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A Year of Great Accomplishment

ChevronTexaco euphoria tempered by Schumer's call for FTC to block Unocal deal, undo other oil mergers

SAN RAMON, Calif. -- ChevronTexaco Corp. Chairman and CEO David O'Reilly told stockholders at the company's 2005 annual meeting yesterday that 2004 was a year of great accomplishment and that the execution of sound corporate strategies was driving the company in the right direction.

We have the right strategies, the right people, a strong queue of projects and great momentum, O'Reilly said.

He said that the recently announced Unocal Corp. acquisition will provide immediate and long-term value for stockholders, increasing proved [image-nocss] oil-equivalent reserves about 15% to approximately 13 billion barrels and boosting expected net oil-equivalent production to about 3 million barrels per day in 2006.

This is a rare opportunity to acquire a unique independent with supermajor assets that complement our strategies and core assets, O'Reilly said. We are building on tremendous financial strength, a strong asset base, our world-class people and our commitment to a successful long-term strategic direction and partnerships around the world.

But Senator Charles Schumer (D-N.Y.) has called on the Federal Trade Commission (FTC) to block the proposed merger of ChevronTexaco and Unocal to create competition to drive gasoline prices down. He also called for the FTC to review the Chevron-Texaco, Exxon-Mobil and BP-Amoco mergers to see whether they can be undone. The bottom line is, the price of gas is going way up and competition is going way down, he said in a statement. Without regulating the mergers of these behemoth oil companies, gas prices will continue to go full speed ahead and nothing can rein them in.

The ChevronTexaco-Unocal merger, like the Chevron-Texaco and Exxon-Mobil mergers before it, will further reduce competition in the oil industry by placing the vast majority of production and distribution resources under the control of a handful of corporate giants, Schumer's statement said.

The merger of ChevronTexaco and Unocal will only intensify the dangerous level of concentration in the oil industry. Consolidation has already seriously undermined competition, leaving American consumers vulnerable to repeated and sustained spikes in the price of oil, the statement said. Because of the industry's vertical integrationthe five largest oil companies in the United States control almost as much crude oil production as the Middle Eastern members of OPEC, over half of domestic refiner capacity, and over 60% of the retail gasoline market.

It added, Last year, with crude oil averaging $41 per barrel and working families paying exorbitant prices to heat their homes and fuel their cars, the world's top 10 oil companies made more than $100 billion in profit and in some cases posted record-breaking fourth- quarter earnings that were in some cases more than 200% higher than the previous year. This year, crude oil prices are consistently trading at above $50 per barrel, simultaneously increasing the financial burden of energy costs for working families and oil company profits.

Schumer's statement concluded, New Yorkers are getting burned by gas prices and there is no relief in sight. As we head into the summer gas prices will continue to heat up if the Feds don't do something now. A shrinking number of huge oil companies not competing with each other translates to lighter pocketbooks all around. We wouldn't let this happen in another industry, and it shouldn't happen here.

Peter Robertson, vice chairman of the ChevronTexaco board, told stockholders that 2004 was both financially and operationally the strongest year in the company's 125-year history.

Referring to record net income of $13.3 billion for the year and a return on capital employed of nearly 26%, Robertson pointed to strong commodity prices and sound operating practices as leading factors in this outstanding performance.

Clearly, we benefited from high oil and natural gas prices, as well as from improved refining margins, Robertson said. But we also benefited from our strong operating performance, and we ran our base business well.

Patricia Woertz, executive vice president of downstream, said business improvements in ChevronTexaco's refining organization supplemented strong market conditions to deliver record performance and earnings. In 2004 our refinery utilization rate was 2% higher than in 2003, she said, adding that the company had been able to create additional value by improving operating efficiencies.

Woertz said other important highlights in 2004 included ChevronTexaco regaining the right to market fuels in the United States under the Texaco brand, the Chevron fuel brand becoming the first in the United States and Canada to be named a Top Tier gasoline by four of the world's leading automakers.

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