ChevronTexaco Corp. (NYSE: CVX) reported record net income of $2.6 billion ($2.40 per share - diluted) for the first quarter 2004, compared with net income of $1.9 billion ($1.81 per share - diluted) in the year-ago period. A major contributor to the earnings increase was improved performance by the company's downstream operations.

First quarter 2004 results included income of $34 million ($0.03 per share - diluted) associated with certain assets that were classified as discontinued operations because of their pending disposition. The income for these assets in the year-ago quarter was $37 million ($0.03 per share - diluted). The 2003 quarter also included net charges of $196 million ($0.18 per share - diluted) relating to the adoption of new accounting standards.

Special charges of $55 million and $39 million were included in the 2004 and 2003 quarters, respectively. Foreign currency effects reduced earnings $43 million and $45 million in the corresponding periods, respectively.

                               Earnings Summary

                                                        Three Months Ended
                                                                 March 31
    Millions of Dollars                                    2004      2003
    Income From Continuing Operations -
     By Major Operating Area (A),(B)
      Upstream - Exploration and Production              $1,951    $1,936
      Downstream - Refining, Marketing and Transportation   640       315
      Chemicals and Other                                   (63)     (172)
        Total                                             2,528     2,079
    Income From Discontinued Operations                      34        37
    Cumulative Effect of Changes in Accounting Principles    --      (196)
        Net Income(A),(B)                                $2,562    $1,920

    (A) Includes foreign currency effects                  $(43)     $(45)
    (B) Includes special charges                           $(55)     $(39)

"All of our major businesses contributed to an excellent first quarter, with profits that helped us achieve a 17 percent return on capital employed for the past 12 months," said Chairman and CEO Dave O'Reilly. "Our upstream operations continued to benefit from strong prices for both crude oil and natural gas. In our downstream and chemicals segments, increased demand for refined products and commodity chemicals strengthened industry margins and helped boost our earnings from last year's first quarter." O'Reilly commented that higher utilization rates throughout the company's worldwide refinery network also contributed to the improvement in downstream earnings.

"We've had a sustained period of very strong earnings and cash flows, and our outlook for the future remains positive," O'Reilly added. "As a result of our sustained performance, we were pleased recently to announce a program to repurchase up to $5 billion of the company's common stock as a means to further enhance shareholder value.

"Since the first of this year, we've again reduced the company's debt and contributed more than $500 million to our employee pension plans," O'Reilly said. "Our balance sheet continues to strengthen, and we ended the first quarter with a debt ratio of 25 percent, down from 32 percent just a year ago." O'Reilly also noted that the company's cash balances at the end of this year's first quarter were nearly $6 billion, up over $1.5 billion from the end of 2003.

O'Reilly also remarked on recent achievements that underscore the company's focus on key project milestones and strategic initiatives:

Upstream and Global Gas

Finalized sales of certain nonstrategic assets in the United States and the U.K. North Sea and continued major marketing efforts to sell other previously-announced nonstrategic assets in the United States and western Canada.

Advanced major development activities, including the Tahiti project in deepwater Gulf of Mexico and the Sanha Condensate Project offshore Angola.

Awarded the right to conduct exploration activities in deepwater Block-1 in the Joint Development Zone, offshore Sao Tome and Principe and Nigeria. ChevronTexaco will be operator and have a 51 percent interest in the block.

Entered through the company's 50 percent-owned Sasol Chevron joint venture into a Memorandum of Understanding with Qatar Petroleum to expand the ORYX gas-to-liquids project. Qatar Petroleum and Sasol Chevron also agreed to pursue an opportunity to develop a 130,000 barrels-per-day upstream/downstream integrated gas-to-liquids project.

Downstream

Announced plans to increase the company's joint-venture-ownership interest in Singapore Refining Company from 33 percent to 50 percent, further strengthening ChevronTexaco's position in one of its core and growing markets.

Made progress toward an objective of selling 1,500 service stations worldwide, with dispositions totaling more than 600 from the program's inception in 2003 through the first quarter 2004.

In summary, O'Reilly said, "Besides benefiting from strong marketplace fundamentals in recent periods, we've also maintained our focus on operational excellence in daily operations and a disciplined approach toward investing for the long term. These are key enablers of increased profitability and improved returns on invested capital, which create value for our shareholders and further enhance our company's competitiveness."

The company provided additional detail about factors contributing to the $2 billion of earnings in the quarter for the upstream operations. Average prices for U.S. crude oil and natural gas liquids in the quarter rose about a dollar per barrel to more than $30. Internationally, the average liquids price was slightly lower at about $29. The average U.S. natural gas sales price decreased 11 percent to $5.23 per thousand cubic feet, while internationally the average natural gas price of $2.67 was marginally higher than the year-ago quarter. Worldwide oil-equivalent production, including volumes produced from oil sands and production under an operating service agreement, declined about 2 percent from the 2003 first quarter. Most of the decline was associated with properties sold after last year's first quarter.

Sales and other operating revenues in the first quarter 2004 were $33 billion, up 8 percent from the 2003 period.

                    UPSTREAM - EXPLORATION AND PRODUCTION

    U.S. Exploration and Production
                                                     Three Months Ended
                                                             March 31
    Millions of Dollars                               2004       2003
    Income Before Cumulative Effect of Change in
     Accounting Principle(A)                          $860     $1,016
    Cumulative Effect of Accounting Change              --       (350)
        Segment Income(A)                             $860       $666

    (A) Includes special charges                      $(55)       $--

U.S. exploration and production income was $860 million in the first quarter, down $156 million from results in the 2003 period before the $350 million charge related to the adoption of a new accounting principle. The 2004 results included a special charge for a litigation matter. Earnings declined primarily due to lower natural gas prices and lower net production of liquids and natural gas. Among the items partially offsetting these adverse effects were higher prices for crude oil and natural gas liquids and lower operating expenses.

Net oil-equivalent production declined 10 percent, or 96,000 barrels per day, from the 2003 quarter. This resulted primarily from normal field declines and asset sales, the effects of which were only partially offset by increased and first-time production from various fields. The liquids component of net production was down 8 percent to 531,000 barrels per day. Net natural gas production averaged 2.1 billion cubic feet per day, down 13 percent.

    International Exploration and Production
                                                   Three Months Ended
                                                            March 31
    Millions of Dollars                              2004       2003
    Income From Continuing Operations(A)           $1,091       $920
    Income From Discontinued Operations                34         37
    Cumulative Effect of Accounting Change             --        145
        Segment Income(A)                          $1,125     $1,102

    (A) Includes foreign currency effects            $(20)      $(46)

International exploration and production income from continuing operations increased $171 million from the year-ago quarter to $1.091 billion. Among the factors contributing to the earnings increase were lower exploration expenses, an increase in the sale of crude oil and natural gas liquids and higher natural gas prices in certain countries. These benefits were partially offset by an effect of approximately $60 million from higher operating expenses.

Oil-equivalent production, including volumes produced from oil sands and production under an operating service agreement, increased about 3 percent, or 47,000 barrels per day, from the year-ago first quarter. The net liquids component increased 43,000 barrels per day to 1,365,000. New production in Chad and higher net production in Indonesia, Venezuela and at the Athabasca oil sands project were partially offset by planned maintenance activities in China, expansion activities in Thailand, and lower net production in several other countries, including Nigeria and the Partitioned Neutral Zone.

Production remains shut in for security reasons in certain onshore areas of Nigeria following civil unrest during the first half of 2003. Net natural gas production rose by 29 million cubic feet per day. Increased net production in Trinidad and Tobago, Kazakhstan, Venezuela and the Philippines was offset partially by lower production in Thailand, the United Kingdom and Canada.

DOWNSTREAM - REFINING, MARKETING AND TRANSPORTATION

    U.S. Refining, Marketing and Transportation
                                                 Three Months Ended
                                                         March 31
    Millions of Dollars                            2004      2003
        Segment Income                             $276       $70

U.S. refining, marketing and transportation earnings of $276 million improved $206 million from last year's quarter. The primary reasons for the improvement were an increase in average refined-product margins, higher sales volumes and lower operating expenses. Contributing to these improvements was the absence of major refinery shutdowns in 2004.

The quarter's average refined-product sales price increased 2 percent to about $45 per barrel. Sales volumes for refined products increased by 10 percent to 1,461,000 barrels per day, primarily on higher sales of unbranded gasoline, diesel fuel and fuel oil. Sales of branded gasoline increased 1 percent to 545,000 barrels per day in the first quarter 2004.

    International Refining, Marketing and Transportation
                                                   Three Months Ended
                                                            March 31
    Millions of Dollars                             2004        2003
        Segment Income(A),(B)                       $364        $245

    (A) Includes foreign currency effects           $(25)       $(18)
    (B) Includes special charges                    $ --        $(39)

International refining, marketing and transportation segment income increased $119 million in the 2004 quarter to $364 million. Foreign currency effects reduced earnings $25 million and $18 million in the 2004 and 2003 periods, respectively. Results in 2003 also included $39 million of special charges relating to asset sales by an equity affiliate. Otherwise, the improvement in segment income resulted mainly from higher average refined-product margins and improved earnings from equity affiliates and the company's shipping operations, which benefited from increased freight rates.

Total refined-product sales volumes of 2,370,000 barrels per day were 2 percent higher in the 2004 quarter compared with last year's quarter, primarily on higher sales of unbranded gasoline.

                                  CHEMICALS

                                                    Three Months Ended
                                                              March 31
    Millions of Dollars                             2004          2003
        Segment Income(A)                            $74            $3

    (A) Includes foreign currency effects            $(2)           $3

Chemical operations earned $74 million in the first quarter 2004, compared with $3 million in the 2003 quarter. Results for the Oronite subsidiary and for the company's 50 percent-owned Chevron Phillips Chemical Company LLC (CPChem) affiliate improved on higher margins for lubricant additives and commodity chemicals. During the 2004 quarter, CPChem experienced high but relatively stable prices for natural gas and natural gas-based feedstocks and overall was able to recover most of these costs through higher prices. During the 2003 period, significant volatility in energy and feedstock costs hindered such pass-through efforts.

                                  ALL OTHER

                                                     Three Months Ended
                                                             March 31
    Millions of Dollars                                2004      2003
    Net Charges Before Cumulative Effect of Changes
     in Accounting Principles(A)                      $(137)    $(175)
    Cumulative Effect of Accounting Changes              --         9
        Net Segment Charges(A)                        $(137)    $(166)

    (A) Includes foreign currency effects                $4       $16

All Other consists of the company's interest in Dynegy, coal mining operations, power and gasification businesses, worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities, and technology companies.

Net segment charges before the cumulative effect of changes in accounting principles were $137 million in the first quarter 2004, compared with net charges of $175 million in the corresponding 2003 period. The effects of lower net interest expense and higher corporate income tax benefits were partially offset by lower Dynegy earnings and lower foreign exchange gains.

CAPITAL AND EXPLORATORY EXPENDITURES

Capital and exploratory expenditures were $1.7 billion during the first quarter 2004, compared with $1.5 billion in the 2003 period. The amounts included the company's share of affiliate expenditures of about $300 million and $150 million in the 2004 and 2003 periods, respectively. The increase from 2003 included approximately $150 million related to the company's share of expenditures by the 50 percent-owned Tengizchevroil affiliate for the expansion of production operations for the Tengiz and Korolev fields in Kazakhstan. Expenditures for international exploration and production projects in 2004 were nearly $900 million, or slightly more than 50 percent of the total expenditures, reflecting the company's continued emphasis on international crude oil and natural gas production activities.