Report to Stockholders

By Peter J. Robertson, Vice Chairman
ChevronTexaco Corporation

Opening Remarks and Corporate Overview

San Ramon, California, April 27, 2005

Ladies and gentlemen, good morning and welcome to this meeting of ChevronTexaco stockholders. We're pleased you could join us today, to hear how our company is building for the future.

Let me start by introducing the nominees for the board of directors:

  • Samuel Armacost, chairman of SRI International;
  • Robert Denham, partner of the law firm of Munger, Tolles and Olson;
  • Robert Eaton, retired chairman of the board of management of DaimlerChrysler;
  • Sam Ginn, retired chairman of Vodafone;
  • Carla Hills, chairman and chief executive officer of Hills & Company International Consultants and former U.S. Trade representative;
  • Franklyn Jenifer, president of the University of Texas at Dallas;
  • Charles Shoemate, retired chairman of the board, president and chief executive officer of Bestfoods;
  • Ronald Sugar, chairman of the board, chief executive officer and president of Northrop Grumman Corporation;
  • Carl Ware, senior adviser to the chief executive officer of The Coca-Cola Company;
  • Sam Nunn, former U.S. Senator from Georgia, who is not able to attend today;
  • Dave O'Reilly, chairman of the board and chief executive officer of ChevronTexaco Corporation.

Thanks to all of you for your willingness to serve as directors of our great company.

Dave will be joining me in today's presentation, along with Pat Woertz, executive vice president of Downstream, and George Kirkland, executive vice president of Upstream and Gas.

I'd like to introduce the other members of our Executive Committee who are here today:

  • John Bethancourt, executive vice president of Technology and Services;
  • Steve Crowe, vice president and chief financial officer;
  • Charles James, vice president and general counsel;
  • Sam Laidlaw, executive vice president of Business Development.

We have several other corporate officers here today.

I'd like to introduce Jonathan Mullins and Alan Page, our engagement partners from PricewaterhouseCoopers; and Douglas Czarnecki, the inspector of election.

Let me begin by saying, that 2004 was the strongest year in our 125-year history, both financially and operationally. We reported net income of $13.3 billion. Clearly, we benefited from oil and natural gas prices, as well as from improved refining margins. But we also benefited from our strong operating performance. We ran our base business well and achieved a return on capital employed of 25.8 percent.

Our strong cash flow enabled us to reduce debt by $1.3 billion. As a result, we ended the year with a total debt to total debt-plus-equity ratio of 19.9 percent. Our AA credit rating reflects our low debt level as well as our financial strength.

I'm proud to tell you that 2004 was our safest year ever. We had a 14 percent improvement in our workforce incident rate, with 161 fewer people injured compared with 2003.

We are committed to delivering value to our stockholders. In 2004, we raised our annual dividend payment for the 17th consecutive year.

A year ago, we launched a stock buyback program of up to $5 billion in up to three years. To this point, we are ahead of the ratable pace and have repurchased $2.8 billion worth of our common shares.

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.

Total stockholder return is another important measure of our performance. Our five-year goal was to be No. 1 among our largest peers. As you can see, we met that goal. For the period 2000 through 2004, we tied for No. 1, and we've greatly outperformed the broad market indicator of the S&P 500.

Now here's a look at our capital and exploratory expenditures.

In 2005, we expect to invest approximately $10 billion, about 20 percent higher than our 2004 spending level.

About 74 percent of our 2005 budget will go to our upstream business, where we see the greatest opportunities to grow our company and to create value.

Approximately 19 percent of the budget will go to refining and marketing investments as well as to supply and transportation projects.

Our performance over the past several years has been driven by our "4+1" operating strategy. That means having an unrelenting focus on operational excellence, cost reduction, capital stewardship and profitable growth. The "plus one" element in our "4+1" operating strategy is organizational capability -- ensuring that our people are aligned with the right resources and strategies to do their jobs effectively, efficiently and with ingenuity.

We're focused on every element of "4+1." Together, this means better management, smarter allocation of capital, and more effective execution.

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 natural 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.

Now we'll spend the next few minutes discussing how we are advancing our key strategies across our major business units.

At this time, I would like to introduce Pat Woertz, who will talk about the accomplishments and strategic focus of our Downstream operations.

Read the Overview of Downstream by Patricia A. Woertz

Updated: April 2005