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Chevron Merril Lynch Energy Conf
- 1. Merrill Lynch Global Energy Large Cap Conference John Watson Executive Vice President, Strategy and Development New York City – December 2, 2008 Strategic Continuity © 2008 Chevron Corporation
- 2. Cautionary Statement CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 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 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. The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. 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 chemicals margins; actions of competitors; timing of exploration expenses; 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 32 and 33 of the company’s 2007 Annual Report on Form 10- K/A. In addition, such statements could be affected by general domestic and international economic and political conditions. Unpredictable or unknown factors not discussed in this presentation 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,” “unrisked resource,” “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. © 2008 Chevron Corporation 2
- 3. Key Accomplishments 2008 Year-To-Date Safety improvement Base business improvement Major capital projects Portfolio rationalization © 2008 Chevron Corporation 3
- 4. Strong Financial Performance First 9 Months 2008 $ 19.0 Earnings Billion 27.4 % ROCE (Rolling 12 months) % 7.4 Debt ratio Dividend % 12.1 increase in 2Q08 © 2008 Chevron Corporation 4
- 5. Delivering Results 2008 Total Stockholder Return Through Nov 21st © 2008 Chevron Corporation 5
- 6. Rewarding Our Shareholders © 2008 Chevron Corporation 6
- 7. Strategic Continuity Upstream Grow and build new legacy positions Downstream Improve returns Renewable Energy Capture profitable positions 1993 2008 540 MBD 65 MBD © 2008 Chevron Corporation 7
- 8. Tactical Flexibility • Added focus on base business and reliability • Aggressive cost control – leveraging market conditions • Further application of technology © 2008 Chevron Corporation 8
- 9. Resilience to Changing Markets © 2008 Chevron Corporation 9
- 10. Present Challenges / Future Opportunities 1980s 2008 © 2008 Chevron Corporation 10
- 11. Chevron’s Strategic Advantages Technology Exploration Focused Downstream Leader Leader Large Advantaged Access Resource Base Top Project Queue © 2008 Chevron Corporation 11
- 12. Downstream Sharpening the Focus © 2008 Chevron Corporation 12
- 13. Advantaged Geographic Focus North America Asia-Pacific % of Energy 50 Demand Growth % of Chevron 75 Refining Capacity Major Refineries © 2008 Chevron Corporation 13
- 14. Portfolio High-Grading Asset Sales Scandinavia Netherlands North America Benelux Nigeria Ecuador Asia-Pacific Uganda Brazil Peru Kenya Western Paraguay Africa Uruguay Credit Card Manufacturing Retail Fuels © 2008 Chevron Corporation 14
- 15. Improving Refinery Reliability • Superior capabilities – Hiring experts – Reliability specialists – Reliability University © 2008 Chevron Corporation 15
- 16. Improving Refinery Reliability • World-Class processes – Regular asset reliability briefs – Focus on risk elimination © 2008 Chevron Corporation 16
- 17. Improving Refinery Reliability • Advanced equipment – Risk detection – Remote monitoring – Design for reliability © 2008 Chevron Corporation 17
- 18. Increasing Integration Value PNZ Heavy El Segundo © 2008 Chevron Corporation 18
- 19. Increasing Integration Value Hawaii Asia High-Mercury Singapore Thailand South Korea © 2008 Chevron Corporation 19
- 20. Increasing Integration Value Caspian Blend Pembroke © 2008 Chevron Corporation 20
- 21. Improving Marketing Returns © 2008 Chevron Corporation 21
- 22. Investing For Higher Margins By Increase Increase crude high-value 2010 flexibility product yields to reduce crude cost by $0.50/bbl © 2008 Chevron Corporation 22
- 23. Upstream and Gas The Growth Leader © 2008 Chevron Corporation 23
- 24. Upstream Project Performance Nigeria Agbami Current production exceeds 100,000 barrels per day © 2008 Chevron Corporation 24
- 25. Upstream Project Performance Kazakhstan Tengiz Expansion Full facilities start-up © 2008 Chevron Corporation 25
- 26. Upstream Project Performance Gulf of Mexico Blind Faith First production © 2008 Chevron Corporation 26
- 27. Upstream Project Performance Brazil Frade On track for 2009 first oil © 2008 Chevron Corporation 27
- 28. Upstream Project Performance Gulf of Mexico Tahiti Commissioning in progress for 2009 first oil © 2008 Chevron Corporation 28
- 29. Upstream Project Performance Angola Tombua Landana Start-up expected in 2009 © 2008 Chevron Corporation 29
- 30. Best Upstream Earnings Per Barrel © 2008 Chevron Corporation 30
- 31. Best Exploration Performance © 2008 Chevron Corporation 31
- 32. Growing a Leading Resource* Portfolio © 2008 Chevron Corporation 32
- 33. Low Costs © 2008 Chevron Corporation 33
- 34. Technology Leader Thermal Recovery • World’s largest • Well positioned for thermal operations: the future: – San Joaquin Valley – PNZ expansion – Duri Field – Ells River – Petropiar expansion © 2008 Chevron Corporation 34
- 35. Technology Leader Sour Oil & Gas Wyoming Kazakhstan China Carter Creek Tengiz sour Chuandongbei sour gas plant production sour gas © 2008 Chevron Corporation 35
- 36. Base Business Performance Continuing Focus © 2008 Chevron Corporation 36
- 37. 2004-2007 Positioned for Growth TCO SGI/SGP ACG II-III Petropiar Upgrader Projects >$1B Chevron Share © 2008 Chevron Corporation 37
- 38. 2008-2011 Growth Leadership AOSP Expansion 1 TCO SGI/SGP Piceance ACG II-III Chuandongbei Petropiar Platong II Upgrader Blind Faith Tahiti Perdido North Duri Frade Papa Terra Agbami Moho Bilondo Nigeria EGP 3 Tombua Landana Nigeria GTL Usan NWS Train 5 Projects >$1B Chevron Share © 2008 Chevron Corporation 38
- 39. 2012+ Growth North America Asia-Pacific • Big Foot • Gorgon • Tonga • Wheatstone • Jack / St. Malo • Gendalo-Gehem • Tubular Bells • Hebron Eurasia Africa • Tengiz Expansion • Angola LNG • Bonga SW / Aparo • Karachaganak Phase III Expansion • Negage • Lucapa © 2008 Chevron Corporation 39
- 40. Chevron’s Strategic Advantages Technology Exploration Focused Downstream Leader Leader Large Advantaged Access Resource Base Top Project Queue © 2008 Chevron Corporation 40
- 41. Merrill Lynch Global Energy Large Cap Conference John Watson Executive Vice President, Strategy and Development New York City – December 2, 2008 Strategic Continuity © 2008 Chevron Corporation
- 42. Appendix © 2008 Chevron Corporation 42
- 43. Appendix 1 Reconciliation of Chevron’s Non-GAAP Earnings TOTAL UPSTREAM 9 mos 2008 2007 2006 2005 2004 2003 Adjusted Earnings * $ 18,608 $ 15,166 $ 13,142 $ 11,724 $ 8,622 $ 6,369 Special Items: Asset Impairments & Revaluations (400) (350) -- -- -- (133) Asset Dispositions 350 -- -- -- 1,217 109 Tax Adjustments -- -- -- -- -- 118 Environmental Remediation Provisions -- -- -- -- -- -- Restructurings & Reorganizations -- -- -- -- -- (60) Litigation Provisions -- -- -- -- (55) -- Total Special Items (50) (350) -- -- 1,162 34 Cumulative Effect of Changes in Accounting Principles -- -- -- -- -- (205) Reported Earnings $ 18,558 $ 14,816 $ 13,142 $ 11,724 $ 9,784 $ 6,198 Net Production Volume (MBOED) 2,526 2,619 2,667 2,517 2,509 2,637 Reported Earnings per BOE $ 26.81 $ 15.50 $ 13.50 $ 12.76 $ 10.65 $ 6.44 * Adjusted Earnings are also known as Operational Earnings. Earnings of competitors are adjusted on a consistent basis as Chevron to exclude certain special item effects based on publicly available information. © 2008 Chevron Corporation 43
- 44. Appendix 2 Calculation of Chevron’s Upstream Cost per BOE 2007 2006 2005 2004 2003 Production Cost $ 8.81 $ 7.09 $ 6.71 $ 5.74 $ 5.24 Other Operating Expenses/(Income) $ 2.15 $ 1.23 $ 0.66 ($ 0.33) $ 1.11 Exploration Expenses $ 1.38 $ 1.47 $ 0.84 $ 0.80 $ 0.62 DD&A $ 7.10 $ 6.32 $ 5.12 $ 4.04 $ 3.94 Total Upstream Operating Costs per BOE $ 19.44 $ 16.11 $ 13.33 $ 10.25 $ 10.91 Notes: 1. The 2003 through 2006 upstream costs per BOE for Chevron (as well as the competitor group) are quoted from A.G. Edwards report “Upstream Matrix Performance Analysis (1997-2006), Eleventh Edition”. 2. For competitors, the 2007 costs per BOE shown in slide 33 are calculated on a consistent basis, using publicly available information and adjusting for special items to normalize these costs. © 2008 Chevron Corporation 44