2009 Annual Meeting Remarks by George L. Kirkland
George L. Kirkland, Executive Vice President for Upstream and Gas
Overview of Upstream and Gas
San Ramon, California, May 27, 2009
Good morning. It's good to be back at our Annual Stockholders Meeting and discuss Chevron's upstream and gas businesses.
We had a superb 2008 — record earnings, the startup of nine major capital projects, excellent exploration results and top competitive performance in key areas.
I'd like to start with a short overview of Chevron's upstream portfolio.
As you can see on the map, Chevron has oil and gas operations in nearly all of the world's key hydrocarbon basins. We operate in 26 countries through four regional operating companies and 14 business units.
With 11.2 billion barrels of proved reserves and 2.7 million barrels per day of production capacity, Chevron has a portfolio of depth and diversity.
In 2008, upstream had record earnings of $21.7 billion. This translates to earnings per barrel of $22.85. As you can see, we're in the No. 2 position for 2008. This strong position in earnings per barrel is the result of our competitive cost structure and high-quality asset base.
Chevron has the most competitive cost structure in the industry. Upstream expense costs translated to $20.05 per barrel in 2008 — the No. 1 position.
Although we're doing well in a competitive sense, a key focus in 2009 is to drive our cost structure down. As John noted a moment ago, in these current market conditions, it is critical to maintain a strong balance sheet.
Exploration remains the foundation of our future growth, and 2008 was another great year. We added more than 1.7 billion barrels of oil-equivalent. That's a success rate of 49 percent — in line with the seven-year average of 45 percent.
Since 2002, we've added more than 8.5 billion barrels of oil-equivalent resources. Our consistent success reconfirms our exploration strategy.
In total, Chevron holds 64 billion barrels of unrisked resources in our portfolio. Of that total, 60 percent is oil, the rest is natural gas.
We have 40 major capital projects in our queue in which Chevron's investment exceeds $1 billion. Our full inventory includes 93 projects each greater than $200 million.
Over the next two years we expect new project startups and continued ramp-ups to deliver significant growth. This incremental production is projected to reach 650,000 barrels per day in 2010.
Last year was a great year for project startups, with nine in total. This achievement demonstrates our ability to execute complex projects.
The three largest — Agbami, the Tengiz expansion and Blind Faith — are all Chevron-operated. The fourth-operated project was the Area 12 expansion at the Duri Field in Indonesia.
Together with our joint-venture partners, we also achieved first production at five other projects. The ramp-up of these nine projects is expected to contribute 350,000 barrels per day in 2009.
On this slide you can see the major Chevron-operated startups in 2009. They include:
- Tahiti – a subsea oil development in 4,100 feet [1,250 m] of water in the Gulf of Mexico;
- Frade – our first as the operator of a deepwater development offshore Brazil; and
- Tombua-Landana in Angola – scheduled for first oil during the second half of this year.
In 2010, our key project startups include the first expansion of the Athabasca Oil Sands Project in Canada, the Perdido development in the deepwater Gulf of Mexico, and Stage 3A of the Escravos Gas Project in Nigeria.
In summary, upstream is well positioned in the current economic climate and remains committed to the long term. We are sustaining our investment in exploration and advancing our major capital projects to create long-term production growth for the enterprise.
Now I would like to introduce Mike Wirth who will discuss our downstream businesses.
CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This press release of Chevron Corporation contains forward-looking statements relating to Chevron's operations that are based on management's current expectations, estimates and projections about the petroleum, chemicals, and other energy-related industries. Words such as "anticipates," "expects," "intends," "plans," "targets," "projects," "believes," "seeks," "schedules," "estimates," "budgets" and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond the company's control and are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Unless legally required, Chevron undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are crude-oil and natural-gas prices; refining, marketing and chemical margins; actions of competitors or regulators; timing of exploration expenses; timing of crude-oil liftings; the competitiveness of alternate-energy sources or product substitutes; technological developments; the results of operations and financial condition of equity affiliates; the inability or failure of the company's joint-venture partners to fund their share of operations and development activities; the potential failure to achieve expected net production from existing and future crude-oil and natural-gas development projects; potential delays in the development, construction or start-up of planned projects; the potential disruption or interruption of the company's net production or manufacturing facilities or delivery/transportation networks due to war, accidents, political events, civil unrest, severe weather or crude-oil production quotas that might be imposed by OPEC (Organization of Petroleum Exporting Countries); the potential liability for remedial actions or assessments under existing or future environmental regulations and litigation; significant investment or product changes under existing or future environmental statutes, regulations and litigation; the potential liability resulting from pending or future litigation; the company's acquisition or disposition of assets; gains and losses from asset dispositions or impairments; government-mandated sales, divestitures, recapitalizations, industry-specific taxes, changes in fiscal terms or restrictions on scope of company operations; foreign currency movements compared with the U.S.dollar; the effects of changed accounting rules under generally accepted accounting principles promulgated by rule-setting bodies; and the factors set forth under the heading "Risk Factors" on pages 30 and 31 of the company's 2008 Annual Report on Form 10-K. In addition, such statements could be affected by general domestic and international economic and political conditions. Unpredictable or unknown factors not discussed in this press release could also have material adverse effects on forward-looking statements.
U.S. Securities and Exchange Commission (SEC) rules permit oil and gas companies to disclose only proved reserves in their filings with the SEC. Certain terms, such as "resources," "undeveloped gas resources," "oil in place," "recoverable reserves," and "recoverable resources," among others, may be used in this presentation to describe certain oil and gas properties that are not permitted to be used in filings with the SEC. In addition, SEC regulations define oil-sands reserves as mining-related and not a part of conventional oil and gas reserves.
Updated: May 2009