ChevronTexaco Reports First Quarter Net Income of $2.7 Billion

ChevronTexaco Corp. (NYSE: CVX) reported net income of $2.7 billion ($1.28 per share - diluted) for the first quarter 2005, compared with net income of $2.6 billion ($1.20 per share - diluted) in the year-ago period. The 2004 quarter included a special-item charge of $55 million related to a litigation matter.

Sales and other operating revenues in the first quarter 2005 were $40 billion, up 22 percent from the same period in 2004, mainly as a result of higher prices for crude oil, natural gas and refined products.

                               Earnings Summary

                                                         Three Months Ended
                                                                   March 31
    Millions of Dollars                                      2005      2004
    Income From Continuing Operations -
     By Major Operating Area (A,B)
      Upstream - Exploration and Production                $2,379    $1,974
      Downstream - Refining, Marketing and Transportation     409       640
      Chemicals                                               137        74
      All Other                                              (248)     (137)
        Total                                               2,677     2,551
    Income From Discontinued Operations - Upstream             --        11
        Net Income (A,B)                                   $2,677    $2,562

    (A) Includes foreign currency effects                    $(21)     $(43)
    (B) Includes special charges                              $--      $(55)

"Quarterly profits for our upstream operations again benefited from strong prices for both crude oil and natural gas," said Chairman and CEO Dave O'Reilly. "Our downstream earnings in the quarter, however, were adversely affected by the impacts of planned and unplanned downtime at several of our refineries." O'Reilly said the company's chemical businesses earned $137 million in the quarter, up 85 percent from the year-ago period, as margins continued to improve in markets for commodity chemicals.

"Return on capital employed for the previous 12 months was 25 percent," O'Reilly stated. "This sustained financial performance has enabled us to continue strengthening the balance sheet and returning value to our stockholders. We were pleased to announce earlier this week an increase in the quarterly dividend of 12.5 percent."

O'Reilly said the company had cash and marketable securities totaling $11.9 billion at the end of the first quarter, and the debt ratio stood at 19 percent -- down from 25 percent at the end of last year's first quarter. During the first quarter, the company purchased nearly $710 million of its common shares in the open market, bringing to $2.8 billion the value of shares acquired since the initiation of a $5 billion repurchase program in April of last year.

Strategic Focus

O'Reilly also remarked on recent achievements that underscore the company's focus on key project milestones and strategic initiatives. In upstream, the company's strategies to grow profitability in its core areas of operation and to commercialize its significant international gas resource base were advanced in several locations, including:

    Nigeria

    -- Signed a production-sharing contract for Block 1 in the Nigeria - Sao
       Tome e Principe Joint Development Zone. ChevronTexaco will be the
       operator and has a 51 percent interest in the block.
    -- Entered into a $1.1 billion construction contract to build a floating
       production, storage and offloading vessel for the Agbami Field.
    -- Awarded a $1.7 billion engineering, procurement and construction
       contract for the Escravos gas-to-liquids project.

    Angola

    -- Awarded with partners in the Angola liquefied natural gas (LNG) project
       contracts for the front-end engineering and design of a multi-billion
       dollar onshore LNG plant. This project will be designed to help reduce
       flaring of natural gas and represents a major step forward in enabling
       the commercialization of some of Angola's vast natural gas resources.
    -- Achieved first production at a total average rate of 6,000 barrels per
       day from the Sanha Field, located in the Block 0 concession, offshore
       Cabinda province. Combined production from the 39 percent-owned Sanha
       Field and nearby Bomboco Field is expected to reach a maximum total
       daily production of approximately 100,000 barrels of crude oil,
       condensate and liquefied petroleum gas in 2006.

    Trinidad and Tobago / Venezuela

    -- Announced the Manatee 1 natural gas discovery in Block 6d in Trinidad
       and Tobago waters. This well extended the area of natural gas
       discovered in Venezuela's Loran Field.
    -- Signed a letter of intent with Spain's Repsol YPF to pursue with the
       government of Venezuela new joint development activities in Venezuela's
       Orinoco Belt.

    Australia

    -- Reached a framework agreement with joint-venture participants to align
       equity interests in the Greater Gorgon Area, offshore Western
       Australia. The agreement provides the basis for the combined
       development of natural gas at Gorgon and nearby gas fields as one
       world-scale project. The company is a significant holder of gas
       resources in the area and will have a 50 percent ownership interest in
       the licenses for the Greater Gorgon Area.

    United Kingdom

    -- Produced first oil from the initial development phase of Clair Field,
       offshore west of the Shetland Islands. With additional development, the
       19 percent-owned project is expected to average a total daily
       production of 60,000 barrels of crude oil and 15 million cubic feet of
       natural gas by 2006.

    Libya

    -- Announced a successful bid in Libya's first exploration license round
       under the Exploration and Production Sharing Agreement IV.
       ChevronTexaco will be operator and has 100 percent interest in onshore
       Block 177.

    Positioning for the Future

"Earlier this month, we announced an agreement to acquire Unocal Corporation," O'Reilly said. "Unocal's core upstream assets are world class, especially in Southeast Asia, the Permian Basin, Gulf of Mexico and the Caspian region. The asset base and talented people of Unocal are a good fit with ChevronTexaco and its employees around the world, and we are excited by the opportunity to combine the strengths of these two fine companies." O'Reilly noted that the Unocal transaction was conditioned on approval by Unocal shareholders and the necessary regulatory agencies.

                    UPSTREAM - EXPLORATION AND PRODUCTION

Worldwide oil-equivalent production, including volumes produced from oil sands and production under an operating service agreement, declined 7 percent from the 2004 first quarter and was unchanged from the fourth quarter 2004. Most of the decline from the 2004 first quarter was associated with asset sales, cost-recovery and variable-royalty provisions of certain production agreements and production shut-in as a result of Hurricane Ivan in September 2004.

Average U.S. prices for crude oil and natural gas liquids in the first quarter 2005 increased more than $8 to nearly $39 per barrel. Internationally, prices were up over $11 per barrel to about $40. The average U.S. natural gas sales price increased 10 percent to about $5.75 per thousand cubic feet, while internationally the average natural gas price of nearly $3 per thousand cubic feet was 11 percent higher than the year-ago quarter.

                       U.S. Exploration and Production

                                                        Three Months Ended
                                                                 March 31
    Millions of Dollars                                  2005        2004
    Income From Continuing Operations*                   $767        $854
    Income From Discontinued Operations                    --           6
        Segment Income*                                  $767        $860
    *Includes special charges                             $--        $(55)

U.S. exploration and production income was $767 million in the first quarter, down $93 million from the year-ago period. The 2004 results included a special-item charge of $55 million for a litigation matter. Earnings declined primarily due to lower production of liquids and natural gas, resulting from property sales, the effects of Hurricane Ivan and normal field declines. Depreciation and depletion expense was higher in the 2005 period. Partially offsetting these adverse effects was the benefit of higher prices for liquids and natural gas.

Net oil-equivalent production declined 18 percent to 719,000 barrels per day in the 2005 quarter. The liquids component was down 15 percent to 452,000 barrels per day. Net natural gas production averaged 1.6 billion cubic feet per day, down 22 percent. Excluding the lower production attributable to property sales and Hurricane Ivan, net oil-equivalent production otherwise declined 8 percent. In mid-March, the company resumed production at the Petronius platform in the Gulf of Mexico, which was severely damaged by Hurricane Ivan.

                   International Exploration and Production

                                                        Three Months Ended
                                                                   March 31
    Millions of Dollars                                 2005           2004
    Income From Continuing Operations*                $1,612         $1,120
    Income From Discontinued Operations                   --              5
        Segment Income*                               $1,612         $1,125
    *Includes foreign currency effects                  $(18)          $(20)

International exploration and production income increased from $1.1 billion in 2004 to $1.6 billion. The improvement was due mainly to higher average prices for both liquids and natural gas. These benefits were partially offset by the effect of lower oil-equivalent production.

Net oil-equivalent production, including volumes produced from oil sands and production under an operating service agreement, decreased 2 percent to 1,692,000 barrels per day in the 2005 quarter. The net liquids component decreased 2 percent to 1,333,000 barrels per day. Lower cost-recovery and variable-royalty volumes under certain production agreements were partially offset by new production from China and Chad and higher production from Venezuela. Net natural gas production of 2.2 billion cubic feet declined 2 percent from the first quarter 2004. Excluding the lower production associated with property sales and reduced volumes connected with cost-recovery and variable-royalty agreements, net oil-equivalent production increased 3 percent.

             DOWNSTREAM - REFINING, MARKETING AND TRANSPORTATION

                 U.S. Refining, Marketing and Transportation

                                                        Three Months Ended
                                                                  March 31
    Millions of Dollars                                  2005        2004
        Segment Income                                    $58        $276

U.S. refining, marketing and transportation earnings of $58 million decreased $218 million from last year's first quarter. The company's refined-product margins were lower in the 2005 period, primarily for West Coast operations. Included in the lower margins was the effect of planned and unplanned downtime at the company's refineries in El Segundo and Richmond, California. Margins in the East were modestly higher, despite planned downtime at the company's Pascagoula, Mississippi, refinery. Total operating expenses were higher in the 2005 period, largely due to costs for refinery maintenance.

Sales volumes for refined products were essentially unchanged at 1,462,000 barrels per day. Sales of branded gasoline increased 7 percent from the 2004 quarter to 583,000 barrels per day. The increase was attributable to the reintroduction of the Texaco brand in the Southeast.

             International Refining, Marketing and Transportation

                                                       Three Months Ended
                                                                March 31
    Millions of Dollars                                 2005        2004
        Segment Income*                                 $351        $364
    *Includes foreign currency effects                   $12       $(25)

International refining, marketing and transportation segment income decreased $13 million in the 2005 quarter to $351 million. Excluding foreign currency effects in both periods, earnings declined on lower average margins. Refinery downtime also contributed to the decline.

Total refined-product sales volumes of 2,331,000 barrels per day were down 2 percent from the 2004 quarter, primarily on lower fuel oil sales.

                                  CHEMICALS

                                                        Three Months Ended
                                                                March 31
    Millions of Dollars                                 2005        2004
        Segment Income*                                 $137         $74
    *Includes foreign currency effects                   $(1)        $(2)

Chemical operations earned $137 million in the first quarter 2005, compared with $74 million in the 2004 quarter. Results for the company's 50 percent-owned Chevron Phillips Chemical Company LLC (CPChem) affiliate improved on higher margins for commodity chemicals. Partially offsetting the improved CPChem results was a decline in the earnings of the company's Oronite subsidiary.

                                  ALL OTHER

                                                      Three Months Ended
                                                                March 31
    Millions of Dollars                                 2005        2004
        Net Charges*                                   $(248)      $(137)
    *Includes foreign currency effects                  $(14)         $4

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

Net charges were $248 million in the first quarter 2005, compared with $137 million in the corresponding 2004 period. The increase in net charges was associated with higher expenses for certain corporate items and lower Dynegy earnings.

                     CAPITAL AND EXPLORATORY EXPENDITURES

Capital and exploratory expenditures were $1.7 billion during the first quarter 2005, about the same as the first quarter 2004. The amounts included the company's share of affiliate expenditures, which were also flat at about $300 million in both the 2005 and 2004 periods. Upstream expenditures represented 78 percent of the companywide total in 2005. Approximately 70 percent of the upstream expenditures were for the company's projects outside the United States, reflecting the company's continued emphasis on international crude oil and natural gas production activities.

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