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 acquisition, the debt ratio declined as a result of higher stockholders’ equity balances for retained earnings and the capital stock that was issued in connection with the Unocal acquisition.

GUARANTEES, OFF-BALANCE-SHEET

ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS,

AND OTHER CONTINGENCIES

Direct or Indirect Guarantees*

      At December 31, 2006, the company and its subsidiaries provided guarantees, either directly or indirectly, of $296 million for notes and other contractual obligations of affiliated companies and $131 million for third parties, as described by major category below. There are no amounts being carried as liabilities for the company’s obligations under these guarantees.

     The $296 million in guarantees provided to affiliates related to borrowings for capital projects. These guarantees were undertaken to achieve lower interest rates and generally cover the construction periods of the capital projects. Included in these amounts are the company’s guarantees of $214 million associated with a construction completion guarantee for the debt financing of the company’s equity interest in the BTC crude oil pipeline project. Substantially all of the $296 million guaranteed will expire between 2007 and 2011, with the remaining expiring by the end of 2015. Under the terms of the guarantees, the company would be required to fulfill the guarantee should an affiliate be in default of its loan terms, generally for the full amounts disclosed.

     The $131 million in guarantees provided on behalf of third parties relate to construction loans to governments of certain of the company’s international upstream operations. Substantially all of the $131 million in guarantees expire by 2011, with the remainder expiring by 2015. The company would be required to perform under the terms of the guarantees should an entity be in default of its loan or contract terms, generally for the full amounts disclosed.

     At December 31, 2006, Chevron also had outstanding guarantees for about $120 million of Equilon debt and leases. Following the February 2002 disposition of its interest in Equilon, the company received an indemnification from Shell for any claims arising from the guarantees. The company has

not recorded a liability for these guarantees. Approximately 50 percent of the amounts guaranteed will expire within the 2007 through 2011 period, with the guarantees of the remaining amounts expiring by 2019.

     Indemnifications   The company provided certain indemnities of contingent liabilities of Equilon and Motiva to Shell and Saudi Refining, Inc., in connection with the February 2002 sale of the company’s interests in those investments. The company would be required to perform if the indemnified liabilities become actual losses. Were that to occur, the company could be required to make future payments up to $300 million. Through the end of 2006, the company paid approximately $48 million under these indemnities and continues to be obligated for