2014



To Our Stockholders 

For Chevron 2014 was a year of moving forward our strong queue of projects. Even as we experienced a 50 percent drop in the price of oil in the second half of the year, we maintained our focus on providing affordable and reliable energy, safely and responsibly, to the benefit of our stakeholders. 

Financially we had a solid year as reflected in our net income of $19.2 billion on sales and other operating revenues of $200.5 billion. We achieved a 10.9 percent return on capital employed. 2014 represented the 27th consecutive year of annual dividend payout increases, underlining that our commitment to the dividend is our highest financial priority. In 2014 we launched our three-year $10 billion divestment program, obtaining $5.7 billion in asset sales during the first year. Finally, although market returns were challenged in 2014 our annualized total stockholder returns of 1 1.5 and 1.4 percent over the past five- and 10-year periods, respectively, continued to lead our peer group. 

In the upstream we ranked No. 1 in earnings per barrel relative to our peers for the fifth straight year. We are targeting production of 3.1 million barrels of oil-equivalent per day in 2017, a 20 percent increase from 2014, which is a larger growth rate than that projected for our large competitors. 

In early December Jack/St. Malo, one of our deepwater U.S. Gulf of Mexico projects, delivered first oil on time and within budget. In 2015 we’ll also see additional production from ramp-ups at Tubular Bells in the Gulf of Mexico, the Bibiyana expansion in Bangladesh and our Escravos gas-to- liquids facility in Nigeria, all of which started up in 2014. We also expect the startup in 2015 of our Gorgon liquefied natural gas project offshore Western Australia, and we will ramp up production from our Permian Basin assets in the United States. 

In exploration we’re positioning ourselves for growth. We had a successful year in 2014, including two significant Gulf of Mexico discoveries in the deep water — Guadalupe and Anchor — as well as promising discoveries in Australia, Canada and the Permian Basin. 

In downstream and chemicals we ranked No. 1 in earnings per barrel relative to our peers. We are benefiting from improved reliability and targeted growth efforts. We made reliability investments at several refineries, including in El Segundo, California, and Salt Lake City, Utah. We started up the Pascagoula, Mississippi, base oil facility this year, making Chevron the world’s largest premium base oil producer. Oronite completed a major expansion in Singapore, which, when combined with earlier growth initiatives, doubled the plant’s original additives production capacity. Chevron Phillips Chemical, our joint venture, started up a new 1-hexene plant in Texas, where it also broke ground on a new ethane cracker and two polyethylene facilities. 

We enter 2015 with the financial strength to meet the challenges of a volatile crude oil price environment. We have significant efforts underway to manage to a lower cost structure and capital spend rate. We announced a 2015 capital and exploratory budget of $35 billion. The 2015 budget is 13 percent