press release

ChevronTexaco Increases Target for Annual Savings from Merger Synergies to $2.2 Billion, up from $1.8 Billion

  • New annual synergy rate targeted for April 2003; previous $1.8 billion objective to be met six months ahead of schedule
  • Operational and financial goals confirmed to increase oil and gas production and improve returns on capital employed

NEW YORK, June 19, 2002 -- ChevronTexaco Corp. reported today that it increased its merger-related synergy target to $2.2 billion, an annual before-tax rate to be achieved by April 2003. The company also said it expects to meet its previously announced $1.8 billion annual synergy objective by October 2002, or six months ahead of schedule.

In a presentation to security analysts, Chairman and CEO Dave O'Reilly said, "In the eight months since completing our merger, ChevronTexaco moved swiftly and successfully to integrate its businesses and to put in motion aggressive plans to enhance upstream performance and improve downstream returns. One benefit is that we expect synergies to be at a $1.8 billion annual rate by October of this year, or six months earlier than our initial projection. And in the process we have been able to identify an additional $400 million in synergies we expect to capture by April 2003. Since announcing the merger in October 2000, we have almost doubled our initial synergy target.

"Taken together, the plans we have outlined today are designed to achieve within two years, a 2 to 3 percent improvement in our return on capital employed," said O'Reilly, who also emphasized that the company's overarching objective is to be first among its peers in total stockholder return for the five-year period ending in 2004.

Synergy Benefits

Vice President and Chief Financial Officer John Watson further described the company's synergy results and plans. "We have been able to identify additional synergy opportunities across all sectors of our business," Watson said. "By streamlining the organization, consolidating facilities, integrating systems, sharing best practices and leveraging global procurement opportunities, we've been able to surpass our initial targets and do so ahead of schedule. These synergies are making a positive impact on our bottom line."

Upstream Growth

During presentations at the meeting, Vice Chairman for Upstream Peter Robertson noted that ChevronTexaco's upstream portfolio is expected to deliver competitive long-term production growth, and improved returns on capital employed. He reaffirmed that worldwide oil and gas production will increase at an expected compounded annual growth rate of 2.5 to 3 percent by 2006.

Robertson told analysts that the company was already strategically well positioned across the globe's major oil production areas, and will continue to expand its business by creating new entry options and by seeking to develop new core production areas. He also cited a rigorous global evaluation process that has optimized ChevronTexaco's exploration program. "Our enhanced capabilities are delivering success, notably the recent Tahiti discovery in the deepwater Gulf of Mexico." Robertson estimated that Tahiti holds 400 to 500 million barrels of recoverable oil reserves.

Robertson also spoke of plans to increase development of the company's considerable natural gas reserves. "We are building a global gas business," he said. "We plan to commercialize the huge Gorgon gas field offshore Australia where ChevronTexaco now has a major interest. We're also pursuing other gas-related opportunities including a gas-to-liquid facility in Nigeria, a liquefied natural gas facility in Angola and liquefied natural gas (LNG) regasification terminals in North America."

Strengthening the Downstream

Improving return on capital employed was a dominant theme in the remarks by Patricia Woertz, executive vice president in charge of global refining and marketing. "Our downstream business is global and positioned for stronger returns," said Woertz.

"With strong brands and world-class refining and marketing networks, we've set a goal of sustaining a 12 percent return on capital employed in the U.S., and achieving by 2005, a 10 percent return on capital employed internationally. By integrating the legacy Chevron, Texaco and Caltex operations, we aim to capture $700 million in synergy savings by next year."

Power, Chemicals and Technology

"Our power, gasification and advanced technology businesses present us with opportunities to realize benefits across the entire energy value chain," said Darry Callahan, executive vice president for power, chemicals and technology. Callahan also reported on the company's interest in Dynegy. "We support Dynegy's management team in their efforts to restore investor confidence in that company," Callahan said.

In the chemicals sector, Callahan outlined how the Chevron Phillips joint venture has yielded synergies to compete effectively during a downturn in a cyclical business. "With projected demand recovery, combined with new plants coming on line and a sharp focus on reliable operations, we are positioned to take full advantage of the next industry upswing," said Callahan.

About ChevronTexaco

ChevronTexaco is a leader in the global energy business with wide-ranging activities in more than 180 countries. ChevronTexaco is the third-largest energy company in terms of global oil reserves (8.5 billion barrels) and fourth-largest in global oil and natural gas production (2.7 million barrels of oil and equivalent gas per day). It has the capacity to refine more than 2.2 million barrels per day, sells more than 4.2 million barrels of refined products daily and owns or has interest in more than 25,000 retail outlets under Chevron, Texaco and Caltex brands. It is the fourth largest company in the global lubricants business, is an industry leader in the power and gasification businesses and has extensive technology operations, ranging from core business research and development to e-business and venture capital activities.

Cautionary Statement Relevant to Forward-Looking Information for the Purpose of "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995.

Some of the items discussed in this press release are forward-looking statements about ChevronTexaco's operations. These statements are based on management's current expectations, estimates and projections. The statements included in this press release are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our 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. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Unless legally required, ChevronTexaco undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Updated: June 2002