Plan Trust. Changes reflect capital in excess of par.
(2)Beginning and ending total issued share balances include 14,168,000 shares associated with Chevron’s Benefit Plan Trust for all periods.
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. General
Basis of Presentation The accompanying consolidated financial statements of Chevron Corporation and its subsidiaries (together, Chevron or the company) have not been audited by an independent registered public accounting firm. In the opinion of the company’s management, the interim data includes all adjustments necessary for a fair statement of the results for the interim periods. These adjustments were of a normal recurring nature. The results for the three- and nine-month periods ended September 30, 2021, are not necessarily indicative of future financial results. The term “earnings” is defined as net income attributable to Chevron.
Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the company’s 2020 Annual Report on Form 10-K.
Impact of the Coronavirus Disease 2019 (COVID-19) Pandemic The outbreak of COVID-19 and decreases in commodity prices resulting from oversupply, government-imposed travel restrictions and other constraints on economic activity caused a significant decline in the demand for our products and created disruptions and volatility in the global marketplace beginning late in the first quarter 2020, which negatively affected our results of operations and cash flows throughout 2020. While commodity prices and demand have largely recovered, jet fuel demand is not back to pre-pandemic levels. There continues to be uncertainty around the extent to which the COVID-19 pandemic may impact our future results, which could be material.
Note 2. Changes in Accumulated Other Comprehensive Losses
The change in Accumulated Other Comprehensive Losses (AOCL) presented on the Consolidated Balance Sheet and the impact of significant amounts reclassified from AOCL on information presented in the Consolidated Statement of Income for the nine months ended September 30, 2021 and 2020 are reflected in the table below.
Changes in Accumulated Other Comprehensive Income (Loss) by Component**(1)**
(Millions of dollars)
| Currency Translation Adjustment | Unrealized Holding Gains (Losses) on Securities | Derivatives | Defined Benefit Plans | Total | ||||||||||||||||||||||||||||
| Balance at December 31, 2019 | $ | (142) | $ | (8) | $ | — | $ | (4,840) | $ | (4,990) | ||||||||||||||||||||||
| Components of Other Comprehensive Income (Loss): | ||||||||||||||||||||||||||||||||
| Before Reclassifications | 5 | (5) | — | 9 | 9 | |||||||||||||||||||||||||||
| Reclassifications | — | — | — | 474 | 474 | |||||||||||||||||||||||||||
| Net Other Comprehensive Income (Loss) | 5 | (5) | — | 483 | 483 | |||||||||||||||||||||||||||
| Balance at September 30, 2020 | $ | (137) | $ | (13) | $ | — | $ | (4,357) | $ | (4,507) | ||||||||||||||||||||||
| Balance at December 31, 2020 | $ | (107) | $ | (10) | $ | — | $ | (5,495) | $ | (5,612) | ||||||||||||||||||||||
| Components of Other Comprehensive Income (Loss): | ||||||||||||||||||||||||||||||||
| Before Reclassifications | (31) | (1) | (5) | 563 | 526 | |||||||||||||||||||||||||||
| Reclassifications(2) (3) | — | — | 2 | 666 | 668 | |||||||||||||||||||||||||||
| Net Other Comprehensive Income (Loss) | (31) | (1) | (3) | 1,229 | 1,194 | |||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | (138) | $ | (11) | $ | (3) | $ | (4,266) | $ | (4,418) |
(1)All amounts are net of tax.
(2) Refer to Note 14, Financial and Derivative Instruments for reclassified components of cash flow hedging.
(3) Refer to Note 8, Employee Benefits for reclassified components, including amortization of actuarial gains or losses, amortization of prior service costs and settlement losses, totaling $853 million that are included in employee benefit costs for the nine months ended September 30, 2021. Related income taxes for the same period, totaling $187 million, are reflected in “Income Tax Expense” on the Consolidated Statement of Income. All other reclassified amounts were insignificant.
.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 3. Information Relating to the Consolidated Statement of Cash Flows
| Nine Months Ended September 30 | |||||||||||
| 2021 | 2020 | ||||||||||
| (Millions of dollars) | |||||||||||
| Distributions more (less) than income from equity affiliates includes the following: | |||||||||||
| Distributions from equity affiliates | $ | 1,838 | $ | 1,209 | |||||||
| (Income) loss from equity affiliates | (4,000) | 1,040 | |||||||||
| Distributions more (less) than income from equity affiliates | $ | (2,162) | $ | 2,249 | |||||||
| Net decrease (increase) in operating working capital was composed of the following: | |||||||||||
| Decrease (increase) in accounts and notes receivable | $ | (5,692) | $ | 3,601 | |||||||
| Decrease (increase) in inventories | (353) | 201 | |||||||||
| Decrease (increase) in prepaid expenses and other current assets | (94) | 632 | |||||||||
| Increase (decrease) in accounts payable and accrued liabilities | 3,842 | (3,609) | |||||||||
| Increase (decrease) in income and other taxes payable | 838 | (846) | |||||||||
| Net decrease (increase) in operating working capital | $ | (1,459) | $ | (21) | |||||||
| Net cash provided by operating activities includes the following cash payments: | |||||||||||
| Interest on debt (net of capitalized interest) | $ | 427 | $ | 384 | |||||||
| Income taxes | 2,943 | 2,527 | |||||||||
| Proceeds and deposits related to asset sales and returns of investment consisted of the following gross amounts: | |||||||||||
| Proceeds and deposits related to asset sales | $ | 563 | $ | 1,912 | |||||||
| Returns of investment from equity affiliates | 23 | 67 | |||||||||
| Proceeds and deposits related to asset sales and returns of investment | $ | 586 | $ | 1,979 | |||||||
| Net sales (purchases) of marketable securities consisted of the following gross amounts: | |||||||||||
| Marketable securities purchased | $ | (3) | $ | (2) | |||||||
| Marketable securities sold | 2 | 37 | |||||||||
| Net sales (purchases) of marketable securities | $ | (1) | $ | 35 | |||||||
| Net repayment (borrowing) of loans by equity affiliates consisted of the following gross amounts: | |||||||||||
| Borrowing of loans by equity affiliates | $ | — | $ | (3,925) | |||||||
| Repayment of loans by equity affiliates | 389 | 2,491 | |||||||||
| Net repayment (borrowing) of loans by equity affiliates | $ | 389 | $ | (1,434) | |||||||
| Net borrowings (repayments) of short-term obligations consisted of the following gross and net amounts: | |||||||||||
| Proceeds from issuances of short-term obligations | $ | 4,449 | $ | 8,863 | |||||||
| Repayments of short-term obligations | (6,225) | (7,479) | |||||||||
| Net borrowings (repayments) of short-term obligations with three months or less maturity | (1,851) | (1,990) | |||||||||
| Net borrowings (repayments) of short-term obligations | $ | (3,627) | $ | (606) | |||||||
| Net sales (purchases) of treasury shares consists of the following gross and net amounts: | |||||||||||
| Shares issued for share-based compensation plans | $ | 388 | $ | 206 | |||||||
| Shares purchased under share repurchase and deferred compensation plans | (633) | (1,751) | |||||||||
| Net sales (purchases) of treasury shares | $ | (245) | $ | (1,545) | |||||||
| Net contributions from (distributions to) noncontrolling interests consisted of the following gross amounts: | |||||||||||
| Distributions to noncontrolling interests | $ | (51) | $ | (10) | |||||||
| Contributions from noncontrolling interests | 17 | — | |||||||||
| Net contributions from (distributions to) noncontrolling interests | $ | (34) | $ | (10) |
The Consolidated Statement of Cash Flows excludes changes to the Consolidated Balance Sheet that did not affect cash.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The “Other” line in the Operating Activities section includes changes in postretirement benefits obligations and other long-term liabilities.
The company paid dividends of $1.34 per share of common stock in third quarter 2021. This compares to dividends of $1.29 per share paid in the year-ago corresponding period.
The major components of “Capital expenditures” and the reconciliation of this amount to the reported capital and exploratory expenditures, including equity affiliates, are presented in the following table:
| Nine Months Ended September 30 | |||||||||||
| 2021 | 2020 | ||||||||||
| (Millions of dollars) | |||||||||||
| Additions to properties, plant and equipment | $ | 5,087 | $ | 6,576 | |||||||
| Additions to investments | 309 | 86 | |||||||||
| Current-year dry hole expenditures | 55 | 226 | |||||||||
| Payments for other assets and liabilities, net | (1) | (33) | |||||||||
| Capital expenditures | 5,450 | 6,855 | |||||||||
| Expensed exploration expenditures | 302 | 322 | |||||||||
| Assets acquired through finance lease obligations and other financing obligations | 49 | 49 | |||||||||
| Payments for other assets and liabilities, net | 1 | 33 | |||||||||
| Capital and exploratory expenditures, excluding equity affiliates | 5,802 | 7,259 | |||||||||
| Company’s share of expenditures by equity affiliates | 2,258 | 3,063 | |||||||||
| Capital and exploratory expenditures, including equity affiliates | $ | 8,060 | $ | 10,322 |
The table below quantifies the beginning and ending balances of restricted cash and restricted cash equivalents in the Consolidated Balance Sheet:
| At September 30 | At December 31 | ||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | ||||||||||||||||||||
| (Millions of dollars) | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 5,998 | $ | 6,866 | $ | 5,596 | $ | 5,686 | |||||||||||||||
| Restricted cash included in “Prepaid expenses and other current assets” | 246 | 169 | 365 | 452 | |||||||||||||||||||
| Restricted cash included in “Deferred charges and other assets” | 781 | 756 | 776 | 773 | |||||||||||||||||||
| Total cash, cash equivalents and restricted cash | $ | 7,025 | $ | 7,791 | $ | 6,737 | $ | 6,911 |
Additional information related to restricted cash is included on page 19 in Note 13 under the heading “Restricted Cash.”
Note 4. Summarized Financial Data — Tengizchevroil LLP
Chevron has a 50 percent equity ownership interest in Tengizchevroil LLP (TCO). Summarized financial information for 100 percent of TCO is presented in the following table:
| Nine Months Ended September 30 | |||||||||||
| 2021 | 2020 | ||||||||||
| (Millions of dollars) | |||||||||||
| Sales and other operating revenues | $ | 10,845 | $ | 6,757 | |||||||
| Costs and other deductions | 5,568 | 4,655 | |||||||||
| Net income attributable to TCO | $ | 3,692 | $ | 1,483 |
Note 5. Summarized Financial Data — Chevron Phillips Chemical Company LLC
Chevron has a 50 percent equity ownership interest in Chevron Phillips Chemical Company LLC (CPChem). Summarized financial information for 100 percent of CPChem is presented in the table on the following page.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
| Nine Months Ended September 30 | |||||||||||
| 2021 | 2020 | ||||||||||
| (Millions of dollars) | |||||||||||
| Sales and other operating revenues | $ | 10,414 | $ | 6,093 | |||||||
| Costs and other deductions | 7,972 | 5,179 | |||||||||
| Net income attributable to CPChem | $ | 2,797 | $ | 877 |
Note 6. Summarized Financial Data — Chevron U.S.A. Inc.
Chevron U.S.A. Inc. (CUSA) is a major subsidiary of Chevron Corporation. CUSA and its subsidiaries manage and operate most of Chevron’s U.S. businesses. Assets include those related to the exploration and production of crude oil, natural gas and natural gas liquids and those associated with refining, marketing, and supply and distribution of products derived from petroleum, excluding most of the regulated pipeline operations of Chevron. CUSA also holds the company’s investment in the Chevron Phillips Chemical Company LLC joint venture, which is accounted for using the equity method.
The summarized financial information for CUSA and its consolidated subsidiaries is as follows:
| Nine Months Ended September 30 | |||||||||||
| 2021 | 2020 | ||||||||||
| (Millions of dollars) | |||||||||||
| Sales and other operating revenues | $ | 85,002 | $ | 50,360 | |||||||
| Costs and other deductions | 81,553 | 54,221 | |||||||||
| Net income (loss) attributable to CUSA | $ | 4,184 | $ | (2,203) | |||||||
| At September 30, 2021 | At December 31, 2020 | ||||||||||
| (Millions of dollars) | |||||||||||
| Current assets | $ | 19,081 | $ | 10,555 | |||||||
| Other assets | 47,219 | 48,054 | |||||||||
| Current liabilities | 15,922 | 12,403 | |||||||||
| Other liabilities | 21,877 | 14,102 | |||||||||
| Total CUSA net equity | $ | 28,501 | $ | 32,104 | |||||||
| Memo: Total debt | $ | 15,009 | $ | 7,133 |
Note 7. Operating Segments and Geographic Data
Although each subsidiary of Chevron is responsible for its own affairs, Chevron Corporation manages its investments in these subsidiaries and their affiliates. The investments are grouped into two business segments, Upstream and Downstream, representing the company’s “reportable segments” and “operating segments.” Upstream operations consist primarily of exploring for, developing and producing crude oil and natural gas; liquefaction, transportation and regasification associated with liquefied natural gas (LNG); transporting crude oil by major international oil export pipelines; processing, transporting, storage and marketing of natural gas; and a gas-to-liquids plant. Downstream operations consist primarily of the refining of crude oil into petroleum products; marketing of crude oil and refined products; transporting of crude oil and refined products by pipeline, marine vessel, motor equipment and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives. “All Other” activities of the company include worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities and technology companies.
The company’s segments are managed by “segment managers” who report to the “chief operating decision maker” (CODM). The segments represent components of the company that engage in activities (a) from which revenues are earned and expenses are incurred; (b) whose operating results are regularly reviewed by the CODM, which makes decisions about resources to be allocated to the segments and assesses their performance; and (c) for which discrete financial information is available.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The company’s primary country of operation is the United States of America, its country of domicile. Other components of the company’s operations are reported as “International” (outside the United States).
Segment Earnings The company evaluates the performance of its operating segments on an after-tax basis, without considering the effects of debt financing interest expense or investment interest income, both of which are managed by the company on a worldwide basis. Corporate administrative costs and assets are not allocated to the operating segments. However, operating segments are billed for the direct use of corporate services. Nonbillable costs remain at the corporate level in “All Other.” Earnings by major operating area for the three- and nine-month periods ended September 30, 2021 and 2020, are presented in the following table:
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Segment Earnings | (Millions of dollars) | (Millions of dollars) | |||||||||||||||||||||
| Upstream | |||||||||||||||||||||||
| United States | $ | 1,962 | $ | 116 | $ | 4,349 | $ | (1,709) | |||||||||||||||
| International | 3,173 | 119 | 6,314 | (1,225) | |||||||||||||||||||
| Total Upstream | 5,135 | 235 | 10,663 | (2,934) | |||||||||||||||||||
| Downstream | |||||||||||||||||||||||
| United States | 1,083 | 141 | 1,729 | (397) | |||||||||||||||||||
| International | 227 | 151 | 425 | 782 | |||||||||||||||||||
| Total Downstream | 1,310 | 292 | 2,154 | 385 | |||||||||||||||||||
| Total Segment Earnings | 6,445 | 527 | 12,817 | (2,549) | |||||||||||||||||||
| All Other | |||||||||||||||||||||||
| Interest expense | (160) | (153) | (517) | (471) | |||||||||||||||||||
| Interest income | 8 | 7 | 28 | 43 | |||||||||||||||||||
| Other | (182) | (588) | (1,758) | (1,901) | |||||||||||||||||||
| Net Income Attributable to Chevron Corporation | $ | 6,111 | $ | (207) | $ | 10,570 | $ | (4,878) |
Segment Assets Segment assets do not include intercompany investments or intercompany receivables. Segment assets at September 30, 2021, and December 31, 2020, are as follows:
| At September 30, 2021 | At December 31, 2020 | ||||||||||
| Segment Assets | (Millions of dollars) | ||||||||||
| Upstream | |||||||||||
| United States | $ | 41,944 | $ | 42,431 | |||||||
| International | 140,044 | 144,476 | |||||||||
| Goodwill | 4,402 | 4,402 | |||||||||
| Total Upstream | 186,390 | 191,309 | |||||||||
| Downstream | |||||||||||
| United States | 25,722 | 23,490 | |||||||||
| International | 18,135 | 16,096 | |||||||||
| Total Downstream | 43,857 | 39,586 | |||||||||
| Total Segment Assets | 230,247 | 230,895 | |||||||||
| All Other | |||||||||||
| United States | 4,412 | 4,017 | |||||||||
| International | 5,289 | 4,878 | |||||||||
| Total All Other | 9,701 | 8,895 | |||||||||
| Total Assets — United States | 72,078 | 69,938 | |||||||||
| Total Assets — International | 163,468 | 165,450 | |||||||||
| Goodwill | 4,402 | 4,402 | |||||||||
| Total Assets | $ | 239,948 | $ | 239,790 | |||||||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Segment Sales and Other Operating Revenues Segment sales and other operating revenues, including internal transfers, for the three- and nine-month periods ended September 30, 2021 and 2020, are presented in the following table. Products are transferred between operating segments at internal product values that approximate market prices. Revenues for the upstream segment are derived primarily from the production and sale of crude oil and natural gas, as well as the sale of third-party production of natural gas. Revenues for the downstream segment are derived primarily from the refining and marketing of petroleum products such as gasoline, jet fuel, gas oils, lubricants, residual fuel oils and other products derived from crude oil. This segment also generates revenues from the manufacture and sale of fuel and lubricant additives and the transportation and trading of refined products and crude oil. “All Other” activities include revenues from insurance operations, real estate activities and technology companies.
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Sales and Other Operating Revenues | (Millions of dollars) | (Millions of dollars) | |||||||||||||||||||||
| Upstream | |||||||||||||||||||||||
| United States | $ | 7,374 | $ | 3,367 | $ | 19,199 | $ | 10,377 | |||||||||||||||
| International | 11,262 | 5,911 | 29,568 | 19,478 | |||||||||||||||||||
| Subtotal | 18,636 | 9,278 | 48,767 | 29,855 | |||||||||||||||||||
| Intersegment Elimination — United States | (3,520) | (1,916) | (9,631) | (6,148) | |||||||||||||||||||
| Intersegment Elimination — International | (3,141) | (1,661) | (8,277) | (5,223) | |||||||||||||||||||
| Total Upstream | 11,975 | 5,701 | 30,859 | 18,484 | |||||||||||||||||||
| Downstream | |||||||||||||||||||||||
| United States | 15,984 | 8,147 | 40,749 | 24,568 | |||||||||||||||||||
| International | 15,496 | 10,649 | 40,683 | 29,341 | |||||||||||||||||||
| Subtotal | 31,480 | 18,796 | 81,432 | 53,909 | |||||||||||||||||||
| Intersegment Elimination — United States | (558) | (307) | (1,524) | (1,899) | |||||||||||||||||||
| Intersegment Elimination — International | (384) | (230) | (1,110) | (1,001) | |||||||||||||||||||
| Total Downstream | 30,538 | 18,259 | 78,798 | 51,009 | |||||||||||||||||||
| All Other | |||||||||||||||||||||||
| United States | 87 | 208 | 321 | 645 | |||||||||||||||||||
| International | 1 | 3 | 1 | 11 | |||||||||||||||||||
| Subtotal | 88 | 211 | 322 | 656 | |||||||||||||||||||
| Intersegment Elimination — United States | (48) | (171) | (233) | (510) | |||||||||||||||||||
| Intersegment Elimination — International | (1) | (3) | (1) | (11) | |||||||||||||||||||
| Total All Other | 39 | 37 | 88 | 135 | |||||||||||||||||||
| Sales and Other Operating Revenues | |||||||||||||||||||||||
| United States | 23,445 | 11,722 | 60,269 | 35,590 | |||||||||||||||||||
| International | 26,759 | 16,563 | 70,252 | 48,830 | |||||||||||||||||||
| Subtotal | 50,204 | 28,285 | 130,521 | 84,420 | |||||||||||||||||||
| Intersegment Elimination — United States | (4,126) | (2,394) | (11,388) | (8,557) | |||||||||||||||||||
| Intersegment Elimination — International | (3,526) | (1,894) | (9,388) | (6,235) | |||||||||||||||||||
| Total Sales and Other Operating Revenues | $ | 42,552 | $ | 23,997 | $ | 109,745 | $ | 69,628 |
Note 8. Employee Benefits
Chevron has defined benefit pension plans for many employees. The company typically prefunds defined benefit plans as required by local regulations or in certain situations where prefunding provides economic advantages. In the United States, all qualified plans are subject to the Employee Retirement Income Security Act minimum funding standard. The company does not typically fund U.S. nonqualified pension plans that are not subject to funding requirements under laws and regulations because contributions to these pension plans may be less economic and investment returns may be less attractive than the company’s other investment alternatives.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The company also sponsors other postretirement employee benefit (OPEB) plans that provide medical and dental benefits, as well as life insurance for some active and qualifying retired employees. The plans are unfunded, and the company and the retirees share the costs. For the company’s main U.S. medical plan, the increase to the pre-Medicare company contribution for retiree medical coverage is limited to no more than four percent each year. Certain life insurance benefits are paid by the company.
The components of net periodic benefit costs for 2021 and 2020 are as follows:
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| (Millions of dollars) | (Millions of dollars) | ||||||||||||||||||||||
| Pension Benefits | |||||||||||||||||||||||
| United States | |||||||||||||||||||||||
| Service cost | $ | 112 | $ | 124 | $ | 337 | $ | 373 | |||||||||||||||
| Interest cost | 56 | 89 | 175 | 265 | |||||||||||||||||||
| Expected return on plan assets | (145) | (163) | (439) | (488) | |||||||||||||||||||
| Amortization of prior service costs (credits) | — | — | 1 | 1 | |||||||||||||||||||
| Amortization of actuarial losses (gains) | 68 | 96 | 245 | 288 | |||||||||||||||||||
| Settlement losses | 108 | 184 | 576 | 304 | |||||||||||||||||||
| Total United States | 199 | 330 | 895 | 743 | |||||||||||||||||||
| International | |||||||||||||||||||||||
| Service cost | 27 | 33 | 98 | 97 | |||||||||||||||||||
| Interest cost | 35 | 44 | 104 | 131 | |||||||||||||||||||
| Expected return on plan assets | (42) | (52) | (131) | (155) | |||||||||||||||||||
| Amortization of prior service costs (credits) | 2 | 2 | 6 | 7 | |||||||||||||||||||
| Amortization of actuarial losses (gains) | 11 | 12 | 35 | 33 | |||||||||||||||||||
| Settlement losses | (1) | — | (1) | — | |||||||||||||||||||
| Total International | 32 | 39 | 111 | 113 | |||||||||||||||||||
| Net Periodic Pension Benefit Costs | $ | 231 | $ | 369 | $ | 1,006 | $ | 856 | |||||||||||||||
| Other Benefits* | |||||||||||||||||||||||
| Service cost | $ | 11 | $ | 9 | $ | 32 | $ | 28 | |||||||||||||||
| Interest cost | 15 | 18 | 41 | 53 | |||||||||||||||||||
| Amortization of prior service costs (credits) | (7) | (7) | (20) | (21) | |||||||||||||||||||
| Amortization of actuarial losses (gains) | 3 | 1 | 11 | 3 | |||||||||||||||||||
| Net Periodic Other Benefit Costs | $ | 22 | $ | 21 | $ | 64 | $ | 63 |
- Includes costs for U.S. and international OPEB plans. Obligations for plans outside the United States are not significant relative to the company’s total OPEB obligation.
Through September 30, 2021, a total of $1.4 billion was contributed to employee pension plans (including $1.3 billion to the U.S. plans). Total contributions for the full year are currently estimated to be up to $1.75 billion ($1.55 billion for the U.S. plans and $200 million for the international plans). Contribution amounts are dependent upon plan investment returns, changes in pension obligations, regulatory requirements and other economic factors. Additional funding may ultimately be required if investment returns are insufficient to offset increases in plan obligations.
During the first nine months of 2021, the company contributed $107 million to its OPEB plans. The company anticipates contributing approximately $47 million during the remainder of 2021.
Note 9. Assets Held For Sale
At September 30, 2021, the company classified $1.98 billion of net properties, plant and equipment as “Assets held for sale” on the Consolidated Balance Sheet. These assets are associated with upstream operations that are anticipated to be sold in the next 12 months. The revenues and earnings contributions of these assets in 2020 and the first nine months of 2021 were not material.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 10. Income Taxes
The income tax expense increased between quarterly periods from $165 million in 2020 to $1.94 billion in 2021. The company's income before income tax expense increased $8.10 billion from a loss of $44 million in 2020 to income of $8.06 billion in 2021, primarily due to higher realizations, upstream sales volumes and downstream margins. The company’s effective tax rate changed between quarterly periods from negative 375 percent in 2020 to 24 percent in 2021. The change in the effective tax rate is mainly due to the consequence of mix effects, resulting from the absolute level of earnings or losses and whether they arose in higher or lower tax rate jurisdictions and the absence of a one-time tax charge in an international location.
The income tax expense increased between the nine-month periods from a benefit of $1.59 billion in 2020 to a charge of $4.05 billion in 2021. This increase is a direct result of the company’s income before income tax expense increasing $21.15 billion, from a loss of $6.50 billion in 2020 to income of $14.65 billion in 2021. The increase in income is primarily due to higher crude oil realizations, the absence of second quarter 2020 impairments and write-offs and higher upstream sales volumes, partially offset by lower asset sale gains. The company’s effective tax rate changed between nine-month periods from 24 percent in 2020 to 28 percent in 2021. The change in effective tax rate is primarily a consequence of mix effects, resulting from the absolute level of earnings or losses and whether they arose in higher or lower tax rate jurisdictions and unfavorable tax items.
Tax positions for Chevron and its subsidiaries and affiliates are subject to income tax audits by many tax jurisdictions throughout the world. For the company’s major tax jurisdictions, examinations of tax returns for certain prior tax years had not been completed as of September 30, 2021. For these jurisdictions, the latest years for which income tax examinations had been finalized were as follows: United States — 2013, Nigeria — 2007, Australia — 2009, Kazakhstan — 2012 and Saudi Arabia — 2015.
The company engages in ongoing discussions with tax authorities regarding the resolution of tax matters in the various jurisdictions. Both the outcomes for these tax matters and the timing of resolution and/or closure of the tax audits are highly uncertain. However, it is reasonably possible that developments regarding tax matters in certain tax jurisdictions may result in significant increases or decreases in the company’s total unrecognized tax benefits within the next 12 months. Given the number of years that still remain subject to examination and the number of matters being examined in the various tax jurisdictions, the company is unable to estimate the range of possible adjustments to the balance of unrecognized tax benefits.
Note 11. Litigation
MTBE
Chevron and many other companies in the petroleum industry used methyl tertiary butyl ether (MTBE) as a gasoline additive. Chevron is a party to six pending lawsuits and claims, the majority of which involve numerous other petroleum marketers and refiners. Resolution of these lawsuits and claims may ultimately require the company to correct or ameliorate the alleged effects on the environment of prior release of MTBE by the company or other parties. The company’s ultimate exposure related to pending lawsuits and claims is not determinable. The company no longer uses MTBE in the manufacture of gasoline in the United States.
Ecuador
Texaco Petroleum Company (Texpet), a subsidiary of Texaco Inc., was a minority member of an oil production consortium with Ecuadorian state-owned Petroecuador from 1967 until 1992. After termination of the consortium and a third-party environmental audit, Ecuador and the consortium parties entered into a settlement agreement specifying Texpet’s remediation obligations. Following Texpet’s completion of a three-year remediation program, Ecuador certified the remediation as proper and released Texpet and its affiliates from environmental liability. In May 2003, plaintiffs alleging environmental harm from the consortium’s activities sued Chevron in the Superior Court in Lago Agrio, Ecuador. In February 2011, that court entered a judgment against Chevron for approximately $9.5 billion plus additional punitive damages. An appellate panel affirmed, and Ecuador’s National Court of Justice ratified the judgment but nullified the punitive damages, resulting in a judgment of approximately $9.5 billion. Ecuador’s highest Constitutional Court rejected Chevron’s final appeal in July 2018.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In February 2011, Chevron sued the Lago Agrio plaintiffs and several of their lawyers and supporters in the U.S. District Court for the Southern District of New York (SDNY) for violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act and state law. The SDNY court ruled that the Ecuadorian judgment had been procured through fraud, bribery, and corruption, and prohibited the RICO defendants from seeking to enforce the Ecuadorian judgment in the United States or profiting from their illegal acts. The Court of Appeals for the Second Circuit affirmed, and the U.S. Supreme Court denied certiorari in June 2017, rendering final the U.S. judgment in favor of Chevron. The Lago Agrio plaintiffs sought to have the Ecuadorian judgment recognized and enforced in Canada, Brazil, and Argentina. All of those recognition and enforcement actions were dismissed and resolved in Chevron’s favor. Chevron and Texpet filed an arbitration claim against Ecuador in September 2009 before an arbitral tribunal administered by the Permanent Court of Arbitration in The Hague, under the United States-Ecuador Bilateral Investment Treaty. In August 2018, the Tribunal issued an award holding that the Ecuadorian judgment was based on environmental claims that Ecuador had settled and released, and that it was procured through fraud, bribery, and corruption. According to the Tribunal, the Ecuadorian judgment “violates international public policy” and “should not be recognized or enforced by the courts of other States.” The Tribunal ordered Ecuador to remove the status of enforceability from the Ecuadorian judgment and to compensate Chevron for any injuries resulting from the judgment. The third and final phase of the arbitration, to determine the amount of compensation Ecuador owes to Chevron, is ongoing. In September 2020, the District Court of The Hague denied Ecuador’s request to set aside the Tribunal’s award, stating that it now is “common ground” between Ecuador and Chevron that the Ecuadorian judgment is fraudulent. In December 2020, Ecuador appealed the District Court’s decision to The Hague Court of Appeals. In a separate proceeding, Ecuador also admitted that the Ecuadorian judgment is fraudulent in a public filing with the Office of the United States Trade Representative in July 2020.
Management’s Assessment The ultimate outcome of the foregoing matters, including any financial effect on Chevron, remains uncertain. Chevron continues to believe that the Ecuadorian judgment is illegitimate and unenforceable and that it does not provide any basis upon which an estimate of a reasonably possible loss or range of loss can be made.
Note 12. Other Contingencies and Commitments
Income Taxes The company calculates its income tax expense and liabilities quarterly. These liabilities generally are subject to audit and are not finalized with the individual taxing authorities until several years after the end of the annual period for which income taxes have been calculated. Refer to Note 10 beginning on page 15 for a discussion of the periods for which tax returns have been audited for the company’s major tax jurisdictions.
Settlement of open tax years, as well as other tax issues in countries where the company conducts its businesses, are not expected to have a material effect on the consolidated financial position or liquidity of the company and, in the opinion of management, adequate provision has been made for income taxes for all years under examination or subject to future examination.
Guarantees The company and its subsidiaries have certain contingent liabilities with respect to guarantees, direct or indirect, of debt of affiliated companies or third parties. Under the terms of the guarantee arrangements, the company would generally be required to perform should the affiliated company or third party fail to fulfill its obligations under the arrangements. In some cases, the guarantee arrangements may have recourse provisions that would enable the company to recover any payments made under the terms of the guarantees from assets provided as collateral.
Indemnifications In the acquisition of Unocal, the company assumed certain indemnities relating to contingent environmental liabilities associated with assets that were sold in 1997. The acquirer of those assets shared in certain environmental remediation costs up to a maximum obligation of $200 million, which had been reached at December 31, 2009. Under the indemnification agreement, after reaching the $200 million obligation, Chevron is solely responsible until April 2022, when the indemnification expires. The environmental conditions or events that are subject to these indemnities must have arisen prior to the sale of the assets in 1997.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Although the company has provided for known obligations under this indemnity that are probable and reasonably estimable, the amount of additional future costs may be material to results of operations in the period in which they are recognized. The company does not expect these costs will have a material effect on its consolidated financial position or liquidity.
Long-Term Unconditional Purchase Obligations and Commitments, Including Throughput and Take-or-Pay Agreements The company and its subsidiaries have certain contingent liabilities with respect to long-term unconditional purchase obligations and commitments, including throughput and take-or-pay agreements, some of which may relate to suppliers’ financing arrangements. The agreements typically provide goods and services, such as pipeline and storage capacity, utilities, and petroleum products, to be used or sold in the ordinary course of the company’s business.
Environmental The company is subject to loss contingencies pursuant to laws, regulations, private claims and legal proceedings related to environmental matters that are subject to legal settlements or that in the future may require the company to take action to correct or ameliorate the effects on the environment of prior release of chemicals or petroleum substances, including MTBE, by the company or other parties. Such contingencies may exist for various sites, including, but not limited to, U.S. federal Superfund sites and analogous sites under state laws, refineries, crude oil fields, service stations, terminals, land development areas, and mining activities, whether operating, closed or divested. These future costs are not fully determinable due to factors such as the unknown magnitude of possible contamination, the unknown timing and extent of the corrective actions that may be required, the determination of the company’s liability in proportion to other responsible parties, and the extent to which such costs are recoverable from third parties.
Although the company has provided for known environmental obligations that are probable and reasonably estimable, the amount of additional future costs may be material to results of operations in the period in which they are recognized. The company does not expect these costs will have a material effect on its consolidated financial position or liquidity. Also, the company does not believe its obligations to make such expenditures have had, or will have, any significant impact on the company’s competitive position relative to other U.S. or international petroleum or chemical companies.
Other Contingencies Governmental and other entities in various jurisdictions across the United States have filed legal proceedings against fossil fuel producing companies, including Chevron, purporting to seek legal and equitable relief related to climate change. Further such proceedings are likely to be filed by other parties. The unprecedented legal theories set forth in these proceedings entail the possibility of damages liability and injunctions, including, without limitation, injunctions against the production of all fossil fuels, that, while we believe remote, could have a material adverse effect on the company’s results of operations and financial condition. Management believes that these proceedings are legally and factually meritless and detract from constructive efforts to address the important policy issues presented by climate change, and will vigorously defend against such proceedings.
Seven coastal parishes and the State of Louisiana have filed 43 separate lawsuits in Louisiana against numerous oil and gas companies seeking damages for coastal erosion in or near oil fields located within Louisiana’s coastal zone under Louisiana’s State and Local Coastal Resources Management Act (SLCRMA). Chevron entities are defendants in 39 of these cases. The lawsuits allege that the defendants’ historical operations were conducted without necessary permits or failed to comply with permits obtained and seek damages and other relief, including the costs of restoring coastal wetlands allegedly impacted by oil field operations. Plaintiffs’ SLCRMA theories are unprecedented; thus, there remains significant uncertainty about the scope of the claims and alleged damages and any potential effects on the company’s results of operations and financial condition. Management believes that the claims lack legal and factual merit and will continue to vigorously defend against such proceedings.
Chevron receives claims from and submits claims to customers; trading partners; joint venture partners; U.S. federal, state and local regulatory bodies; governments; contractors; insurers; suppliers; and individuals. The amounts of these claims, individually and in the aggregate, may be significant and take lengthy periods to resolve, and may result in gains or losses in future periods.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The company and its affiliates also continue to review and analyze their operations and may close, decommission, sell, exchange, acquire or restructure assets to achieve operational or strategic benefits and to improve competitiveness and profitability. These activities, individually or together, may result in significant gains or losses in future periods.
Note 13. Fair Value Measurements
The three levels of the fair value hierarchy of inputs the company uses to measure the fair value of an asset or liability are described as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities. For the company, Level 1 inputs include exchange-traded futures contracts for which the parties are willing to transact at the exchange-quoted price and marketable securities that are actively traded.
Level 2: Inputs other than Level 1 that are observable, either directly or indirectly. For the company, Level 2 inputs include quoted prices for similar assets or liabilities, prices obtained through third-party broker quotes and prices that can be corroborated with other observable inputs for substantially the complete term of a contract.
Level 3: Unobservable inputs. The company does not use Level 3 inputs for any of its recurring fair value measurements. Level 3 inputs may be required for the determination of fair value associated with certain nonrecurring measurements of nonfinancial assets and liabilities.
The fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at September 30, 2021, and December 31, 2020, is as follows:
Assets and Liabilities Measured at Fair Value on a Recurring Basis
(Millions of dollars)
| At September 30, 2021 | At December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||||||||||||
| Marketable Securities | $ | 34 | $ | 34 | $ | — | $ | — | $ | 31 | $ | 31 | $ | — | $ | — | |||||||||||||||||||||||||||||||
| Derivatives - not designated | 494 | 494 | — | — | 74 | 37 | 37 | — | |||||||||||||||||||||||||||||||||||||||
| Total Assets at Fair Value | $ | 528 | $ | 528 | $ | — | $ | — | $ | 105 | $ | 68 | $ | 37 | $ | — | |||||||||||||||||||||||||||||||
| Derivatives - not designated | 281 | 144 | 137 | — | 173 | 58 | 115 | — | |||||||||||||||||||||||||||||||||||||||
| Derivatives - designated | 4 | 4 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Total Liabilities at Fair Value | $ | 285 | $ | 148 | $ | 137 | $ | — | $ | 173 | $ | 58 | $ | 115 | $ | — |
Marketable Securities The company calculates fair value for its marketable securities based on quoted market prices for identical assets. The fair values reflect the cash that would have been received if the instruments were sold at September 30, 2021.
Derivatives The company records most of its derivative instruments — other than any commodity derivative contracts that are accounted for as normal purchase and normal sale — on the Consolidated Balance Sheet at fair value, with the offsetting amount to the Consolidated Statement of Income. The company designates certain derivative instruments as cash flow hedges that, if applicable, are reflected in the table above. Derivatives classified as Level 1 include futures, swaps and options contracts traded in active markets such as the New York Mercantile Exchange. Derivatives classified as Level 2 include swaps, options and forward contracts principally with financial institutions and other oil and gas companies, the fair values of which are obtained from third-party broker quotes, industry pricing services and exchanges. The company obtains multiple sources of pricing information for the Level 2 instruments. Since this pricing information is generated from observable market data, it has historically been very consistent. The company does not materially adjust this information.
Assets and liabilities carried at fair value at September 30, 2021, and December 31, 2020, are as follows:
Cash and Cash Equivalents The company holds cash equivalents in U.S. and non-U.S. portfolios. The instruments classified as cash equivalents are primarily bank time deposits with maturities of 90 days or less, and money market funds. “Cash and cash equivalents” had carrying/fair values of $6.0 billion and $5.6 billion at September 30, 2021, and December 31, 2020, respectively. The fair values of cash and cash equivalents are
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
classified as Level 1 and reflect the cash that would have been received if the instruments were settled at September 30, 2021.
Restricted Cash had a carrying/fair value of $1.0 billion and $1.1 billion at September 30, 2021 and December 31, 2020, respectively. At September 30, 2021, restricted cash is classified as Level 1 and includes restricted funds related to certain upstream decommissioning activities and other corporate and tax items, which are reported in “Prepaid expenses and other current assets” and “Deferred charges and other assets” on the Consolidated Balance Sheet.
Long-Term Debt had a net carrying value, excluding amounts reclassified from short-term debt, purchase price fair value adjustments and finance lease obligations, of $26.9 billion and $30.8 billion at September 30, 2021, and December 31, 2020, respectively. The fair value of long-term debt for the company was $29.6 billion and $34.4 billion at September 30, 2021 and December 31, 2020, respectively. Long-term debt primarily includes corporate issued bonds, classified as Level 1 and are $28.5 billion for the period. The fair value of other long-term debt classified as Level 2 is $1.1 billion.
The carrying values of other short-term financial assets and liabilities on the Consolidated Balance Sheet approximate their fair values. Fair value remeasurements of other financial instruments at September 30, 2021, and December 31, 2020, were not material.
The fair value hierarchy for assets and liabilities measured at fair value on a nonrecurring basis at September 30, 2021, is as follows:
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
(Millions of dollars)
| At September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Before - Tax Loss | |||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||||||||||
| Properties, plant and equipment, net (held and used) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||
| Properties, plant and equipment, net (held for sale) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Investments and advances | 16 | — | — | 16 | 5 | 26 | |||||||||||||||||||||||||||||||||||
| Total Assets at Fair Value | $ | 16 | $ | — | $ | — | $ | 16 | $ | 5 | $ | 26 |
Properties, plant and equipment The company did not have any impairments of long-lived assets measured at fair value on a nonrecurring basis to report.
Investments and advances The company did not have any material impairments of investments and advances measured at fair value on a nonrecurring basis to report in third quarter 2021. At September 30, 2021, the company had assets measured at fair value Level 3 using unobservable inputs of $16 million.
Note 14. Financial and Derivative Instruments
The company’s commodity derivative instruments principally include crude oil, natural gas, liquefied natural gas and refined product futures, swaps, options and forward contracts. The company applies cash flow hedge accounting to certain commodity transactions, where appropriate, to manage the market price risk associated with forecasted sales of crude oil. The company’s derivatives are not material to the company’s consolidated financial position, results of operations or liquidity. The company believes it has no material market or credit risks to its operations, financial position or liquidity as a result of its commodities and other derivatives activities.
The company uses commodity derivative instruments traded on the New York Mercantile Exchange and on electronic platforms of the Inter-Continental Exchange and Chicago Mercantile Exchange. In addition, the company enters into swap contracts and option contracts principally with major financial institutions and other oil and gas companies in the “over-the-counter” markets, which are governed by International Swaps and Derivatives Association agreements and other master netting arrangements.
Derivative instruments measured at fair value at September 30, 2021, and December 31, 2020, and their classification on the Consolidated Balance Sheet and Consolidated Statement of Income are as follows:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
| Consolidated Balance Sheet: Fair Value of Derivatives (Millions of dollars) | ||||||||||||||||||||
| Type of Contract | Balance Sheet Classification | At September 30, 2021 | At December 31, 2020 | |||||||||||||||||
| Commodity | Accounts and notes receivable, net | $ | 404 | $ | 73 | |||||||||||||||
| Commodity | Long-term receivables, net | 90 | 1 | |||||||||||||||||
| Total Assets at Fair Value | $ | 494 | $ | 74 | ||||||||||||||||
| Commodity | Accounts payable | $ | 277 | $ | 172 | |||||||||||||||
| Commodity | Deferred credits and other noncurrent obligations | 8 | 1 | |||||||||||||||||
| Total Liabilities at Fair Value | $ | 285 | $ | 173 |
| Consolidated Statement of Income: The Effect of Derivatives (Millions of dollars) | ||||||||||||||||||||||||||||||||
| Type of | Gain / (Loss) Three Months Ended September 30 | Gain / (Loss) Nine Months Ended September 30 | ||||||||||||||||||||||||||||||
| Contract | Statement of Income Classification | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||
| Commodity | Sales and other operating revenues | $ | 203 | $ | 38 | $ | (339) | $ | 283 | |||||||||||||||||||||||
| Commodity | Purchased crude oil and products | (21) | (7) | (45) | (31) | |||||||||||||||||||||||||||
| Commodity | Other income | (8) | 6 | (43) | 3 | |||||||||||||||||||||||||||
| $ | 174 | $ | 37 | $ | (427) | $ | 255 |
In the nine months ending September 30, 2021, cash flow hedging contracts decreased Sales and other operating revenues by $2 million compared with no impact in the same period of the prior year. At September 30, 2021, pre-tax deferred losses in Accumulated Other Comprehensive Losses related to outstanding crude oil price hedging contracts were $4 million, of which all is expected to be reclassified into earnings during the next 12 months as the hedged crude oil sales are recognized in earnings.
The table below represents gross and net derivative assets and liabilities subject to netting agreements on the Consolidated Balance Sheet at September 30, 2021, and December 31, 2020.
| Consolidated Balance Sheet: The Effect of Netting Derivative Assets and Liabilities (Millions of dollars) | ||||||||||||||||||||||||||||||||
| Gross Amount Recognized | Gross Amounts Offset | Net Amounts Presented | Gross Amounts Not Offset | Net Amount | ||||||||||||||||||||||||||||
| At September 30, 2021 | ||||||||||||||||||||||||||||||||
| Derivative Assets - not designated | $ | 3,537 | $ | 3,043 | $ | 494 | $ | — | $ | 494 | ||||||||||||||||||||||
| Derivative Liabilities - not designated | $ | 3,324 | $ | 3,043 | $ | 281 | $ | — | $ | 281 | ||||||||||||||||||||||
| Derivative Liabilities - designated | $ | 4 | $ | — | $ | 4 | $ | — | $ | 4 | ||||||||||||||||||||||
| At December 31, 2020 | ||||||||||||||||||||||||||||||||
| Derivative Assets - not designated | $ | 818 | $ | 744 | $ | 74 | $ | — | $ | 74 | ||||||||||||||||||||||
| Derivative Liabilities - not designated | $ | 917 | $ | 744 | $ | 173 | $ | — | $ | 173 |
Derivative assets and liabilities are classified on the Consolidated Balance Sheet as accounts and notes receivable, long-term receivables, accounts payable, and deferred credits and other noncurrent obligations. Amounts not offset on the Consolidated Balance Sheet represent positions that do not meet all the conditions for “a right of offset.”
Note 15. Revenue
“Sales and other operating revenue” on the Consolidated Statement of Income primarily arise from contracts with customers. Related receivables are included in “Accounts and notes receivable, net” on the Consolidated Balance Sheet, net of the current expected credit losses. The net balance of these receivables was $11.2 billion and $7.6 billion at September 30, 2021, and December 31, 2020, respectively. Other items included in “Accounts and notes receivable, net” represent amounts due from partners for their share of joint venture operating and project costs and amounts due from others, primarily related to derivatives, leases, buy/sell arrangements and product exchanges, which are accounted for outside the scope of ASC 606*.*
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 16. Financial Instruments - Credit Losses
Chevron’s expected credit loss allowance balance was $717 million as of September 30, 2021 and $671 million as of December 31, 2020, with a majority of the allowance relating to non-trade receivable balances.
The majority of the company’s receivable balance is concentrated in trade receivables, with a balance of $14.6 billion as of September 30, 2021, which reflects the company’s diversified sources of revenues and is dispersed across the company’s broad worldwide customer base. As a result, the company believes the concentration of credit risk is limited. The company routinely assesses the financial strength of its customers. When the financial strength of a customer is not considered sufficient, alternative risk mitigation measures may be deployed, including requiring prepayments, letters of credit or other acceptable forms of collateral. Once credit is extended and a receivable balance exists, the company applies a quantitative calculation to current trade receivable balances that reflects credit risk predictive analysis, including probability of default and loss given default, which takes into consideration current and forward-looking market data as well as the company’s historical loss data. This statistical approach becomes the basis of the company’s expected credit loss allowance for current trade receivables with payment terms that are typically short-term in nature, with most due in less than 90 days.
Chevron's non-trade receivable balance was $3.3 billion as of September 30, 2021, which includes receivables from certain governments in their capacity as joint venture partners. Joint venture partner balances that are paid as per contract terms or not yet due are subject to the statistical analysis described above while past due balances are subject to additional qualitative management quarterly review. This management review includes review of reasonable and supportable repayment forecasts. Non-trade receivables also include employee and tax receivables that are deemed immaterial and low risk. Equity affiliate loans are also considered non-trade and associated allowances of $560 million are included within Investments and Advances on the Consolidated Balance Sheet at both December 31, 2020, and September 30, 2021.
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