2012



To Our Stockholders 

For Chevron, 2012 was another year of delivering strong results. Even as global economic challenges persisted, we continued building the foundation for sustained growth in our upstream and downstream businesses. And we produced excellent returns for our stockholders. 

Our strong financial performance was reflected in net income of $26.2 billion on sales and other operating revenues of $231 billion. We achieved a competitive 18.7 percent return on capital employed. We increased our dividend payout to stockholders for the 25th consecutive year, marking an average dividend increase of 1 1 percent compounded since 2004 — compared with the average 3 percent of S&P 100 companies over that same period. Our total stockholder returns of 6.5 percent and 16.3 percent over the past five- and 10-year periods, respectively, continue to lead our peer group. 

Our major businesses generated strong operating results. In the upstream, we ranked No. 1 in earnings per barrel relative to our peers for the third straight year. In 2012, we advanced four deepwater major capital projects through startup: Usan, Caesar/Tonga, Agbami 2 and Tahiti 2 — with Tahiti setting several industry records for water injection in deepwater production. Over the next five years, we anticipate 16 project startups with a Chevron share of investment greater than 

$1 billion each. Among them are two of our three new liquefied natural gas projects: Angola and Gorgon, offshore Western Australia; our deepwater projects Jack/St. Malo, Big Foot and Tubular Bells in the U.S. Gulf of Mexico; and the Escravos Gas-to-Liquids Project in Nigeria. 

Exploration successes continued in 2012 with discoveries in seven countries. That includes Australia’s Carnarvon Basin, bringing total discoveries there to 19 since mid- 2009 and positioning our Gorgon and Wheatstone projects for potential future expansions. Exploration success was nearly 74 percent, exceeding our 10-year average of 54 percent. We added 1.1 billion barrels of net oil- equivalent proved reserves, replacing 112 percent of production in 2012. 

The global restructuring of our downstream and chemicals business has delivered greater value from a more focused footprint. In 2012, we ranked No. 2 in earnings per barrel relative 

to our peer group. Construction of a lubricants facility at our Pascagoula, Mississippi, refinery is progressing toward completion by year-end 2013 and is expected to make Chevron the world’s largest producer of premium base oil. We are on track to capture $1 billion in annual refinery profit improvements, compared with 2008, through measures including improved product yields and energy efficiency. 

Our 2013 capital and exploratory budget of $36.7 billion, combined with our strong financial position, supports our long-term growth strategy. This record level of capital spending reflects our unmatched project queue, as well as confidence in our competitive advantages and organizational capability. It keeps us on target to reach our production goal of 3.3 million barrels of oil-equivalent per day by 2017, an increase of more than 20 percent from 2010 levels. 

To continually improve our