Net income of $23.9 billion represented
a 28.1 percent increase
over the previous year. Capital and
exploratory
expenditures for 2008
were $22.8 billion, and return on
capital employed was 26.6 percent.
For the 21st consecutive year, we
increased our annual dividend payout.
We continued to return cash to our
stockholders
through stock buyback
programs, purchasing $8 billion of our
common shares during 2008. In total
stockholder return, we outperformed
the S&P 500 by nearly 19 percentage
points. While our total stockholder
return was negative 18.4 percent, our
results stood out compared with the
market and most peers, underscoring
our strength and discipline.
Our strategies focus on delivering
value over time: In 2008, we advanced our queue of 40 major
capital projects, each with a net Chevron share of investment exceeding
$1 billion. We added 1.3 billion barrels of oil-equivalent proved reserves, replacing 146 percent of
oil-equivalent production this year.
We also significantly improved our operating reliability at our eight company-operated refineries.
The people of Chevron managed
these achievements while accomplishing
one more: 2008 was our
safest year ever. We earned one of
the best safety records in our industry,
making our global operations four times safer than five years ago.
Delivering Energy Now
In the upstream, we brought projects
onstream that are as large as
they are long-term.
In the U.S. Gulf of Mexico, we
began production at our deepwater
Blind Faith Field. In Kazakhstan,
Tengizchevroil completed major
expansion projects that nearly
doubled production capacity from
the giant Tengiz Field. In Indonesia,
an expansion of our Duri Field started production. In Australia,
our fifth liquefied natural gas processing
unit came onstream. And in
Nigeria, our Agbami deepwater field
celebrated first oil.
The ability to efficiently produce over
decades depends as much on strong
partnerships as on operational and
technical skills. In 2008, we extended
our agreement with the Kingdom of
Saudi Arabia for 30 years to operate
the Kingdom's 50 percent crude
oil and natural gas interests in the
Partitioned Neutral Zone between
the Kingdom and the State of Kuwait.
To increase flexibility in refining the
world's full range of crude oils, we
upgraded key refineries in 2008.
Refineries in California, Mississippi
and at our 50 percent-owned Yeosu
Refinery in South Korea now transform
lower-cost, heavier crude oils
into premium-value products. These
major upgrades also included facilities
to improve long-term reliability.
Running efficient, reliable operations
also means anticipating the forces of
nature. Last summer, Hurricanes Dolly,
Gustav and Ike forced evacuations
of
our Gulf of Mexico operations three
times. Securing and starting up operations
is complex; our people did it,
maintaining perfect safety. They also
provided needed fuel to emergency
responders and the public. They are
a dedicated team.
Developing Energy for the Future
Looking ahead, we're investing for the
future. Our plans focus on increasing
reserves, boosting crude oil and
natural gas production, and improving
reliability and efficiency.
In exploration, we're focused on large
and aggregated energy resources in
key basins of the world. Discoveries
eventually become long-term energy
producers, and this year, three will
begin production. Frade, offshore
Brazil, is forecasted to start up in
the first half of the year. The Gulf of Mexico's Tahiti Field and Angola's offshore
Tombua-Landana development
should reach first oil in the second
half of 2009. In the downstream, we
plan to launch four new refinery projects
to further improve reliability and
refining flexibility
Meeting the Energy Challenge
These are just some of our efforts at Delivering Energy Now — Developing Energy for the Future, the theme of this Annual Report.
As economies around the world
search for solid ground, certain
outcomes are inevitable: Worldwide
demand for energy will rise over
the long term. Population growth,
industrialization, urbanization and the
developing world's demand for rising
living standards all but ensure that.
Energy is not a luxury – it's the
foundation for economic growth. By
investing in the future, we're creating
value not only for our stakeholders, but also we're building economic
prosperity around the globe.
While times are challenging, the people
of Chevron have their eyes fixed
on the horizon. That's where growth
will take hold. And when it does, the
world will need all the energy it can
get. Human energy and ingenuity will
deliver it — two resources the people
of Chevron have in abundant supply.
Thank you for investing in our company.
Dave O'Reilly
Chairman of the Board and Chief Executive Officer
February 26, 2009