2004 Annual Meeting Remarks by David J. O'Reilly

By David J. O'Reilly, Chairman and CEO
ChevronTexaco Corporation

2004 Annual Meeting of Stockholders

San Ramon, California, April 28, 2004

Also see a press release regarding this speech.

Ladies and gentlemen, good morning and welcome to this meeting of ChevronTexaco stockholders.

This is a very special year for our company as we mark the 125th anniversary of ChevronTexaco. We're pleased you could join us today to share briefly in our history and, more important, to hear how our company is building for the future.

In this portion of the meeting, I plan to comment on the past year and the steps we're taking to sustain our strong performance and deliver value to you, our stockholders.

Financial Results for 2003

Let me begin by saying that 2003 was one of our best years ever, both financially and operationally.

We reported net income of $7.2 billion. Clearly, we benefited from oil and natural gas prices as well as from improved downstream margins. But we also benefited from our strong operating performance. We ran our base business well and achieved a return on average capital employed of 15.7 percent.

Our strong cash flow enabled us to reduce debt by $3.7 billion. As a result, we ended the year with a total debt-plus-equity ratio of 25.8 percent. Our AA credit rating reflects our low debt level as well as our financial strength.

I'm also proud to tell you that 2003 was our safest year ever.

We are committed to delivering stockholder value. In 2003, we raised our annual dividend payment for the 16th consecutive year. Our dividend currently yields approximately 3 percent, a very competitive yield within our peer group.

Last month, we took another step to enhance the value of your investment in ChevronTexaco. We announced that we plan to repurchase up to $5 billion of the company's common stock within the next three years. Our strong earnings and cash flow are enabling us to return cash to our stockholders and at the same time to reduce debt and fund a robust capital program.

Here is another important measure of our performance. Our goal is to be No. 1 among our peers in total stockholder return. 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.

Here is a look at our capital and exploratory expenditures. In 2004, we expect to invest about $8.5 billion, which is about 15 percent higher than 2003 spending.

About 75 percent of our 2004 budget will go to our upstream business, where we see the greatest opportunities to grow our company and create value. About 16 percent of the budget will go to refining and marketing investments as well as to supply and transportation projects.

Operational Excellence

Over the past year, we have made tremendous progress by focusing on two factors that are critical to our success.

First is our commitment to operational excellence. This means running safe, reliable and environmentally sound operations.

I mentioned earlier that 2003 was our safest year ever. During the year, we also improved our reliability metrics in many areas, including in our largest refineries.

And we made progress in our environmental performance. In addition to operational excellence, we are focused on capital stewardship. This means making better-quality expenditure decisions and executing projects well. Over the past three years, we've made considerable progress on this front, and as a result, have improved our capital allocation and efficiency.

Strategies to Grow Value

Let's look now at the strategies that each of our main businesses is pursuing to continue to grow the value of your investment.

In the upstream, our strategy is to grow profitability in our core areas and build new legacy positions. Our gas strategy is to commercialize our large equity resource base by targeting the rapidly growing North American and Asian markets. And our downstream strategy is to improve future returns by focusing on areas of market and supply strength.

Closing Remarks

As you can see, we have accomplished much over the past year and have achieved a number of successes in our three main businesses — upstream, gas and downstream.

Of course, it is the people of ChevronTexaco who are behind our company's success. They deliver results and do so the right way.

The search for new supplies of energy takes us to some of the world's most challenging areas — areas afflicted by disease, poverty and internal conflict. Last year, our employees kept operations running safely despite a major strike in Venezuela and despite war in the Middle East.

Last year, our company was honored to receive the U.S. Department of State's 2003 Award for Corporate Excellence. It was given in recognition of the sustained efforts of our Nigerian affiliate to contribute to a higher quality of life in that country.

Also last year, the president of Nigeria named the managing director of Chevron Nigeria Ltd. as co-chairman of the Nigerian Business Coalition Against HIV/AIDS. ChevronTexaco is committed to combating HIV and AIDS throughout Africa and works with numerous partners in the effort.

Just a few weeks ago, our company received another honor for its humanitarian efforts. It was given by the Organization of American States for the programs we have under way to alleviate poverty in Latin America, particularly in Venezuela.

These awards are a testament to ChevronTexaco people around the globe. As individuals — and as a company — we are committed to being responsible citizens of the world.

Because many of our operations are in developing countries, we take additional steps to ensure that our business is a mutual success for our company, the local community and the host country. We recognize that strong and healthy economies not only contribute to a nation's standard of living but also help create safer societies, more stable governments and a better investment climate for business.

Last year, we issued our first Corporate Responsibility Report. It contains information about the actions we are taking globally on a wide range of areas, including human rights, protecting the environment, diversity, local work-force development and community engagement. It features both our successes and the areas in which we are committed to improve. Our Corporate Responsibility Report is available on our Internet site. I encourage you to read it.

Our company has achieved a great deal since we met last year.

  • We've delivered strong financial results.
  • We've made significant improvements in running our base business.
  • We've secured some new long-term growth opportunities and made progress on others.

Our challenge now is to maintain the momentum. And I assure you, we are doing just that. As you've just seen, we have the financial strength and the asset base to deliver long-term value. Along with that, you have our personal commitment to deliver world-class performance.

We are in this industry for the long-term. For 125 years, we have produced the energy that is the building block for economic development and an improved standard of living.

In this, our anniversary year, we take pride in our company's past accomplishments and successes. But we also are mindful of our responsibility to provide abundant, affordable energy for the next 125 years. And we look forward to doing so.

Read full text of Vice Chairman of the Board Peter Robertson's remarks to 2004 Annual Meeting of Stockholders

Read full text of Executive Vice President Patricia Woertz's remarks to 2004 Annual Meeting of Stockholders

Updated: April 2004