ChevronTexaco Reorganizes North American Portfolio

ChevronTexaco plans to sell its interests in additional non-strategic producing properties in the United States, re-align strategic business units and evaluate opportunities to divest selected producing and midstream assets in western Canada. The plans support ChevronTexaco's drive to improve competitive performance and increase operating efficiency in North America.

The planned divestitures are part of ChevronTexaco's ongoing North America portfolio optimization program announced earlier this year. Longer term, the company expects to retain about 400 core fields.

"We're building a focused and efficient portfolio of assets composed of strategic core fields that represent the vast majority of our long-term value in North America," said Ray Wilcox, vice president of ChevronTexaco and president of ChevronTexaco Exploration and Production Co. "These efforts are part of our strategy to maximize and grow the value of our base business. We expect to retain nearly all of our current earnings, cash flow and resource base, and to improve our overall competitiveness."

The U.S. properties for sale are located in 15 states and the Outer Continental Shelf of the Gulf of Mexico. They represent more than 60 percent of ChevronTexaco's total U.S. properties but only 5 percent of daily production. Most of these properties are non-operated joint ventures and royalty-only interests.

Canadian assets being considered for divestment consist of mature producing fields and midstream assets in western Canada currently producing 35,000 barrels of oil-equivalent production per day. The decision does not affect strategically significant assets, which include: the Athabasca Oil Sands Project, MacKenzie Delta gas, East Coast Canada exploration, development and production activities, or the company's refining and marketing operations.

In addition to portfolio optimization activities, the company is announcing organizational changes to improve efficiency and focus that will result in some office consolidations. The Permian Business Unit, located in Midland, Texas, and the MidContinent Business Unit, located in Houston, will be consolidated and headquartered in Houston. However, some functions directly linked to operational needs will continue in Midland. The Deepwater Gulf of Mexico Business Unit, currently based in New Orleans, will become the Deepwater Gulf of Mexico Exploration and Projects Business Unit and will focus exclusively on exploration and major deepwater development projects. It will be co-located with other ChevronTexaco worldwide deepwater and technology groups in Houston. Gulf of Mexico operations will continue to be located in Louisiana (New Orleans and Lafayette) and will manage all of ChevronTexaco's operating activities in the Gulf of Mexico, including deepwater.

The divestment program and office consolidations are expected to be completed in 2004. An estimated 150 to 200 jobs will be eliminated directly or indirectly as a result of the portfolio decisions in the United States. Personnel impacts in Canada will be determined based on the ultimate actions around the disposition of the western Canada producing and midstream assets.

The company expects to record charges against fourth quarter earnings for the write-down of these selected U.S. assets that will be offered for sale, as well as for estimated employee termination benefits associated with these asset sales and office reorganizations. These charges are not expected to be material to total corporate earnings for the quarter. Asset dispositions during 2004 could result in net gains that are material to the company's earnings in any single period.

"ChevronTexaco will remain the No. 1 producer in California and the Gulf of Mexico Shelf," said Wilcox. "We're the No. 2 producer in the Permian Basin and the No. 3 natural gas producer in the United States, bolstered by our strong MidContinent gas production. We will continue our strong leadership and commitment to the communities where we operate. These changes will enable our workforce to realign and focus on opportunities that can add the most value to ChevronTexaco and its stockholders," he added.