of the worldwide upstream investment in each of the three years, reflecting the company’s continuing focus on opportunities that are available outside the United States.

     In 2007, the company estimates capital and exploratory expenditures will be 18 percent higher at $19.6 billion, including $2.4 billion of spending by affiliates. About three-fourths of the total, or $14.6 billion, is budgeted for exploration and production activities, with $10.6 billion of this amount outside the United States. Spending in 2007 is primarily targeted for exploratory prospects in the deepwater Gulf of Mexico and western Africa and major development projects in Angola, Australia, Brazil, Kazakhstan, Nigeria, the deepwater Gulf of Mexico and an oil sands project in Canada.

     Worldwide downstream spending in 2007 is estimated at $3.8 billion, with about $1.6 billion for projects in the United States. Capital projects include upgrades to refineries in the United States and South Korea and construction of liquefied natural gas tankers and gas-to-liquids facilities in support of associated upstream projects.

     Investments in chemicals, technology and other corporate businesses in 2007 are budgeted at $1.2 billion. Technology investments include projects related to molecular transformation, unconventional hydrocarbons, oil and gas reservoir management and development of second-generation biofuel production.

Pension Obligations   In 2006, the company’s pension plan contributions totaled approximately $450 million. Approximately $225 million of the total was contributed to U.S. plans. In 2007, the company estimates total contributions will be $500 million. Actual amounts are dependent upon plan-investment results, changes in pension obligations, regulatory requirements and other economic factors. Additional funding may be required if investment returns are insufficient to offset increases in plan obligations. Refer also to the discussion of pension accounting in “Critical Accounting Estimates and Assumptions,” beginning on page FS-20.

FINANCIAL RATIOS

Financial Ratios

      Current Ratio – current assets divided by current liabilities. The current ratio in all periods was adversely affected by the fact that Chevron’s inventories are valued on a Last-In-First-Out basis. At year-end 2006, the book value of inventory was lower than replacement costs, based on average acquisition costs during the year, by approximately $6 billion.

     Interest Coverage Ratio – income before income tax expense, plus interest and debt expense and amortization of capitalized interest, divided by before-tax interest costs. The interest coverage ratio was higher in 2006 compared with 2005, primarily due to higher before-tax income and lower average debt balances. The company’s interest coverage ratio was essentially unchanged between 2005 and 2004.

     Debt Ratio – total debt as a percentage of total debt plus equity. The decrease between 2005 and 2006 was due to lower average debt levels and an increase in stockholders’ equity. Although total debt was slightly higher at the end of 2005 than a year earlier due to the assumption of debt associated with the Unocal