"Our success demonstrates that we are moving in the right direction, with strong momentum," O'Reilly said. "We are confident that we have the right strategies to create a strong platform for sustained performance."
O'Reilly told stockholders the acquisition of Unocal Corporation in 2005 has strengthened Chevron's oil and gas position in key regions around the world and created new opportunities for significant value creation.
O'Reilly praised Chevron's employees for delivering world-class performance while at times overcoming a number of unexpected challenges, such as the Asian tsunami and the hurricanes on the U.S. Gulf Coast. He also said the company is investing in emerging energy technologies such as advanced batteries, hydrogen and biofuels.
Peter Robertson, vice chairman of the board, told stockholders that 2005 was the company's second consecutive year of record earnings. For the year, the company achieved net income of $14.1 billion and a return on capital employed of 22 percent.
Robertson said Chevron in 2005 also increased the quarterly dividend by 12.5 percent, the 18th consecutive increase in as many years; completed a $5 billion stock buyback program and launched another program of up to $5 billion over three years; and set a capital and exploratory budget of approximately $15 billion, roughly 34 percent higher than the company's 2005 spending level.
"Our strong earnings and cash flows are enabling us to return cash to our stockholders and, at the same time, fund a robust capital program, which in 2006 will be the highest annual spend in our history," said Robertson.
George Kirkland, executive vice president, Upstream and Gas, told stockholders the company continued its track record as an industry-leading explorer: "In 2005, we continued our strong exploration program by making 31 new discoveries that resulted in a 58 percent success rate. Major discoveries were made in the deepwater U.S. Gulf of Mexico, Venezuela, Trinidad and Tobago, and Nigeria," he said.
Kirkland said good progress was made during 2005 to advance major capital projects. Overall, Chevron has more than 20 projects with capital costs that each exceed $1 billion and over 40 projects that each exceed $500 million.
The five largest upstream capital projects are Agbami offshore Nigeria, Tahiti in the U.S. Gulf of Mexico, Benguela Belize-Lobito Tomboco offshore Angola, the Tengizchevroil Sour Gas Injection/Second Generation Plant project in Kazakhstan, and the Greater Gorgon Area development offshore Australia. Kirkland said all five projects are essential to bringing on new production and new reserves during the next five years.
"When coupled with our strong focus on efficiently producing as many barrels as we can from our existing operations, we expect to achieve production growth in excess of 3 percent per year over the next five years," Kirkland added.
Mike Wirth, executive vice president, Downstream, said Chevron's downstream performance was supported by strong market conditions and significant business improvements.
"We are focused on excelling in execution, advancing our growth projects and generating additional integration value," Wirth said. "We have aggressive efforts under way to increase utilization at our refineries -- a key to maximizing the advantages of our portfolio. This year, we will bring online additional gasoline manufacturing capacity and execute several projects to extract more value out of each barrel of crude oil."
Wirth said progress was made in 2005 in selling non-strategic retail fuel sites. Since 2003, the company has divested more than 2,300 sites, generating more than $1 billion in after-tax proceeds. Other downstream highlights included the implementation of several projects to increase refinery scope and flexibility and independent market recognition that Chevron was the most powerful brand in the United States in 2005, for the second consecutive year, and the Texaco brand was No. 2.
Eight proposals were voted on by Chevron stockholders, and the preliminary report of the Inspector of Election is as follows:
Item 1: More than 1.7 billion shares, or about 96 percent of the votes cast, were voted for the 13 nominees for election to the board of directors. Item 2: More than 1.7 billion shares, or about 98 percent of the votes cast, were voted to ratify the appointment of Pricewaterhouse Coopers LLP as the independent registered public accounting firm. Item 3: The stockholder proposal to amend company bylaws for proponent reimbursement for expenses incurred in presenting proposals for stockholder consideration was defeated. Approximately 66 percent of the votes were cast against the proposal. Item 4: The stockholder proposal to report on environmental implications related to oil and gas drilling in protected and sensitive areas was defeated. Approximately 90 percent of the votes were cast against the proposal. Item 5: The stockholder proposal to disclose policies and procedures for political contributions as well as all political contributions was defeated. Approximately 86 percent of the votes were cast against the proposal. Item 6: The stockholder proposal to adopt an animal welfare policy was defeated. Approximately 93 percent of the votes were cast against the proposal. Item 7: The stockholder proposal to adopt a comprehensive human rights policy was defeated. Approximately 75 percent of the votes were cast against the proposal. Item 8: The stockholder proposal to report annual expenditures in Ecuador from 1993 to 2005 was defeated. Approximately 91 percent of the votes were cast against the proposal.
Final voting results will be reported in Chevron's second quarter 2006 Form 10-Q, which will be filed with the Securities and Exchange Commission in August. Specific information about the proposals before Chevron stockholders this year may be found in the Investor Relations section of the company's Web site in the "Notice of the 2006 Annual Meeting and the 2006 Proxy Statement."
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