Since Chevron was founded more than 130 years ago, crude oil, natural gas and other sources of energy have produced an unprecedented rise in living standards for billions of people. Over that time, our company has built an enduring legacy of industry leadership and value for investors while producing the energy that makes our quality of life possible.
As your Chairman, I'm committed to building on that legacy. It's an honor to lead Chevron into a future where energy will continue to be a foundation for global economic growth.
A company's strategies — and the abilities, values and focus of its people — are tested in tough times. In 2009, the people of Chevron delivered strong results in the face of a global economic downturn and difficult industry conditions.
We brought major capital projects online or to capacity and achieved industry-leading production growth. We made major new discoveries of crude oil and natural gas and continued to grow our natural gas business. Employees aggressively managed costs, resulting in about a 15 percent decrease in operating expenses over 2008. And we accomplished all this while recording fewer workplace injuries than ever before.
Our financial performance for 2009 contributed to a strong balance sheet and returns for investors. Total stockholder return — a critical measure of our performance — was No. 1 among our top competitors over the past five years. We increased our annual dividend in 2009 for the 22nd consecutive year. Net income in 2009 was $10.5 billion on sales and other operating revenues of $167 billion, reflecting lower prices from 2008 for crude oil and natural gas and lower sales margins and prices for refined products. Return on capital employed for the year was 10.6 percent.
We advanced our upstream growth strategy by bringing world-class deepwater projects online, including Tahiti in the U.S. Gulf of Mexico, Tombua-Landana offshore Angola and Frade offshore Brazil. Our Tengiz expansion in Kazakhstan and Agbami ramp-ups in Nigeria added significant production volumes. We also achieved impressive results managing our producing crude oil and natural gas assets to limit natural field declines.
In 2009, we made strong progress toward our goal to build a high-impact, global natural gas business. Construction of the Escravos gas-to-liquids and Angola liquefied natural gas (LNG) plants continued. Offshore Western Australia, we gave the go-ahead for the massive Gorgon LNG project and achieved important commercial milestones for the Wheatstone LNG development.
We added 1.1 billion barrels of net oil-equivalent proved reserves, replacing 112 percent of net oil-equivalent production in 2009. And we continue to build for our future: Our exploration expertise and applied technology resulted in a drilling success rate of 57 percent, one of the best in the industry.
The economic environment was challenging for refining and marketing in 2009. To manage our refining and marketing businesses in this environment, we are aggressively controlling costs. Our downstream and chemical businesses continued their strong focus on reliability and safety. Refineries continued to run at industry-leading levels of utilization. Restructuring in our lubricants and Oronite fuel additives businesses generated improved earnings.
In 2009, we progressed our renewable energy strategy, which is focused on enhancing our geothermal energy business — the largest in the world — while building our energy efficiency business and developing nonfood biofuels.
Chevron's performance and growth are intrinsically linked with the communities where we operate. Our projects generate thousands of jobs and support for businesses big and small around the world. Our community engagement programs are strategic investments in the future of our communities, focusing on health, education and sustainable socioeconomic development.
Chevron enters 2010 from a position of financial and operational strength, with solid potential for growth. Our $21.6 billion capital and exploratory budget for 2010 reflects our industry-leading queue of major capital projects that support future growth. Much of our 2010 spending will focus on large multiyear projects aligned with our upstream growth strategies, on improving our operating efficiency and reliability, and on aligning our downstream businesses with the strongest market opportunities.
Chevron's core strengths — starting with the talent, dedication and values of our employees worldwide — position us to achieve growth while helping meet long-term global demand for energy. The values of The Chevron Way — getting results the right way — guide us every day. We operate with the highest standards of integrity and respect for human rights. We are deeply committed to safe and efficient operations and to conducting our business in an environmentally sound manner. We build strong partnerships to produce energy and support communities.
Chevron's future holds great promise. We have world-class assets, strong market positions and an industry-leading queue of projects and opportunities. We have robust long-term strategies and a proven ability to deliver results. We have unassailable ethics and a culture that attracts and develops the best talent. Chevron's vision remains constant: to be the global energy company most admired for its people, partnership and performance.
Our world grows more complex every day. We face increased challenges — geopolitical, environmental, regulatory and technical. But Chevron employees have risen to challenges for more than 130 years — with dedication, ingenuity and hard work. And I'm confident we will continue to do so.
Thank you for investing in Chevron.
John S. Watson
Chairman of the Board and Chief Executive Officer
February 25, 2010
Posted: April 2010