to the “Selected Operating Data” table, on page FS-12, for the three-year comparative production volumes in the United States.

     No special items were recorded in 2005. Special items in 2004 included gains of $366 million from property sales, partially offset by charges of $55 million due to an adverse litigation matter. Net special charges of $64 million in 2003 were composed of charges of $103 million for asset impairments, associated mainly with the write-down of assets in anticipation of sale; charges of $38 million for restructuring and reorganization, mainly for employee severance costs; and gains of $77 million from property sales.

International upstream income of more than $7.5 billion in 2005 increased $1.7 billion from $5.8 billion in 2004. Higher prices for crude oil and natural gas in 2005 and earnings from the former Unocal operations increased earnings approximately $2.9 billion between periods. About 80 percent of this benefit arose from the effect of higher prices on heritage-Chevron production. Partially offsetting these benefits were higher expenses between periods for heritage-Chevron operations for certain income-tax items, including the absence of a $200 million benefit in 2004 relating to changes in income tax laws. The change between years also reflected the impact of $851 million of special-item gains in 2004, while no special items were recorded in 2005. Foreign currency losses in 2004 were $129 million. Gains of $14 million were recorded in 2005.

     Income of $5.8 billion in 2004 was nearly $2.5 billion higher than earnings recorded in 2003. Approximately $900 million of the increase was the difference between the effects in each period from special items (discussed below) and foreign currency losses. Approximately $1.1 billion of the increase was associated with higher prices for crude oil and natural gas. Another $400 million resulted from lower income-tax expense between periods, including a benefit of about $200 million in 2004 as a result of changes in income tax laws. Partially offsetting these effects were higher transportation costs in 2006 of about $200 million. The balance of the change between periods was associated with a gain in 2003 from the implementation of a new accounting standard. (Refer to Note 24, beginning on page FS-59, for a discussion of FAS 143, “Accounting for Asset Retirement Obligations.”)

     Net oil-equivalent production of 1.8 million barrels per day in 2005, including 143,000 net barrels per day from oil sands in Canada and production under an operating service agreement in Venezuela, increased about 6 percent from 2004 and 5 percent from 2003. Absent the net effect of increased volumes in 2005 from five months of production from the former Unocal operations, the effect of property sales and the effect of higher prices on cost-recovery and variable-royalty provisions of certain contracts, oil-equivalent production in 2005 was essentially the same as 2004 and 2003.

     The net liquids component of oil-equivalent production was 1.4 million barrels per day in 2005, unchanged from 2004 and 2003. Excluding the effects of Unocal production, property sales and the effect of