Merrill Lynch Global Energy Large Cap Conference Presentation
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Transcript of Merrill Lynch Global Energy Large Cap Conference Presentation
© 2008 Chevron Corporation
Merrill LynchGlobal Energy Large Cap ConferenceJohn WatsonExecutive Vice President, Strategy and DevelopmentNew 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 3
Key Accomplishments2008 Year-To-Date
Safety improvement
Base business improvement
Major capital projects
Portfolio rationalization
© 2008 Chevron Corporation 4
Strong Financial PerformanceFirst 9 Months 2008
ROCE(Rolling 12 months) 27.4%
Earnings 19.0$Billion
7.4Debt ratio%
Dividend increase 12.1%
in 2Q08
© 2008 Chevron Corporation 5
Delivering Results 2008 Total Stockholder Return Through Nov 21st
© 2008 Chevron Corporation 6
Rewarding Our Shareholders
© 2008 Chevron Corporation 7
Strategic Continuity
UpstreamGrow and build new legacy positions
Downstream Improve returns
Renewable EnergyCapture profitable positions
1993 200865 MBD 540 MBD
© 2008 Chevron Corporation 8
Tactical Flexibility
• Added focus on base business and reliability
• Aggressive cost control – leveraging market conditions
• Further application of technology
© 2008 Chevron Corporation 9
Resilience to Changing Markets
© 2008 Chevron Corporation 10
Present Challenges / Future Opportunities
1980s 2008
© 2008 Chevron Corporation 11
Chevron’s Strategic Advantages
ExplorationLeader
TechnologyLeader
Resource Base
Large
Project Queue
Top
AccessAdvantaged
DownstreamFocused
© 2008 Chevron Corporation 12
DownstreamSharpening the Focus
© 2008 Chevron Corporation 13
Advantaged Geographic Focus
Major Refineries
North America
Asia-Pacific
75 of ChevronRefining Capacity
%
50 of Energy Demand Growth
%
© 2008 Chevron Corporation 14
Portfolio High-GradingAsset Sales
North America
Asia-Pacific Ecuador
BrazilPeru
Paraguay
Uruguay
Scandinavia
Netherlands
Benelux
Credit Card Manufacturing Retail Fuels
WesternAfrica
Nigeria
Kenya
Uganda
© 2008 Chevron Corporation 15
Improving Refinery Reliability
• Superior capabilities– Hiring experts– Reliability specialists– Reliability University
© 2008 Chevron Corporation 16
Improving Refinery Reliability
• World-Class processes
– Regular asset reliability briefs
– Focus on risk elimination
© 2008 Chevron Corporation 17
Improving Refinery Reliability
• Advanced equipment– Risk detection– Remote monitoring– Design for reliability
© 2008 Chevron Corporation 18
Increasing Integration Value
PNZ Heavy El Segundo
© 2008 Chevron Corporation 19
Increasing Integration Value
Asia High-Mercury HawaiiSingapore
ThailandSouth Korea
© 2008 Chevron Corporation 20
Increasing Integration Value
PembrokeCaspian Blend
© 2008 Chevron Corporation 21
Improving Marketing Returns
© 2008 Chevron Corporation 22
Investing For Higher Margins
2010By
crude flexibility
Increase
by $0.50/bbl
to reduce
crude cost
high-valueproduct yields
Increase
© 2008 Chevron Corporation 23
Upstream and GasThe Growth Leader
© 2008 Chevron Corporation 24
Upstream Project PerformanceNigeria
AgbamiCurrent production exceeds 100,000 barrels per day
© 2008 Chevron Corporation 25
Upstream Project PerformanceKazakhstan
Tengiz ExpansionFull facilities start-up
© 2008 Chevron Corporation 26
Upstream Project PerformanceGulf of Mexico
Blind FaithFirst production
© 2008 Chevron Corporation 27
Upstream Project PerformanceBrazil
FradeOn track for 2009 first oil
© 2008 Chevron Corporation 28
Upstream Project PerformanceGulf of Mexico
TahitiCommissioning in progress for 2009 first oil
© 2008 Chevron Corporation 29
Upstream Project PerformanceAngola
Tombua LandanaStart-up expected in 2009
© 2008 Chevron Corporation 30
Best Upstream Earnings Per Barrel
© 2008 Chevron Corporation 31
Best Exploration Performance
© 2008 Chevron Corporation 32
Growing a Leading Resource* Portfolio
© 2008 Chevron Corporation 33
Low Costs
© 2008 Chevron Corporation 34
Technology LeaderThermal Recovery
• Well positioned for the future:
– PNZ expansion– Ells River– Petropiar
expansion
• World’s largest thermal operations:
– San Joaquin Valley– Duri Field
© 2008 Chevron Corporation 35
Technology LeaderSour Oil & Gas
WyomingCarter Creek sour gas plant
KazakhstanTengiz sour production
ChinaChuandongbei sour gas
© 2008 Chevron Corporation 36
Base Business PerformanceContinuing Focus
© 2008 Chevron Corporation 37
2004-2007Positioned for Growth
Projects >$1B Chevron Share
TCO SGI/SGPACG II-III
Petropiar Upgrader
© 2008 Chevron Corporation 38
2008-2011Growth Leadership
Projects >$1B Chevron Share
TCO SGI/SGPACG II-III
Petropiar Upgrader
AOSP Expansion 1Piceance
Blind FaithTahiti
Perdido
FradePapa Terra Agbami
Nigeria EGP 3Nigeria GTL
Usan
Moho BilondoTombua Landana
NWS Train 5
Platong II
Chuandongbei
North Duri
© 2008 Chevron Corporation 39
2012+ Growth
North America• Big Foot• Tonga• Jack / St. Malo• Tubular Bells• Hebron
Asia-Pacific• Gorgon• Wheatstone• Gendalo-Gehem
Eurasia• Tengiz Expansion• Karachaganak
Phase III Expansion
Africa• Angola LNG• Bonga SW / Aparo• Negage• Lucapa
© 2008 Chevron Corporation 40
Chevron’s Strategic Advantages
ExplorationLeader
TechnologyLeader
Resource Base
Large
Project Queue
Top
AccessAdvantaged
DownstreamFocused
© 2008 Chevron Corporation
Merrill LynchGlobal Energy Large Cap ConferenceJohn WatsonExecutive Vice President, Strategy and DevelopmentNew York City – December 2, 2008
Strategic Continuity
© 2008 Chevron Corporation 42© 2008 Chevron Corporation
Appendix
© 2008 Chevron Corporation 43© 2008 Chevron Corporation 43
Appendix 1Reconciliation 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 44
Appendix 2Calculation 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.