2016



to our stockholders

Low commodity prices in 2016 reduced earnings across the industry and reinforced the need for structural reform. With Brent averaging $44 per barrel, Chevron reported a loss of $497 million compared with earnings of $4.6 billion in 2015. It was a year of transition, and Chevron took significant actions to reduce costs and improve net cash flow to ensure our competitiveness in any operating environment. 

Our 2016 priorities were to finish projects under construction; reduce capital spending; reduce operating expenses; complete asset sales; and operate safely and reliably. We made substantial progress (see graphic, Page 4) on these priorities as we worked toward our goal of becoming cash balanced and able to pay the dividend from free cash flow in 2017. 

The actions we took included thousands of initiatives across the enterprise to prioritize investments, negotiate better rates from vendors and suppliers, and improve drilling and other efficiencies. All of these actions enabled us to increase our annual per-share dividend payout for the 29th consecutive year. Our total stockholder returns outpaced our major competitors by a wide margin last year. In fact, we’re No. 1 in total stockholder return relative to our peers for any cumulative holding period going back 25 years. Our year-end debt ratio was 24 percent. 

Operationally, we met a number of milestones, including startup at our Gorgon liquefied natural gas (LNG) project. Gorgon is one of the world’s largest LNG projects, and we expect it to be a significant revenue source for decades. We also achieved startup at Alder in the U.K. North Sea. We brought on line all three trains at the Chuandongbei Project in China. We restarted the Angola LNG project. We achieved natural gas production from the Bangka Field Development Project in Indonesia. And finally, we ramped up our Jack/St. Malo deepwater project in the U.S. Gulf of Mexico. 

Our Upstream business, responsible for exploration and production, reported worldwide net production of 2.6 million barrels of oil-equivalent per day. Production increases were offset by asset sales, normal field declines and maintenance-related downtime. We added approximately 1 billion barrels of oil-equivalent (BBOE) of proved reserves in 2016 before asset sales. These equate to approximately 108 percent of net oil-equivalent production for the year. After asset sales, we replaced approximately 95 percent of production. In our exploration program, we added approximately 1.4 BBOE to our resource base. 

Our Downstream and Chemicals business, which is responsible for our refining, marketing and chemical manufacturing, achieved its highest refinery utilization in more than 10 years. We also progressed a number of strategic initiatives. For example, we closed the sale of our Hawaii refining and marketing business. We sanctioned the Salt Lake refinery’s alkylation retrofit project using technology we developed to improve the efficiency and safety of this process – technology that we will license to others. We also progressed work on our $6 billion joint-venture U.S. Gulf Coast Petrochemicals Project, which includes a world-scale ethane