2007



To Our Stockholders 

2007 was a year of significant achievement for our company. We reported record earnings, led our peer group in total stockholder return and advanced our robust queue of major capital projects, which are creating a strong foundation for long-term growth. Most important, the people of Chevron performed superbly, demonstrating the values and ingenuity that distinguish our company. 

Net income of $18.7 billion represented a fourth consecutive year of record earnings. Capital

and exploratory expenditures for the year were $20 billion, and return on capital employed was 23.1 percent. We increased the annual dividend for the 20th consecutive year and achieved a total stockholder return of 30.5 percent, approximately 25 percentage points higher than the return delivered by the S&P 500. We continued to return cash to our stockholders through stock buyback programs, purchasing $7 billion of our common shares during 2007. In September, we initiated a new program to acquire up to $15 billion of our common shares over a period of up to three years. We are committed to the capital discipline necessary to create sustainable, long-term value for our stockholders. 

In the upstream, we executed our strategy of man- aging our base business profitably while advancing new projects for future growth and returns. Our base business, which is our daily crude oil and natural gas production activities around the world, generates the cash to fund our long-term growth. We manage these assets with a strong focus on world-class reservoir management, improved recovery rates and continual innovation. Nowhere is this more evident than in California’s San Joaquin Valley, where the Kern River Field celebrated its 2 billionth barrel of production in late 2007. Kern River began production in 1899 and through the consistent application of innovative technology continues to be a world-class asset. 

Our exploration program, which is centered on high-impact prospects in key basins, had a highly successful year. We posted a 41 percent success rate, adding approximately 1 billion barrels of potentially recoverable oil and natural gas resources. 

Major capital projects in the upstream reached several milestones. The Agbami floating production, storage and offloading vessel was completed and was positioned in the deep water off Nigeria in early 2008. In 2007, the Bibiyana gas field in Bangladesh began production, and we launched commercial production from the 110-megawatt Darajat III geo- thermal plant in Indonesia. 

Chevron’s track record as a successful partner helped us achieve a 10-year extension for producing natural gas in the Gulf of Thailand, which will help realize our goal of increasing production from this area to more than 1 billion cubic feet per day. Our expertise in producing sour gas at the Tengizchevroil project in Kazakhstan was a key factor in our selection as a partner by the China National Petroleum Corporation for the development of the Chuandongbei natural gas area in central China. 

Our global downstream operations continue to focus on increasing refinery flexibility, improving reliability and creating new business