ChevronTexaco Says 2003 One of Company's Best Years Ever

ChevronTexaco (NYSE: CVX) Chairman and CEO David J. O'Reilly reported to stockholders at its 2004 annual meeting that ChevronTexaco has accomplished much over the past year and achieved a number of successes in the company's three main businesses: upstream, natural gas and downstream.

"2003 was one of our best years ever, both financially and operationally," O'Reilly said. "Our strong earnings and cash flow are enabling us to return cash to our stockholders and at the same time reduce debt and fund a robust capital program."

O'Reilly added, "Our goal is to be No. 1 among our peers in total stockholder return. We've been meeting that goal. For the period beginning in 2000 to the present, we've not only outperformed our largest competitors, but we've also outperformed the broad market indicator of the S&P 500."

O'Reilly went on to report additional financial successes including $7.2 billion net income in 2003, a 15.7 percent return on average capital employed, debt reduction of $3.7 billion and a 16th consecutive year in which the company has increased its annual dividend payment. These successes, along with a $5 billion common stock repurchase program initiated in early 2004, have strengthened stockholders' investment value.

O'Reilly also highlighted ChevronTexaco's areas of strategic focus: upstream, where the company plans to grow profitability in core areas and build new legacy positions; natural gas, where the company plans to commercialize its large equity resource base by targeting the rapidly growing North American and Asian markets; and downstream, where the company plans to improve future returns by focusing on areas of market and supply strength. In support of these strategies, O'Reilly noted the capital and exploratory program for 2004 is $8.5 billion, approximately 15 percent higher than 2003 spending.

Vice Chairman Peter Robertson reported on the upstream.

He said that ChevronTexaco has one of the best records in the industry for replacing production. "In 2003, we added approximately 1 billion oil- equivalent barrels of net proved reserves, or 108 percent of the volumes we produced." The additions came from a broad range of activities, including drilling activities in the United States; the application of improved recovery techniques in Indonesia and the United States; reservoir studies of fields in Kazakhstan, principally the Tengiz Field; and through the conclusion of successful contract extension negotiations in Denmark and Colombia.

The company continued its series of exploration successes with major discoveries in the deepwater U.S. Gulf of Mexico and Nigeria. The drilling program also confirmed the size and scale of two other major discoveries, both of which are expected to lead to significant developments -- the Io-Jansz natural gas discovery offshore Australia and the Usan discovery offshore Nigeria.

He added that the company was beginning exploration activities on newly acquired acreage in the Gulf of Thailand, Venezuela, offshore Canada and Nigeria. The company was just awarded a 51 percent interest in the premier deepwater block of the joint development area shared by Sao Tome and Principe, and Nigeria, where the company expects to begin drilling operations this year.

Robertson also reported on the natural gas business. "We have the size and scope to be a major player as demand of natural gas continues to grow," he said. In 2003 the company reestablished a natural gas marketing presence in the United States. In addition, ChevronTexaco reached milestones on key liquefied natural gas and gas-to-liquids projects. In the Pacific Basin, the company moved forward on developing the Greater Gorgon Area fields offshore Australia. In the Atlantic Basin, ChevronTexaco received regulatory approval to construct the Port Pelican liquefied natural gas facility offshore Louisiana.

Executive Vice President Patricia Woertz told stockholders that downstream's performance has greatly improved. She cited improvements made at two of the company's largest refineries -- Richmond and El Segundo, both in California -- which achieved enhanced utilization rates, and improved safety records and environmental performance. The processes and practices that contributed to these results are now being implemented throughout the company's global refining system, she said.

Woertz also noted, "We upgraded our refineries at Pascagoula, Miss; at Pembroke, in Wales; and at our joint-venture refinery in Rotterdam, Netherlands, all to produce low-sulfur fuels to meet more stringent environmental standards.

In closing, Woertz reiterated downstream's commitment to deliver at least $500 million in pre-tax earnings improvements by the end of 2005 and to continue strong operating performance now and in the future.