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Net income for 2002 was down more than 65 percent compared with the previous year. Likewise, the value of our
company’s stock – as with that of others in the energy industry and the broader market – experienced a sharp
downturn.

We are not satisfied with these results, and we are working aggressively to achieve substantial and sustainable
improvement in the performance of all our businesses. As we improve, we are building on a solid foundation,
including a strong balance sheet and excellent investment opportunities that the merger, completed in late 2001,
provided. Today, we have the size, scope and financial capabilities to create greater value for our stockholders.

The merger also has enabled us to deliver major cost savings. By the end of the first quarter of 2003, the
company will have achieved an annual synergy capture rate of $2.2 billion – far higher than the $1.2 billion we
had estimated at the outset.

STRATEGIES FOR SUCCESS

Our most immediate challenge is to improve the returns on our invested capital. Our strategies to accomplish
this are focused on improving the performance of our existing assets, developing new assets that can deliver
superior returns and exiting those assets that do not offer the long-term potential to create value for you, our
stockholders.

In the upstream business, we have leading positions in some of the most promising regions of the world,
including Eurasia, West Africa, Latin America, Australia and the U.S. deepwater Gulf of Mexico. We have a
portfolio of major projects that will come on stream during the next five years, contributing significantly to
production and reserves. We also intend to build a profitable global natural gas business, based on our large
developed and undeveloped gas positions in North America, Africa and Australia.

In downstream operations, we are focusing on improving the performance of our refining and marketing
businesses by capitalizing on our larger scale to lower costs and competitively leveraging our enhanced market
and supply positions.

Throughout our worldwide operations, we continue to focus on building organizational capability in two areas
that are critical to our success – capital stewardship and operational excellence. In capital stewardship, we have
been working to improve decision quality and project execution, and we are seeing measurable progress. For
example, at $8.5 billion, our 2003 capital and exploratory budget is 17 percent lower than the combined budget
of the pre-merger companies, yet it fully satisfies our strategic priorities.

We also are making strides in operational excellence, which means running our businesses safely, reliably and
efficiently. 2002 was the safest year ever for employees and contractors, a notable achievement that occurred
during a period of major transition. At the same time, our worldwide refinery utilization rate increased to 91
percent, and we have set targets for increased reliability in all our businesses. If you take only one message from
this annual report, it should be that ChevronTexaco is indeed “up to the challenge” of improving its financial
performance. By aggressively implementing our strategies, we intend to deliver strong results and overcome the
challenges that negatively affected our performance in 2002.

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