Chevron Corporation 1995 Annual Report New Prospects. New Perspectives. CHEVRON CORPORATION 1995 ANNUAL REPORT Table of Contents Chevron at a Glance 1 TO OUR STOCKHOLDERS BUSINESS AREAS OF OPERATION 3 FINANCIAL HIGHLIGHTS EXPLORATION AND PRODUCTION Explores for and produces crude oil and Major producing areas include the 4 OPERATING HIGHLIGHTS natural gas in the United States and 24 Gulf of Mexico, California, the Rocky 6 THE CHEVRON WAY other countries. Third-largest U.S. natu- Mountains, Texas, Canada, the North The company’s Mission and ral gas producer. Worldwide net produc- Sea, Australia, Indonesia, Angola, Vision statements tion was more than 1.4 million barrels a Nigeria and Kazakstan. Exploration day of oil and equivalent gas. areas include the above, as well as 7 NEW PROSPECTS. Competitive Advantage: Balanced U.S. frontiers such as Bolivia, Colombia, NEW PERSPECTIVES. and international short- and long-term Congo, Peru, Ireland and Namibia. STRATEGIES FOR THE FUTURE opportunities create high-value portfolio. 10 Build a committed team to accomplish the corporate mission. REFINING Converts crude oil into a variety of Principal U.S. locations are El Segundo 10 Continue exploration and pro- refined products, including motor gaso- and Richmond, Calif.; Pascagoula, duction growth in international line, diesel and aviation fuels, lubri- Miss.; Salt Lake City, Utah; El Paso, areas. cants, asphalt, chemicals and other Texas; and Honolulu, Hawaii. Also re- 14 Generate cash from North products. Chevron is one of the largest fines in Canada, Wales and (through its American exploration and pro- refiners in the United States. Caltex affiliate) Asia, Africa, the Mid- duction operations, while main- Competitive Advantage: Largest supplier dle East, Australia and New Zealand. taining value through sustained of California reformulated gasoline. production levels. 16 Achieve top financial perform- MARKETING ance in U.S. refining and One of the leading U.S. marketers of marketing. refined products, including motor gasoline, diesel and aviation fuels, 18 Grow Caltex in attractive markets, lubricants and other products. Retail while achieving superior competi- outlets number 7,800 in the United tive financial performance. States, 200 in Canada and 500 in the 19 Continue to improve competitive United Kingdom; Caltex supplies financial performance in chemi- 8,400 retail outlets worldwide. ■ Chevron holds 9 percent or greater gasoline market share. cals, while developing attractive Competitive Advantage: No gasoline sold Retail locations also in Canada, the United opportunities for growth. provides better performance or lower Kingdom and (through Caltex) in Asia, emissions than Chevron gasolines with Africa, the Middle East, Australia and 21 Be selective in non-core busi- nesses. Techron. New Zealand. 22 Focus on reducing costs across SUPPLY AND DISTRIBUTION all activities. Purchases, sells, trades and transports Cargo trading offices in Houston; 23 REPORT ON THE ENVIRONMENT – by pipeline, tanker and barge – crude Walnut Creek, Calif.; London; oil, liquefied natural gas, natural gas Abidjan, Côte d’Ivoire; Singapore; 24 GLOSSARY OF ENERGY AND liquids (such as propane and butane), Mexico City; and Moscow. Interests FINANCIAL TERMS chemicals and refined products. in pipelines throughout the United 25 FINANCIAL REVIEW Competitive Advantage: Chevron’s fleet States and in Africa, Australia, Indo- maintains the best safety and environ- nesia, Papua New Guinea, Europe 60 ELEVEN-YEAR FINANCIAL and the Middle East. Tanker opera- SUMMARY mental record among major oil compa- nies. tions worldwide. 62 ELEVEN-YEAR OPERATING SUMMARY CHEMICALS 63 BOARD OF DIRECTORS Plants in 10 states and in France, Main products are ethylene, benzene, Brazil and Japan. Through affiliates 64 OFFICERS styrene, normal alpha olefins, paraxy- and subsidiaries, operates or markets lene, polyethylene, polystyrene and a in more than 80 countries. Whenever possible, Chevron prints on recy- variety of additives for fuels and cled and recyclable paper. The company has lubricants. printed its Annual Reports on recycled paper Competitive Advantage: Using propri- since 1990. etary technology, Chevron is a low-cost leader and manufacturer of benzene, paraxylene and normal alpha olefins. Mines in New Mexico, Wyoming, COAL Alabama and Kentucky; partnership Mines and markets coal, ranking interests in Illinois and Indiana. among the top 20 coal producers in the United States. Competitive Advantage: More than half the company’s reserves are environmen- tally desirable low-sulfur coal. CHEVRON CORPORATION 1995 ANNUAL REPORT To Our Stockholders ‘We’ve developed new perspectives on the way we do business.’ ▼ ’m very optimistic about Chevron’s new opportunities. For instance, we invested Ifuture. I’m also proud of the company’s about $1 billion in new facilities at our performance, not only during 1995, but for California refineries to make cleaner-burn- the past several years. What we’ve accom- ing reformulated gasolines. This has posi- plished has set the stage for what lies ahead. tioned our U.S. downstream (refining and And I see the future as a time of achieve- marketing) operations for greater profitabil- ment and growth. ity. Another example is the progress made We’ve built a strong foundation. We’ve by Caltex, our 50 percent-owned inter- also learned – sometimes the hard way – national downstream affiliate, on several how to operate successfully in the business expansion projects. And there are upstream environment of the ’90s. We’re leaner. We efforts under way worldwide. work more economically. We’re more entre- From these and numerous other preneurial. And we have better growth changes, we’ve found the resources to seek opportunities. out and take advantage of new prospects. We’ve developed new perspectives on the OPERATING EARNINGS CLIMB way we do business. Briefly, our earnings for 1995, excluding special charges, were nearly $2 billion, an BUILDING A STRONG FOUNDATION KEN DERR increase of 17 percent over 1994. Most of THE CHEVRON WAY CHAIRMAN our businesses had excellent years, with A key component of our foundation is a chemicals and international upstream document called The Chevron Way. (See (exploration and production) producing Page 6.) It includes Chevron’s Mission and record earnings. However, the special Vision, as well as four other important state- charges, including the adoption of a new ments. Together, these documents articulate required accounting standard, brought our our goals, values and principles. net income down to $930 million. More TECHNOLOGY PROVIDES information on our financial results follows A COMPETITIVE ADVANTAGE on the next pages. Detailed financial infor- Technology always has been a Chevron mation starts on Page 25. strength. Our technical and scientific know- FINDING NEW PROSPECTS AND ledge and experience not only have contrib- NEW PERSPECTIVES uted to our success worldwide, but also are I believe that 1995 marked the beginning of key reasons Chevron often is the partner of a new growth period. Over the past few choice in international joint ventures. years, we’ve focused on our core businesses In exploration and production, Chevron and disposed of many non-core assets. is a leader in such technologies as reservoir We’ve also invested in many areas that are simulation and both three- and four-dimen- starting to pay off – both financially and in sional seismic imaging. (Time is the added CHEVRON CORPORATION 1995 ANNUAL REPORT dimension.) Our gasoline additive, Techron, On the other hand, planned spending is unsurpassed in reducing car emissions on worldwide refining, marketing and trans- and maintaining vehicle performance. portation – set at $1.5 billion – will be Chevron Chemical Company has two down about 20 percent. Much of the reduc- new proprietary technologies – Aromax tion will come in the United States, where and Eluxyl. we have completed the major investments in AVERAGE ANNUAL RETURN our California refineries to meet federal and CUTTING COSTS STILL A PRIORITY TO STOCKHOLDERS state requirements for cleaner gasoline. The In today’s business world, cost control is no PERCENTAGE remaining major item is $500 million for longer a competitive advantage. It’s a com- 40 our worldwide chemicals business. petitive necessity. We’ve taken more than $1.5 billion out of our cost structure in the 30 STRONG SHOWING FOR RESERVES past five years, including nearly $300 mil- REPLACEMENT 22.0 lion in 1995. 20 1995 was an outstanding year for adding new oil and natural gas to our inventory. MEETING SAFETY GOALS 10 Chevron replaced 138 percent of its oil and We’ve made enormous progress in meeting natural gas production with new proved our goal of having the best safety record reserves. The replacement rate for interna- among our key competitors. In the past two 0 91 92 93 94 95 tional operations was 178 percent; for U.S. years, we’ve cut our rate of recordable inci- Chevron stockholders have operations, 92 percent. dents nearly in half. Once again, Chevron averaged an annual return of almost 16 percent over the Worldwide, more than 700 million bar- employees have risen to meet a challenge. past seven years. rels of oil and equivalent gas were added to INVESTING IN THE FUTURE reserves, with more than 50 percent coming RETURN ON AVERAGE Our planned spending for 1996 clearly re- from new drilling. At year-end, Chevron’s CAPITAL EMPLOYED* flects our optimism about Chevron’s future. PERCENTAGE worldwide proved reserves stood at 6 billion We’re investing more capital because we see 16 barrels of oil and equivalent gas. tremendous opportunities. We’ve set our CAPITALIZING ON OUR capital and exploratory budget at $5.3 bil- 12 NEW PROSPECTS lion, up about 10 percent from 1995 spend- 9.8 Chevron is rich in excellent short- and ing. About $3 billion will go to worldwide 8 long-term growth opportunities. Many of exploration and production, a 10 percent these are described starting on Page 10, but increase over last year. In line with our 4 I’d like to highlight some of them. For strategic intent to focus on international instance… opportunities, about $2 billion will be spent 0 ■ 91 92 93 94 95 The huge Britannia gas field in the outside the United States.