has the flexibility to increase borrowings and/or modify capital-spending plans to continue paying the common stock dividend and maintain the company’s high-quality debt ratings.

     Common Stock Repurchase Program In connection with a $5 billion stock- repurchase program initiated in April 2004, the company acquired 92.1 million of its common shares for $5 billion through November 2005. During 2005, about 49.8 million of common shares were repurchased under this program for a total cost of $2.9 billion.

     In December 2005, the company authorized the acquisition of up to an additional $5 billion of its common shares from time to time at prevailing prices, as permitted by securities laws and other legal requirements and subject to market conditions and other factors. The program is for a period of up to three years and may be discontinued at any time. Under this program, the company acquired approximately 1.7 million shares in the open market for $100 million during December 2005. Purchases through mid-February 2006 increased the total shares acquired to 8.3 million at a cost of $481 million.

     Capital and exploratory expenditures Excluding the $17.3 billion acquisition of Unocal Corporation, total reported expenditures for 2005 were $11.1 billion, including $1.7 billion for the company’s share of affiliates’ expenditures, which did not require cash outlays by the company. In 2004mand 2003, expenditures were $8.3 billion and $7.4 billion, respectively, including the company’s share of affiliates’ expenditures of $1.6 billion and $1.1 billion in the corresponding periods.

     Of the $11.1 billion in expenditures for 2005, about three-fourths, or $8.4 billion, related to upstream activities. Approximately the same of the worldwide upstream investment in each of the years, reflecting the company’s continuing focus on opportunities that are available outside the United States.

     In 2006, the company estimates capital and exploratory expenditures will be 33 percent higher at $14.8 billion, including spending by affiliates. About three-fourths, or $11.3 billion, is again for exploration and production activities, with $8 billion of that amount outside the United States. Spending is primarily targeted for exploratory prospects in the deepwater Gulf of Mexico and western Africa and major development projects in Angola, Nigeria, Kazakhstan and the deepwater Gulf of Mexico. Included in the upstream expenditures is about $1 billion to develop the company’s international natural gas resource base.

     Worldwide downstream spending in 2006 is estimated at $2.8 billion, with about $1.9 billion for refining and marketing and $900 million for supply and transportation projects, including pipelines to support expanded upstream production. Approximately two-thirds of the total projected spending is outside the United States.

     Investments in chemicals businesses in 2006 are budgeted at $250 million. Estimates for energy technology, information technology and facilities, real estate activities, power-related businesses and other businesses total approximately $460 million.

FINANCIAL RATIOS

     Current Ratio – current assets divided by