that were shut in or damaged from the hurricanes and the production that will result from the drilling of new wells in the area. Approximately 20,000 net oil-equivalent barrels of daily production are not expected to be sufficiently economic to restore. Refer also to pages 11 through 24 for additional discussion and detail of production volumes worldwide.

     The company estimates that oil-equivalent production in 2006 will average between 2.7 million and 2.8 million barrels per day. However, future estimates are subject to many uncertainties, including quotas that may be imposed by OPEC, the price effect on production volumes calculated under cost-recovery and variable-royalty provisions of certain contracts, severe weather, and the potential for local civil unrest and changing geopolitics that could cause production disruptions. Approximately 26 percent of the company’s net oil-equivalent production in 2005, including net barrels from oil sands and production under an operating service agreement, occurred in the OPEC-member countries of Indonesia, Nigeria and Venezuela and in the Partitioned Neutral Zone between Saudi Arabia and Kuwait. Although the company’s production level during 2005 was not constrained in these areas by OPEC quotas, future production could be affected by OPEC-imposed limitations. Future production levels also are affected by the size and number of economic investment opportunities and, for new large-scale projects, the time lag between initial exploration and the beginning of production. Refer to pages FS-5 through FS-7 for discussion of the company’s major upstream projects.

     In certain onshore areas of Nigeria, approximately 45,000 barrels per day of the company’s net production capacity was shut in during 2003 because of civil unrest and damage to production facilities. The company has adopted a phased plan to restore these operations, and about one-third of the volumes had been returned to production as of early 2006.

     Refer to pages FS-7 through FS-9 for additional discussion of the company’s upstream operations.

     Downstream   Refining, marketing and transportation earnings are closely tied to global and regional supply and demand for refined products and the associated effects on industry refining and marketing margins. The company’s core marketing areas are the West Coast of North America, the U.S. Gulf Coast, Latin America, Asia and sub-Saharan Africa. In 2005, industry refining margins improved over the prior year, reflecting strong demand for refined products; however, marketing margins, which are highly influenced by regional market conditions, were mixed. Many regions experienced stronger marketing margins, but these margins were generally lower in the United States and Europe, as retail prices did not keep pace with rising crude oil and spot product prices. Industry margins in the future may be volatile, due primarily to changes in the price of crude oil used for refinery feedstock, disruptions at refineries resulting from maintenance programs and mishaps and levels of inventory and demand for refined products.

     Other influences on the company’s profitability in this segment include