Good morning. My name is Matt, and I will be your conference facilitator today. Welcome to Chevron's First Quarter 2007 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session and instructions will be given at that time. (Operator Instructions). As a reminder, this conference call is being recorded. I would now like to turn the conference over to Vice President and Chief Financial Officer of Chevron Corporation, Mr. Steve Crowe. Please go ahead, sir.

Thank you, Matt. Welcome to Chevron's first quarter earnings conference call. Today, on the call, I am joined by Irene Melitas, Manager of Investor Relations. Our focus today is on Chevron's financial and operating results for the first quarter of 2007. We'll refer to the slides that are available on the web. I remind you that today's presentation contains estimates, projections and other forward-looking statements and ask that you review the Safe Harbor statement on slide two. I'll begin with slide 3, which provides an overview of our financial performance. The company reported earnings of $4.7 billion for the quarter or $2.18 per diluted share. Earnings were up 18% from the first quarter a year ago, reflecting a $700 million after-tax gain on the sale of our interest in the Nerefco Refinery in the Netherlands and higher margins on refined products worldwide. These benefits were partially offset by the effect of lower prices for crude oil and natural gas on upstream profits. First quarter results were 25% higher than the fourth quarter of 2006, which Irene will discuss shortly. Return on capital employed for the trailing four quarters was 23%. And the debt ratio was about 12% at quarter end. Earlier this week, we announced an 11.5% dividend increase raising our quarterly dividend to $0.58 per share. 2007 marks the 20th consecutive year that the company has increased its annual dividend payout. Share repurchases totaled $1.25 billion, the same quarterly pace as in 2006. Slide 4 highlights some of the milestones we achieved in recent months, starting with upstream. Last month, we announced the start-up of our Bibiyana natural gas field in Bangladesh. The field is initially expected to produce 200 million cubic feet of natural gas per day rising to 500 million cubic feet per day by 2010. This exploration success continues with the announcement of two deepwater oil accumulations in the northern part of the Republic of Congo Moho-Bilondo permit. Chevron's non-operated interest is 31.5%. Evaluation and development options studies are underway. In the downstream, we announced the sale of our 31% interest in the Nerefco Refinery in the Netherlands. The transaction closed at the end of March, and was part of our portfolio rationalization efforts highlighted during the March analyst meeting. Irene, will now take us through the quarterly comparisons. Irene?

Thanks, Steve. My remarks compare first quarter results to those of the fourth quarter 2006. As a reminder, our earnings release compared first quarter 2007 to the same quarter a year ago. Turning to slide 5; first quarter net income was about $940 million higher than the fourth quarter results. First quarter earnings benefited by $700 million from the sale of our interest in the Nerefco Refinery in Europe, as indicated in our interim update for the quarter. Volume effects reduced earnings by $175 million and were primarily attributable to lower liftings in Canada and production in the US. A decrease in exploration expense contributed favorably to the quarters results. The other bar reflects a positive swing in tax related items, lower operating expenses, and the net of everything else. Slide 6, summarizes the results of our US upstream earnings, which declined by $90 million between quarters. The benefit of higher natural gas realizations were partially offset by lower liquids realizations, and netted to a $20 million improvement in earnings. The $1.38 per barrel decrease in crude realizations was generally smaller than the decrease in industry benchmark prices. While the average price for WTI declined by $1.89 per barrel between quarters. The Gulf of Mexico benchmark trade month price, which is on a lagged basis, declined by about $0.95 per barrel Higher natural gas realizations resulted in a $50 million profit improvement. Though Henry Hub bid-week prices improved by $0.24 per thousand cubic feet, our average realizations improved $0.50 per thousand cubic feet, reflecting our regional production mix and spot sales. Volume effects associated with third-party pipeline disruptions in the Gulf of Mexico and San Joaquin Valley and two fewer producing days reduced earnings by $65 million. Other primarily reflects an unfavorable variance in FAS 133 effects, which was partially offset by lower exploration expenses and other items. Turning to slide 7; international upstream earnings were about $90 million higher than the fourth quarter. Lower oil prices reduced earnings by about $35 million, and were partially offset by higher gas realizations. Unit liquids realizations declined by $0.62 per barrel, less than the drop in spot brand prices due to country mix effects. Lower liftings in Canada resulted in a negative earnings variance of $100 million. A decrease in exploration expenses benefited earnings by $155 million. The variance in other includes lower operating expenses between quarters. Slide 8, summarizes the change in worldwide oil equivalent production including volumes produced from oil sands in Canada. Daily volumes were down by 12,000 barrels between the quarters. During the first quarter, US production declined 14,000 barrels per day due to third-party pipeline disruptions affecting the Gulf of Mexico and San Joaquin Valley and natural field declines. Outside the US, oil and gas production was relatively flat between quarters. Production increases in the United Kingdom reflect the absence of downtime at Britannia during the fourth quarter. This increase was offset by lower production in Canada due to unplanned downtime at Hibernia. Turning to slide 9, US downstream results in the first quarter were slightly higher than the prior quarters. Lower realized margin effects of about $85 million adversely impacted earnings relative to the fourth quarter. This was primarily due to the affects of the Richmond refinery crude unit turnaround, which was extended by repairs associated with the fire. The unit was down for most of the quarter, which prevented the company from capturing the improved West Coast refining margins. Refining margins were also dampened by supply effects during the quarter. Marketing margins were lower on the West Coast. Weaker asphalt and lubricants margins also affected the quarter's results. Somewhat offsetting these lower margin affects were improved refining and marketing margins in the East. The other variance includes lower expenses at the Pascagoula refinery following the fourth quarter's FCC shutdown and expansion project and other miscellaneous items. Turning to slide 10, international downstream earnings of about $1.3 billion were substantially higher than the fourth quarter. The sale of our interest in the Nerefco refinery, and associated assets in the Netherlands resulted in an after-tax gain of $700 million. Absence the sale, results were about $40 million lower between quarters. Realized downstream margins improved earnings by about $50 million led by higher refining margins in most regions, in line with the rise in indicator margins. An unfavorable swing in foreign exchange effects reduced earnings by $90 million and drove the variance in other. Slide 11 shows earnings from chemicals were $120 million in the first quarter compared with $124 million in the fourth quarter. Results for olefins declined during the quarter, primarily due to lower ethylene margins and higher manufacturing costs related to plant turnarounds. The improvement in additives earnings reflects the combination of higher margins, and lower non-manufacturing expenses. Slide 12 covers all other. First quarter results show a positive variance from the prior quarter due to higher earnings associated with the company's investment in Dynegy, included in the P&L business' bar and as mentioned in our interim update guidance, favorable corporate tax items included in other. Largely as a result of the variance in tax items, net charges for segment Other were lower than our standard quarterly guidance for this segment at a range of $160 million to $200 million excluding Dynegy. That completes our brief analysis for the quarter. Back over to you, Steve.

Thanks, Irene. That concludes our prepared remarks. We'll now take your questions, one question per caller, please. We'll wrap up at or before the top of the hour. Matt, please open the lines for questions. Thanks.

Thank you. (Operator Instructions). Our first question is from Dan Barcelo of Banc of America. Your question please.

Yes. Good morning.

Hey, Dan.

Regarding to me, you had an impact obviously in the first quarter from Richmond. I didn't know, if you could just further quantify for us a bit some of the non-recurring operational impacts for first quarter for the downstream relative to just the refining margin impacts or other environment impacts?

Sure. Thanks, Dan. Just for a little bit of background, as Irene mentioned, we had a fire that occurred at the Richmond refinery in mid January at the crude unit. Just as that was being brought down for schedule maintenance. We had a failure of a swing out [wash oil pipe spool]. But as I mentioned, there was a plant turnaround being readied and so our supply position already anticipated the unit being out of service. The fire itself extended the shutdown by about a month and the refinery was back by the end of the first quarter. From an analytical perspective, if you try to get an estimate of the cost of the incident including the lost profit opportunity as well as the additional repair costs, then it's probably on the order of about $150 million or so. Thank you. Next question please.

Our next question is from Doug Leggate of Citigroup. Your question, please.

Thanks. Good morning, Steve and Irene.

Good morning, Doug.

Good morning.

The tax in the quarters, Steve, I think Irene alluded a little bit there in the comments. But it was obviously a bit lower than your guidance, I guess. Can you just walk us through some of the major items there and just reiterate perhaps what you expect the run rate to be for the balance of the year?

Sure. Thank you, Doug. The first quarter effective tax rate was 37.6% and if you look at the average effective tax rate for full year 2006, it was more on the order of 46%. So Doug as you pointed out, it was considerably lower than last year. And looking at the components as to why our average effective tax rate is lower in the first quarter for a 90-day period, I'd point to three things. Number one, we had a lower tax rate associated with the Nerefco sale, certainly a non-recurring item from a run rate perspective. Number two, we have some favorable adjustments for prior periods resulting from the completion of tax audits. And number three, in the first quarter, proportionately more income was earned in lower tax rate jurisdictions. Clearly, we operate in many taxing jurisdictions. So, as they shift from location to location, you can get some noise on that score. With respect to the favorable adjustments for prior periods as Irene mentioned, we try to at least reference this in the April 10th interim update. In that interim update, we spoke about all other segment. We said, for the first quarter, favorable tax-related effects at the corporate level are expected to substantially offset corporate charges for the period. So, given the earlier guidance that should have given some indication that we were going to be getting a favorable tax benefit. But those three components explain roughly the 10% decline or 9% decline from sort of an average run rate. As to your question, what might be an average rate? I think, the rate that we saw in 2006, is pretty representative. Again, there will be noise that occurs when we have adjustments as a result of completion of tax audits. And there will be noise to the extent that you have transactions that result in tax rates different than that average. Thanks very much for you question, Doug. I hope that helps.

Our next question is from Ron Oster of A.G. Edwards. Your question please.

Good morning Steve. Had a quick question on Gorgon, I was wondering if you could give us an update in terms of any progress that's been made there regarding the development type or any contract sales? If you could just kind go over some of the major hurdles that need to be overcome before it to be sanctioned? And any timeframe on sanction would be helpful?

Thank Ron. We covered this at last months New York, Analyst Meeting. But for the benefit of those who may not have heard that, let me give a little bit of background. Gorgon is a project of great scale and complexity. And certainly, we're dealing with increasing market-related costs. Gorgon is presently in the engineering and design phase. You may recall, last December, we received concurrence on the environmental framework for two-train LNG facility on Barrow Island, which was given by the Western Australian government. We are now awaiting the final environmental permits from the Western Australia government and the Common Wealth. Which we expect will occur around mid-year. During the last several months, we've undertaken additional studies to reduce costs, consider appropriate production capacities, and try to mitigate any uncertainty with respect to the execution before we make a final investment decision. But the project is moving forward, and the first hurdle that we need to get past is the environmental permit, which I mentioned we hope to see in the not too distant future. As was indicated in the slides, that we showed at the Analysts Meeting last month, start-up is expected after 2010. It's difficult for me to give anything more precise at this stage of the game until some of these milestones are completed. But I thank you for your question, Ron.

Our next question is from Mark Flannery of Credit Suisse, your question please.

Yes, thanks. My question is on Kazakhstan and Tengiz, in particular. Can you just update us what we expect to see from that project as we go through the year? Any maintenance or ramp ups, ramp downs that kind of things?

Thank you, Mark. Again, this was a project that George Kirkland discussed at last months Analysts Meeting. But, let me give just a little bit of a backdrop here on this phased expansion at TCO. The sweet gas injection came on in the latter part of 2006. This year, we've tested it and established the sustained injection rates and pressures, and the mechanical operation of the facilities. Later in 2007, we expect the Sour Gas Injection to commence and staged oil will increase. Once fully online in 2008 as the project ramps up, we see Tengiz gross production capacity increasing from levels in the neighborhood of 285,000 barrels a day to a range of 460,000 to 550,000 barrels a day, once it is fully online. So, it’s moving ahead, and we will continue to update you with respect to the project as information becomes available. Thanks very much, Mark.

Our next question is from Paul Cheng of Lehman Brothers, your question please.

Hi Steve and Irene. Good morning.

Hi, Paul.

Good morning, Paul.

Just a quick one, it seems that you update Gorgon. Can you give us an update on Nigeria and Angola on the LNG project to see where we are in terms of sanctioning those projects? Thank you.

Thank you, Paul. Those projects are earlier in their development. The Angola LNG project in which we own about 36% equity is still in feed that is the engineering and the front-end engineering and design phase. It is progressing with the collaboration of our partners, and we expect FID, later this year. As to the Nigeria LNG project, the Olokola I, it too was in feed with engineering and design work underway. It’s a little bit further back than the Angola I. But we will keep you apprise as it progresses. That's the current status Paul. Thank you very much.

Our next question is from Mark Gilman of Benchmark, your question please.

Guys, good morning.

Good morning, Mark.

Good morning, Mark.

Wondering to see if I could get a little bit more clarification on the international downstream earnings, knowing that, that segment contains a number of what I would consider to be non-refining and marketing activities including shipping, including CPC, including the petrochemical interest in Korea with LG. I also noticed in that variance analysis, there was no mention one way or the other of the potential absence of the fourth quarter LIFO benefit that favorably impacted those results. So, if you could clarify that first quarter result in that segment, drill down a little bit, I would appreciate it?

Thanks Mark. You asked about some of the other contributing factors to our international downstream earnings, for example, shipping and so forth. Shipping was actually down between quarters on account of fewer liftings and lower freight rates. The earnings contributed from the Sasol JV were positive between quarters. Trading margins were higher between quarters, and clearly the biggest driver as far as other items relates to foreign exchange, which was a negative variance between the two quarters. Inventory related effects, I do not have that specifically isolated at this time. We can certainly get back to you after the call.

Thanks Mark, you are quite right to say, it’s a very large business with lots of components in it. And making it simplified for these bar charts, we do take a lot of things that get netted together. Thank you very much. May we have the next call please?

Your next question is from Bernie Picchi of Wall Street Access. Your question please.

Yes. Good morning, Steve and Irene. It was interesting and pleasing to see that you had a 5% increase in branded gasoline sales in the US in the quarter. I was a little surprised by that given kind of what's happened to gasoline prices. Can you give us any color on what may or how it should be happening region by region and also within the quarter and if you can go out into the beginning of the second quarter? Are you seeing a continuation of that trend? Is it going to falling-off on acceleration or what's going on?

Thank you, Bernie. The main driver that we've seen in our increase in volumes associated with branded gasoline here in the United States has been the expansion associated with the Texaco brand. As we got a full use of that, we've expanded the brand both in the Southeast and now more recently on the West Coast. So, that's been a key contributor for the increasing sales of branded gasoline that we've seen here in the United States. And as you can imagine, that's a very favorable development from our perspective. As far as I know, Bernie, we don't see any thing that suggests that will not continue. Thanks very much. May we have the next call?

The next question is from Oswald Clint of Sanford Bernstein. Your question please.

Hi. Good morning, guys. Just one question on exploration please. Given, there are very successful exploration discoveries quarter today than actually over the last couple of years, is there any potential for the rest of the year for a step up in drilling activity or some extra exploration wells to be drilled over the course of 2007?

Well, as we had talked about at our January call, we see the exploration activity essentially on par with that of last year. We've just had tremendous success with exploration, as you know. And over the last five years, our success rate has been industry leading at 45%. I don't have any specific new information with regards to the exploration program, but it is something that we are very proud of and it had a tremendous track record on. Perhaps, we can get you some more detail if you follow up with Irene a little later.

I would actually also recommend that you refer to the presentation by Bobby Ryan back in March and in one of the slides, it actually provides in great detail what our program is for 2007.

Thank you, Irene. May we have the next call?

Our next question is from of John Herrlin of Merrill Lynch. Your question please.

Yeah. Hi. Looking upstream at your CapEx, you are up 26% versus first quarter of last year, but down 21% versus fourth quarter. I am just trying to get a sense of what you are spending on there? Are these lumpy changes because of all the development stuff you are doing with things like at (inaudible) and Tahiti or is it because of exploration activity?

Thank you, John. Certainly, our C&E pattern is influenced by the timing of these large projects that you've heard so much about. We monitor the capital program very, very closely. Sort of on a naive basis, if you look back for several years for Chevron, our spending tends to be backend loaded to the second half of the year. The $4.1 billion spend through the first quarter in the aggregate that includes R&M and other as well, is right in line with our historical pattern of spending about 20% to 21% of the full C&E amount in the first quarter. So, I think your perception is correct. It's driven largely by the timing of these projects.

Thanks.

Thanks very much, John.

Our next is from Jason Gammel of Prudential. Your question please.

Good morning, Steve and Irene.

Good morning, Jason.

Good morning, Jason.

With the Richmond incident now largely behind you, can you provide us with any guidance about the progress on capturing the reliability refinery within the system, maybe in terms of utilization ranges that we could expect to see for the remainder of the year based on what you know about scheduled maintenance?

Well, as we would have mentioned at last month's analyst meeting, we are spending a lot of time on process and equipment and people in trying to create that reliability refinery. Running the refineries with excellence is a very cost effective way of increasing earnings for our shareholders. As Mike would have mentioned last month, 2007 has a particularly heavy turnaround. As I mentioned, there was a turnaround at the first plant turnaround in the first quarter at Richmond, and we have other plant turnarounds that occur here in the United States and overseas. For competitive reasons and commercial reasons, we don't describe the timing of those things until they are completed. But they will influence the metrics when you look at crude utilization. However, they are well planned for and the downstream units are up and running. And so, we will continue to progress our efforts towards improving reliability. It is a key focus for our downstream business and we expect to see continued progress just as we had done in 2006. But thanks for the question very much, Jason.

And Jason, if I may add one more thing, just a data point here. The number of outages for the last six months was about 40% lower than the prior six months. So, I think that speaks to our ongoing progress and the reliability arena.

Thank you. May we have the next question please?

Our next question comes from Paul Cheng of Lehman Brothers, your question please.

Hi, Steve and Irene. I just had a follow-up. When I was looking at your share buyback, it's about $1.25 billion a quarter and if you are looking at your cash flow generating capability and your cash on hand. Is there any reason that company do not want to increase the run rate to a more substantial?

Thanks Paul. The cash on hand at the end of the first quarter included the proceeds from the Nerefco sale which were received as the clock struck midnight on March 31st. Absent of that, the cash balances at the end of March relative to the end of the year were nearly the same. As I pointed out, we spent $1.25 billion for share repurchases in the first quarter. Given the cash balances that we have now and our cash generation capacity, along with the strengthening of commodity prices, it's highly likely that we'll increase the pace of our repurchase program here in the second quarter. But we look at the repurchase program as an appropriate use of our cash in excess of operating needs and our capital program. But first and foremost, we have such a wonderful queue of projects we want to make sure we fund the growth for our shareholders by making sure that those projects are well funded. Over the last three years or so, we've used the share repurchase program as a way of balanced capital realignment as we've reduced debt and reacquired equity. It is however, even from an investment point of view quite apart from capital structure, an attractive investment for excess cash for our shareholders, as we're purchasing reserves at rates that are under $10 a barrel. So, I think you can expect a step up in the repurchase rate in the second quarter. Thanks very much, Paul

Steve. Can I stay in with additional question?

Sure.

You talked about the branded sales gasoline sale up because of Texaco. Can you share with us some market intelligence, in your network, what is the same store sales you offered here for those stores that have open more than 12 months?

Thanks Paul. I don't have the information for the change in volumes for same store sales year-to-year. If you give us some time we may be able to get that information for you. Thanks so much.

Thank you.

Our next question is from Mark Gilman of Benchmark, your question please.

Steve and Irene, I wonder if we could talk in a little bit greater detail about the West African production numbers. Which in this particular quarter and frankly in some quarters previously, seem to be running below that, which I would expect given the development inventory and progress on projects? Could you alert us to any specific entitlement and production sharing contract effects regarding Angola and Block 14 in particular or ultimately if the first quarter is associated either or would decline from 4Q is associated either with Chad, Nigeria or elsewhere. If you could highlight that as well please?

Yes, Mark thanks for your question. The variance in West Africa is largely driven by Nigeria. Last quarter, we had most of the variance in our Africa production, primarily in liquids, reflected an incremental production that was allocable to us under terms of one of our agreements that were completed in the quarter. These types of allocations occur periodically and are somewhat similar to cost recovery barrels. So what you are seeing 4Q, 1Q is the absence of that allocation, if you will. In Angola, actually the story is quite positive for the quarter. We did show a positive variance and it reflects primarily strong performance of our fields out there, and the addition of one more producing well at BBLT during the first quarter.

Thanks very much, Mark. I think at this juncture, we'll wrap it up. In closing, let me say that we appreciate everybody's participation on today's call. And I especially want to thank each of the analysts on behalf of all the participants for their questions during this morning session. So, Matt back to you.

Ladies and gentlemen, this concludes today's first quarter 2007 earnings conference call. You may now disconnect. Good day.