Welcome to Chevron’s second quarter 2007 earnings conference call. (Operator Instructions) I will now turn the conference over to the Chairman and CEO of Chevron Corporation, Mr. Dave O’Reilly. Please go ahead sir. Dave O’Reilly: Welcome to Chevron’s second quarter earnings conference call. Today I’m joined by Steve Crowe, Chief Financial Officer and Irene Melitas, Manager of Investor Relations. Our focus today is on Chevron’s financial and operating results for the second quarter of 2007 and I’ll refer to the slides that are available on the web. I’ll 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 2. Turning to slide 3. The company reported earnings of $5.4 billion in the second quarter, up 24% from the second quarter of 2006. Earnings of $2.52 per diluted share were up 28% from a year ago. The main drivers for the increase were first, a $680 million after-tax gain on the sale of our interest in Dynegy, partially offset by costs of $160 million from retiring on economic debt. Second, the absence of hurricane related charges for uninsured costs incurred in the second quarter of 2006; and thirdly, higher margins for refined products. Second quarter results were 14% higher than the first quarter, which Steve will discuss shortly. Return on capital employed for the trailing four quarters was 24% and the debt ratio was about 10% at quarter end. Share repurchases totaled $1.75 billion, reflecting a higher buy back pace, which Steve foreshadowed at last quarters conference call. We now expect to complete the current buy back program in the third quarter. Steve will now take us through the quarterly comparisons.

Thanks, Dave. My remarks compare second quarter results to those of the first quarter 2007. As a reminder, our earnings release compared second quarter 2007 to the same quarter a year ago. Turning to slide 4; second quarter net income was $665 million higher than the first quarter’s result, driven by stronger commodity prices in the upstream and higher realized margins in downstream, particularly in refining. An increase in environmental remediation charges and a charge for the early redemption of Texaco capital bonds contributed negatively to the quarters results. Both items were highlighted in our interim update. The other bar reflects a negative variance in tax-related items and a net of everything else. Both periods had like-sized asset sales gains, the Nerefco sale in the first quarter and Dynegy in the second largely offsetting one another. Slide 5 summarizes the results of our U.S. substream earnings, which improved by about $425 million between quarters. Higher realizations particularly for liquids benefited earnings by $220 million between quarters. The $7.29 per barrel increase in crude realizations was generally in line with the increase on a composite of industry benchmark prices and contributed to a favorable $200 million variance between quarters. Improved natural gas realizations resulted in a $20 million profit effect. Though Henry Hub bid prices increased by $0.76 per 1,000 cubic feet, our average realizations rose $0.16 per 1,000 cubic feet reflecting our regional production mix and spot sales. Volumes including one additional producing day increased earnings by $30 million. Other primarily reflects a favorable variance in FAS 133 effects, lower exploration expenses and a gain on the sale of a couple of small operations. Turning to slide 6, international upstream earnings were $305 million higher than the first quarter’s. Stronger oil prices benefited earnings by about $560 million and were partly offset by lower gas realizations. Unit Liquids realizations improved $10.17 per barrel, in line with the rise in spot Brent prices. Higher liftings in Canada, Bangladesh and Azerbaijani and other international locations resulted in a positive earnings variance of $120 million. The negative $70 million for litigation represents the absence of a favorable litigation settlement in the first quarter. The variance in other includes an unfavorable swing in tax-related items as well as higher operating and depreciation expense. Slide 7 summarizes the change in worldwide oil equivalent production, including volumes produced from oil sands in Canada. Daily volumes were down by 13,000 barrels per day between quarters with the larger changes by country noted on the slide. For the first six months of the year, our worldwide oil equivalent production averaged 2.640m barrels per day. We expect production for the second half of the year to be in line with the first. Turning to slide 8, U.S. downstream results in the second quarter exceeded the prior quarters by about $430 million. Higher realized margins benefited earnings by $390 million relative to the first quarter, reflecting stronger industry margins, particularly refining. Refining margins were partially dampened by inventory-related effects and an unfavorable variance in final pricing adjustments for long-haul crude. Marketing margins also improved the quarter’s results. Refining volumes increased results by $135 million between quarters primarily due to the completion of the first quarter Richmond Refinery crude unit turnaround. The unfavorable variance in other largely reflects an increase in costs for environmental remediation as highlights in our interim update. Turning to slide 9, international downstream results of $517 million were lower than the first quarter’s. Absent the first quarter’s $700 million gain on the sale of our interest in the Nerefco Refinery, results were $56 million lower between quarters. Realized downstream margins improved earnings by about $150 million, primarily led by higher refining margins in most regions, in line with the rise in indicator margins. Lower volumes resulted in a decline of about $45 million between quarters reflecting, the fourth quarter Nerefco sale. Included in other is an swing in foreign exchange effects along with higher operating expenses reflecting increased maintenance and labor costs. Slide 10 shows earnings from chemicals were $104 million in the second quarter compared with $120 million in the first quarter. Results for olefins improved during the quarter due to higher ethylene and polyethylene margins and increased ethylene volumes. This was more than offset by an asset writedown in aromatics. Slide 11 covers all other. Second quarter results show a positive variance from the prior quarter arising from a gain on the sale of our interest in Dynegy which was partially offset by a charge related to the early redemption of Texaco capitol bonds, both of which were highlighted in our interim update. The variance in the other bar reflects and increase in environmental remediation expense for legacy Texaco and Unocal sites that have been closed or sold, tax related and other miscellaneous items. Absent the Dynegy gain and charge related to debt redemption, net charges for this segment fell within the guidance range of $160 million to $200 million provided in our interim update. That completes our brief analysis for the quarter. Back over to you, Dave. Dave O’Reilly: Thanks, Steve. Turning to slide 12, we highlight some of the recent developments of the last few months starting with upstream. Last month we announced delay in our Gulf of Mexico Tahiti project due to some problems discovered in the facilities shackles. New shackles have been ordered and the timing of their installation is currently under review. At this time we have no further updates to provide regarding the completion date for these activities but will keep you apprised once we have a firm defined recovery plan in place. We have also signed a memorandum of understanding with the Venezuelan Government for the retention of our 30% interest in Hamaca. The MOU established the basic terms of the conversion and governance of the new joint venture company. Final conversion steps, including the National Assembly’s approval and the issuance of a Presidential Transfer Decree, are expected later this year. In Europe, we successfully completed a production test of the Rosebank Appraisal well west of Shetland. Chevron holds a 40% interest in the Rosebank discovery and is the operator. A third appraisal well is expected to be completed later this year and the resulting data will determine a future work program for the discovery. On the downstream side, earlier in the quarter we disclosed that an extensive plan turnaround of our major crude distillation unit in the El Segundo Refinery was underway. That turnaround is now mechanically complete and the unit start up is under way. During the down time, certain work was performed to progress the heavy crude project which remains on track for year end completion. We also completed the sale of our fuels marketing assets in Uruguay and announced an agreement for the sale of the Benelux marketing assets in Europe. That transaction is expected to close during this third quarter and both transactions are part of our portfolio rationalization efforts highlighted during our March analyst meeting. Finally in May, as we mentioned earlier, we sold our interest in Dynegy. Our decision was driven by Dynegy’s exits from oil and gas activities and the company’s increasing focus on power generation, thereby minimizing the strategic fit with Chevron. That concludes our prepared remarks. We’ll now take your questions, and one caller and one question per caller at a time, please. We’ll try to wrap up at or before the top of the hour. So, Matt, please open the lines for questions.

Our first question comes from Dan Barcelo - Banc Of America.

Regarding U.S. natural gas production, you mentioned in your press release that it’s down about 7% year on year due to base decline. However, if I look over the last three quarters sequentially it seems the decline is a lot less. I don’t know if you could give any further guidance on base declines for natural gas and even for oil which has actually been pretty flat, especially given the pull back for natural gas prices?

We don’t really assign a declined value to natural gas versus liquids. The guidance we’ve previously issued is that overall our decline rate worldwide is about 4% to 5%, and in the U.S. it is higher, somewhere in the neighborhood of about 7%. But we don’t otherwise provide a split between liquids and gas.

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

Production guidance for the balance of this year, perhaps looking ahead, can you just bring us up to date with where you see things. Just to be clear, Venezuela is not I guess really out of the equation in terms of the present mix, but do you see any other changes taking place in Venezuela that might impact your production that way, over the balance of this year in particular? Dave O’Reilly: Thanks, Doug. You know as I had mentioned in the aggregate for the enterprise, we see second half production largely the same as we had in the first; that is 2.640 million barrels a day or thereabouts. In the second half of the year we do anticipate some declines here in the United States as a result of normal field declines, particularly in the Gulf of Mexico. But, internationally, we expect to see some pick-up in Eurasia as a result of our TCO expansion that will be coming on later in the year, as well as a full six months of Bibiyana, where it came on line at the end of the first quarter this year. As far as the specifics on Venezuela are concerned for Hamaca right at this juncture the terms have not been made public so we won’t comment on that particularly. But our projects are largely on track and as I said, we expect to be about the same for the full year.

Our next question is from Arjun Murti - Goldman Sachs. Your question please.

Thanks. My question is on some of the tax claims that have been filed by Russia related to the CPC that’s at least been in the press. I realize the nature of these things are difficult to forecast outcomes and so forth, but just given the importance of your Tengiz project in Kazakhstan production, to the extent that you’re not able to come to some sort of settlement with Russia do they have any reasonable recourse or actions that they can take or should we feel that since it is a separate country from Kazakhstan we shouldn’t feel that the Tengiz or Kazak production is at risk for any reason related to these tax claims.

Arjun, there have been some tax claims. By the way, these are not unusual; we get them all over the world, United States included, but let me just put them in perspective. The very first tax claim that we appealed, it went to the higher court. The higher court kicked it back down to the lower court. These are kind of I would say legitimate questions for tax authorities to ask that we need to resolve so that was an encouraging sign. So I expect that we’re going to resolve these tax claims just like we do in other jurisdictions and it’s a matter of interpretation of the tax code and sitting down and understanding one another and getting a resolution. Now having said that, with Tengiz of course we are also looking at other options; we’re not solely dependent on CPC. We have a significant rail program, export program that we’ve exercised in the past. As you remember, we operated Tengiz for five or six years without any CPC pipeline but we have many other options. We are also developing a southern route to take advantage of our participation in the Baku line so there are multiple options for exports here but I wouldn’t get hung up on this tax case because I think it’s just an example of something we have to work our way through.

Your next question is from Paul Chang of Lehman Brothers. Your question please.

Dave, can you give an update on the status of our Gorgon, Agbami, and also the neutral zone contract expansion? Dave O’Reilly: Okay, Gorgon, Agbami and neutral zone; let me start with Gorgon. You’ll recall that one of the big issues last year was getting government approval from the environmental perspective from the Western Australia government and the Western Australian government EPA had filed an objection. We worked our way through that and at the end of last year we were able to resolve those issues and objections from the EPA and gain the approval of the Western Australian government to go ahead with the project. Then there were two other issues remaining which we talked about in the spring at our March analyst meeting. The first was getting federal government approval or the commonwealth government technically, approval for the environmental permits there. That process is still underway and is not complete but I am confident that we’re going to get completion there and we’re working hard to get it there. The other issue was the question of costs and the cost escalation that we’re seeking in the whole L&G supply chain: Fabrication, contractors, construction, and et cetera. That led us to go back and work with our partners late last year and we’re continuing that work, although we should be wrapping it up this year. It caused us to go back with our partners and look at trying to come up with alternatives and optimization for the construction plan and facilities; different configurations. That work is underway. We’re working with our partners. This is an enormously big project. It’s very important from a capital storage perspective to get it right. So we’re looking at a facility that’s going to be on the ground for decades and producing very, very copious quantities of gas. We want to get it right, we’re working our way through it. When we get it right, we’ll move forward with it. But that work is still underway. That’s Gorgon. You asked two other questions, although you were supposed to ask one.

It’s all in one question. Dave O’Reilly: I know, yes. Agbami; Next month I’ll be in Korea visiting the FPSO, which is nearing completion. It’s one of the largest ever built, the size of an aircraft carrier I’ve been told. So I’m looking forward to seeing it. It’s going to sail later this quarter, early in the fourth quarter. So everything is online with Agbami. The third question you asked was the neutral zone. We are in the process of renegotiating or negotiating an extension or amendment to the neutral zone agreement, which has been in place from 1949 and through different successor companies and it’s too early to predict the outcome, other than to say that we are currently engaged and over the next year or so we hope to get that issue resolved. But it’s too early to say yet. It’s early days of the negotiation. Thank you. I will take the next question please.

Our next question is from Nicole Decker of Bear Stearns. Your question please.

Good morning. My question is on the share buyback program given that you aim to complete your authorization next quarter I am interested in hearing your thoughts on the likelihood of an extension or a renewal?

As Dave mentioned we anticipate completing the currently $5 billion authorized program in the third quarter. That would amount to $1.9 billion and we fully expect that our board will authorize a follow-on program right behind it. As indicated, we’ve been ramping up the repurchase program given the current market conditions and our debt profile with $1.75 billion here in the second quarter and as I mentioned 1.9 billion in the third quarter. So thanks very much, but that can be your expectation. May we have the next question?

Our next question is from Bruce Lanni of AG Edwards. Your question please.

Just a follow-up question somewhat dealing with Paul Chang. Gulf of Mexico; I tuned in a little bit late, you may have covered it. But can you give us an update on the sanctioning there as well as any status or comments on Jack and Bob North? Dave O’Reilly: Let me just kind of give you an overview of the Gulf of Mexico in general. I covered the Tahiti issue earlier in my opening remarks and we have no firm plan yet for recovery other than we’ve ordered replacement shackles and we’re still working on a recovery plan there. Blind Faith; the hull has been delivered to the Gulf. By the way the Tahiti hull is in the Gulf. So it’s not a question of the hull, it’s a question of getting the shackles manufactured and coming up with a new program for installation. It’s much too early to predict what timeframe that can occur. On Blind Faith the hull has been delivered into the Gulf of Mexico and that’s looking on track. Jack and St. Malo, you recall last year, we completed a extensive record setting test on Jack and we have an appraisal program planned for both St. Malo on a continuation of the appraisal of Jack during 2008;, not during 2007, so you will not hear more from us this year, other than to say there’s more appraisal underway and that will lead to a much better understanding in ‘08 and beyond that, who knows. We’ll be developing some sort of a development plan to move forward, but that is the timeframe for those two. On Tubular Bells, we’re still working with the operator on that to develop further appraisal and it’s too early to predict yet, but the ultimate development is there, but I’ll refer you to the operator on that one. Was there another question?

Bob North. Dave O’Reilly: I believe we have a well in our program currently with Bob North and so we’ll perhaps have more to say about Bob North later this year.

Our next question is from Neil McMahon of Sanford Bernstein. Your question please.

Just on Jack again, actually, it looked like there was a delay on the next appraisal well on Jack, and I believe at the investor presentation earlier in the year, you were not planning to test that appraisal well, but given the fact that it’s been delayed into 2008, are you now going to test that next appraisal well and maybe you could provide sort of an ongoing description of how you’re finding the reservoir characteristics based on the work you’ve done so far. Dave O’Reilly: Let me go back and be very precise because we were very careful about what we said. We said we do our next appraisal well at Jack either late this year or early next year. What I’m saying now is it’s going to be early next year, not late this year. It is unlikely that we’ll need to test that well, but it will help us characterize the scope of the reservoir, and beyond that I’m not prepared to make any other predictions. St. Malo, I don’t know we’ve made a decision yet as to whether we’re going to test the St. Malo well, a lot of it depends on what we find in the next appraisal well, so it’s too early to tell what we’ll do there. One of the great advantages here is now we’ve merged our predevelopment teams because this is the benefit of a merger between Chevron and Unocal because Unocal was the operator at St. Malo, we’re the operator at Jack. Now we’ll be able to merge the technical teams that are working on this and I think we’re trying to optimize our plans here so that we transfer learning things from one to the other and take the most efficient approach to developing this new trend in an economic way. So early days yet, more work to come, but we’re very satisfied with the progress we’ve made to date.

Your next question is from Mark Gilman - Benchmark Company. Your question please.

I was wondering if you could provide just a little bit more clarity and granularity on the heavy crew projects in El Segundo and Yeosu in Korea in terms of what units in particular you’re putting in, the size, the cost and what the yield implications will be? Dave O’Reilly: Let me just give you a general review on El Segundo first. We tried to cover some of this in the March meeting. The El Segundo work really requires a lot of work in two areas. It requires a facility to be installed in our major crude unit, which is currently underway and actually just about wrapped up as I mentioned in my formal remarks. The second phase of the construction work revolves around the coker because we need more coking capacity and more efficient coking capacity and construction work is already underway but it will be conducted and completed during the coker turnaround that we had scheduled in the fourth quarter this year. So the plan is to have it all wrapped up. In the case of Yeosu, it is actually so that the El Segundo is in the hundreds of millions sort of range. Now the Yeosu project is a $1.5 billion and that involves some new facilities, dehydrogenation facilities, as well as at the back end of it, a new base oil plant, the ability of the plant and the capacity of the plant to convert heavier crudes, that will complete by the end of the year and that’s on track. The lube oil plant is expected to start up in the second quarter of next year. It lags behind the basic plan itself. So that’s generally the scope of the 2 projects. The one in Yeosu is quite much more significant and we’ll be covering that in more detail in one of our upcoming calls or perhaps in our big analyst meeting early next year. Thank you.

Our next question is from Robert Kessler - Simmons, your question please.

Dave, I don’t really expect you to speak on behalf of other oil companies but any reason as to why you’re sticking around in Venezuela despite Exxon and Conoco having taking Chavez to court effectively. Dave O’Reilly: Well, first of all we’ve been there a long time. Since the 1940s originally, but first let me mention a couple of things. We were able to successfully convert our Boscan operation to a joint-ventured company last year and in the process of doing that, preserve value and come out of it in what we think was a satisfactory conclusion. We believe that we have the same opportunity here at Hamaca, and I can’t speak for other companies other than to say that we wouldn’t be making this choice if we didn’t think it was the right choice for Chevron, and we are confident that under the circumstances we can complete, well the negotiations are complete, but get approved by the authorities so we can continue to operate there. But I think in your question you almost implied part of the answer. You should put that question to some of the others as well.

Any thoughts about a future heavy oil project, in addition to Hamaca at this point? Dave O’Reilly: No, I think our focus right now is on restructuring our current operations there, and we just have to see how we’re treated there, what the opportunities are in the future and our decisions to go further there are entirely dependent on our experience with the operations that we’ve already converted and are in the process of converting. Thank you.

The next question is from Mark Gilman - Benchmark, your question please.

I’m having an awful lot of difficulty with the transparency in the release, regarding there are indicated to be no special items, but as we go through the discussion there seems to be quite a number. I was hoping you could quantify the asset sales in U.S. E&P, the environmental provisions, and refining and marketing, and to what extent those provisions are included in the $150 million number that is indicated in the waterfall chart regarding overall earnings, and also the asset writedown in foreign E&P?

Thank you, Mark. We don’t disclose special items, because we no longer view it as special items given the size of our firm. But the things that we’ve disclosed in the press release and foreshadowed in the interim update are I think some of the key things if you were making some adjustments you could take into account. Certainly the largest among those would be the gain connected with our sale of the Dynegy shares. Similarly in the same segment we indicated that there was a charge in connection of the redemption of some uneconomic Texaco capital bonds, which we reacquired here in the second quarter. Those two might be things you could pull from our report of results. Dave O’Reilly: I would like to build a little bit on it, Steve is right on the mark, you know, we are not going to dig into the ups and downs, because every quarter there are ups and downs, let me give you one example. We see environment charges come pretty much every year, now they come in lumps; some quarters there are fewer and some quarters there more, this quarter they are some what more than we’d experience, for example, in the first quarter. But it varies and I think you’ve go to expect that these things are ongoing, so we treat them as a part of our ongoing business. I think from an analyst perspective the best way to view our earnings is to look at them and then if we see things we truly believe are unique and that do not belong in routine business, such as the two items that Steve cited, I think those we will continue to highlight. But others I think you’ve got to take into the ongoing business environment and they are lumpy, slightly up sometimes, down other times. If there is something that we believe is a significant factor, that we think you ought to take into account, we are going to tell you about it. And that is why we highlighted these two items that we did in the second quarter. I think we are about ready to wrap up, so I would like to thank you all for participating in the call. Please let Irene or our team know if you have any follow-up questions. I look forward to talking to you in future quarters or future meetings. Thank you for your interest in the company. Good bye.