4 Plus 1
David J. O'Reilly, Chairman of the Board and Chief Executive Officer
Annual Meeting of Stockholders
Los Angeles, California
Also see a press release regarding this speech
It's a pleasure to welcome you to our 2001 Annual Meeting. I'd like to continue by reviewing some of the tremendous successes our company achieved in the year 2000.
To begin with, our financial performance last year was superb, setting a new standard. Our operations improved their performance significantly as well, setting several records for safety, reliability and production. And we announced plans to merge with Texaco, to build a stronger company for the long term.
Our net income in 2000 was $5.2 billion -- by far the highest in the company's 121-year history.
Our earnings per share were also up more than 150 percent last year.
This record income helped us achieve two challenging goals we set last year: The first is to be No. 1 in total stockholder return relative to our peers for the period that runs from 2000 through 2004. The second is to achieve a minimum of 12 percent return on capital employed (ROCE) while continuing to grow the company.
Well, how have we done?
Since January 1, 2000, we are now in second place in total stockholder return. Texaco is in first place due to the premium we offered them as part of the merger proposal.
We finished No. 1 in return on capital employed for the year 2000 -- with 22 percent -- an accomplishment we're very proud of.
Of course, these achievements were helped along by sustained high prices for crude oil and natural gas and strong refining margins, particularly in the United States.
However, underlying these results, was solid operating performance. For example, we've steadily increased our oil and gas production an average of 3 percent each year over the last five years.
Now, let me cover some of our other accomplishments last year.
We announced the Chevron and Texaco merger to create one of the largest and most competitive international energy companies.
We strengthened our chemicals business by forming a world-class joint venture with Phillips.
We made several key additions to our worldwide upstream portfolio, which Dick Matzke will cover in a few minutes.
We achieved our production growth targets in 2000.
We also replaced more than 150 percent of the oil and gas we produced -- the eighth consecutive year we've added more reserves than produced.
Our refining and marketing performance improved last year because of higher margins and improved reliability.
Finally, we significantly strengthened our balance sheet through debt reduction and share buybacks.
We had a terrific year last year, but we aren't resting on our laurels.
As announced this morning, our first-quarter earnings were a record $1.6 billion, more than 50 percent higher than the first quarter of last year.
Now, I'd like to turn the podium over to Dick Matzke, who will give you a brief overview of some of the exciting opportunities in our worldwide portfolio.
Mr. Matzke's Remarks
I believe Dick's presentation demonstrates the strength and diversity of Chevron's worldwide portfolio and the potential for growth opportunities in all aspects of our business.
Last year, I said that achieving our goals would require superior performance in four key areas: Operational Excellence, Cost Reduction, Capital Stewardship and Profitable Growth; and that building Organizational Capability in each would be critical to achieving our financial goals.
We call these priorities "4 + 1," and I'd like to update you on our progress.
In 2000 and 2001, we're focusing initially on building world-class Organizational Capability in Operational Excellence and Capital Stewardship.
We've already made significant progress in the area of Operational Excellence, which means safe, reliable, efficient and environmentally sound performance.
For example, we've logged more than 14 million hours without a lost-time incident at our Tengiz facility in Kazakhstan while achieving new production records at the same time.
Our refineries in North America have had their best safety performance ever.
2000 was also our best year on record for fire losses. Our losses amounted to just $500,000 -- an incredible achievement for a company that generated $50 billion in revenue last year.
Despite these improvements we need to do more.
We're building our capability through better work processes, enhanced training, more rapid sharing of lessons learned, and increased focus on recognition and accountability.
The other area of focus is Capital Stewardship -- wisely investing our money -- a key element for a company our size with a capital budget of $6 billion.
We're increasing our skills by providing project teams with improved decision-making tools and by continuing a rigorous analysis of completed projects so that lessons learned can be incorporated into the decisions and execution of future projects.
By using these techniques, we've been able to reduce the time from discovery to first oil production.
We've also improved the design, construction and start-up of facilities and reduced our overall project costs.
You can be proud of Chevron's talented work force and the progress our employees have made and their efforts to attain world-class status in each of the areas I just mentioned.
Let me now say a few words about our proposed merger with Texaco and the strategic rationale we used in making this move.
We strongly believe that the combination of these two great companies will create a top-tier, global energy company with expanded scale, scope and competitiveness.
The new company will have a premier global upstream portfolio with leading positions in prime exploration and producing areas. It will have a unified global downstream business, built around three well-known international brands. And ChevronTexaco will have expanded growth opportunities in both power and advanced technologies, as well as strengthened organizational capability to achieve No. 1 in total stockholder return.
Let me make a few comments about the current status.
We're currently working on the FTC's request for information. Teams have been meeting regularly since the merger announcement to plan the integration of Chevron, Texaco and Caltex. We recently announced our top 50 management positions.
Looking ahead, we first have to complete the FTC review, and if we get the green light to proceed, we'll schedule a special stockholders' meeting to vote on the merger.
We can't predict exactly when the FTC approval will occur, but our objective to complete the merger as quickly as possible is unchanged. In the meantime, we'll remain focused on executing our plans.
Last, let me say a few words about the global energy picture.
Concerns about oil prices and availability, as well as regional natural gas and electricity supply and prices, have been very much in the news. Events of the past year have heightened the public's awareness of how much our well-being depends on sufficient supplies of affordable energy efficiently utilized.
Energy is a key input to a healthy economy that is increasingly global, interdependent and dynamic, with enormous potential for improving the lives of people everywhere. We at Chevron are committed to doing our part to responsibly develop energy supplies and services.
When we complete our proposed merger with Texaco, the new ChevronTexaco Corp. will be even better positioned to fulfill that role. We will have the assets, financial strength and people to make a difference.
Chevron will be a vital partner in creating the energy that fuels progress. By doing so, we will serve our customers, the communities in which we operate, and our stockholders.
I'm very positive about the outlook for our company and very proud of the commitment and performance of the many thousands of Chevron people who have contributed to our success.
Updated: April 2001