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2009 Annual Meeting Remarks by George L. Kirkland

George L. Kirkland

By George L. Kirkland, Executive Vice President for Upstream and Gas
Chevron Corporation

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.

Slide: A Strong Worldwide 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.

Slide: Top-Tier Competitive Position

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.

Slide: Top-Tier Competitive Position

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.

Slide: Consistent Exploration Success

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.

Slide: Consistent Exploration Success

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.

Slide: A leading portfolio of projects

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.

Slide: Commitment to Earnings & Returns — 2008 Project Startups

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.

Slide: Commitment to Earnings & Returns — 2009-2010 Project Startups

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.

Read the Overview of Downstream by Mike Wirth

Cautionary Statement

Updated: May 2009