2016 annual report positioned for the future As the average annual crude oil price hit a 10-year low, 2016 presented significant challenges for the oil and gas industry. In response, Chevron took action to improve our free cash flow with tighter spending and with additional revenue from expected production growth. We are committed to becoming cash balanced in 2017, and today we stand well positioned to meet that objective. Chevron’s portfolio is built upon a strong and diverse set of assets around the globe. In the Upstream sector, our asset classes comprise conventional and unconventional crude oil and natural gas, heavy oil, liquefied natural gas (LNG), and deepwater assets. Our Upstream portfolio includes premier LNG assets in Australia; legacy crude oil assets in Kazakhstan; strong unconventional assets in the United States, Canada and Argentina; and excellent deepwater assets in Nigeria, Angola and the U.S. Gulf of Mexico. In addition, our world-class Downstream and Chemicals business is focused on growing higher-return segments, including petrochemicals, lubricants and additives. Publications and other news sources The 2016 Corporate Responsibility Details of the company’s political The Annual Report, distributed in Report is available in May on the contributions for 2016 are available April, summarizes the company’s company’s website, Chevron.com/CR, on the company’s website, Chevron’s employees take great pride in safely developing and delivering aordable, reliable financial performance in the or a copy may be requested by Chevron.com, or by writing to: preced ing year and provides an writing to: Policy, Government and Public Aairs energy that improves lives and powers the world forward while creating value for our overview of the company’s major Policy, Government and Public Aairs Chevron Corporation stockholders, our business partners and the communities where we operate. activities. Corporate Responsibility 6001 Bollinger Canyon Road Communications Building G Chevron’s Annual Report on Form Chevron Corporation San Ramon, CA 94583-2324 A digital version of this report is available on our website at 10-K filed with the U.S. Securities 6001 Bollinger Canyon Road and Exchange Commission and the Building G For additional information about chevron.com/annualreport2016. Supplement to the Annual Report, San Ramon, CA 94583-2324 the company and the energy industry, containing additional financial and visit Chevron’s website, Chevron.com. operating data, are available on the Additional information about the It includes articles, news releases, company’s website, Chevron.com, company’s corporate responsibility speeches, quarterly earnings or copies may be requested by eorts can be found on Chevron’s information, the Proxy Statement and contacting: website at Chevron.com/CR and the complete text of this Annual Report. Investor Relations Chevron.com/CreatingProsperity. Chevron Corporation 6001 Bollinger Canyon Road, A3140 San Ramon, CA 94583-2324 On the cover: Chevron has a strong shale and tight resource position in the Permian Basin of West Texas and southeastern 925 842 5690 New Mexico. The Permian Basin is one of the oldest and most Email: [email protected] important producing areas in the United States. On this page: Building on a record of strong performance at the Tengiz oil field in Kazakhstan, Chevron’s 50 percent- owned aliate, Tengizchevroil, is proceeding with the development of its Future Growth Project–Wellhead Pressure Management Project. connect with us This Annual Report contains forward-looking statements — identified by words such as “expect,” “commit,” “position,” “focus,” “goal,” “target,” “schedule,” “plan,” “strategy” and similar phrases — that reflect management’s current estimates and beliefs, but are not guarantees of future results. Please see “Cautionary Statement Relevant to Forward-Looking Information for the Purpose of ‘Safe Harbor’ Provisions of the Private Securities Litigation Reform Act of 1995” on Page 9 for a discussion of some of the factors that could cause actual results to dier materially. PHOTOGRAPHY Inside Front Cover: Aibar Khamiev Page 2: Eric Myer PRODUCED BY Policy, Government and Public Aairs and Comptroller’s Departments, Chevron Corporation DESIGN Information Design & Communications, Chevron Corporation PRINTING ColorGraphics — Los Angeles, California chevron.com/annualreport2016 102972_CVX_AR2016_v18.1_030917_Front_Back_PRINT.indd 2 4/5/17 4:03 PM future growth project–wellhead pressure management project production contents 2.9 billion 2 letter to stockholders 4 2016 priorities barrels 5 chevron at a glance Tengiz crude oil production 6 chevron stock performance since Tengizchevroil (TCO) 7 financial and operating highlights was founded in 1993 8 2017 strategies production growth 9 financial review 72 five-year financial summary 260,000 73 five-year operating summary barrels 85 glossary of energy and financial terms Approximate daily crude oil 86 board of directors production increase expected 87 corporate ocers when the Tengiz expansion 88 stockholder and investor information project is complete and operating at full capacity goods and services $20 billion Invested by TCO in Kazakhstani goods and services since 1993 1 102972_CVX_AR2016_v19.2_031417_PRINT.indd 1 4/4/17 7:41 PM to our stockholders Low commodity prices in 2016 reduced earnings across the year. Our total stockholder returns outpaced our major industry and reinforced the need for structural reform. With competitors by a wide margin last year. In fact, we’re Brent averaging $44 per barrel, Chevron reported a loss of No. 1 in total stockholder return relative to our peers for $497 million compared with earnings of $4.6 billion in 2015. any cumulative holding period going back 25 years. It was a year of transition, and Chevron took significant Our year-end debt ratio was 24 percent. actions to reduce costs and improve net cash flow to ensure our competitiveness in any operating environment. Operationally, we met a number of milestones, including startup at our Gorgon liquefied natural gas (LNG) project. Our 2016 priorities were to finish projects under construction; Gorgon is one of the world’s largest LNG projects, and we reduce capital spending; reduce operating expenses; expect it to be a significant revenue source for decades. complete asset sales; and operate safely and reliably. We We also achieved startup at Alder in the U.K. North Sea. We made substantial progress (see graphic, Page 4) on these brought on line all three trains at the Chuandongbei Project priorities as we worked toward our goal of becoming cash in China. We restarted the Angola LNG project. We achieved balanced and able to pay the dividend from free cash flow natural gas production from the Bangka Field Development in 2017. Project in Indonesia. And finally, we ramped up our Jack/St. Malo deepwater project in the U.S. Gulf of Mexico. The actions we took included thousands of initiatives across the enterprise to prioritize investments, negotiate better rates Our Upstream business, responsible for exploration and from vendors and suppliers, and improve drilling and other production, reported worldwide net production of 2.6 million efficiencies. All of these actions enabled us to increase our barrels of oil-equivalent per day. Production increases annual per-share dividend payout for the 29th consecutive were offset by asset sales, normal field declines and 2 Chevron Corporation 2016 Annual Report 29th consecutive year 2016 marked the 29th consecutive year we increased the annual per-share dividend payout. maintenance-related downtime. We added approximately Angola to achieve first oil. In Kazakhstan, our 50 percent- 1 billion barrels of oil-equivalent (BBOE) of proved reserves owned affiliate, Tengizchevroil, will be working on a project in 2016 before asset sales. These equate to approximately expected to increase its total production to approximately 108 percent of net oil-equivalent production for the year. 1 million barrels of oil-equivalent per day. First oil is planned for After asset sales, we replaced approximately 95 percent 2022. In the Permian Basin, we will continue to focus on shale of production. In our exploration program, we added and tight resource development, capitalizing on efficiencies approximately 1.4 BBOE to our resource base. we’ve already demonstrated in our drilling program there. Our Downstream and Chemicals business, which is responsible for our refining, marketing and chemical I am optimistic about the future. manufacturing, achieved its highest refinery utilization in Our products are responsible for more than 10 years. We also progressed a number of strategic initiatives. For example, we closed the sale of our Hawaii the greatest advancements in living refining and marketing business. We sanctioned the Salt standards in recorded history. Energy Lake refinery’s alkylation retrofit project using technology we developed to improve the efficiency and safety of this demand remains strong, and we expect process – technology that we will license to others. We also progressed work on our $6 billion joint-venture U.S. Gulf the need for oil and natural gas to Coast Petrochemicals Project, which includes a world-scale continue to grow over the next 20-plus ethane cracker and polyethylene units, targeted for initial production in 2017. years as the developing world reaches for a better quality of life. Midstream and Development secured additional LNG sales commitments for delivery from Australia, despite the challenging market environment. In addition,