Chevron's 4Q 2012 After-tax Net Income was $7,245 mil, up 41% over the $5,123 mil earned in the 4Q 2011.
So this 41% earnings increase has to be just great for Chevron?
Well, actually not so great. Let me explain.
First, Chevron reduced its effective income tax rate from 48.3% in the 4Q 2011 to only 39.1% in the 4Q 2012. If Chevron wouldn't have changed its effective tax rate from that in the 4Q 2011, its 4Q 2012 Net Income would have been $1,102 mil lower.
And second, Chevron's Pretax Income in the 4Q 2012 was $11,976 mil, an increase of $2,011 mil from the $9,965 mil generated in the 4Q 2011.
But when you review the elements of this Pretax Income increase of $2,011 mil in the 4Q 2012 over the 4Q 2011, the Other Income report line shows $2,483 mil in the 4Q 2012, as compared with only $391 mil in the 4Q 2011, thus an increase of $2,092 mil.
Thus the increase in Other Income of $2,092 mil exceeds the total increase in Pretax Income of $2,011 mil.
Other Income is where Chevron reports its Gains on Asset Sales.
In its earnings release, Chevron disclosed that in its International Upstream business, there was a Gain from an Asset Exchange in Australia which was about $1.4 bil on an after-tax basis.
In addition, Chevron also disclosed that in its International Downstream business, it had higher Gains on Assets Sales, primarily from the Sale of its Fuel Marketing Business in 3 countries in the Caribbean.
My hunch is that these Gains in both Australia and the Caribbean combined, made up a huge chunk, if not nearly all, of the $2,092 mil increase in Other Income in the 4Q 2012 over the 4Q 2011, which exceeded the Total Pretax Income increase of $2,011 mil in the 4Q 2012 over the 4Q 2011.
