chevron corporation’s 2009 security analyst meeting...

F I N A L T R A N S C R I P T

CVX - Chevron Corporations 2009 Security Analyst Meeting

Event Date/Time: Mar. 10. 2009 / 9:00AM ET

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C O R P O R A T E P A R T I C I P A N T S

Jim AleverasChevron Corporation - General Manager, IR

Dave O'ReillyChevron Corporation - Chairman and CEO

Pat YarringtonChevron Corporation - VP and CFO

Mike WirthChevron Corporation - EVP, Global Downstream

George KirklandChevron - EVP, Global Upstream & Gas

C O N F E R E N C E C A L L P A R T I C I P A N T S

Mark GilmanThe Benchmark Company - Analyst

Paul SankeyDeutsche Bank - Analyst

Jason GammelMacquarie - Analyst

Paul ChengBarclays Capital - Analyst

Doug LeggateHoward Weil - Analyst

Neil McMahonSanford Bernstein - Analyst

Arjun MurtiGoldman Sachs - Analyst

Mark FlanneryCredit Suisse - Analyst

Robert KesslerSimmons & Company International - Analyst

David LeibowitzHorizon Asset Management - Analyst

Erik MielkeMerrill Lynch - Analyst

Michael LaMotteJPMorgan Chase & Co. - Analyst

P R E S E N T A T I O N

Jim Aleveras - Chevron Corporation - General Manager, IR

Good morning. Good morning and welcome to Chevron's 2009 Security Analyst Meeting. I'm Jim Aleveras, General Managerof Investor Relations. We're very pleased to be with you today, both those of you here in the audience as well as those joining

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Mar. 10. 2009 / 9:00AM, CVX - Chevron Corporations 2009 Security Analyst Meeting


us by webcast.

Before we begin today's program, safety is a top priority for Chevron. So we ask that you take a moment to locate the nearestexits. In the event of an emergency, the hotel staff will provide us with further information. Also, to minimize interference withthe sound system and to avoid disruptions, I would ask that you turn off all cell phones and blackberries. We really appreciatethat.

Our program today includes a comprehensive update of Chevron. We'll begin with a corporate overview followed by moreextensive discussions about our major business segments.

Our agenda features presentations by our Chairman and Chief Executive Officer, Dave O'Reilly; our Vice President and ChiefFinancial Officer, Pat Yarrington; the Executive Vice President of our Downstream Business, Mike Wirth; and the Executive VicePresident of Upstream and Gas Operations, George Kirkland.

We'll take a few questions at the conclusion of Mike Wirth's segment. A brief break will follow. I'd ask that you please take yourname badge with you if you leave the room. You will need to have the badge to reenter this room after the break.

We've set aside a larger block of time for questions before we adjourn for the reception after this meeting. Those of you joiningus via webcast are invited to participate in the Q&A segment. Please submit your questions to us by 11:00 a.m. EDT throughthe investors section of the company's website at www.chevron.com.

Also here with us today are John Watson, currently our Executive Vice President for Strategy and Development. On April 1st,John will replace Peter Robertson as our Vice Chairman of the Board. And Rhonda Zygocki, our Vice President of Policy,Government, and Public Affairs is with us as well. My Investor Relations Team and I are available to provide you with any assistanceyou may require after the presentation.

Today's presentation contains estimates, projections, and other forward-looking statements. Please take a few moments toview the Safe Harbor Statement that appears on this slide. A larger sized, printed copy is in the appendix to your booklets. Also,on our website, you can magnify this page for easier reading.

Thank you for your attention. It's now my pleasure to introduce to you our Chairman and Chief Executive Officer, Dave O'Reilly.

Dave O'Reilly - Chevron Corporation - Chairman and CEO

Well, thank you, Jim. Good morning and welcome. We have a very focused agenda today and after our presentation I'll lookforward to taking your questions.

2008 was an outstanding year for Chevron. We set a new record for safety and are among the best in the industry. We addednew production from a number of major projects, notably the Tengiz expansion, Agbami, and Blind Faith.

We continue to operate with excellence. In fact we increased our production efficiency and our refinery utilization. We continueto optimize our portfolio to balance future growth and current profitability and our total stockholder return was among thebest in our peer group.

I'd now like to present a video that I believe provides some interesting insights into the remarkable year we had in 2008.

(Video Playing)







Let me now go into more detail about our 2008 financial performance which was very strong.

We earned $23.9 billion. Our return on capital employed increased to more than 26%, further improving our competitive position.We executed our capital program well. We maintained a low debt ratio and we increased the quarterly dividend by 12%. Werepurchased $8 billion in shares.

Now, we're in a business where investment decisions have long-term consequences so we focus on longer term measures. Theultimate measure of success is total stockholder return. And over the five years ending December 31, our stockholder returnaveraged 14.8%, a very strong second place in a period when the S&P 500 average annual loss was over 2%.

I'd now like to turn to the overall industry outlook for a moment. We've seen energy growth forecasts trimmed over the lastyear, particularly in the near term. For the longer term, however, we believe that global energy demand will rise as economicgrowth resumes.

The 2008 EIA World Energy Report forecasts that oil and gas demand will grow significantly over the period 2005 to 2030.Demand growth will be much larger in the non-OECD countries where total energy demand is projected to grow by 85%.

Now the Upstream business is different from most other capital intensive industries. There is a decline curve, which makesUpstream capacity self-correcting. When demand and price fall, the capacity additions needed to offset normal field declinesdon't occur at the pace required to meet future demand growth.

This chart from the NPC Study shows that 30 million to 45 million barrels a day of capacity is required by 2015, primarily toreplace the decline curve. Even if demand is relatively flat, about 30 million barrels per day will be needed.

Think of this as three Saudi Arabias. And at oil prices at about $40 a barrel and the current cost structure, investment is likely tobe at a slower pace than needed to have this capacity.

Chevron is competitively advantaged in a number of key areas. We're the leader in exploration among our peer group. We havea huge resource base of proved and unproved reserves. This has lead to the top project queue in the industry.

Chevron is also a leader in technology, especially the technology related to challenged resources. We have a strong organizationand the best people in the industry.

And finally, our Downstream is relatively smaller and more geographically focused than some of our peers. We have moreexposure to some of the top growth areas of the world.

Our competitive advantages are the result of sticking to consistent, long-term strategies as shown on this slide. First, growUpstream profitably in core areas and build new legacy positions. Secondly, commercialize our equity gas resource base whilebuilding a high impact Global business. Third, improve Downstream returns and selectively grow with a focus on integratedvalue creation. And finally, invest in renewable energy technologies and capture profitable positions.

We have the right strategies and they haven't changed. We have, however, adjusted our capital allocation in 2009. Our keyUpstream growth initiatives are intact and making progress. We're moving legacy projects to development, we're movingresources to reserves, and we're continuing to deliver our industry-leading exploration program.

As oil and gas prices rose, so did the cost of goods and services we use in our capital projects and in our daily operations. Nowthat cycle is reversing and we are insuring the lowest cost structure for projects in the evaluation and design phase.






We've intentionally chosen to adjust the pace of spending in our Upstream base business and we'll produce these barrels later,as lower costs and higher prices.

In the Downstream, we're continuing our program to improve reliability and feedstock flexibility. We're already running lesscostly crudes, and running them more efficiently.

In summary, Chevron is well-positioned for these difficult market conditions. We entered the recession with a very strong balancesheet and low debt. We have a strong commitment to a solid and growing dividend throughout the market cycle. Our portfoliois less exposed to sectors that are most sensitive to economic downturn, such as Chemicals and Downstream.

We have strong relationships with host governments, a vital advantage in all phases of market cycle. And we have the capacityto sustain investment in the down cycle.

I'll now turn to Pat Yarrington to cover our financial performance in more detail.

Pat Yarrington - Chevron Corporation - VP and CFO

Thank you, Dave and good morning everyone. I'll start by reviewing our financial priorities, then I'll briefly discuss our 2008financial highlights, our strong financial position, and how we are investing for the future.

Our key financial priorities are unchanged. First, we plan to sustain and grow our dividends. We have a solid and predictabletrack record of doing precisely this.

Second, we intend to fund our capital program. We have a deep queue of attractive capital projects that earn good returns andare viable over a wide range of commodity prices. These projects grow earnings and cash flow and create value for ourshareholders.

Our third priority is to maintain our financial strength and flexibility and to do so throughout the commodity price cycle. Weintend to maintain a solid AA rating. We know our balance sheet is a differentiator in the current environment. And finally, whenappropriate, we are committed to returning surplus cash to our stockholders.

Now let me recap some of our financial highlights for 2008. Chevron had another record year in 2008, earning nearly $24 billion.Upstream operations accounted for the bulk of our net income, coming in at almost $22 billion. Downstream also had a strongyear, earning nearly $3.5 billion. This is our sixth consecutive year of record earnings, and details about the year's performanceare included in our Form 10-K which was filed about two weeks ago.

As I mentioned, one of our priorities is to sustain and grow our dividends. In times like these, a predictable dividend representsadditional value to our investors. We've had 21 consecutive annual increases in dividends, with dividends growing at an averageannual rate of 12% over the last five years. The growth rate is over 7% for the last 21 years. At month-end, our dividend yieldwas about 4%.

I'd like to focus on our balance sheet for a moment. Over the past few years, we have done exactly as we should have. We'veused the cash flows generated during recent times to reduce debt and strengthen our balance sheet. We ended 2008 with morecash than debt, just as we have for several years running. Our debt ratio at year-end was just over 9%. Our balance sheet is akey advantage. We're in a very strong position in the current environment.

This slide is intended to give perspective to our financial strength and resilience over a longer period of time and over a widerange of commodity prices. The top chart shows average WTI prices since 1975 adjusted to 2008 dollars. The bottom chartshows our debt ratio over this same time.






Aside from the Gulf acquisition in 1984, we routinely used periods of high oil prices to reduce our debt. And even with extendedperiods of low prices, we've lived within our means and maintained a strong balance sheet. This is not accidental. Our balancesheet is strong because of the sound choices that we have made.

Last year, we had sources of cash of $34 billion. We used nearly 60% to fund our capital program and grow the enterprise. 35%was returned to our stockholders through either dividends or share repurchases. Over the last five years, cash returned to ourstockholders has totaled more than $46 billion, $25 billion in share buybacks and over $21 billion in dividends.

Our 2008 average capital employed totaled $90 billion with Upstream representing nearly two-thirds and Downstream abouta quarter. Last year's return on capital employed for the enterprise was 27%.

Our returns on capital employed have been above 20% for each of the last five years. And in 2008, our ROCE was the secondhighest of the five company peer group. As you can see from the map, we have a geographically diverse portfolio.

And now, I'd like to turn to the future. Our planned 2009 capital program is $22.8 billion, the same level as in 2008. We arecontinuing to fund attractive investments consistent with our long-term strategies. We are investing through the cycle.

About 10% of the 2009 program represents one-time payments related to the Partitioned Neutral Zone and Chuandongbeiconcession arrangements.

Much of our spending continues to be on our large, multi-year Upstream capital projects. We have a deep queue of projectsthat are continually moving forward, from exploration to development to production. Downstream outlays for 2009 are focusedon refinery system upgrades, improving reliability, enhancing feedstock flexibility, and lowering costs. Finally, when looked atthrough a different lens, 45% of our planned 2009 spending in OECD countries.

Now, cost management is not a new theme for us for 2009. Our industry-leading procurements processes have been in placefor ten years. They served us well when costs were rapidly rising and these processes will be equally beneficial as costs decline.

We're leveraging our buying power utilizing global master agreements. We're aggressively negotiating discounts for goodsand services, and many of our contracts are indexed, which allow us to capture raw material costs at a lower rate.

We're also carefully pacing our spending in both our base business and our major capital projects. With our base business, wehave deferred certain activities in anticipation of costs coming down. We believe the current environment is an excellentopportunity to develop our major capital projects at lower costs.

Let me sum up. We have a strong track record of balancing current performance for future earnings growth. The most criticalfactor for current performance is running our businesses well with full focus on reliability, on safety, efficiency, and costeffectiveness. These are essential to being profitable today.

For longer-term earnings growth, our strategies remain unchanged because they are the right strategies. Our superior explorationresults have led to an exceptional line-up of projects. The depth of this queue allows us to be selective in our choice and ourtiming of investment decisions. We've demonstrated that we can deliver these projects and these are the essential elementsfor tomorrow's growth in earnings. This balance allows us to deliver both earnings growth and provide competitive returns toour stockholders.

I'd like to now turn in over to Mike to handle our Downstream operations.






Mike Wirth - Chevron Corporation - EVP, Global Downstream

Thank you, Pat. Good morning. It's a pleasure to be here again to discuss Chevron's Downstream business.

Today, I'll break my comments into three sections. First, I'll address 2008 performance. I'll follow that with comments on ourDownstream strategy. Then the bulk of my presentation will address our competitiveness and efforts to continue to improve.

2008 was Chevron Downstream's safest year ever. Several years ago, we were at the back of the competitive range. Today, weare world class. We have done this through steadfast leadership commitment, disciplined execution of standardized processes,and a relentless focus on eliminating risks. Our people are bringing the same focus and discipline to other aspects of our business,which leads me to utilization.

Solomon is an external benchmarking organization that gathers data on the refining industry and reports out every other year.You can see that their utilization data for this decade shows a pattern similar to the safety trend I just showed you. Chevron hassteadily moved from the back of the pack to the front. And despite some challenges in 2007, I'm proud to report that in 2008,our people delivered best-ever Solomon Utilization for Chevron-operated refineries. This exceeded our commitment to improve6% versus 2005.

Later this year, Solomon will report how our performance stacks up with the competition and I'm confident we'll comparefavorably. Underlying this improvement is the same leadership commitment, disciplined execution, and relentless focus on riskreduction that has resulted in world class safety performance.

In 2008, we executed well and we delivered results. Return on capital employed improved to better than 14% and ranks secondin the stack of four majors who have large scale global Downstream operations. The magnitude of our ROCE improvement in2008 was greater than that of any other competitor.

I'll now move to strategy and the macro trends we see in the world and I'll point out the competitive advantages for Chevronin this environment. Our Downstream strategy remains unchanged. We will improve returns and invest selectively with a focuson integrated value creation. The three key components of this strategy also remain unchanged. We must continue to deliveroperational excellence in our base business, maintain a disciplined approach to investments in our refining assets, and continueto high-grade our portfolio. And while our strategy is unchanged, we adjusting tactics to respond to the current environment.I'll touch on that in just a bit.

Despite the current recession, as Dave mentioned earlier, the outlook for global energy demand growth remains strong in thelonger-term. Over the decade, beginning in 2007, Wood Mackenzie's most recent forecast expects some 12 million barrels perday of increased demand for petroleum products. The demand growth is heavily focused in Asia and is skewed towards distillateproducts. Both of these longer-term trends align well with our strengths.

Chevron has a relatively smaller Downstream and a more focused footprint than many of our competitors. The large majorityof our assets are located in North America and Asia-Pacific. This has been a conscious choice to concentrate on the largestmarkets today and the fastest growing markets into the future. This advantaged footprint is a competitive differentiator. Andin a world dominated by distillate demand growth, we are also very well-positioned.

Chevron invented hydrocracking 50 years ago and was the first to commercialize it. More refiners select our hydrocrackingtechnology today than any other. In North America and Asia our hydrocracking capacity relative to our fluid cracking capacityis the highest in the industry. This advantage allows us to more readily adjust current production from gasoline to jet and dieselto meet market demand. It is also competitively advantaged in producing high quality lubricant base oils and incremental dieselproduction can be brought on stream from this installed platform at a capital cost lower than through the types of greenfieldinvestments being pursued by some of our competition.






So our geographic footprint matches future market growth and our technology footprint matches the type of demand growth.Both of these are sources of competitive advantage for Chevron.

In the near-term, our industry faces a challenging environment. Demand growth has slowed in much of the world and has gonenegative in some markets. Industry refining margins reflect this, and we cannot count on the strength we've seen over the lastfew years. The balance of my comments will address our near-term priorities and how we'll improve competitiveness in thesechallenging times.

I'll start with the strength of our existing assets and focus on North America. This chart shows net refining margin versuscumulative capacity for all North America refineries based on external modeling and 2008 market conditions.

We have six refineries in North America, represented here by the red dots. Our large facilities are complex and generate strongmargins and lie in the first and second quartiles of this chart. Our small facilities have competitive niches that are sharply focusedon delivering competitive results. Our investments and operating efforts are focused on moving all of our refineries further tothe left. Those competitor facilities in the fourth quartile were feeling impacts of the economic downturn and margin environmentmost sharply.

I've already mentioned our hydrocracking strength. Our marketing business is also strong. Our brand position remainsunsurpassed. And our footprint aligns well with markets that continue to experience population growth and more favorabledemand characteristics. So we start from a position of strength.

Against that backdrop, we are always focused on further improving our competitive position. Our efforts are directed into thesefour areas, each of which strengthens performance, and each of which drives reductions in costs.

Safe and reliable operations, sustainably executed, deliver consistent performance, and reduce the cost of incidents. Investmentsin flexibility reduce raw material costs, the single largest element of our cost structure. Supply efficiency improvements reducefinished product costs and continued portfolio high-grading reduces operating costs and capital employed.

I already covered our strong 2008 utilization and meeting our improvement goal. This has been driven by a reliability cultureand absolute leadership commitment. We've made key investments and developed tools that our people use to maintain asteady and proactive maintenance approach. The application of advanced technology continues to yield benefits, and we areconstantly improving energy efficiency.

So while we've met the goal of improving utilization, our commitment to continually sustain and improve reliability is unchanged.

Our capital spending is predominantly in refining. More than half of this investment will improve feedstock flexibility and productyields. These improvements will enable us to run lower quality crudes, reducing input costs. We'll also improve the yield ofhigh-value products from each barrel while not increasing crude capacity. So we work the refining margin on both ends, lowerfeed costs, and higher product realizations which helps widen margins no matter what the market conditions.

Another quarter of this investment will support reliable operations and improve energy efficiency. The result will be less downtimeand even lower costs.

This investment is primarily directed into our large refineries. At El Segundo, projects under construction will increase our abilityto run heavier and higher sulfur crudes, be more reliable, and improve the yield of high-value products. These projects includeimprovements to one of our crude units, and to our FCC and alkylation plants that are scheduled to be completed by the years2010 and 2011.






At Richmond, projects under construction will improve crude flexibility, reliability, and energy efficiency. This includes a newhydrogen plant and additional sulfur handling facilities. We'll retire a number of older units as part of this work and improveenergy efficiency as a result. This work is expected to be completed next year.

At Pascagoula, the continuous catalytic reformer is well into construction. This project will increase utilization and improve theyield of high-value products and is scheduled to start up next year.

And finally, in South Korea, building on the success of the heavy oil upgrade completed in 2007, we continue to invest in loweringcrude costs, improving reliability, and increasing the yield of high-value products. The first phase of the current heavy oil upgradeshould be complete next year.

Pinnacle to all these efforts is our industry-leading application of state-of-the-art technologies. This includes better methodsfor real-time monitoring of equipment and facilities to identify potential issues before they impact reliability, improved reactorinternals and automation to improve performance. It also includes the application of technologies to improve coker cycle timeand proprietary catalyst and reactor design to handle heavier, higher sulfur crudes and enhance product yield.

Our efforts are paying off. These projects, along with other investments and supply chain improvements, are expected to reducefeedstock costs for our entire system, on average $1.00 per barrel against the standard benchmark by 2011 versus a 2007baseline.

Similarly, capital investments in supply chain improvements are projected to reduce the cost of finished products by about$0.30 per barrel over this same period through improved forecasting, scheduling, blend optimization, and better channel andcustomer optimization.

Now shifting to marketing, we continue to simplify our business and improve returns. Two dimensions of these efforts arehighlighted here. Through the end of last year, we reduced our lubricant product line offering by over 40% versus 2005. By2010, we expect this reduction to reach two-thirds. These changes significantly reduce complexity and cost. At the same time,the profitability of our Lubricants business has more than tripled.

In our Fuels business, we continue to shed retail site ownership and rationalize our service station network. Over that samefive-year period, we plan to see a 25% reduction in capital invested in property, plants, and equipment. Through 2008, we havealready achieved 70% of these reductions, driving lower costs and higher returns.

For several years we have been rationalizing our portfolio to focus on markets of competitive strength and material contribution.Last year, we exited over 20 markets. In 2009, planned market exits, including already announced transactions in Africa andLatin America, will reduce our workforce by 1,500 employees, operating expense by $300 million per year, and capital employedby nearly $1 billion. We will continue these efforts in 2009 and beyond.

So I'd like to wrap up by reiterating a few key points. First, our people delivered strong 2008 performance. Safety and utilizationwere at record levels, earnings were the second highest in our Downstream history, and returns improved in a volatileenvironment.

Second, our strategy remains unchanged. We will continue to leverage our advantaged footprint through portfolio focus andstrategic re-investments. We have a strong asset base, outstanding brands, and attractive markets. We will continue to buildup on these strengths and move less attractive positions out of our portfolio.

And finally, we are sharply focused on continual improvement and competitiveness, for investing to further strengthen oursuperior refining assets. We're sharply focused on reducing costs and absolutely committed to sustaining our utilizationimprovements. And our people continue to build on Chevron's legacy of technology leadership. I'm convinced our competitiveperformance will remain strong.






Thank you. We'll be please to take some of your questions now before the break. Dave and Pat will join me.

Q U E S T I O N S A N D A N S W E R S


Thank you, Mike. And now we welcome some questions. Let me just point out a few of the rules before we do that. We have anumber of microphones around the room. So when you have a question, raise your hand and wait for the microphone beforeasking your question. And then remember to state your name and affiliation when the microphone gets to you so I know whoyou are. It's pretty hard to see with the lights coming this way. And the final point is please hold your Upstream questions untillater in the program, after George presents the Upstream part of the presentations.

I saw a hand here. I think it's Mark. I'm not sure. Then I'll come over here.

Mark Gilman - The Benchmark Company - Analyst

Dave, thank you. Mark Gilman, The Benchmark Company. I have two questions -- one for you, one for Mike if I could, please.


Sure.

Mark Gilman - The Benchmark Company - Analyst

Have your planning assumptions, intermediate to longer-term, in terms of major parameters, the macro economic nature, thecommodity price nature changed at all and if so, how so over the course of, let's say, the last 12 months?

Secondly, for Mike, give me, if you would, the benefit of your thoughts of the competitiveness of your Australian refining assets;and whether those assets meet the kind of stringent test which you suggested vis-a-vis the rest of the portfolio. Thanks.


Okay, let me go to the first question, which is the plan assumptions. And the answer to that question is that we always look atthe long-term view, Mark. Our long-term view hasn't changed. We never got caught up in $140 oil, obviously. In fact, you canalready tell as the market was getting to $140, oil the demand was falling. So the rocket was going up but the fuel -- the rocketkeeps going up after the fuel has left for awhile, then it turns around and gravity takes over. So clearly, it reversed.

I would say that we have to be a little cautious in the current environment because I don't think any of us anticipated the degreeto which the credit markets would freeze up and the degree to which the global economy would slow. So I think to say thatour near-term plans are not being influenced by the current events, as you can see from the presentation, would be anexaggeration.

But the long-term view, we haven't changed, we're committed to the long-term cycles and what we anticipate and observe inthe market is that while we've been the 5% to 95% of what you would plan for. So this is not -- we're a cyclical business. We'reused to cycles and we're in a down cycle, and as we showed in those charts that Pat showed, we've been able to manage ourway through cycles in the past.






Mike, do you want to deal with Australia?


I will. Caltex Australia is a well-managed and competitive player in the Australian market. The Australian market is certainlylinked into Asia and we believe that that is an area that will continue over the longer term to see the favorable growthcharacteristics that we've described.

And we've been pleased with the performance of Caltex Australia, particularly the last several years. Their results have beenvery strong and the board there has been very sharply focused on the competitiveness of their business. Their refineries thereare smaller scale than many of the refineries in the region. And I think as they reach reinvestment points, there will be decisionsthat will have to be taken by the Board of the company. But in the here-and-now, we've been very pleased with the performanceof Caltex Australia.


I think a question here. Paul?

Paul Sankey - Deutsche Bank - Analyst

Thanks. It's Paul Sankey at Deutsche Bank. Patricia, if I could on CapEx, could you specify how much lower -- or maybe I'll addressit to Dave and you can decide how to answer it -- but could you specify how much lower your CapEx was as a result of thestep-back in activity that you referenced that you had made a discretionary decision to spend a little less? Could you just specifywhat that is? Could you talk a little bit more about the cash balance that you see in 2009 if say, for example, we were to hold$50 oil, would you expect to be raising more debt by the end of the year? And finally, if we were to continue with $50 oil into2010, would we expect your CapEx to step down materially? Or would we expect your debt to step up? Thanks.


Okay, I'm going to have the last couple of those questions go to Pat, but let me just talk about capital program for a minute.We did make some tactical adjustments in our program. George is going to talk about it more specifically but we've taken acouple billion out of base business program because we believe that -- and George will explain this in more depth -- that wewill get better economics by holding back on that part of the program. Now on the cash balances and the $50 oil scenario, Pat,maybe you'd like to comment on those.


Sure. I think fundamentally, I want to reemphasize how strong a balance sheet we had going into this downturn and I feel verycomfortable that even at a $40 or $50 circumstance and the high capital program that we've announced for this year that we'reat a good balance sheet position through the rest of the year. It's a very fluid environment, as you know. Revenues comingdown but costs coming down quite rapidly as well and I think you could expect to see an increase in leverage, all things beingequal, from the end of 2008 through the end of 2009. But it would be a very manageable increase in leverage. Very manageable.


And for 2010, if we kept at $50 oil, would you be stepping up your debt again over the same level of activity?







It would depend on how far costs come down, Paul. I think that's the big issue. But I think that -- the point I'll make here is weare committed to investing through the cycle but maybe some tactical adjustments. But I don't -- I think our debt would bewell within the historical AA range that we've shown and quite comfortably managed through that range. That's the advantageof having a strong balance sheet. So we're financially strong. We intend to stay financially strong through this cycle. Too manyunknowns.


Yes, but you can say that you'd defend the AA would be your core.


That's always been our core intent, to protect the AA, to establish and maintain a AA credit rating. I think Joseph, question. Ican't see who it is in the light but Matt, right back here. Two behind.

Jason Gammel - Macquarie - Analyst

Thank you. It's Jason Gammel with Macquarie. Had a question for Mike on the VRSH technology. I realize that the pilot plant atPascagoula was delayed because of contract costs essentially but could you talk about where you're at in evaluating thetechnology and when we might see deployment?


I can. We did defer the pre-commercial plant as a part of overall prioritization this year relative to cash and the very attractiveinvestment opportunities that we have and the high cost environment for projects of that nature. We continue to run the pilotplant and our technology center in Richmond with very promising results. We've run different configurations, different feeds,and the technology is as promising as it ever was. It certainly is as promising as it was a year ago. We simply have chosen todefer the investment in the pre-commercial plant until the cost structure comes off and we can do that more economically.


Question? This row here, please. No, right here. Hand up. Will you put your hand up, hold it, so we can find you? Thanks. Is thatPaul?

Paul Cheng - Barclays Capital - Analyst

Yes. Thank you, Dave. Paul Cheng, Barclays Capital. I actually have two questions for Mike and maybe one for Pat. Mike, whenwe're looking at your original investment for Jamnagar for $300 million, I think, based on some industry newsletter suggestthat you're going to sell your back to Reliance Industry. Based on the exchange rate, it will end up to be maybe less than $300MM. So in hindsight, do you consider that as a sound investment, or that maybe that fulfilled what you are looking for or whatwe may have learned from that?

The second question is that in your Caltex operation -- it remains a little bit more complicated than your U.S., that you have alot joint ventures. And in theory, that means the operation that is fully owned. You have much better control, much easier that






to integration and it seems that you've been talking about your integration, how you're adding value. Is there any opportunityto further simplify your structure over there?

For Pat, you're talking about the cost reduction and how the industry costs are coming down. For your peers, I think that's tosuppose someone that will be say maybe like BP want to say go back to reopen every single contract and renegotiate even forthose firm contracts. For Exxon, they say they will not be as aggressive there. So wondering there, what's the approach forChevron on that aspect? Thank you.


Okay, I'll start with Jamnagar and your questions on that. We had an option on a world-class refinery in a growing market, andthat was something we found attractive. When it came time to evaluate the next decision, we had a very attractive set ofalternatives for that investment and as we look at further investment in Jamnagar versus our other alternatives, we prefer toput the capital into the other alternatives. So whether it's a sound investment, I think those dollars will go to good use in ourbusiness and I think we did explore a number of opportunities with Reliance but have chosen to go a different direction.

On Caltex, it is a bit more complicated and there is a bit less control on the former Caltex markets in Asia. I will tell you we'veput a lot of work into improving the collaboration with each of those entities over the last several years. If you were to go tothose refineries today, you would find that they are using many of our reliability practices. You would find our technologies arebecoming more and more integrated into the refinery systems in those joint ventures. And you would find investments thatare being driven to help satisfy some of our over-arching objectives.

And one specifically that I'll mention are a number of refineries in Asia now have made investments to run high-mercury crudes,which come out of our Southeast Asian production and have seen pretty heavy discounts in the marketplace. We've got payoutson those investments in more than one of the joint refineries. And three of the refineries are making investments to run thosecrudes; two of those have already been paid off, the third one will start up this year and we'll see a pretty short pay-out on thatand we're seeing some benefits on the upstream realization there.

So we've worked hard to improve governance and collaboration with the joint ventures. I'm very pleased with the progressthat we've made and the amount of influence that we have to help improve those operations as part of our global system.


Pat, do you want to deal with procurement?


Paul, I think the top line message would be that it's very situationally specific, and it depends on what the category is and whatthe particular vendor is. But our approach, we have strong category management practices in place that we've had for decadesand we will be aggressively in sitting down with each and every one of them. But I do think we listen to what their particularcircumstances are, what their cost profile looks like, what they can do, and negotiate very aggressively on that.

But we're in this business for the long haul and we need our vendors to be healthy as well. So we take a very long-term relationshipview on things when it's important to our business line to do that. If it's a more ancillary type of relationship, then obviously,we can afford to be very aggressive in getting costs down. I think the message for you all is that we're very much on top of thisand it's a daily sort of dialogue that we have with our key suppliers.







Thank you. Question in the third row, middle. Thank you.

Doug Leggate - Howard Weil - Analyst

Thanks, Dave. It's Doug Leggate, Howard Weil. Couple for Mike, maybe you can direct them again, Dave. But a number of yourcompetitors have chosen over the years to take capital out of retail here in the US. I'm just wondering, in light of yourdecapitalization strategy in the downstream, where you stand in terms of your relative thoughts there?

And I hope this isn't an upstream question, Dave, but you have a decent size position in oil sands but no obvious integrationstrategy with the lower 48 refining. So I'm just wondering how you're thinking about that, whether or not you see currentweakness across the statutories, maybe an opportunity to bolster that opportunity down the road?


Okay. Well, Mike, do you want to take the retail or you can take the oil sands if you want.


We've been decapitalizing our retail business here in the United States for a number of years, Doug. We have, I believe, just shyof 10,000 retail outlets in the United States right now, and we own just a few hundred of those. If you were to go back not toomany years ago, we owned several thousand out of those. And so we are down to a relatively small single-digit percentage ofour branded networks in the United States that we actually own, and that number continues to decline.

So we've got most of our capital actually out of the retail system here. And I think, frankly, we've been ahead of some of theothers in the industry. We've been at it longer, and given the regulatory environment here, it's actually a cumbersome process.And oftentimes, doing it site by site takes some time. So I'm pleased with where we are in our retail decapitalization.


Let me just chime in on the odds being a little sized there -- I think on the oil sands, we're going to cover a little bit of that inGeorge's presentation. But you're observation is a good one. Our current plans for oil sands would have us generate productionthat's consistent with expanded upgrading capacity that is under construction in Canada. But you're right -- we do not have apresence in the upper Midwest, for example, although there is the potential of bringing oil sands to other parts of the UnitedStates, particularly as the pipeline systems adjust to the new flows for oil.

So have some options there but your observation is a good one and I'm not going to try to speculate on what our plans mightbe in that area beyond just acknowledging that your observation's a good one. And George will cover some more of it in hispresentation. Second row?

Neil McMahon - Sanford Bernstein - Analyst

Hi, Neil McMahon with Sanford Bernstein. Two questions, one for Dave and then one for Mike. Given your balance sheet strengthand as George will go through the legacy asset base you're going to be developing, is there any acquisitions or thoughts ofacquisitions on the horizon? But do you actually need to think about that given the portfolio's strength? And secondly, for Mike,maybe you could give us some real-time insights into Asian diesel demand? At minute, it's certainly been suffering in terms ofEurope and diesel cracks over there. Maybe you could give us what you're seeing given your good footprint in that region.







We'll take those two questions and then I'm going to take a break and then we'll come back for the upstream presentation. Letme start with the acquisition question and then we'll go to Mike on the diesel. We don't need to get in an acquisition mode,given the line-up of opportunities that we have. And you'll see that even more clearly in the second half of the presentation.

Now having said that, though, we have when we've seen the opportunity in the past, taken advantage of those opportunitieshence the Texaco merger, hence the Unocal acquisition. So we're not blind to considering those opportunities. But it's notsomething that we feel we need to do to be successful. But it is always an option that I'm not going to speculate about. And onthe diesel?


Yes, yes, Asian diesel demand is much like global diesel demand, it's soft. And had been holding up as it had, even here in theUnited States, pretty well into the first part of last year or even through mid-year, and then really as you saw the global economyslow down dramatically in the second half, we saw that in Asia as well as in the United States. It varies country by country andslightly different policy approaches being taken in some of the countries. But I would say that it is declining across the boardon a year-on-year basis as you look in Asia in total in concert with the economy.


But if you take a look at the long-term view here again, I think the long-term view as we've shown you is that the diesel, thedistillate part of the barrel is projected to grow the most and I think once we get through this period of economic malaise andslowdown, it's inevitable that this part of the barrel is going to grow and grow more speedily than gasoline.

So thank you by the way for sticking to the downstream and general questions, and saving the upstream for George. Let's takea ten-minute break and then re-assemble. Remember, bring your badges with you so that you can get back in. Thank you. Tenminutes.

(Break)

P R E S E N T A T I O N

George Kirkland - Chevron - EVP, Global Upstream & Gas

Good morning. It's good to be back again to discuss Chevron's Upstream and Gas businesses. We had a superb 2008, recordearnings, the start-up of nine major capital projects, excellent exploration results, and top competitive performance in key areas.Today, I'll cover our strategies, which remain unchanged and how we're going to manage our investments in the currenteconomic environment. Chevron has a robust and enviable portfolio and we're making the right decisions to maintain long-termproduction and value growth.

I'll now do some scene setting, providing a short overview of Chevron's upstream portfolio. As you can see on the map, Chevronhas upstream operations in nearly all of the world's key hydrocarbon basins. Presently, we operate in 26 countries through fourregional operating companies and 14 business units. Our organization structure strikes a balance between local presencethrough operational business units and centralization with functional groups of excellence. This combination provides Chevrona competitive advantage. With 11.2 billion barrels of proved reserves and 2.7 million barrels a day of production capacity,Chevron has a portfolio with breadth and diversity.






I'll now address three topics -- performance, strategy, and growth. The performance section will highlight 2008 accomplishments.Within strategy, I'll review our actions for the changing business climate described earlier by Dave. And I'll close with our growthstory, continued exploration success, our queue of projects, progress on our 2009 start-ups, and our production outlook. Andfinally, an update on key legacy positions, namely Australia LNG and the Gulf of Mexico Lower Tertiary trend.

Let's start with our 2008 safety performance. Safety is one of the foundations of our business and is a key indicator of ourcapabilities and performance. At Chevron, we have a commitment to world class safety. This chart illustrates our continuedimprovement -- 20% in 2008 alone -- making us a leader among our peers. I'm very proud of this performance and our employeeswho made this happen. Together, we share a commitment to our goal of zero incidents.

Now let's look at Chevron's 2008 financial performance relative to our peers. Upstream had record earnings of $21.7 billion. Thistranslates to an earnings per barrel of $22.85. As the upper chart shows, margins have steadily grown since 2003, increasing byover $16 per barrel of oil equivalent. Our competitive position in this metric has also improved appreciably, bringing us closeto the number one position. While our competitor's results are not yet in, it appears that our ROCE is 2008 of 36.6% will maintainthe number two position.

Now let's look at 2008 production as compared to 2007. 2008 net production was lower than 2007 by 89,000 barrels a day. Notethat oil prices averaged $72 a barrel in 2007 and $100 a barrel in 2008. Looking at the bar on the far right, three factors reducedour 2008 production level. First, price reduced our net entitlement barrels by 72,000 barrels a day. Second, market and OPECcurtailments reduced production by 13,000 barrels a day. And finally, the full-year impact of hurricanes in the Gulf of Mexicoamounted to 35,000 barrels a day.

Absent these factors, 2008 production would have met our goal of 2.65 million barrels a day. Significant growth of approximately110,000 barrels a day came from the start-up and ramp-up of major capital projects. The base business decline rate for 2008was about 3%, significantly better than our 4% to 5% guidance.

Now I'll discuss the major capital projects that contributed new production in 2008. Last year was a great year for project start-upswith nine in total. This achievement demonstrates our ability to execute complex projects. The three largest -- Agbami, theTengiz Expansion, and Blind Faith -- are all Chevron-operated and I'll cover them in a little more detail in a moment.

The fourth operated project, the 12th Area Expansion of the Duri steamflood project in Sumatra increases the scope of what isalready the largest steamflood project in the world. It reinforces our position as the leader in heavy oil thermal recoverytechnology.

In conjunction with our joint venture partners, we also achieved first production at five other projects. Arthit in Thailand startedup in March, Moho-Bilondo offshore Republic of Congo began operations in April, ACG Phase III in Azerbaijan also started upin April, Brodgar-Callanish in the North Sea achieved first production in July, and the Northwest Shelf Train 5 came on-line inSeptember. These nine projects contributed 85,000 barrels a day of net production in 2008 on an annualized basis. These projectshaven't yet realized their full-year growth impact on production. We're currently making good project progress towards fullproduction and we expect these projects to add another 265,000 barrels a day in 2009 bringing their total contribution to350,000 barrels a day.

Now let's take a closer look at Agbami. First oil at the Agbami deepwater project was delivered in late July. Agbami is 70 milesoffshore Nigeria. It's a subsea development in 4,800 foot of water with wells tied back to an FPSO. This vessel is one of the largestof its type in the world. Operational reliability at Agbami has been excellent and current production has ramped up to 170,000barrels a day. Gas injection has begun and water injection will commence by the end of the first quarter. The ramp-up is onschedule and expected to reach full capacity of 250,000 barrels per day by year-end as more wells are drilled and completed.

The next project I'll discuss is the Tengiz Expansion in Kazakhstan. This expansion was completed in September, bringingTengizchevroil's daily crude production capacity to 540,000 barrels a day. The new facility stabilizes and sweetens produced






crude, separates and processes natural gas into gas products and elemental sulfur, and re-injects approximately one-third ofthe produced sour gas back into the reservoir at very high pressures. This re-injection helps maintain reservoir energy andreduces the volume of produced sulfur.

We're very pleased with the performance of this one-of-a-kind facility. Operational fine-tuning is ongoing with current productionat the name plate design of 240,000 barrels a day. The new plant is one of the largest sulfur processing facilities in the world. Itdemonstrates our ability to leverage our sour gas production expertise to design, build and operate a complex project. Technologyhas played a key role in this success. The injection system employs the world's first 10,000 psi sour gas compressor.

I'll now discuss Blind Faith. Blind Faith, located in the Gulf of Mexico, is a subsea oil development in 7,000 feet of water, makingit the deepest in Chevron's portfolio. First oil was achieved in November of last year. Blind Faith is currently producing 65,000barrels of oil equivalent per day from four subsea wells connected to a semi-submersible facility. Blind Faith continues oursuccessful Gulf of Mexico program and further demonstrates our competency in deepwater development. I'll be sharing moreon the upcoming deepwater projects in the Gulf of Mexico and elsewhere later in this presentation.

I've now covered 2008's success in terms of safety, competitive position and project start-ups. 2008 was also a good year forreserve replacement. On an SEC basis, Chevron replaced 146% of our production in 2008 or 1.34 billion barrels, bringing ourtotal proved reserves at the end of the year to 11.2 billion barrels. Net additions of 793 million barrels came from the PNZ contractextension, the entering into Chuandongbei, Angola LNG and our ongoing reservoir management processes. The increase inproved reserves also included a favorable price impact of 550 million barrels associated with higher volume entitlements underproduction sharing and variable loyalty agreements.

Next, I'll mention some of our other accomplishments in 2008. Last fall, we reached agreement with the Kingdom of SaudiArabia on a 30 year extension to the Partitioned Neutral Zone contract. This extension allows Chevron to pursue enhancedrecovery of a truly world-scale resource. The large steamflood pilot of the Eocene Reservoir at the Wafra Field was placed oncold production late last year and first steam injection is expected mid-year 2009. This carbonate steamflood, where up to 12billion barrels of oil in place exist, is the first of its kind and demonstrates our ability to deploy our thermal heavy oil expertise.

In 2007, in recognition of our sour gas expertise, Chevron was selected by CNPC to develop and operate the Chuandongbeiproject in the Sichuan province of China. We reached FID on the first of three stages of development in 2008. The significantprogress on Gorgon and Wheatstone will be covered in the growth section of this presentation. 2008 was another excellentyear for exploration, and I'll also cover this later in the presentation.

And finally, in Canada, agreements were reached during 2008 with the provincial government of Newfoundland and Labradorto allow development of the offshore Hebron field. The joint venture is now looking to efficiently advance the project towardsFEED. This completes the performance section of the presentation.

The second segment focuses on our upstream and gas strategies. We have tested our Upstream and gas strategies against thecurrent environment and have reaffirmed their fit to both our short-term and long-term goals. As a result, our strategies remainunchanged. Let's review them.

In order to grow profitably in core areas and build new legacy positions, we focus on six strategies -- delivering operationalexcellence; continually improving our safety, environmental and reliability performance; maximizing the value of our basebusiness through systemic reservoir management, application of technology and the use of best practices; leading the industryin both the selection and execution of major capital projects; sustaining superior exploration performance and growing ourresource base; commercializing our large undeveloped natural gas resource base; and capturing new core Upstream positionsby leveraging our competencies in technology, project execution along with our reputation as a good partner and operator.

Now let's review Chevron's current cost structure, our investment strategy, and the role of technology. This chart updated fromlast year shows our current cost structure. These costs include production, operating costs, exploration expense, and DD&A.






Although we do not have the competitor data for 2008 yet, we believe our costs will remain among the lowest in the peergroup. Chevron's competitive cost structure and our high quality asset base has led to this strong position in earnings per barrelshown previously. In 2008, Upstream costs were approximately $20 per barrel, an increase of about $1.40 per barrel or 8% fromlast year. The largest contributor to this increase was the higher cost of goods and services.

Our cost escalation last year was somewhat less than the 12% reported in the CERA Upstream Capital Cost index. Althoughwe're doing well in a competitive sense, a key focus in 2009 is to drive our cost structure down. On the operating expense sidewe've been taking aggressive action and are seeing benefits, particularly in the procurement of goods and services, leveragingour buying power.

Now I'll talk about some of the steps we're taking to manage our portfolio in today's price environment. The most recent CERAUpstream Capital Cost index is shown on the graph. There was significant cost inflation in the first three quarters of 2008,estimated at 16%. However, in the last quarter, the index dropped 4%. The blue-shaded area on the graph is our estimate ofhow we see costs continuing to come down.

I have several points to make with regard to cost and our projects. First, to capture lower cost we will use discretion in projecttiming decisions. There are many moving parts but cost may well revert back to 2005 or 2006 levels. Second, our recent start-upswere contracted in a lower cost environment; and as a result, remain economically robust in this downturn. I would also like topoint out that costs vary depending on local market conditions. This particularly impacts Chuandongbei in China and PlatongII in Thailand. These projects benefit from lower regional costs.

In summary, our strategy is to sustain the momentum of our key legacy projects while selectively deferring others. By waiting,we can capture lower capital costs to improve projects economics. In all cases, we will utilize our industry-leading procurementprocesses to drive costs down.

I'd now like to discuss the impact of this strategy on our base business and 2009 production outlook. Our 2009 capital andexploratory budget, after removing one-time payments for Chuandongbei and the PNZ extension, is approximately 14% lessthan in 2008. The deferral of FEED and FID decisions on certain major capital projects accounts for some of the budget reduction.

But the most significant budget decrease is related to our base business activities. Lower base business investment will allowus to capture lower costs in the future by simply waiting. Market demand and OPEC curtailments also factored into our investmentdecisions. In the short-term, this will result in lower production. Of course, the barrels associated with the base business do nogo away. They will still be there when conditions improve. As a result, we do not expect to have a 3% compounded annualproduction growth rate between 2005 and 2010.

However, production growth of 4% is expected in 2009. Without external constraints, productions growth would be an additional3% higher. The continued ramp-up and start-up of major capital projects drives the production growth, and these barrels haveamong the highest cash margins in our portfolio. Our forecast shows a 300,000 barrel a day increase related to these newprojects.

I'd now like to return to our longer term strategy and first cover the technology area. There's a lot to say in this area. Technologyis core to enabling our strategies, which allows us to move our resources to reserves and to production. In our model, proprietarytechnology is integrated with the ingenuity of employees and suppliers to achieve superior results.

I'd like to highlight three areas where we see this approach to technology is working well to monetize our resource base,exploration, deepwater, and base business. In exploration, we have benefited from industry and proprietary advancements inseismic imaging, particularly in our Gulf of Mexico focus area. Our peers also have access to portions of this technology. But it'sour integrated workflow processes and regional understanding of geologic trends that underpin our success.






In the deepwater, our leadership position comes from our drilling and development competencies. We're testing a uniquesingle-trip multi-zone frac-pack tool that will both reduce costs and improve effectiveness of deepwater well completions. Thistool has undergone two successful onshore field trials at the Rangely Field in Colorado. With state of the art drill ships undercontract, we can drill deeper and more efficiently in deeper waters. These dual activity drill ships allow us to simultaneouslydrill and perform offline operations, providing substantial cost savings.

In addition, we have fully integrated drilling teams of earth scientists and engineers who plan and monitor real-time operationsin Well Drilling and Execution Collaboration Centers. This approach has realized enhanced drilling performance.

Finally in the base business, deploying our competencies in heavy oil thermal processes and sour gas has been used to greateffect. Chuandongbei is an excellent example of how our expertise has enabled us to establish new legacy positions. In addition,applying integrated real-time monitoring and control systems or i-field technologies has improved reliability and fieldperformance. To better manage our reservoirs, we have significantly enhanced our reservoir simulation model, making it thebest in the industry. This concludes the strategy section.

Thus far, we've covered 2008 performance, our strategies, and how we're going to manage investments during 2009. Now I'dlike to turn to the future and highlight how our continued commitment to exploration, our industry-leading project queue andour execution efficiency will ensure the long-term growth of our Upstream and Gas businesses.

First, exploration. Exploration is the foundation of our future growth, and 2008 was another great year. Over 1.7 billion barrelsof oil equivalent was added with a success rate of 49%, in line with the seven year average of 45%. It is important to note thatof this total approximately 800 million barrels were associated with conventional resources. As the graph on the right showson a cumulative basis since 2002, we've added over eight and a half billion barrels of oil equivalent resources.

I know the dots on the map are busy but they make a point. We're having consistent success that reconfirms our explorationstrategy. The most significant discoveries last year include an extension to the Wheatstone and Iago gas fields offshore WesternAustralia, the recently announced Buckskin oil discovery in the Gulf of Mexico, and the successful appraisal program at Ells River.

Our exploration success is affirmed by our industry-leading competitive position, highlighted on the next slide. According toWood Mackenzie, Chevron is the leader within the peer group in underlying exploration resource replacement. The data showsthat between 2002 and 2007 Chevron had 106% resource replacement ratio. As you can see, this is approximately 40 percentagepoints better than our nearest competitor. Clearly, we are building a foundation for future growth by year-on-year addingsubstantial resources to our portfolio.

On the next slide, let's look at the capital efficiency of our exploration program. Not only is Chevron first among our peers on aresource replacement basis, our capital efficiency is also industry-leading. Wood Mackenzie data shows that our underlyingfinding costs for the period 2002 to 2007 were $1.43 per barrel, the lowest among our competitors. This combination ofexploration capital efficiency and consistent resource addition provides Chevron with a competitive advantage for organicgrowth.

Our overall resource growth and distribution is shown on the next slide. Between year-end 2004 and 2008, our resource basegrew by nearly eight billion barrels of 14%. This resource growth more than offsets four years of production, asset sales, andprice effects, which totaled five and a half billion barrels. The bar graph on the right shows the geographic diversity of our 64billion barrels of unrisked resources.

I'll finish the exploration discussion with the 2009 program. Last year, I explained our overall approach to exploration is one offocus and impact. The majority of our exploration capital dollars are directed to four focus areas and to impact wells. An impactwell is where the resource potential for the opportunity exceeds 100 million barrels of oil equivalent. Our four focus areas arethe Gulf of Mexico deepwater, Northwest Australia, West Africa deepwater, and the Gulf of Thailand. The remainder of ourcapital is directed to finding new focus areas through investments in new venture, new entry, and test basins.






Our 2009 focus area exploration plans include drilling the following, five impact wells in the Gulf of Mexico, four in the LowerTertiary Trend, and one in the Miocene Trend, four wells in Northwest Australia, including appraisal well on the Clio discovery,one well in Nigeria at the Owowo prospect along with continuing the exploration and appraisal program in the Gulf of Thailand.In total, over 50 exploratory wells are expected to be drilled in 2009.

One of our test area wells is Rosebank North in the west of Shetlands area, which is currently being drilled by a new state-of-the-art,6th generation drill ship. An appraisal well at the Rosebank discovery will follow the North Rosebank well. Overall, we expectour exploration investments in 2009 will be approximately the same as the past two years, around $2 billion.

Now I'll turn our attention to our major capital project queue. This is the same slide we showed last year and displays the locationof each of our 40 major capital projects in which Chevron's share of investment is over $1 billion. These projects are expectedto have the most impact on our long-term production growth. Today, I'll only highlight those billion dollar projects comingonline in 2009 and some of our key legacy projects.

First, let's review the full inventory of the major capital projects in which Chevron's net share is over $200 million -- a total of 93projects. I'll cover two important elements regarding our project inventory, development phase and resource distribution.Development phase of these 93 projects is shown on the left side of the chart. There's a good distribution of projects from earlystages through start-up. We also have a diverse portfolio including conventional, deepwater, LNG, and heavy oil. The chart onthe right shows the resource distribution for each project type as a percentage of the total unrisked volume of 28 billion barrels.Almost half of this volume is located within OECD countries.

There's a good balance of conventional and deepwater resources. You'll note that LNG comprises approximately 35% of thevolume and is expected to play a significant role in our future. The heavy oil component of our portfolio accounts for 12% andonly 2% of the total resources are in oil sands.

I'd now like to share with you the incremental production impact from our major capital projects currently under constructionor ramping up to full capacity. Over the next two years, we expect new project start-ups and continued ramp-ups to deliversignificant growth. The incremental production from these projects is projected to increase from 153,000 barrels a day in 2008to 650,000 barrels a day in 2010.

In addition to new projects coming on, we're continuing to benefit from the ramp-up of projects that started in 2007 and 2008.For example, since coming online in March 2007, Bibiyana in Bangladesh has more than doubled first-year production to 85,000barrels of oil equivalent a day. We've already talked about our 2008 start-ups. In 2009, nine new projects greater than $200million net Chevron share are planned to come online and another eight in 2010.

I'd now like to provide more detail on three 2009 project start-ups. Tahiti is a subsea oil development in 4,100 feet of water inthe Gulf of Mexico. Six wells are tied back to a spar with a processing capacity of 125,000 barrels a day and 70 million cubic feetof gas. The truss spar was successfully installed during the first quarter of 2007 and the topside modules have now been set.The hook-up and commissioning is proceeding and all producing wells will be available at first oil which is now expected in thesecond quarter of this year. The estimated recoverable resources at Tahiti are between 400 and 500 million barrels, and productionis expected to reach full capacity by the fourth quarter of 2009.

I'd now like to talk about Frade. Frade is our first operated deepwater development in Brazil. It is a subsea oil development in3,700 foot of water with wells tied back to an FPSO. This FPSO was constructed in Dubai, and is scheduled to arrive on locationthis month. The project is scheduled for start-up during the second half of 2009. Development drilling and subsea installationis ongoing. Three producing wells are planned at start-up and the development calls for 12 horizontal producers and sevenvertical injectors. Frade's estimated recovery is between 200 and 300 million barrels and peak production of approximately90,000 barrels a day is expected in 2011.






Now let's review the Tombua-Landana project. In Angola, Tombua-Landana is scheduled for first oil during the second half ofthis year. Five producing wells are planned at start-up. This oil development in 1,200 foot of water is based on compliant piledtower technology. It includes a drilling and production platform with 30 wells and a 10-well subsea center and Tombua South.The platform and the topsides shown here were successfully installed late last year. Temporary power and lighting systemshave been established on the platform and hook-up and commissioning continues. The recoverable resources at Tombua-Landanaare estimated at approximately 350 million barrels and peak production of 100,000 barrels a day is expected in 2011.

During 2009, Chevron has four major capital projects scheduled for FID where the investment is greater than $500 million netChevron share. These are listed on the right. All these projects are follow-on stage developments building on existing infrastructureexcept Gorgon. We see a window of opportunity to move forward with Gorgon -- timing it to capture growing market demandwhile benefiting from a lowering cost environment. Our portfolio of other projects offers us flexibility and optionality to movethem forward at the appropriate times.

I'll now talk about future growth. Two areas are especially important to future growth, our LNG portfolio, particularly in Australia,and the Lower Tertiary trend in the deepwater Gulf of Mexico. Both offer legacy positions, very long-term cash flows andproduction and we made significant strides last year to realize the potential in these two areas. First, I'll cover the LNG projects.

With 149 trillion cubic feet of unrisked gas resources located throughout the world, gas will clearly have a large role in our futurereserve and production picture. Within the Asia-Pacific region, Chevron holds gas resources in excess of 70 Tcf. Our holdingsthere are the largest of any of our competitors. According to the EIA, natural gas consumption in Asia is expected to almostdouble between 2005 and 2020, putting Chevron in an enviable position.

Now let's take a look at our LNG project queue. We currently have seven LNG projects in our portfolio in various stages ofmaturity. By 2015, LNG production is expected to more than triple, to approximately 300,000 barrels of oil equivalent per day.Northwest Shelf Train 5 came online in 2008 and is currently ramping up to full production. Angola LNG is a multi-billion dollarproject currently under construction. It is approximately 30% complete, remains on schedule for start-up in 2012 and will beable to serve both the North American and the European markets. Chevron has a 36.4% working interest in this one Train, 5.2metric ton per annum plant.

Delta Caribe in Venezuela, Olokola in Nigeria, and Gendalo-Gehem in Indonesia are all in the evaluation phase. Our largest LNGgrowth opportunity is in Australia. Let's take a look at these two key projects.

We've made substantial progress on both Gorgon and Wheatstone in the last 12 months. We expect to sanction Gorgon Trains1 through 3 during the second half of 2009. Our FID decision will be made after the environment permits for the third Trainproposal are received and FEED is completed. Permit approval is anticipated at mid-year. Non-binding heads of agreementshave been signed with three utility companies in Japan and GS Caltex in South Korea. Approximately 70% of Chevron's LNGoff-take is expected to be purchased through these agreements which will be finalized at FID.

Technology will play a key role at Gorgon. Approximately 120 million tons of CO2 will be sequestered over the life of this asset,making this one of the largest carbon dioxide sequestration projects in the world.

Wheatstone, a 100% Chevron-owned project, is advancing towards FEED. It's a greenfield, two Train LNG and domestic gasproject. We recently announced Ashburton North as the preferred site 200 kilometers south of the field. We are actively marketingChevron's LNG off-take from this project. You'll be hearing more about both of these projects through the remainder of thisyear.

I'll now turn to another growth story. There was a lot of interest on the fourth quarter earnings call about the Gulf of MexicoLower Tertiary trend. I'd like to give you an update on this trend and the tremendous opportunity it presents. Chevron has anindustry-leading portfolio in the Lower Tertiary trend. We've been very successful in deepwater lease sales acquisitions. It's our






view that Chevron has an equity interest in more than half of the top 45 Lower Tertiary projects in the trend. This commandingposition obviously offers a competitive advantage.

Remember that the Lower Tertiary trend is already being exploited at our joint development at the Perdido Project. Perdido isour "next in line" deepwater development in the Gulf of the Mexico. The spar is on location and hook-up and commissioningcontinues. First oil is anticipated in 2010, ramping up to 130,000 barrels a day by 2013.

I'll cover the Jack/St. Malo project in a moment. But first, let's review the Buckskin discovery. In February, we announced a newdeepwater oil discovery named Buckskin at Keathley Canyon Block 872, 44 miles west of Jack/St. Malo. Chevron is the operatorwith a 55% working interest. The Buckskin well encountered more than 300 feet of net pay and early indications are that therecoverable resources are impact sized, and large enough to be another potential anchor development. An appraisal programwill be pursued during 2009 and 2010 to determine the upside, the extent and the commerciality of this discovery. This discoveryfurther demonstrates how the Lower Tertiary trend continues to deliver success.

Now I'll cover the Jack/St. Malo development. Jack/St. Malo provides Chevron with a unique opportunity. Jack was discoveredin 2004 and St. Malo in 2003. Combined, our present estimate of recoverable resources is in excess of 500 million barrels. Theappraisal program to date has been very successful. A 2006 well-tested-Jack floated sustained rates of 6,000 barrels per dayfrom approximately 40% of the pay zone. With optimal completions, it is estimated that each well could deliver up to 15,000barrels a day. Furthermore, a follow-up well, Jack number three, has given us a better understanding of the ultimate resourcepotential.

We plan to enter FEED during this quarter, a major milestone. It will be a "hub" co-development in 7,000 feet of water withsubseas centers tied back to a semi-submersible floating production facility. The production capacity is anticipated to be between120,000 and 150,000 barrels of oil equivalent a day with expansion capability to over 200,000 barrels a day.

Technology will play a large role in making this project a success. Subsea boosting systems, single-trip multi-zone frac-packcompletions, dual-activity drill ships, are all important technologies to deliver cost savings and higher production.

I will now close by reiterating and reaffirming our key messages. I'm very pleased with our 2008 performance. Record earnings,industry-leading competitive performance in many areas, start-up of nine projects, reserve replacement of 146%, a seventhconsecutive year of successful exploration. Regarding strategy we are well-positioned to take advantage of lower cost. We haveeffective cost management processes in place to shape costs downward. We have a robust project queue that allows us toprioritize and selectively defer projects to benefit from lower cost.

And finally, we are committed to the long term. We are sustaining our investment in exploration and progressing our majorcapital projects to create long-term production growth for the enterprise. And now I'll turn the podium over to Dave and wecan take questions. Dave?


Okay. Thank you, George. Let me just sum up for a moment before I get to the questions. We have the right strategies to succeedin today's challenging environment. You've heard that we're delivering industry-leading execution; and our outstandingperformance in 2008, I think, confirm that. We're financially strong and we intend to maintain that strength and we're aggressivelyreducing costs to ensure our success. So now I'd like to turn back to the questions and I've said before there are a number ofmicrophones in the room. If you raise your hand I'll call on you. Wait for the microphone to come to you before asking yourquestion, then identify yourself with your name and affiliation. So I'm going to start, Arjun, I'll start with you down here.






Q U E S T I O N S A N D A N S W E R S

Arjun Murti - Goldman Sachs - Analyst

Th

chevron corporation’s 2009 security analyst meeting...

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