2017 Annual Report - chevron.com

1 chevron Corporation6001 Bollinger Canyon Road, San Ramon, CA 94583-2324 2018 chevron Corporation. All rights Recyclable912-09792017 Annual reportChevron Corporation 2017 Annual 13/8/18 11:53 PMXO .0 contents 2 letter to stockholders 6 lead director: one-on-one 7 chevron at a glance 8 chevron stock performance 9 financial and operating highlights 10 winning in any environment 11 financial review 72 five-year financial summary 73 five-year operating summary 85 glossary of energy and financial terms 86 the chevron way 88 board of directors 89 corporate officers 90 stockholder and investor information~ millionchevron acreagenet acres in the Permian Basin181,000permian unconventional productionaverage net oil-equivalent barrels per day in billion barrelschevron resources*of net unrisked oil-equivalent Permian Basin resources in 2017the permian basin is one of the most prolific oil and natural gas geologic basins in the United States* For definition of resources, see Glossary of Energy and Financial Terms, page 85 Publications and other news sourcesThe Annual Report .

2 Distributed in April, summarizes the company s financial performance in the preced ing year and provides an overview of the company s major s Annual Report on Form 10-K filed with the Securities and Exchange Commission and the Supplement to the Annual Report , containing additional financial and operating data, are available on the company s website, , or copies may be requested by contacting:Investor Relations chevron Corporation 6001 Bollinger Canyon Road, A3140 San Ramon, CA 94583-2324 925 842 5690 Email: 2017 Corporate Responsibility Report is available in May on the company s website, , where other Corporate Responsibility information can be found. A printed copy may be requested by writing to:Policy, Government and Public AffairsCorporate Responsibility CommunicationsChevron Corporation6001 Bollinger Canyon RoadBuilding GSan Ramon, CA 94583-2324An in-depth Report that addresses chevron s framework for incorporating climate change into our governance, risk management, strategy, and actions and investments is available at Details of the company s political contributions for 2017 are available on the company s website, , or by writing to.

3 Policy, Government and Public AffairsChevron Corporation6001 Bollinger Canyon RoadBuilding GSan Ramon, CA 94583-2324 For additional information about the company and the energy industry, visit chevron s website, It includes articles, news releases, speeches, quarterly earnings information, the Proxy Statement and the complete text of this Annual has a 100-year history and long-term investments in Nigeria. In the country s Niger Delta region, we pioneered the Global Memorandum of Understanding (GMoU), a public-private partnership community empowerment program that involves participatory development processes to help resolve conflict and address the needs of communities near our operations. Shown: Students in front of a renovated classroom built by the Idama Regional Development Committee, whose projects are funded by a chevron -Nigerian National Petroleum Corporation joint Annual Report contains forward-looking statements identified by words such as expect, commit, position, focus, goal, target, schedule, plan, strategy, project, forecast, on track and similar phrases that reflect management s current estimates and beliefs, but are not guarantees of future results.

4 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 11 for a discussion of some of the factors that could cause actual results to differ BY Policy, Government and Public Affairs and Comptroller s Departments, chevron Corporation DESIGN Information Design & Communications, chevron Corporation PRINTING ColorGraphics Los Angeles, Californiaconnect with 23/14/18 2:09 PMpowering the world forwardChevron has emerged from the changes that have reshaped the world s energy landscape as a stronger, leaner and more agile enterprise. Today, we stand ready to win in any business environment. Each day, our people deliver the energy that billions around the world rely on for the most basic of human needs, along with the social and economic progress that reliable, affordable energy provides.

5 Their commitment along with our pursuit of technological and scientific innovations that push the frontiers of our industry positions us well to meet the challenges of this responsibility with skill, ingenuity and an unwavering commitment to the vision, values and strategies of The chevron Way. chevron s portfolio of assets is strong. Our Upstream business is resilient, built to deliver short-cycle, high-return projects as well as long-term resource sustainability. Our Downstream & Chemicals business is highly competitive, with a global portfolio that is strategically focused to leverage areas of strength. Our Midstream organization delivers the commercial, technical and operational expertise that enhances results in Upstream and in Downstream & the world s population continues to grow, so, too, will global demand for energy. We are looking toward the future working to develop generations of talent inside and outside our company; proudly and responsibly leading in conventional energy sources while exploring and evaluating new and emerging energy solutions; and leveraging technology to improve efficiency and productivity while solving the most complex energy challenges of our time.

6 And above all, we are creating value for our stockholders, customers, partners and right way. The responsible way. The chevron digital version of this Report is available. the cover: chevron s Wheatstone Project in Australia, which achieved its first liquefied natural gas (LNG) production in October 2017, reinforces chevron s position as a top natural gas supplier and LNG operator in the Asia-Pacific region. Wheatstone is also making a significant economic contribution to the long-term future of Australia through jobs, government revenues, and local goods and this page: Driven by innovations in well design and applications of new technology, chevron s industry-leading shale and tight rock position in the Permian Basin of West Texas and southern New Mexico exceeded expectations in 2017, increasing production by 35 percent over 2016.* For definition of resources, see Glossary of Energy and Financial Terms, page 13/9/18 12:00 AMThe contributions of the energy industry to economic development have enabled the greatest advancements in living standards in recorded history.

7 Over the course of nearly 140 years, chevron has become a leader in helping improve the communities we touch reducing energy poverty, driving economic and social development, improving health and education, delivering the benefits of modern life, and working to advance human progress for billions around the world, in developed and developing countries alike. Our leadership is a profound source of pride. We take seriously our responsibility to answer the call of those who aspire to a better today even as we continuously innovate to solve the energy challenges of tomorrow. That is why we are anchored to, and guided by, the vision, values and strategies of The chevron Way. We strive to operate as the global energy company most admired for its people, partnership and performance. We are committed to business and enterprise strategies that enhance our ability to deliver industry-leading results and superior stockholder value in any business environment.

8 And most important, we are united by our purpose: enabling human progress by developing the energy that improves lives and powers the world our stockholders2 chevron Corporation 2017 Annual 23/14/18 1:11 PMDelivering on our purpose requires relationships built upon trust and integrity throughout the world. So just as important as what we do is how we do it, through ethical and responsible actions that support and protect our workforce, our stakeholders, the communities where we operate and the environment, while delivering lasting and sustainable value to our stockholders. This is our definition of leading the right way. The responsible way. The chevron Way. (See pages 86 and 87.) In 2017, the world economy grew at its quickest pace in nearly five years, providing strong support to oil and gas demand. The combination of healthy demand growth and OPEC production cuts reduced the surplus in global oil markets, and China s actions to reduce air pollution and curb coal use supported demand in liquefied natural gas (LNG) , heightened geopolitical tensions throughout the world added uncertainty to markets, with ongoing tensions on the Korean Peninsula, continued strain in the Middle East and challenging economic conditions across oil exporting economies.

9 The Congress passed the first comprehensive tax reform legislation in decades and began work on regulatory reform, providing renewed optimism for the economy. Overall, oil and gas market conditions improved in 2017, and hydrocarbons are projected to play an important role in fueling the world economy for decades to come. chevron s actions to bring on line new production from the Permian Basin in the United States and from our major capital projects in Australia helped meet growing global demand in 2017 and supported our aim of being a reliable supplier of the affordable energy the world needs in order to the downturn in commodity prices that began in 2014, we adjusted to challenging conditions, and in 2017, we delivered on our commitments to generate winning performance in any price environment. A key objective for 2017 was to become cash neutral balance cash coming in and cash going out in an environment of lower commodity prices.

10 Full-year cash flow from operations was $ billion, and we were cash balanced without asset sales. This momentum continues as we move into 2017, we improved returns by further reducing expenses and by generating increased revenues as we brought projects on line. At the same time, our capital spending continued to shift toward shorter-cycle, high-return investments in unconventional oil and continued to unlock value from our industry-leading portfolio of opportunities, including legacy positions in Australia, Kazakhstan and the Permian Basin. We captured the benefits of being an integrated energy company with strong earnings, cash flow and returns from our Downstream & Chemicals full-year 2017 net income was $ billion, up $ billion from a loss in 2016. Our sales and other operating revenue was $ billion, up $ billion from 2016. We achieved a percent return on capital employed.