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CHAIRMAN KEN DERR ANNOUNCES WIDE-RANGING PROGRAM TO IMPROVE CHEVRON'S PROFITABILITY; COMPANY TO TAKE CHARGE AGAINST 4TH QUARTER EARNINGS

CHAIRMAN KEN DERR ANNOUNCES WIDE-RANGING PROGRAM TO IMPROVE CHEVRON'S

PROFITABILITY; COMPANY TO TAKE CHARGE AGAINST 4TH QUARTER EARNINGS
 SAN FRANCISCO, Jan. 15 /PRNewswire/ -- Chevron Chairman Ken Derr today announced a series of actions designed to strengthen Chevron's competitiveness, improve financial performance, reduce operating costs and place more emphasis on highly attractive business opportunities.
 In addition, Derr announced that fourth quarter 1991 financial results will reflect after-tax special charges of about $270 million, including $185 million relating to a major operational change at the Port Arthur, Texas, refinery and anticipated reductions of about 2,500 people in the company's work force.
 Derr outlined the aggressive action plan while speaking by satellite video and audio links to more than 26,000 Chevron employees at 60 locations around the United States, Canada and Great Britain today. The measures include:
 -- Increasing the company's 1992 capital and exploratory budget by 6 percent over 1991 spending -- to $5.3 billion -- to take advantage of many profitable business opportunities, especially overseas;
 -- Making a fundamental change at Chevron's Port Arthur refinery. A decision will be made later this year as to which of four options for the refinery will be pursued. At a minimum, the refinery will be down-sized, cutting capacity by about a third to 200,000 barrels per day and reducing the work force by about 500 people. The other three options include finding a joint-venture partner; offering it for sale; or completely shutting it down except for chemicals manufacturing, which would cut about 1,600 jobs;
 -- Accelerating a program to sell more of Chevron's non-strategic U.S. oil and gas fields. A strategy team will redefine the company's portfolio during the next few weeks, with a goal of cutting operating costs and boosting profits at a much faster pace than announced two years ago. Organizational consolidations also will take place.
 -- A major focus on reducing operating costs: Derr set a goal of reducing companywide unit operating costs by 50 cents per barrel of total sales by mid-1993. At current volumes, this would lead to an increase in profitability of about $600 million per year before taxes;
 -- Reducing Chevron's work force by about 2,000 people this year (in addition to the 500 at Port Arthur), achieving half through a voluntary early retirement program, and half from operational restructurings, organizational changes, asset sales and other actions;
 -- Taking other short-term steps to improve cash flow, including deferring salary increases for all exempt employees for at least three months and reducing hiring.
 Derr acknowledged that external factors, such as low natural gas prices, poor refining margins (especially on the West Coast), the recession and reduced demand for petroleum products, have hampered financial results.
 "Our progress in the past few years has been good but not good enough in our highly competitive industry," said Derr. "We need to aggressively accelerate our efforts if we're going to become the best financial performer among the major U.S. petroleum companies.
 "I'm confident that these actions, together with our overall business strategies, will move Chevron into the top tier in every major area in which we operate," he said.
 He urged employees to act with a sense of urgency demanded by poor business conditions and the need for sharper competitiveness.
 Further details of Derr's announcement follow by subject: PORT ARTHUR REFINERY
 Chevron U.S.A. Products Co. will fundamentally change the way it operates its Port Arthur refinery.
 A Port Arthur team is studying the four options outlined previously, with a single-train operation being considered the minimum step. The single-train configuration -- essentially operating one set of processing units instead of two -- will reduce by about 500 people the current staff of 1,900. Crude capacity will be cut by about a third to 200,000 barrels per day. A full shutdown except for the chemical operation would result in job cuts of about 1,600.
 The company is also looking closely at either offering the refinery for sale or finding a joint venture partner, which would allow it to remain open in some configuration.
 "In today's economy, we cannot justify spending nearly $1 billion to upgrade Port Arthur while also facing major investments at our other, more competitive refineries," said Dave Hoyer, president of Chevron U.S.A. Products Co.
 Chevron estimates that new environmental regulations, such as the Clean Air Act amendments, will mandate costs of more than $2 billion over the next five years at all eight of its U.S. refineries.
 The Port Arthur action would have no impact on Chevron's petroleum marketing operations in the Southwest. AFTER-TAX CHARGES
 The minimum change in the way the Port Arthur refinery is operated and the resulting reduction in the refinery work force will require asset writeoffs and severance costs of about $83 million after tax. The additional companywide work force reduction of about 2,000 people will cost about $102 million after tax. These provisions, totalling $185 million after tax, will be recorded in the fourth quarter 1991. In addition, the company expects that other unrelated special charges, primarily for environmental liabilities and asset sales, will reduce fourth quarter earnings by about another $85 million after tax, for a total of $270 million after tax.
 If the decision is made ultimately to shut down the refinery, a minimum additional charge against 1992 earnings of about $200 million after tax would be incurred for the remaining book value and related work force reductions. The amount of this potential charge would be substantially increased for dismantling costs, environmental cleanup and other obligations. VOLUNTARY EARLY RETIREMENT PROGRAM
 Approximately 3,000 exempt employees will be eligible for the voluntary early retirement program, and Chevron anticipates about 1,000 will take advantage of it. The benefits under the program will consist of two weeks pay for each year of service, with a minimum of eight weeks of pay and a maximum of 70 weeks. About 100 of the company's most senior executives are not eligible. CAPITAL AND EXPLORATORY BUDGET
 Chevron is projecting 1992 worldwide capital and exploratory (C&E) spending of about $5.3 billion, up 6 percent from estimated 1991 spending of about $5.0 billion. (The new budget is about $800 million less than the funds originally proposed by Chevron's operating companies.)
 Exploration and production (E&P) units expect to spend about $2.8 billion, compared with 1991's $2.6 billion. Planned U.S. spending is about $1.1 billion, down 7 percent. Planned non-U.S. spending is about $1.7 billion, up 19 percent.
 Major capital projects underway aimed at increasing the production of oil and natural gas include steam- and water-flooding projects in Indonesia, developing the Alba oil field in the U.K. North Sea, installing offshore oil production facilities in Nigeria and Angola, completing construction of the Papua New Guinea oil development, development of the Hibernia field offshore Newfoundland, expansion of the Northwest Shelf liquefied natural gas project in Australia and continuing enhanced oil recovery projects in California.
 Refining and marketing businesses expect to spend about $2 billion, compared with 1991's $1.8 billion. U.S. spending is projected to be about $1.1 billion, up 11 percent; non-U.S. about $850 million, up 14 percent.
 Major U.S. projects include modifying all refineries to manufacture reformulated fuels to meet new Clean Air Act amendments, including MTBE plants at Richmond, Calif., Pascagoula, Miss., and Philadelphia, Penn.; installing emissions-reduction equipment at the El Segundo, Calif., refinery; upgrading service stations and building new ones.
 The program also covers significant spending increases in refining and marketing in the United Kingdom and in the company's Caltex area to serve expanding customer demand. (Caltex is Chevron's 50 percent- owned affiliate, operating throughout most of the Eastern Hemisphere.)
 Chemicals businesses expect to spend about $270 million, unchanged from 1991. The largest project is a new facility at Pascagoula, Miss., to manufacture chemical feedstocks using Chevron's proprietary Aromax process. U.S. EXPLORATION AND PRODUCTION PROGRAM
 In February 1990, Chevron announced a major program to accelerate ongoing upstream asset sales to dispose of more than two thirds of its oil-field properties in five years and streamline the organization, eliminating more than
800 jobs. The newly formed Chevron U.S.A.


Production Company is expanding the program, to further accelerate asset sales and to reduce costs.
 The new program will have significant impact on all business units. For example, the Rocky Mountain and Central Production Business Units in Denver and Houston, respectively, will likely be combined with others or reconfigured, while the Permian Basin and Western Production Business Units in Midland, Texas, and Bakersfield, Calif., will be reorganized in response to changes in the company's property mix brought about by asset sales. Exploration operations in the United States will be consolidated into a single business unit to be headquartered in Houston.
 -0- 1/15/92
 /CONTACT: Mike Libbey, 415-894-4440; Larry Shushan, 415-894-2978; Bonnie Chaikind, 415-894-1200; or Sherri Zippay, 415-894-4581, all of Chevron U.S.A./
 (CHV) CO: Chevron U.S.A. ST: California IN: OIL SU: RCN


JL -- SF007 -- 0001 01/15/92 12:24 EST
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