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Report to Stockholders

By Peter J. Robertson, Vice Chairman
Chevron Corporation

Opening Remarks and Corporate Overview

Houston, Texas, April 26, 2006

Ladies and gentlemen. Good morning and welcome to this meeting of Chevron stockholders.

We're pleased you could join us today to hear about our performance in 2005 and how our company is building for the future.

First, let me introduce our nominees for the Board of Directors. Would you please stand as I call your name and remain standing until all have been introduced.

  • Sam Armacost, chairman of SRI International.
  • Linnet Deily, former Deputy U.S. Trade Representative and retired vice chairman of Charles Schwab Corporation.
  • Bob Denham, partner in the law firm of Munger, Tolles and Olson.
  • Bob Eaton, retired chairman of the Board of Management of DaimlerChrysler.
  • Sam Ginn, retired chairman of Vodafone AirTouch.
  • Frank Jenifer, president emeritus of The University of Texas at Dallas.
  • Donald Rice, chairman and CEO of Agensys, Inc.
  • Dick Shoemate, retired chairman of the Board, president and chief executive officer of Bestfoods.
  • Ron Sugar, chairman of the Board, chief executive officer and president of Northrop Grumman Corporation.
  • Carl Ware, retired executive vice president of The Coca-Cola Company.
  • And finally, Dave O'Reilly, chairman of the Board and chief executive officer of Chevron Corporation.

I would also like to acknowledge Sam Nunn, former U.S. Senator from Georgia, who is not here, but will participate in our Board meeting later this morning.

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

Chairman O'Reilly will be joining me in today's presentation, along with George Kirkland, executive vice president of Upstream and Natural Gas, and Mike Wirth, executive vice president of Downstream.

We have several corporate officers here today. Would you please stand and be recognized.

Thank you.

Now I'd like to introduce:

  • Alan Page, our engagement partner, and Chuck Chang and Ricardo Moreno, partners from PricewaterhouseCoopers.
  • And Douglas Czarnecki, the Inspector of Election.

Thanks to all of you.

2005 was a momentous year, one of great accomplishments and unprecedented challenges for our company.

Let's take a closer look.

We achieved a second consecutive year of record earnings with reported net income of $14.1 billion.

We achieved a strong return on capital employed of 22 percent.

We ended 2005 with a debt-to-total-debt-plus-equity ratio of 17 percent, down from 20 percent at year-end 2004. Our AA credit rating reflects our low debt level as well as our overall financial strength.

Despite the challenges you saw in the video, which included hurricanes and tsunamis, I am proud to say that we set a new record for safety. With an unrelenting focus on safety, we are closing in on our goal to be the industry leader in safety performance in 2006.

Our strong earnings and cash flows are enabling us to return cash to our stockholders and, at the same time, fund a robust capital program, which in 2006 will be the highest annual spend in our history.

In 2005, we increased our quarterly dividend by 12.5 percent. The 18th consecutive increase in as many years.

We also completed a $5 billion stock buyback in November, and in December our Board authorized another program of up to $5 billion over three years.

Total stockholder return is another important measure of our performance. Our goal is to continue to be a top performer over the long term.

As you can see, for the period 2001 through 2005, we tied for No. 2 against our peer group. During this same period, we've also outperformed the broad market indicator of the S&P 500.

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

In 2006, we expect to invest approximately $15 billion, roughly 34 percent higher than our 2005 spending level.

For several years now, our strategies have remained constant. We are confident that they are the right strategies to succeed in today's dynamic and evolving industry environment.

Our overarching aim is to develop leading integrated positions in growth areas. To accomplish this, we are focused on three core strategies:

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 returns by focusing on areas of market and supply strength.

Now we'll discuss how we are advancing our key strategies across our major business units.

At this time, I would like to introduce George Kirkland.

Read the Overview of Upstream and Gas by George L. Kirkland

Updated: April 2006