2013 Annual Stockholders Meeting Remarks by George L. Kirkland

George L. Kirkland

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

2013 Annual Stockholders Meeting

San Ramon, California, May 29, 2013

Good morning, everyone. I'd like to start my discussion with safety.

In the Upstream, we had another industry-leading year in our safety performance. We have had the best performance among our competitors in both Days Away From Work and Total Recordable Incident Rates for the last five years. 2012 was also significant as we achieved our lowest oil-spill rate in 10 years. These results come from our dedicated focus on both personal and process safety.

Now let's turn to the financial performance of our Upstream business. 

In 2012 we achieved superior financial results, placing us No. 1 in our peer group in earnings per barrel at $23.70. For more than three years, we've led our peer group in earnings per barrel by an average of greater than 20 percent. We have also led our peers the last three years in cash margins—and the last two years in ROCE.

We continued that outstanding performance in the first quarter of this year.  Our earnings were $25.81 per barrel, more than $7.50 or 30 percent higher than our nearest competitor. We're very pleased with our leading positions and the large gap separating us from our competition.

Now, let's look at our plans for production growth.   

In 2010, we outlined our plans to increase our production to 3.3 million barrels of oil-equivalent per day by 2017. We're on track to deliver on that commitment.

More than 90 percent of that target will come from fields that are online today or from projects that are under construction. In a moment, I'll talk about our deep queue of projects, critical to reaching 3.3 million barrels per day. Yet to reach that target, base operations are also critical. More than 2 million barrels per day of production comes from our base.

We're slowing natural declines to a rate of about 4 percent through operating efficiency, reservoir management, technology reliability and through targeted investments in base operations.  

Now, let's look at our outstanding queue of major capital projects.

Over the next five years, 50 projects each with Chevron share exceeding $250 million are scheduled to start up. Sixteen of these, as highlighted on the map, have a net Chevron investment exceeding $1 billion.  

Over the next two years, we plan to start up seven large major capital projects. These include onshore gas projects and our large deepwater projects: Jack/St. Malo, Big Foot and Papa-Terra. 

We're also developing two legacy natural gas projects in Australia—Gorgon and Wheatstone. In late 2014, we plan to start up Gorgon, and in early 2015, ship our first cargo of LNG. In late 2016, we plan to start up Wheatstone.

Now let's take a closer look at our growth beyond 2017.

We have a large portfolio of assets in various stages of maturity that will add value beyond 2017. This includes 13 major capital projects in early phases of development that are expected to add production between 2018 and 2022. Among them are the Tengiz Future Growth project in Kazakhstan, Kitimat LNG in Western Canada, and the Wafra Steamflood in the Partitioned Zone.  

We're also developing shale and tight resources that could generate 10 percent of our overall production by 2020. We operate to a high standard in these areas and are deploying technology to reduce our footprint and water usage.  

We continue to be value driven, adding production that grows our diverse portfolio long term.

Now I will turn to our Downstream and Chemicals business.

Improving Downstream and Chemicals' profitability is one of our priorities. In 2010, we committed to improving refining and marketing returns by 7 percent by 2012. I'm very pleased to tell you we exceeded that commitment. At the end of 2012, returns were up 10 percent, thanks to improvements in refining, marketing, portfolio and costs. We achieved all this while maintaining a No. 1 ranking in refinery utilization since 2006, as measured by the Solomon survey.

Downstream and Chemicals has delivered strong earnings and competitive performance. In 2012, Refining and Marketing earnings were just over $3 per barrel, placing us a strong second among peers and very close to No. 1.

We delivered an 18.1 percent adjusted return on capital employed for all of Downstream and Chemicals, also No. 2 among peers.

In addition to improving our Downstream and Chemicals profitability, we've also focused on select areas for growth.  

Chevron Phillips Chemical continues to make progress on U.S. Gulf Coast projects that take advantage of existing infrastructure and attractive feedstocks. This includes a hexane plant slated to start up next year and a world-scale ethylene cracker and derivative unit expected to start up in 2017. Late this year, our Pascagoula Base Oil Plant is scheduled to start up.

The Oronite Singapore expansion will come online in phases, in 2014 and 2016. And GS Caltex started up a new heavy oil upgrader in March, ahead of schedule and with no lost-time incidents in more than 5 million hours worked. This unit helps make Yeosu the largest processor of heavy oil in Korea.

Thank you.

Read Chairman and CEO John S. Watson's Remarks from the 2013 Annual Stockholders Meeting.



This presentation 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 report. 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: changing crude oil and natural gas prices; changing 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 the 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 other pending or future litigation; the company's future acquisition or disposition of assets and 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 rulesetting bodies; and the factors set forth under the heading "Risk Factors" on pages 29 through 31 of the company's 2011 Annual Report on Form 10-K. In addition, such statements could be affected by general domestic and international economic and political conditions. Other unpredictable or unknown factors not discussed in this report could also have material adverse effects on forward-looking statements.

Certain terms, such as "unrisked resources," "unrisked resource base," "recoverable resources" and "oil in place," among others, may be used in this presentation to describe certain aspects of the company's portfolio and oil and gas properties beyond the proved reserves. For definitions of, and further information regarding, these and other terms, see the Glossary of Energy and Financial Terms.


Published: May 2013