Chevron
Annual Report 2020

Plain-text annual report

1149230_Annual_Report_v8.3_r2.indd 55-159 3/18/21 6:41 PM 2020 annual report noble energy enhances chevron’s performance The acquisition of Noble Energy, Inc. in October 2020 is expected to deliver strong financial benefits. Noble’s high-quality assets in the Denver-Julesburg (DJ) Basin, Permian Basin and Eagle Ford in the United States, along with those in the Eastern Mediterranean and West Africa, complement Chevron’s advantaged Upstream portfolio. The acquired low-cost resources strengthen our global portfolio, adding approximately 1.7 billion oil-equivalent barrels of proved reserves at year-end 2020. The transaction aligns with our goal of generating industry-leading returns from our existing portfolio by adding advantaged assets with a low breakeven point. Photo: The DJ Basin is a large geological formation in northwestern Colorado and southeastern Wyoming. Our newest facilities enable us to eliminate more than 90 percent of greenhouse gas emissions and reduce our surface footprint by more than 95 percent by combining facility locations with innovative processes and the latest technology. ~330,000 net acres DJ basin 148,000 average net barrels of oil-equivalent production per day in 2020 90% less greenhouse gas emissions with newest facilities On the cover: An earth scientist in our reservoir modeling group in Houston, Texas, analyzes subsurface data in search of natural gas. A digital version of this report is available at www.chevron.com/annualreport2020 1149230_Annual_Report_v8.3_r3.indd 6243-6139 3/19/21 4:25 PM The way companies respond to challenging events tests the strength of their people, their culture and their plans. Faced with such conditions, some change their strategies, alter their priorities or revise their fnancial commitments to stockholders. At Chevron, we responded to the events of 2020 with resilience – afrming our strategy, maintaining our priorities and honoring our commitments. higher returns in a lower-carbon future Our approach to delivering higher returns in a lower-carbon world is grounded in a set of beliefs. We know afordable, reliable, ever- cleaner energy enables modern life, and we believe energy transitions must work for all. We set ambitions and favor results, striving for actions that deliver measurable progress. We believe in the power of people to deliver innovative solutions to the world’s biggest challenges. We support innovation, competitive markets, partnerships and smart, inclusive policy as the most efective ways to deliver the progress needed to achieve shared goals. We articulate our goal in four words – “higher returns, lower carbon” – a simple statement that captures our view of what it takes to succeed in the future of energy and our commitment to all stakeholders. “Higher returns, lower carbon” starts with fnancial strength. This is underpinned by an advantaged portfolio, a strong balance sheet, strict capital discipline, a dividend that is our frst fnancial priority, and the transformation of our business to work more efciently and efectively. It recognizes the need to deliver value for our stockholders and to work with all stakeholders in a world moving toward a lower-carbon energy system. We embrace this future and are aligning our strategy to advance these goals. Our strategy also requires unwavering commitment to the values that have sustained us: being an industry leader in health, safety and environmental performance; continuing to build an inclusive workforce where diversity is valued and celebrated; and ensuring that our emphasis on performance, integrity and accountability guides everything we do. We believe this is how leaders perform and how long-term value is generated – for stockholders, stakeholders and society as a whole. Contents higher returns in a lower-carbon future ����������������������������������I chevron at a glance �������������������������������������������������������������� XIII chairman’s letter ��������������������������������������������������������������������� II chevron stock performance�������������������������������������������������XIV higher returns, lower carbon ������������������������������������������������� VI fnancial and operating highlights ��������������������������������������� XV our beliefs �����������������������������������������������������������������������������VIII protecting people and the environment ����������������������������XVI lead director: one-on-one ����������������������������������������������������� IX fnancials ������������������������������������������������������������������������������� 30 board of directors ������������������������������������������������������������������� X glossary of energy and fnancial terms ��������������������������������112 corporate ofcers ������������������������������������������������������������������ XI stockholder and investor information ��������������������������������� 113 1149230_Annual_Report_v8.3_r1.indd 1 1149230_Annual_Report_v8.3_r1.indd 1 3/12/21 11:58 AM 3/12/21 11:58 AM   To our stockholders: The COVID-19 pandemic and resulting disruption to world energy markets tested the resilience of Chevron and our strategies like never before. As we look toward economic recovery, we are grateful for our people and our partners. They have risen to the challenge, keeping global supply chains moving, powering manufacturing and transportation systems to deliver equipment and supplies to frontline workers, and ensuring essential products are available to those in need. The opportunity to leverage our assets and global relationships to give aid to others has been an honor for all of us at Chevron. 1149230_Annual_Report_v8.3_r1.indd 2 1149230_Annual_Report_v8.3_r1.indd 2 3/12/21 10:29 AM 3/12/21 10:29 AM building on strengths Even before COVID-19, we were preparing to lead in a future marked by change. Our actions were proactive and disciplined – simplifying and modernizing work; integrating teams, processes and value chains across business units and geographies; elevating leadership capabilities; advancing digital solutions; and empowering our workforce to make decisions quickly, safely and with greater accountability. We leveraged our strengths to design a better company for the long term – one that can act deliberately, seize opportunity and generate stronger returns. And we remained true to our values, prepared to succeed in any environment, and adaptive in a dynamic world where disruption is routine. Our fnancial priorities have not changed: growing the dividend While others are lowering dividends, we have maintained ours as we know it is a vital source of stockholder income. In 2020, we increased our payout 8 percent, the 33rd consecutive annual increase in per-share dividend payout. maintaining a strong balance sheet Financial strength – demonstrated by our industry-leading net debt ratio – gives us the fexibility to navigate uncertain market conditions and address emerging opportunities. reinvesting to grow future cash fows Improving capital efciency allows us to sustain our future at a lower reinvestment rate. The Noble Energy acquisition is expected to generate free cash fow and added $13 billion in enterprise value. returning excess cash to stockholders After meeting the frst three priorities, we return excess cash to stockholders through buybacks. We have repurchased shares in 13 of the last 17 years, including returning $1.75 billion to stockholders in 2020. Our priorities anchor our commitment to deliver higher returns. They guide us in good times – and we stand by them in difcult times. They dictate a disciplined approach to capital allocation. They inform actions to strengthen our already advantaged portfolio through smart acquisitions and prudent divestments – focusing on assets that deliver higher returns. Our success in reliably delivering value for stockholders will be commemorated this year when we celebrate a full century on the New York Stock Exchange – one of only 29 companies to reach this milestone. operating with resilience During 2020, global oil demand fell by some 9 percent, while natural gas demand fell by a more modest 3 percent. Stress in energy markets was compounded by intense competition for market share among the world’s key oil producers. These disruptions occurred against the backdrop of geopolitical uncertainty and growing economic distress. We demonstrated both resilience and agility in adjusting to extreme market conditions, balancing short-term cash fow and long-term value. Our portfolio is anchored in businesses that are low cost, large scale and long-lived – from our royalty- advantaged position in the Permian and growing natural gas business in the Eastern Mediterranean to our feedstock- advantaged chemicals business and leading fuels brands on the U.S. West Coast. We expect to deliver results through the business cycle, creating greater value for our stockholders and stronger cash fow for decades. When market conditions deteriorated in 2020, we swiftly reduced capital spending by 35 percent from 2019. We also reduced operating costs, refecting our commitment to both capital and cost discipline. In the Permian Basin, we demonstrated our fexibility to cut short-cycle capital. At the same time, we redoubled internal transformation eforts to become more agile, cost efcient and streamlined. In our Upstream business, the acquisition of Noble Energy added complementary high-quality assets in Texas’s Permian Basin, Colorado’s DJ Basin and the Eastern Mediterranean. Portfolio additions in 2020 included approximately 5.67 million net exploration acres. We added 832 million barrels of net oil-equivalent proved reserves in 2020, with the largest net additions coming from the Noble Energy acquisition. Despite the challenges presented by the COVID-19 pandemic, we advanced construction of the Future Growth Project- Wellhead Pressure Management Project at Tengizchevroil in Kazakhstan. Over three years, we safely delivered by sea 408 modules, many of which weighed between 500 and 1,800 tons, to the Tengiz Field from fabrication sites in Italy, Kazakhstan and South Korea. Chevron Corporation 2020 Annual Report III 1149230_Annual_Report_v8.3.indd 3 1149230_Annual_Report_v8.3.indd 3 3/5/21 5:56 AM 3/5/21 5:56 AM In our Downstream business, we completed the acquisition of Puma Energy (Australia) Holdings Pty Ltd., adding a network of more than 360 company- and retailer-owned service stations, a commercial and industrial fuels business, owned and leased seaboard import terminals and fuel distribution depots. And we made excellent progress on GS Caltex’s olefns mixed-feed cracker project at the Yeosu Refnery in South Korea. In 2020, we also increased production of renewable products and investments in low-carbon technologies, consistent with our energy transition strategy to help advance a lower- carbon future. During the year, Chevron announced frst gas production at our CalBioGas renewable natural gas (RNG) joint venture in California, formed a new RNG partnership with Brightmark and announced frst production of renewable base oil through a joint venture with Novvi. During a year of unprecedented challenges, we also delivered one of our safest years ever. This refects our commitment to protecting people and the environment – and our unwavering determination to keep getting better. advancing a lower-carbon future Helping advance a lower-carbon future requires actions that drive measurable progress, demonstrating the improvements we are making today and our intention to do more tomorrow. Our energy transition strategy focuses on three action areas: y We are reducing the carbon intensity of our operations and assets, prioritizing the projects that return the largest reduction in carbon emissions at the lowest cost to customers and society. y We are increasing renewables and ofsets in support of our business. y And we are investing in low-carbon technologies to enable commercial solutions while leveraging our capabilities and operations to advance technologies such as carbon capture and hydrogen. great challenges – eliminating poverty, creating prosperity for all and delivering the sustainable environment everyone desires. On this foundation of hope, optimism and confdence, we can work together to achieve an even brighter future. At Chevron, our people are helping to build this future, providing the afordable, reliable, ever-cleaner energy that billions of people rely on every day. We take great pride in enabling human progress around the world. And we are deeply grateful to all our employees, partners and stockholders who make this work possible. Thank you for your support and the trust you place in us. These actions will help make energy and global supply chains more sustainable – so industries and customers who use our products can work toward building a lower-carbon world. Sincerely, looking ahead We are coming out of a year like none other: a global pandemic; a historic lockdown of economic activity; and unprecedented disruption in energy markets. Yet the greatest challenges can call forth the greatest responses. Through the power of innovation, markets and partnership, scientists developed multiple COVID-19 vaccines in record time. The tide is beginning to turn, and the pandemic will eventually recede. This inspiring example points the way to meeting other Michael K. Wirth Chairman of the Board and Chief Executive Ofcer Chevron Corporation 2020 Annual Report IV 1149230_Annual_Report_v8.3_r1.indd 4 1149230_Annual_Report_v8.3_r1.indd 4 3/12/21 10:37 AM 3/12/21 10:37 AM     “During a year of unprecedented challenges, we also delivered one of our safest years ever. This refects our commitment to protecting people and the environment – and our unwavering determination to keep getting better.” – Mike Wirth Photo: An operator aboard the Agbami floating production, storage and offloading vessel at the deepwater field 70 miles off the coast of central Nigeria. Chevron Corporation 2020 Annual Report V 1149230_Annual_Report_v8.3_r1.indd 5 1149230_Annual_Report_v8.3_r1.indd 5 3/12/21 10:38 AM 3/12/21 10:38 AM higher returns, lower carbon We are focused on earning higher returns in a lower-carbon future. We recognize the need both to deliver for our stockholders and to work with all stakeholders in a world moving toward a lower-carbon energy system. higher returns We plan to deliver higher returns on capital employed and create superior value for our stockholders by maintaining capital and cost discipline and staying anchored to our four financial priorities: growing the dividend 8% Increased dividend 8% in 2020 reinvesting in our business to grow future cash flows $13 billion maintaining a strong balance sheet 22.7% Achieved industry-leading 22.7% net debt ratio See page 46 for additional information returning excess cash to stockholders $1.75 billion Added $13 billion in enterprise value with Noble Energy acquisition Repurchased shares in 13 of the last 17 years, including $1.75 billion in 2020 Helping to advance a lower-carbon future means striving for actions that drive measurable progress. Our energy transition strategy focuses on three action areas: lower carbon lower carbon intensity cost efficiently increase renewables and offsets in support of our business invest in low‑ carbon technologies to enable commercial solutions We prioritize projects that return the largest reduction in carbon emissions at the lowest cost, and we hold ourselves accountable with transparent metrics. We are increasing the use of renewables in a number of our products, with the goal of reducing life-cycle emissions, in an effort to help our customers achieve their own lower-carbon goals. Chevron Corporation 2020 Annual Report VI We identify promising technologies with the goal of bringing down their cost and helping them compete effectively in the market to achieve global scale. “Helping advance a lower-carbon future requires actions that drive measurable progress, demonstrating the improvements we are making today and our intention to do more tomorrow.” – Mike Wirth Photo: With our Australian headquarters in Perth, Chevron has been present in the country for more than 60 years. At Chevron, we believe our business succeeds best when the people we work with and the communities in which we operate succeed too. 1149230_Annual_Report_v8.3_r1.indd 7 1149230_Annual_Report_v8.3_r1.indd 7 3/12/21 12:13 PM 3/12/21 12:13 PM our beliefs We strive to achieve results the right way. Our actions and investments are guided by a set of beliefs, which shape our culture and underpin our commitment to deliver for our stockholders, partners and all our stakeholders. energy is essential to modern life We work to provide the energy that enables human progress around the world. We live this purpose every day. human ingenuity fuels innovation The imagination and perseverance of people will deliver solutions to energy’s greatest challenges. the future is lower carbon Our actions will help make energy and global supply chains more sustainable – so industries and customers who use our products can work toward building a lower-carbon world. leadership carries great responsibility Meeting rising stakeholder expectations demands performance and accountability at the highest level. We aim to deliver industry-leading results. Photo: Chevron’s joint venture CalBioGas LLC successfully achieved first renewable natural gas production from dairy farms in Kern County, California, in 2020. CalBio brings technology and operational experience to help capture dairy biomethane as a fuel for heavy-duty vehicles. Chevron Corporation 2020 Annual Report VIII lead director: one-on-one Chevron’s lead independent Director, Ronald Sugar, talks with Director Enrique Hernandez Jr. about the link between strong fnancial results and environmental, social and governance (ESG) performance. Sugar: As the two longest-serving Directors on Chevron’s Board, we know strong ESG performance goes hand-in-hand with strong fnancial performance. The company’s resilient strategy and capital discipline enable us to continually strengthen our commitment to building a more sustainable future in any business environment. Our role as Directors is to help position the company to achieve higher returns in a world transitioning to a lower-carbon economy. In this environment, delivering on our ESG commitments will increasingly defne our success as a company and earn support from stockholders and our other stakeholders. Hernandez: That’s right, Ron. To maintain our fnancial strength and deliver on our ESG goals, we prioritize projects that we believe will return the largest reduction in carbon emissions at the lowest costs, and we hold ourselves accountable with transparent metrics. We also partner with those who have shared aspirations and where our combined strengths can have a tangible impact on advancing a lower-carbon future. Sugar: You and I have both met with groups of Chevron stockholders over the years, and we hear their expectations directly, particularly on accountability for ESG matters. We are actively working to lower the carbon intensity of our assets and operations by investing in technologies like carbon capture, utilization and storage and increasing the use of renewables and ofsets in our operations. These actions help lower our operating costs, and they help us meet the increasing expectations of society. For example, Chevron is co-developing up to 500 megawatts of renewable power to provide electricity to strategic assets across Chevron’s global portfolio. In 2020, Chevron also announced the frst production of 100 percent renewable base oil, and one of our joint ventures produced its frst renewable natural gas. Our goal is to help scale innovations like these both to use them across our global platform and to help our customers achieve their lower-carbon goals. These actions will make energy and global supply chains more sustainable. No company can do it alone, but we can all play our constructive part. Hernandez: As a member of the Board’s Public Policy and Sustainability Committee, I know that smart, inclusive public policy is an important part of this efort. We are committed to engaging with governments and stakeholders to create incentives for market-based solutions like carbon pricing and other policies that support the innovations needed to build a lower-carbon economy. These tools are critical to achieving progress on a global basis. Sugar: Rick, you mentioned metrics. You and I both serve on the Board’s Management Compensation Committee, where we set the metrics and monitor the company’s progress toward them. To hold ourselves accountable and allow stakeholders to measure our progress, Chevron has set equity greenhouse gas intensity reduction metrics that are communicated broadly and shared online. These metrics align with the Paris Agreement. To further build environmental progress into our company’s culture, we have tied our compensation plans for executives and employees directly to these metrics. Hernandez: As Board members, we know that transparency is critical to all our ESG eforts, and we aim to be an industry leader on carbon emissions reporting. Our reporting aligns with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures. Our 2020 Sustainability Report provides a detailed look at our performance on our ESG priorities such as global employee diversity, social investments in communities around the world, our stewardship on protecting the environments where we operate and strong governance. Sugar: As you and I well know, Chevron is in a long-cycle, complex global business, which means the Board must think about the future beyond current business conditions. It’s our job, working with Chevron’s diverse and engaged Board, to review, test, debate and, where necessary, work with management to adjust the company’s business strategy. The goal: to most efectively deploy Chevron’s capital and human talent to meet rising stockholder and stakeholder expectations in a world where fnancial results and ESG performance are inextricably linked. Learn more about our ESG eforts at www.chevron.com/sustainability Chevron Corporation 2020 Annual Report IX board of directors The Board of Directors of Chevron directs the affairs of the corporation and is committed to sound principles of corporate governance. The Directors bring a proven track record of success across a broad range of experiences at the policymaking level. Michael K� (Mike) Wirth, 60 Chairman of the Board and Chief Executive Officer since February 2018. Prior to his current role, Wirth served as vice chairman of the Board in 2017 and executive vice president of Midstream & Development from 2016 to 2018. In that role, he was responsible for supply and trading, shipping, pipeline, and power operating units; corporate strategy; business development; and policy, government and public affairs. Wirth was executive vice president of Downstream & Chemicals from 2006 to 2015. Prior to that, he served as president of Global Supply and Trading from 2003 to 2006. In 2001, Wirth was named president of Marketing for Chevron’s Asia/Middle East/Africa business, based in Singapore. He also served on the board of directors for Caltex Australia Limited and GS Caltex Corporation in South Korea. Wirth serves on the board of directors of Catalyst. He also serves on the board of directors and executive committee of the American Petroleum Institute and is a member of the National Petroleum Council, the Business Roundtable, the World Economic Forum International Business Council and the American Society of Corporate Executives. Wirth joined Chevron in 1982 as a design engineer. He earned a bachelor’s degree in chemical engineering from the University of Colorado in 1982. Wanda M� Austin, 66 Director since 2016. She holds an adjunct Research Professor appointment at the University of Southern California’s Viterbi School’s Department of Industrial and Systems Engineering. She is a retired president and chief executive ofcer of The Aerospace Corporation, a leading architect for the United States’ national security space programs. She is a director of Amgen Inc. and Virgin Galactic Holdings, Inc. (2,4) John B� Frank, 64 Director since 2017. He is vice chairman of Oaktree Capital Group LLC, a global investment management company with expertise in credit strategies. He is one of four members of Oaktree’s Executive Committee and was previously the frm’s principal executive ofcer. He is a director of Oaktree Capital Group LLC and its subsidiaries: Oaktree Acquisition Corporation II, Oaktree Acquisition Corporation III and Oaktree Specialty Lending Corporation. (1) Alice P� Gast, 62 Director since 2012. She is president of Imperial College London, a public research university specializing in science, engineering, medicine and business. Previously, she was president of Lehigh University in Pennsylvania. Prior to that, she was vice president for Research, associate provost and Robert T. Haslam Chair in Chemical Engineering at the Massachusetts Institute of Technology. (2,4) Enrique Hernandez Jr�, 65 Director since 2008. He is chairman and chief executive ofcer of Inter-Con Security Systems Inc., a global provider of security and facility support services to governments, utilities and industrial customers. He is chairman of the board of McDonald’s Corporation. (3,4) Marillyn A� Hewson, 67 Director since 2021. She has been strategic advisor to the chief executive ofcer of Lockheed Martin Corporation, a security and aerospace company, since March 2021. Previously, she was executive chairman, chairman, president and chief executive ofcer of Lockheed Martin Corporation. She is a director of Johnson & Johnson. (1) Jon M� Huntsman Jr�, 60 Director since 2020 and from 2014 to 2017 when he resigned to serve as the U.S. Ambassador to Russia. He served as U.S. Ambassador to China and was governor of Utah for two consecutive terms. He is a director of Ford Motor Company. (3,4) Charles W� Moorman IV, 69 Director since 2012. He is a retired chairman of the board, chief executive ofcer and president of Norfolk Southern Corporation, a freight and transportation company. He is a senior advisor to Amtrak, a passenger rail service provider, having previously served as Amtrak’s president and chief executive ofcer. He is a director of Oracle Corporation. (1) Dambisa F� Moyo, 52 Director since 2016. She is chief executive ofcer of Mildstorm LLC, focusing on the global economy and international afairs. Previously, she worked at Goldman Sachs in various roles and at the World Bank in Washington, D.C. She is the author of four New York Times bestsellers and is a director of 3M Company. (1) Debra Reed-Klages, 64 Director since 2018. She is a retired chairman, chief executive ofcer and president of Sempra Energy, an energy services holding company. Previously, she was executive vice president of Sempra Energy and president and chief executive ofcer of San Diego Gas & Electric and Southern California Gas Co. She is a director of Caterpillar Inc. and Lockheed Martin Corporation. (1) Ronald D� Sugar, 72 Lead Director since 2015 and a Director since 2005. He is an advisor and retired chairman and chief executive ofcer of Northrop Grumman Corporation, an aerospace and defense company. He is a senior advisor to Ares Management LLC; Bain & Company; Temasek Americas Advisory Panel, Singapore; G100 Network; and World 50. He is a director of Amgen Inc., Apple Inc. and Uber Technologies Inc. (2,3) D� James Umpleby III, 63 Director since 2018. He is chairman and chief executive ofcer of Caterpillar Inc., a leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. Previously, he was group president of Caterpillar’s Energy and Transportation business segment. (2,3) Committees of the Board 1)Audit: Charles W. Moorman IV, Chair 2)Nominating and Governance: Ronald D. Sugar, Chair 3)Management Compensation: Enrique Hernandez Jr., Chair 4) Public Policy and Sustainability: Wanda M. Austin, Chair Chevron Corporation 2020 Annual Report X       corporate officers Paul R� Antebi, 49 Vice President since 2021 and General Tax Counsel since 2021. Responsible for directing Chevron’s worldwide tax activities. Previously, the company’s Deputy General Tax Counsel. Joined the company in 1998. Pierre R� Breber, 56 Vice President and Chief Financial Officer since 2019. Responsible for controller, tax, treasury, audit and investor relations activities worldwide. Previously, Executive Vice President of Downstream and Chemicals. Joined the company in 1989. Mary A� Francis, 56 Corporate Secretary and Chief Governance Officer since 2015. Responsible for providing advice and counsel to the Board of Directors and senior management on corporate governance matters, managing the company’s corporate governance function, and serving on the Law Function Executive Committee. Previously, Chief Corporate Counsel. Joined the company in 2002. Joseph C� Geagea, 61 Executive Vice President, Technology, Projects and Services since 2015. Responsible for the Chevron Technical Center, including energy technology and innovation; capital projects delivery; IT; asset performance and process safety; and HSE. He is also responsible for environmental management; real estate; procurement; and talent selection. Previously Senior Vice President, Technology, Projects and Services. Joined the company in 1982. David A� Inchausti, 57 Vice President and Controller since 2019. Responsible for corporatewide accounting, fnancial reporting and analysis, internal controls, accounting policy, and digital fnance. Previously, Deputy Comptroller and Upstream Comptroller. Prior to that, 20 years abroad in multiple business units. Joined the company in 1988. James W� Johnson, 62 Executive Vice President, Upstream since 2015. Responsible for Chevron’s global exploration and production activities for crude oil and natural gas. Previously, Senior Vice President, Upstream; President, Chevron Europe, Eurasia and Middle East Exploration and Production Company; Managing Director, Eurasia Business Unit; and Managing Director, Australasia Business Unit. Joined the company in 1981. Navin K� Mahajan, 54 Vice President and Treasurer since 2019. Responsible for Chevron’s banking, fnancing, cash management, insurance, pension investments, and credits and receivables activities. Previously, Vice President of Finance for Downstream & Chemicals, Assistant Treasurer of Operating Company Financing, and Chief Compliance Ofcer. Joined the company in 1996. Rhonda J� Morris, 55 Vice President since 2016 and Chief Human Resources Officer since 2019. Responsible for human resources, diversity and inclusion, ombuds, and employee assistance/work life services. Previously, Vice President, Human Resources, Downstream & Chemicals. Joined the company in 1991. Mark A� Nelson, 57 Executive Vice President, Downstream & Chemicals since 2019. Responsible for directing the company’s worldwide manufacturing, marketing, lubricants, chemicals and Oronite additives businesses. Also oversees Chevron’s joint venture Chevron Phillips Chemical Company. Previously, Vice President, Midstream, Strategy & Policy. Joined the company in 1985. Bruce L� Niemeyer, 59 Vice President, Strategy & Sustainability since 2018. Responsible for guiding development of the company’s key strategies, including capital allocation and sustainability eforts. Previously, Vice President of Chevron’s Mid-Continent Business Unit; Vice President of the Appalachian/Michigan Business Unit; and General Manager of Strategy and Planning for Chevron North America Exploration & Production. Joined the company in 2000. Colin E� Parftt, 57 Vice President, Midstream since 2019. Responsible for Chevron’s Midstream business, including supply and trading activities, shipping, pipeline, and power and energy management. Appointed Chairman of the Board, Noble Midstream Partners GP LLC, in October 2020. Previously, President, Supply and Trading. Joined the company in 1995. R� Hewitt Pate, 58 Vice President and General Counsel since 2009. Responsible for directing the company’s worldwide legal afairs. Previously, Chair, Competition Practice, Hunton & Williams LLP, Washington, D.C., and Assistant Attorney General, Antitrust Division, U.S. Department of Justice. Joined the company in 2009. J� David Payne, 60 Vice President, Health, Safety and Environment (HSE) since 2018. Responsible for HSE strategic planning and issues management, compliance assurance and emergency response. Previously, Vice President of Drilling and Completions. Prior to that, Drilling Manager in Thailand. Joined the company in 1981. Jay R� Pryor, 63 Vice President, Business Development since 2006. Responsible for identifying and developing new, large-scale Upstream and Downstream business opportunities, including mergers and acquisitions. Previously, Managing Director, Chevron Nigeria Ltd., and Managing Director, Asia South Business Unit and Chevron Ofshore (Thailand) Ltd. Joined the company in 1979. Albert J� Williams, 52 Vice President, Corporate Afairs since 2021. Responsible for overseeing government afairs, public afairs, social investment and performance, and the company’s worldwide eforts to protect and enhance its reputation. Previously, Managing Director of Chevron Australia and head of the Australasia business unit. Joined the company in 1991. Retiring Ofcers Charles N� Macfarlane, retired efective February 2021; vice president, since 2013, and general tax counsel, since 2010; joined the company in 1986. Dale A� Walsh, retires efective May 2021; vice president, Corporate Afairs, since 2019; joined the company in 1983. Executive Committee Michael K. Wirth, Pierre R. Breber, Joseph C. Geagea, James W. Johnson, Mark A. Nelson, Colin E. Parfitt, R. Hewitt Pate and Rhonda J. Morris. Chevron Corporation 2020 Annual Report XI Photo: Workers at a drill site in the Permian Basin, where Chevron maintains one of the lowest venting and flaring rates of any company. Chevron s midcontinent business also has a dedicated water team, which implements strategies to reduce the amount of fresh water used for well completions. ’ Chevron Corporation 2020 Annual Report XII X-over .000 1149230_Annual_Report_v8.3_r2.indd 12 1149230_Annual_Report_v8.3_r2.indd 12 3/18/21 7:05 PM 3/18/21 7:05 PM chevron at a glance Chevron is one of the world’s leading integrated energy companies� We believe afordable, reliable and ever-cleaner energy is essential to achieving a more prosperous and sustainable world� Chevron produces crude oil and natural gas; manufactures transportation fuels, lubricants, petrochemicals and additives; and develops technologies that enhance our business and the industry� To advance a lower-carbon future, we are focused on cost efciently lowering our carbon intensity, increasing renewables and ofsets in support of our business, and investing in low-carbon technologies that enable commercial solutions� Our success is driven by a dedicated, diverse and highly skilled global workforce united by The Chevron Way, our enduring statement of culture and our commitment to delivering industry-leading results and superior stockholder value – in any operating  environment. We operate responsibly, applying advanced technologies and capturing high-return, lower- carbon opportunities that create stockholder value in a socially and environmentally responsible manner. 3.08 million barrels - net oil equivalent daily production1 $239.8 billion total assets2 11.1 billion barrels net oil -equivalent proved reserves2, 3 $94.5 billion sales and other operating revenues1 1 Year ended December 31, 2020 2 At December 31, 2020 3 For defnition of “reserves,” see glossary of energy and fnancial terms, page 112 Chevron Corporation 2020 Annual Report XIII chevron stock performance 2020 marked the 33rd consecutive year we increased the annual per-share dividend payout Indexed dividend growth Basis 2005 = 100 7.5% CVX compound annual growth rate 300 250 200 150 100 50 - ˜°°˛ Chevron - S&P 500 - Total stockholder returns* (as of 12/31/2020) 1-year ii -25.7% 20% 10% 0% -10% -20% -30% -40% -50% Peer group: BP p.l.c. (ADS), ExxonMobil, Royal Dutch Shell p.l.c. (ADS), Total S.A. (ADR). Dividends include both cash and scrip share distributions for European peers. ˜°˜° 5-year 3.1% ii •• 10% 5% 0% -5% -10% 10-year ii 3.2% 10% 5% 0% -5% -10% Peer group: BP p.l.c. (ADS), ExxonMobil, Royal Dutch Shell p.l.c. (ADS), Total S.A. (ADR) ■ * Annualized total stockholder return (TSR) as of 12/31/2020. Includes stock price appreciation and reinvested dividends when paid. For TSR comparison purposes, ADR/ADS prices and dividends are used for non-U.S.-based companies. Dividends include both cash and scrip share distributions. Performance graph The stock performance graph at right shows how an initial investment of $100 in Chevron stock would have compared with an equal investment in the S&P 500 Index or the Competitor Peer Group. The comparison covers a fve-year period beginning December 31, 2015, and ending December 31, 2020, and for the peer group is weighted by market capitalization as of the beginning of each year. It includes the reinvestment of all dividends that an investor would be entitled to receive and is adjusted for stock splits. The interim measurement points show the value of $100 invested on December 31, 2015, as of the end of each year between 2016 and 2020. Five-year cumulative total returns (calendar years ended December 31) $200 $175 $150 $125 $100 $203 $116 $93 $75 $50 ... ˜°˛˝ ... ˜°˛˙ Chevron S&P 500 ... ˜°˛ˆ ˜°˛ˇ ˜°˛˘ ˜°˜° Peer group: BP p.l.c. (ADS), ExxonMobil, Royal Dutch Shell p.l.c. (ADS), Total S.A. (ADR) Chevron Corporation 2020 Annual Report XIV financial and operating highlights Financial highlights1 Net income (loss) attributable to Chevron Corporation Sales and other operating revenues Cash fow from operating activities Capital and exploratory expenditures2 Total assets at year-end Total debt and fnance lease obligations Chevron Corporation stockholders’ equity at year-end Common shares outstanding at year-end (Thousands) Per-share data Net income (loss) attributable to Chevron Corporation – diluted Cash dividends Chevron Corporation stockholders’ equity Debt ratio3 Net debt ratio3 Return on stockholders’ equity3 Return on average capital employed3 1 Millions of dollars, except per-share amounts 2 Includes equity in afliates 3 See pages 45-46 for additional information $ $ $ $ $ $ $ $ $ $ 2020 (5,543) 94,471 10,576 13,499 239,790 44,315 131,688 1,911,018 (2.96) 5.16 68.91 25.2% 22.7% (4.0)% (2.8)% 2019 2018 $ 2,924 $ 139,865 27,314 $ 20,994 $ $ 237,428 $ 26,973 $ 144,213 1,868,000 $ $ $ 1.54 4.76 77.20 15.8% 12.8% 2.0% 2.0% $ 14,824 $ 158,902 30,618 $ 20,106 $ $ 253,863 $ 34,459 $ 154,554 1,888,670 $ $ $ 7.74 4.48 81.83 18.2% 13.5% 9.8% 8.2% Total capital and exploratory expenditures 4 ($ – Billions) Operating expense5 ($ – Billions) $50 $40 $30 $20 $10 $0 ~$20�5 billion reduction (2015–2020) ˜ˆˇ ˜˝˝ ˜°˛ ˜˝˙ ˜˝° ˜°ˆ˘ ˘ ˘ ˘ ˘ ˘ ˝˙˝˙ $35 $30 $25 $20 $15 $10 ~$2 billion reduction (2015–2020) ˛˜ˇ ˛˜˙ ˛˜˝ ˛˜˙ ˛˜ˆ ˛˜˙ ˇ˘ ˇ˘ ˇ˘ ˇ˘ ˇ˘ ˜°˜° 4 Includes expenditures by equity afliates. See our Annual Reports on Form 10-K for additional information. 5 Includes operating expense, selling, general and administrative expense, and other components of net periodic beneft costs. See our Annual Reports on Form 10-K for additional information. Operating highlights6 Net production of crude oil, condensate, NGLs and synthetic oil7 (Thousands of barrels per day) Net production of natural gas (Millions of cubic feet per day) Total net oil-equivalent production (Thousands of oil-equivalent barrels per day) Net proved reserves of crude oil, condensate, NGLs and synthetic oil7,8 (Millions of barrels) Net proved reserves of natural gas8 (Billions of cubic feet) Net proved oil-equivalent reserves8 (Millions of barrels) Refinery input (Thousands of barrels per day) Sales of refined products (Thousands of barrels per day) Number of employees at year-end9 2020 2019 2018 1,868 7,290 3,083 6,147 29,922 11,134 1,377 2,224 42,628 1,865 7,157 3,058 6,521 29,457 11,431 1,564 2,577 44,679 1,782 6,889 2,930 6,790 31,576 12,053 1,608 2,655 45,047 6 Includes equity in afliates, except number of employees 7 NGLs = natural gas liquids 8 At year-end 9 Excludes service station personnel Chevron Corporation 2020 Annual Report XV protecting people and the environment The Chevron Way’s emphasis on protecting people and the environment guides our commitment to operating safely and reliably. Our leaders drive a culture of Operational Excellence (OE) at Chevron, managing risk and learning from one another. We maintain a system of efective safeguards to keep our workforce, communities and environment safe. 2020 was our second-best year ever in overall OE performance. In personal safety, we set record lows in serious injuries and motor vehicle crashes. Our Total Recordable Injury Rate is the best in the industry. In process safety, we recorded for the frst time ever no Severe Tier 1 Loss of Containment  (LOC) incidents. This success is due to the Operational Excellence Management System (OEMS), followed by our workforce since 2004 to manage health, safety and environmental risks. The OEMS enables us to assess risks, identify safeguards and implement programs to assure the efectiveness of those safeguards. how we maintain safe operations comprehensive risk management based on data and science Preventing high-consequence incidents and impacts starts with understanding and mitigating risks. We manage risk across our six focus areas through a system of safeguards. Learn more at www.chevron.com/oems assess risk manage safeguards verify assurance our COVID-19 pandemic response maintaining a sense of vulnerability Our successful response to the COVID-19 pandemic has been enabled by our safety culture and tools, emphasizing “people frst and work second,” consistent with how we run our business using the OEMS. Everything we do comes with some level of risk. We routinely assess risk in our business, develop safeguards to mitigate it, and create an assurance process to verify an efective layer of safeguards is in place and functioning. COVID-19 posed a new risk, but one akin to occupational hygiene risks and potential exposures regularly addressed by our workforce. After adapting medical terminology to the language of our safety culture, we applied the same risk-based system to manage COVID-19, ensuring that both new and existing safeguards were not compromised by the pandemic. We remain consistent with the terms, principles and practices employed in our operations, continually looking at risk as we manage operations through the pandemic. Throughout the pandemic, we have relied on a key component of our process safety culture, the concept of maintaining a sense of vulnerability. To do this, we frst develop an awareness of the hazards inherent in our work. We then must remain vigilant for signs of complacency and indicators of weakness in our safeguards, including minor incidents that may foreshadow more serious consequences. In 2020, we again led the industry in process safety. We reduced the frequency and severity of LOC incidents through disciplined adherence to process safety standards while also building fuency and competency across our workforce. Despite a challenging business environment, we collaborated closely with industry partners to strengthen our approach to identifying and mitigating weaknesses in our process safety systems. More on our safety performance at www.chevron.com/sustainability. Chevron Corporation 2020 Annual Report XVI Financial Table of Contents Management’s Discussion and Analysis of Financial Condition and Results of Operations Key Financial Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Earnings by Major Operating Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Business Environment and Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Operating Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Consolidated Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Selected Operating Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Financial Ratios and Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Off-Balance-Sheet Arrangements, Contractual Obligations, Guarantees and Other Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Financial and Derivative Instrument Market Risk . . . . . . . . . . . . . . . . . . . 47 Transactions With Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Litigation and Other Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Critical Accounting Estimates and Assumptions . . . . . . . . . . . . . . . . . . . . 49 New Accounting Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Quarterly Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Consolidated Financial Statements Reports of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Report of Independent Registered Public Accounting Firm . . . . . . . . . . . 56 Consolidated Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . 60 Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Consolidated Statement of Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Management’s Discussion and Analysis of Financial Condition and Results of Operations 64 67 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes to the Consolidated Financial Statements Note 1 Note 2 Note 3 Summary of Significant Accounting Policies . . . . . . . . . . . . . . Changes in Accumulated Other Comprehensive Losses . . . Information Relating to the Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Accounting Standards Lease Commitments Summarized Financial Data – Chevron U.S.A. Inc. Fair Value Measurements Financial and Derivative Instruments Assets Held for Sale . . . . . Note 4 . . . . . . Note 5 . . . . . . . . . . . . Note 6 . . . . . . . . Note 7 . . . . . . . Note 8 . . . . . . . . . . . . . . . . . . . Note 9 . . . . . . . . . . . . Note 10 Equity . . . . . . . . . . . . . . . . . . . . . . . . Note 11 Earnings Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 12 Operating Segments and Geographic Data . . . . . . . . . . . . . . Note 13 . . . . . . Note 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 15 . . . . . . . . . . . Note 16 Properties, Plant and Equipment . . . Note 17 Short-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 19 Accounting for Suspended Exploratory Wells . . . . . Note 20 Stock Options and Other Share-Based Compensation . . . . . . . . . . Note 21 Employee Benefit Plans . . . . . . . . . . . . . . . . . Note 22 Other Contingencies and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . Note 23 Asset Retirement Obligations Note 24 Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 25 Other Financial Information . . . . . . Note 26 Summarized Financial Data – Chevron Phillips Chemical . . . . . . . . . . . . . Investments and Advances Litigation Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-Term Debt . . . . . . . . . . . . . . Company LLC 68 69 69 71 71 72 74 74 74 74 77 78 79 82 83 84 85 86 87 92 94 94 95 Note 27 Restructuring and Reorganization Costs Note 28 Note 29 Acquisition of Noble Energy, Inc. Financial Instruments – Credit Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 95 96 96 . . . . . . . . . . . . . . . . . . . . . Five-Year Financial Summary . . . . . . . . . . . . . . . . . . . . . Supplemental Information on Oil and Gas Producing Activities . . . . . . . . . . . . . . . . . . . . . . 98 99 Refer to the “Results of Operations” section beginning on page 37 for a discussion of financial results by major operating CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Annual Report of Chevron Corporation contains forward-looking statements relating to Chevron’s operations that are based on management’s current expectations, estimates and projections about the petroleum, chemicals and other energy-related industries. Words or phrases such as [“anticipates,” “expects,” “intends,” “plans,” “targets,” “forecasts,” “projects,” “believes,” “seeks,” “schedules,” “estimates,” “positions,” “pursues,” “may,” “could,” “should,” “will,” “budgets,” “outlook,” “trends,” “guidance,” “focus,” “on schedule,” “on track,” “is slated,” “goals,” “objectives,” “strategies,” “opportunities,” “poised,” “potential”] and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond the company’s control and are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Unless legally required, Chevron undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are: changing crude oil and natural gas prices and demand for our products, and production curtailments due to market conditions; crude oil production quotas or other actions that might be imposed by the Organization of Petroleum Exporting Countries (OPEC) and other producing countries; public health crises, such as pandemics (including coronavirus (COVID-19)) and epidemics, and any related government policies and actions; changing economic, regulatory and political environments in the various countries in which the company operates; general domestic and international economic and political conditions; changing refining, marketing and chemicals margins; the company’s ability to realize anticipated cost savings, expenditure reductions and efficiencies associated with enterprise transformation initiatives; actions of competitors or regulators; timing of exploration expenses; timing of crude oil liftings; the competitiveness of alternate- energy sources or product substitutes; technological developments; the results of operations and financial condition of the company’s suppliers, vendors, partners and equity affiliates, particularly during extended periods of low prices for crude oil and natural gas during the COVID-19 pandemic; the inability or failure of the company’s joint-venture partners to fund their share of operations and development activities; the potential failure to achieve expected net production from existing and future crude oil and natural gas development projects; potential delays in the development, construction or start-up of planned projects; the potential disruption or interruption of the company’s operations due to war, accidents, political events, civil unrest, severe weather, cyber threats, terrorist acts, or other natural or human causes beyond the company’s control; the potential liability for remedial actions or assessments under existing or future environmental regulations and litigation; significant operational, investment or product changes required by existing or future environmental statutes and regulations, including international agreements and national or regional legislation and regulatory measures to limit or reduce greenhouse gas emissions; the potential liability resulting from pending or future litigation; the company’s ability to achieve the anticipated benefits from the acquisition of Noble Energy, Inc.; the company’s future acquisitions or dispositions of assets or shares or the delay or failure of such transactions to close based on required closing conditions; the potential for gains and losses from asset dispositions or impairments; government mandated sales, divestitures, recapitalizations, industry-specific taxes, tariffs, sanctions, changes in fiscal terms or restrictions on scope of company operations; foreign currency movements compared with the U.S. dollar; material reductions in corporate liquidity and access to debt markets; the receipt of required Board authorizations to pay future dividends; the effects of changed accounting rules under generally accepted accounting principles promulgated by rule-setting bodies; the company’s ability to identify and mitigate the risks and hazards inherent in operating in the global energy industry; and the factors set forth under the heading “Risk Factors” on pages 18 through 23 in the Annual Report on Form 10-K. Other unpredictable or unknown factors not discussed in this report could also have material adverse effects on forward-looking statements. 30 Chevron Corporation 2020 Annual Report 30 173155_Annual_Report_10-K.indd 30 173155_Annual_Report_10-K.indd 30 3/5/21 6:04 PM 3/5/21 6:04 PM Key Financial Results Millions of dollars, except per-share amounts Net Income (Loss) Attributable to Chevron Corporation Per Share Amounts: Net Income (Loss) Attributable to Chevron Corporation – Basic – Diluted Dividends Sales and Other Operating Revenues Return on: Capital Employed Stockholders’ Equity Earnings by Major Operating Area Millions of dollars Upstream United States International Total Upstream Downstream United States International Total Downstream All Other Net Income (Loss) Attributable to Chevron Corporation1,2 1 Includes foreign currency effects: 2 Income net of tax, also referred to as “earnings” in the discussions that follow. area for the three years ended December 31, 2020. Business Environment and Outlook $ $ $ $ $ 2020 (5,543) (2.96) (2.96) 5.16 94,471 (2.8)% (4.0)% 2019 2018 2,924 $ 14,824 139,865 158,902 1.55 1.54 4.76 $ $ $ $ 2.0% 2.0% 7.81 7.74 4.48 8.2% 9.8% 2020 2019 2018 $ (5,094) $ (1,608) (825) (2,433) (571) 618 47 (3,157) (5,543) (645) 7,670 2,576 1,559 922 2,481 (2,133) 2,924 (304) $ $ $ $ 3,278 10,038 13,316 2,103 1,695 3,798 (2,290) 14,824 611 $ $ $ $ $ $ $ $ Chevron is a global energy company with substantial business activities in the following countries: Angola, Argentina, Australia, Bangladesh, Brazil, Canada, China, Egypt, Equatorial Guinea, Indonesia, Israel, Kazakhstan, Kurdistan Region of Iraq, Myanmar, Mexico, Nigeria, the Partitioned Zone between Saudi Arabia and Kuwait, the Philippines, Republic of Congo, Singapore, South Korea, Thailand, the United Kingdom, the United States, and Venezuela. The company’s objective is to deliver higher returns, lower carbon and superior shareholder value in any business environment. Earnings of the company depend mostly on the profitability of its upstream business segment. The most significant factor affecting the results of operations for the upstream segment is the price of crude oil, which is determined in global markets outside of the company’s control. In the company’s downstream business, crude oil is the largest cost component of refined products. Periods of sustained lower prices could result in the impairment or write-off of specific assets in future periods and cause the company to adjust operating expenses, including employee reductions, and capital and exploratory expenditures, along with other measures intended to improve financial performance. Similarly, impairments or write-offs have occurred, and may occur in the future, as a result of managerial decisions not to progress certain projects in the company’s portfolio. With ongoing global interest in addressing the risks of climate change, support for policies and advancements in lower carbon technologies is expected. In seeking to help advance a lower carbon future, Chevron is focused on lowering its carbon intensity cost efficiently, increasing renewables and offsets in support of its business, and investing in low-carbon technologies to enable commercial solutions. Response to Market Conditions and COVID-19 During most of 2020, travel restrictions and other constraints on economic activity designed to limit the spread of the COVID-19 virus were implemented in many locations around the world. These constraints reduced demand for our products, and commodity prices fell, negatively impacting the company’s 2020 financial and operating results. While demand and commodity prices have shown signs of recovery, demand is not back to pre-pandemic levels, and financial results will likely continue to be challenged in future quarters. Due to the rapidly 31 Management’s Discussion and Analysis of Financial Condition and Results of Operations Key Financial Results Millions of dollars, except per-share amounts Net Income (Loss) Attributable to Chevron Corporation Per Share Amounts: Net Income (Loss) Attributable to Chevron Corporation – Basic – Diluted Dividends Sales and Other Operating Revenues Return on: Capital Employed Stockholders’ Equity Earnings by Major Operating Area Millions of dollars Upstream United States International Total Upstream Downstream United States International Total Downstream All Other Net Income (Loss) Attributable to Chevron Corporation1,2 1 Includes foreign currency effects: 2 Income net of tax, also referred to as “earnings” in the discussions that follow. 2020 2019 2018 $ (5,543) $ $ $ $ (2.96) (2.96) 5.16 94,471 $ $ $ $ $ 2,924 $ 14,824 1.55 1.54 4.76 139,865 $ $ $ $ 7.81 7.74 4.48 158,902 (2.8)% (4.0)% 2.0% 2.0% 8.2% 9.8% 2020 2019 2018 $ $ $ (1,608) (825) (2,433) (571) 618 47 (3,157) (5,543) (645) $ (5,094) $ 7,670 2,576 1,559 922 2,481 3,278 10,038 13,316 2,103 1,695 3,798 (2,133) 2,924 $ (2,290) 14,824 (304) $ 611 $ $ Refer to the “Results of Operations” section beginning on page 37 for a discussion of financial results by major operating area for the three years ended December 31, 2020. Business Environment and Outlook Chevron is a global energy company with substantial business activities in the following countries: Angola, Argentina, Australia, Bangladesh, Brazil, Canada, China, Egypt, Equatorial Guinea, Indonesia, Israel, Kazakhstan, Kurdistan Region of Iraq, Myanmar, Mexico, Nigeria, the Partitioned Zone between Saudi Arabia and Kuwait, the Philippines, Republic of Congo, Singapore, South Korea, Thailand, the United Kingdom, the United States, and Venezuela. The company’s objective is to deliver higher returns, lower carbon and superior shareholder value in any business environment. Earnings of the company depend mostly on the profitability of its upstream business segment. The most significant factor affecting the results of operations for the upstream segment is the price of crude oil, which is determined in global markets outside of the company’s control. In the company’s downstream business, crude oil is the largest cost component of refined products. Periods of sustained lower prices could result in the impairment or write-off of specific assets in future periods and cause the company to adjust operating expenses, including employee reductions, and capital and exploratory expenditures, along with other measures intended to improve financial performance. Similarly, impairments or write-offs have occurred, and may occur in the future, as a result of managerial decisions not to progress certain projects in the company’s portfolio. With ongoing global interest in addressing the risks of climate change, support for policies and advancements in lower carbon technologies is expected. In seeking to help advance a lower carbon future, Chevron is focused on lowering its carbon intensity cost efficiently, increasing renewables and offsets in support of its business, and investing in low-carbon technologies to enable commercial solutions. Response to Market Conditions and COVID-19 During most of 2020, travel restrictions and other constraints on economic activity designed to limit the spread of the COVID-19 virus were implemented in many locations around the world. These constraints reduced demand for our products, and commodity prices fell, negatively impacting the company’s 2020 financial and operating results. While demand and commodity prices have shown signs of recovery, demand is not back to pre-pandemic levels, and financial results will likely continue to be challenged in future quarters. Due to the rapidly Chevron Corporation 2020 Annual Report 31 Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations changing environment, there continues to be uncertainty and unpredictability around the extent to which the COVID-19 pandemic will impact our future results, which could be material. Chevron entered this crisis well positioned with a strong balance sheet, flexible capital program and low cash flow breakeven price. To protect its long-term health and value, the company took swift action, adjusting the items it can control. The company lowered its capital expenditures 35 percent and lowered its operating expense, excluding non-recurring severance costs, by $1.4 billion compared to 2019. The company completed an enterprise-wide transformation that is expected to capture additional cost efficiencies. Additionally, the company suspended its stock repurchase program in March 2020. Taken together, these actions are consistent with our financial priorities: to protect the dividend, to prioritize capital spend that drives long-term value, and to maintain a strong balance sheet. The company expects to continue to have sufficient liquidity and access to both commercial paper and debt capital markets due to its strong balance sheet and investment grade credit ratings. Additionally, the company has access to nearly $10 billion in committed credit facilities. The effective tax rate for the company can change substantially during periods of significant earnings volatility. This is due to the mix effects that are impacted both by the absolute level of earnings or losses and whether they arise in higher or lower tax rate jurisdictions. As a result, a decline or increase in the effective income tax rate in one period may not be indicative of expected results in future periods. Note 15 provides the company’s effective income tax rate for the last three years. Refer to the “Cautionary Statements Relevant to Forward-Looking Information” on page 2 and to “Risk Factors” in Part I, Item 1A, on pages 18 through 23 of the company’s Annual Report on Form 10-K for a discussion of some of the inherent risks that could materially impact the company’s results of operations or financial condition. The company continually evaluates opportunities to dispose of assets that are not expected to provide sufficient long-term value or to acquire assets or operations complementary to its asset base to help augment the company’s financial performance and value growth. Asset dispositions and restructurings may result in significant gains or losses in future periods. The company’s asset sale program for 2018 through 2020 targeted before-tax proceeds of $5-10 billion. For the three year period ending December 31, 2020, assets sales proceeds totaled $7.7 billion, in the middle of the guidance range. The company closely monitors developments in the financial and credit markets, the level of worldwide economic activity, and the implications for the company of movements in prices for crude oil and natural gas. Management takes these developments into account in the conduct of daily operations and for business planning. Comments related to earnings trends for the company’s major business areas are as follows: Upstream Earnings for the upstream segment are closely aligned with industry prices for crude oil and natural gas. Crude oil and natural gas prices are subject to external factors over which the company has no control, including product demand connected with global economic conditions, industry production and inventory levels, technology advancements, production quotas or other actions imposed by the Organization of Petroleum Exporting Countries (OPEC) or other producers, actions of regulators, weather-related damage and disruptions, competing fuel prices, natural and human causes beyond the company’s control such as the COVID-19 pandemic, and regional supply interruptions or fears thereof that may be caused by military conflicts, civil unrest or political uncertainty. Any of these factors could also inhibit the company’s production capacity in an affected region. The company closely monitors developments in the countries in which it operates and holds investments, and seeks to manage risks in operating its facilities and businesses. The longer-term trend in earnings for the upstream segment is also a function of other factors, including the company’s ability to find or acquire and efficiently produce crude oil and natural gas, changes in fiscal terms of contracts, and changes in tax and other applicable laws and regulations. The company is actively managing its schedule of work, contracting, procurement, and supply chain activities to effectively manage costs and ensure supply chain resiliency and continuity in support of operational goals. Third party costs for capital, exploration, and operating expenses can be subject to external factors beyond the company’s control including, but not limited to: the general level of inflation, tariffs or other taxes imposed on goods or services, and market based prices charged by the industry’s material and service providers. Chevron utilizes contracts with various pricing mechanisms, so there may be a lag before the company’s costs reflect the changes in market trends. The spot markets and some of the current cost indexes for many materials and services have stabilized. Crude oil and natural gas prices and demand have rebounded from lows of the early pandemic though demand still has not returned to pre-pandemic levels. Drilling activity in the U.S. has risen slowly but steadily through the end of the year. The timing and 32 Chevron Corporation 2020 Annual Report 32 173155_Annual_Report_10-K.indd 32 173155_Annual_Report_10-K.indd 32 3/5/21 6:04 PM 3/5/21 6:04 PM trajectory of any increase in the cost of materials and services going forward will depend on the extent of the oil and gas industry recovery. Correlated with these initial signs of industry recovery and cost stabilization was a noticeable improvement in the risk of default for key suppliers. To date, there have been no material impacts to operations due to supplier defaults. Chevron is actively monitoring and engaging key suppliers to mitigate any potential business impacts. Capital and exploratory expenditures and operating expenses could also be affected by damage to production facilities caused by severe weather or civil unrest, delays in construction, or other factors. WTI Crude Oil, Brent Crude Oil and Henry Hub Natural Gas Spot Prices - Quarterly Average Brent WTI Henry Hub Oil $/bbl 90 75 60 45 30 15 0 HH $/mcf 15.00 12.50 10.00 7.50 5.00 2.50 0.00 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2018 2019 2020 The chart above shows the trend in benchmark prices for Brent crude oil, West Texas Intermediate (WTI) crude oil and U.S. Henry Hub natural gas. The Brent price averaged $42 per barrel for the full-year 2020, compared to $64 in 2019. As of mid-February 2021, the Brent price was $64 per barrel. The WTI price averaged $39 per barrel for the full-year 2020, compared to $57 in 2019. As of mid-February 2021, the WTI price was $60 per barrel. The majority of the company’s equity crude production is priced based on the Brent benchmark. Crude prices sharply declined at the end of the first and into the second quarter 2020 due to surplus supply as demand decreased following government-imposed travel restrictions and other constraints on economic activity. In the second half of 2020, the supply/demand balance slowly improved, primarily due to production cuts and demand growth, allowing prices to somewhat recover. The company’s average realization for U.S. crude oil and natural gas liquids in 2020 was $31 per barrel, down 37 percent from 2019. The company’s average realization for international crude oil and natural gas liquids in 2020 was $36 per barrel, down 38 percent from 2019. Prices for natural gas are more closely aligned with seasonal supply-and-demand and infrastructure conditions in local markets. In the United States, prices at Henry Hub averaged $1.98 per thousand cubic feet (MCF) during 2020, compared with $2.53 per MCF during 2019. As of mid-February 2021, the Henry Hub spot price increased to $6.00 per MCF amid freezing temperatures across much of the United States. Outside the United States, prices for natural gas depend on a wide range of supply, demand and regulatory circumstances. The company’s long-term contract prices for liquefied natural gas (LNG) are typically linked to crude oil prices. Most of the equity LNG offtake from the operated Australian LNG projects is committed under binding long-term contracts, with the remainder to be sold in the Asian spot LNG market. International natural gas realizations averaged $4.59 per MCF during 2020, compared with $5.83 per MCF during 2019. (See page 41 for the company’s average natural gas realizations for the U.S. and international regions.) The company’s worldwide net oil-equivalent production in 2020 averaged 3.083 million barrels per day. About 14 percent of the company’s net oil-equivalent production in 2020 occurred in the OPEC-member countries of Angola, Equatorial Guinea, Nigeria, the Partitioned Zone between Saudi Arabia and Kuwait, Republic of Congo and Venezuela. The company estimates that net oil-equivalent production in 2021 will grow up to 3 percent compared to 2020, assuming a Brent crude oil price of $50 per barrel and excluding the impact of anticipated 2021 asset sales. This estimate is subject to many factors and uncertainties, including quotas or other actions that may be imposed by OPEC+; price effects on entitlement volumes; changes in fiscal terms or restrictions on the scope of company operations; delays in construction; reservoir performance; greater-than-expected declines in production from mature fields; start-up or ramp-up of projects; fluctuations in demand for crude oil and natural gas in various markets; weather conditions that may shut in production; civil unrest; changing geopolitics; delays in completion of maintenance turnarounds; storage constraints or economic 33 Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations changing environment, there continues to be uncertainty and unpredictability around the extent to which the COVID-19 pandemic will impact our future results, which could be material. Chevron entered this crisis well positioned with a strong balance sheet, flexible capital program and low cash flow breakeven price. To protect its long-term health and value, the company took swift action, adjusting the items it can control. The company lowered its capital expenditures 35 percent and lowered its operating expense, excluding non-recurring severance costs, by $1.4 billion compared to 2019. The company completed an enterprise-wide transformation that is expected to capture additional cost efficiencies. Additionally, the company suspended its stock repurchase program in March 2020. Taken together, these actions are consistent with our financial priorities: to protect the dividend, to prioritize capital spend that drives long-term value, and to maintain a strong balance sheet. The company expects to continue to have sufficient liquidity and access to both commercial paper and debt capital markets due to its strong balance sheet and investment grade credit ratings. Additionally, the company has access to nearly $10 billion in committed credit facilities. The effective tax rate for the company can change substantially during periods of significant earnings volatility. This is due to the mix effects that are impacted both by the absolute level of earnings or losses and whether they arise in higher or lower tax rate jurisdictions. As a result, a decline or increase in the effective income tax rate in one period may not be indicative of expected results in future periods. Note 15 provides the company’s effective income tax rate for the last three years. Refer to the “Cautionary Statements Relevant to Forward-Looking Information” on page 2 and to “Risk Factors” in Part I, Item 1A, on pages 18 through 23 of the company’s Annual Report on Form 10-K for a discussion of some of the inherent risks that could materially impact the company’s results of operations or financial condition. The company continually evaluates opportunities to dispose of assets that are not expected to provide sufficient long-term value or to acquire assets or operations complementary to its asset base to help augment the company’s financial performance and value growth. Asset dispositions and restructurings may result in significant gains or losses in future periods. The company’s asset sale program for 2018 through 2020 targeted before-tax proceeds of $5-10 billion. For the three year period ending December 31, 2020, assets sales proceeds totaled $7.7 billion, in the middle of the guidance range. The company closely monitors developments in the financial and credit markets, the level of worldwide economic activity, and the implications for the company of movements in prices for crude oil and natural gas. Management takes these developments into account in the conduct of daily operations and for business planning. Comments related to earnings trends for the company’s major business areas are as follows: Upstream Earnings for the upstream segment are closely aligned with industry prices for crude oil and natural gas. Crude oil and natural gas prices are subject to external factors over which the company has no control, including product demand connected with global economic conditions, industry production and inventory levels, technology advancements, production quotas or other actions imposed by the Organization of Petroleum Exporting Countries (OPEC) or other producers, actions of regulators, weather-related damage and disruptions, competing fuel prices, natural and human causes beyond the company’s control such as the COVID-19 pandemic, and regional supply interruptions or fears thereof that may be caused by military conflicts, civil unrest or political uncertainty. Any of these factors could also inhibit the company’s production capacity in an affected region. The company closely monitors developments in the countries in which it operates and holds investments, and seeks to manage risks in operating its facilities and businesses. The longer-term trend in earnings for the upstream segment is also a function of other factors, including the company’s ability to find or acquire and efficiently produce crude oil and natural gas, changes in fiscal terms of contracts, and changes in tax and other applicable laws and regulations. The company is actively managing its schedule of work, contracting, procurement, and supply chain activities to effectively manage costs and ensure supply chain resiliency and continuity in support of operational goals. Third party costs for capital, exploration, and operating expenses can be subject to external factors beyond the company’s control including, but not limited to: the general level of inflation, tariffs or other taxes imposed on goods or services, and market based prices charged by the industry’s material and service providers. Chevron utilizes contracts with various pricing mechanisms, so there may be a lag before the company’s costs reflect the changes in market trends. The spot markets and some of the current cost indexes for many materials and services have stabilized. Crude oil and natural gas prices and demand have rebounded from lows of the early pandemic though demand still has not returned to pre-pandemic levels. Drilling activity in the U.S. has risen slowly but steadily through the end of the year. The timing and trajectory of any increase in the cost of materials and services going forward will depend on the extent of the oil and gas industry recovery. Correlated with these initial signs of industry recovery and cost stabilization was a noticeable improvement in the risk of default for key suppliers. To date, there have been no material impacts to operations due to supplier defaults. Chevron is actively monitoring and engaging key suppliers to mitigate any potential business impacts. Capital and exploratory expenditures and operating expenses could also be affected by damage to production facilities caused by severe weather or civil unrest, delays in construction, or other factors. WTI Crude Oil, Brent Crude Oil and Henry Hub Natural Gas Spot Prices - Quarterly Average Brent WTI Henry Hub Oil $/bbl 90 75 60 45 30 15 0 HH $/mcf 15.00 12.50 10.00 7.50 5.00 2.50 0.00 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2018 2019 2020 The chart above shows the trend in benchmark prices for Brent crude oil, West Texas Intermediate (WTI) crude oil and U.S. Henry Hub natural gas. The Brent price averaged $42 per barrel for the full-year 2020, compared to $64 in 2019. As of mid-February 2021, the Brent price was $64 per barrel. The WTI price averaged $39 per barrel for the full-year 2020, compared to $57 in 2019. As of mid-February 2021, the WTI price was $60 per barrel. The majority of the company’s equity crude production is priced based on the Brent benchmark. Crude prices sharply declined at the end of the first and into the second quarter 2020 due to surplus supply as demand decreased following government-imposed travel restrictions and other constraints on economic activity. In the second half of 2020, the supply/demand balance slowly improved, primarily due to production cuts and demand growth, allowing prices to somewhat recover. The company’s average realization for U.S. crude oil and natural gas liquids in 2020 was $31 per barrel, down 37 percent from 2019. The company’s average realization for international crude oil and natural gas liquids in 2020 was $36 per barrel, down 38 percent from 2019. Prices for natural gas are more closely aligned with seasonal supply-and-demand and infrastructure conditions in local markets. In the United States, prices at Henry Hub averaged $1.98 per thousand cubic feet (MCF) during 2020, compared with $2.53 per MCF during 2019. As of mid-February 2021, the Henry Hub spot price increased to $6.00 per MCF amid freezing temperatures across much of the United States. Outside the United States, prices for natural gas depend on a wide range of supply, demand and regulatory circumstances. The company’s long-term contract prices for liquefied natural gas (LNG) are typically linked to crude oil prices. Most of the equity LNG offtake from the operated Australian LNG projects is committed under binding long-term contracts, with the remainder to be sold in the Asian spot LNG market. International natural gas realizations averaged $4.59 per MCF during 2020, compared with $5.83 per MCF during 2019. (See page 41 for the company’s average natural gas realizations for the U.S. and international regions.) The company’s worldwide net oil-equivalent production in 2020 averaged 3.083 million barrels per day. About 14 percent of the company’s net oil-equivalent production in 2020 occurred in the OPEC-member countries of Angola, Equatorial Guinea, Nigeria, the Partitioned Zone between Saudi Arabia and Kuwait, Republic of Congo and Venezuela. The company estimates that net oil-equivalent production in 2021 will grow up to 3 percent compared to 2020, assuming a Brent crude oil price of $50 per barrel and excluding the impact of anticipated 2021 asset sales. This estimate is subject to many factors and uncertainties, including quotas or other actions that may be imposed by OPEC+; price effects on entitlement volumes; changes in fiscal terms or restrictions on the scope of company operations; delays in construction; reservoir performance; greater-than-expected declines in production from mature fields; start-up or ramp-up of projects; fluctuations in demand for crude oil and natural gas in various markets; weather conditions that may shut in production; civil unrest; changing geopolitics; delays in completion of maintenance turnarounds; storage constraints or economic 32 33 Chevron Corporation 2020 Annual Report 33 173155_Annual_Report_10-K.indd 33 173155_Annual_Report_10-K.indd 33 3/5/21 6:04 PM 3/5/21 6:04 PM Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations conditions that could lead to shut-in production; or other disruptions to operations. The outlook for future production levels is also affected by the size and number of economic investment opportunities and the time lag between initial exploration and the beginning of production. The company has increased its investment emphasis on short-cycle projects, but these too are under pressure in the current market environment. In the Partitioned Zone between Saudi Arabia and Kuwait, production was shut-in beginning in May 2015. In December 2019, the governments of Saudi Arabia and Kuwait signed a memorandum of understanding to allow production to restart in the Partitioned Zone. In mid-February 2020, pre-startup activities commenced, and production resumed in July 2020. The financial effects from the loss of production in 2019 and first half 2020 were not significant. During the fourth quarter 2020, oil equivalent production in the Partitioned Zone averaged 40 thousand barrels per day. Chevron has interests in Venezuelan crude oil assets, including those operated by Petropiar, Petroboscan and Petroindependiente. While the operating environment in Venezuela has been deteriorating for some time, Petropiar, Petroboscan, and Petroindependiente have conducted activities consistent with the authorization provided pursuant to general licenses issued by the United States government. During the second quarter 2020, the company completed its evaluation of the carrying value of its Venezuelan investments in line with its accounting policies and concluded that given the current operating environment and overall outlook, which created significant uncertainties regarding the recovery of the company’s investment, an other than temporary loss of value had occurred, which resulted in a full impairment of its investment in the country totaling $2.6 billion and change in accounting treatment from equity method to non-equity method of accounting. As a result, the company also removed approximately 160 million barrels of proved reserves and stopped reporting production in the country effective July 2020. The company remains committed to its people, assets and operations in Venezuela. Net proved reserves for consolidated companies and affiliated companies totaled 11.1 billion barrels of oil-equivalent at year-end 2020, a decrease of 3 percent from year-end 2019. The reserve replacement ratio in 2020 was 74 percent. The 5 and 10 year reserve replacement ratios were 99 percent and 106 percent, respectively. Refer to Table V beginning on page 103 for a tabulation of the company’s proved net oil and gas reserves by geographic area, at the beginning of 2018 and each year-end from 2018 through 2020, and an accompanying discussion of major changes to proved reserves by geographic area for the three-year period ending December 31, 2020. Response to Market Conditions and COVID-19: Upstream Travel restrictions and other constraints on global economic activity in 2020 in response to COVID-19 caused a significant decrease in demand for oil and gas. This led to lower price realizations across all commodities. While critical asset integrity and reliability activities progressed throughout the year, 34 Chevron Corporation 2020 Annual Report 34 173155_Annual_Report_10-K.indd 34 173155_Annual_Report_10-K.indd 34 3/5/21 6:04 PM 3/5/21 6:04 PM locations with high COVID-19 infection rates deferred non-essential work and demobilized non-essential personnel to reduce the COVID-19 exposure risk to our workforce. Despite the challenges posed by the pandemic, progress continues on the FGP/WPMP project at Tengiz. In the second quarter the project construction workforce was demobilized to 20 percent of planned levels, which slowed the overall construction pace. In the third quarter, the rate of infections in Kazakhstan slowed, allowing remobilization of the FGP/ WPMP construction workforce to begin. In the fourth quarter, staffing levels at FGP/WPMP returned to 95 percent of desired fourth quarter remobilization levels, however a worldwide resurgence of infections prevented the remaining 5 percent of the workforce from returning to work and slowed progress on the project. Extended rotations, COVID testing and isolation protocols are in place to minimize the spread of the virus. Given the uncertain timeline for remobilizing all personnel and safely sustaining activity levels, it is too early to provide meaningful information regarding impacts on project cost and schedule. Facility maintenance turnarounds are being adjusted and, in certain cases, deferred into 2021. In some cases, turnarounds have been extended in duration and/or reduced in scope in response to the pandemic. As a result of the reduction in capital expenditures, new production is expected to be lower in the near term as drilling and completion activities are scaled back, most notably in the Permian Basin, Gulf of Mexico, and Argentina. Exploration activities and projects not yet in execution phase have been deferred, which may impact production in future years. Production levels were curtailed in 2020 largely because of reductions imposed by OPEC+ nations in Kazakhstan, Nigeria and Angola. In the fourth quarter, OPEC+ curtailments eased slightly relative to the third quarter. Production has also been curtailed due to market conditions, most notably in Thailand. Additionally, operators of assets where the company has non-operated interests also curtailed production. Production curtailments of approximately 106 thousand barrels of oil equivalent per day were recorded in 2020. In the first quarter of 2021, we expect curtailments to be approximately 40 thousand barrels of oil equivalent per day, predominately related to OPEC+ restrictions. Decreased capital expenditures, lower activity levels, delays in future development timing, and lower commodity prices have resulted in reductions to Chevron’s proved reserve quantities for 2020. For more information on reserves, refer to Table V beginning on page 103. As some countries face a resurgence of the virus, regulatory and in-country conditions could impact logistics and material movement and pose a risk to business continuity. We are taking precautionary measures to reduce the risk of exposure to and spread of the COVID-19 virus through screening, testing and, when appropriate, quarantining workforce and visitors upon arrival to our operated facilities. business. Refer to the “Results of Operations” section on pages 37 and 38 for additional discussion of the company’s upstream Downstream Earnings for the downstream segment are closely tied to margins on the refining, manufacturing and marketing of products that include gasoline, diesel, jet fuel, lubricants, fuel oil, fuel and lubricant additives, and petrochemicals. Industry margins are sometimes volatile and can be affected by the global and regional supply-and-demand balance for refined products and petrochemicals, and by changes in the price of crude oil, other refinery and petrochemical feedstocks, and natural gas. Industry margins can also be influenced by inventory levels, geopolitical events, costs of materials and services, refinery or chemical plant capacity utilization, maintenance programs, and disruptions at refineries or chemical plants resulting from unplanned outages due to severe weather, fires or other operational events. Other factors affecting profitability for downstream operations include the reliability and efficiency of the company’s refining, marketing and petrochemical assets, the effectiveness of its crude oil and product supply functions, and the volatility of tanker-charter rates for the company’s shipping operations, which are driven by the industry’s demand for crude oil and product tankers. Other factors beyond the company’s control include the general level of inflation and energy costs to operate the company’s refining, marketing and petrochemical assets and changes in tax laws and regulations. The company’s most significant marketing areas are the West Coast and Gulf Coast of the United States and Asia. Chevron operates or has significant ownership interests in refineries in each of these areas. Response to Market Conditions and COVID-19: Downstream Beginning in March 2020 and continuing into the first quarter 2021, demand for refined products (primarily jet fuel and motor gasoline) has been below prior year levels as a result of travel restrictions and other constraints on economic activity implemented in many countries to combat the spread of the COVID-19 virus. Product prices also fell sharply, and although economic activity has somewhat rebounded from lows experienced in April, refining margins continued to be at or near historic lows due to lower demand and pressure from 35 Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations conditions that could lead to shut-in production; or other disruptions to operations. The outlook for future production levels is also affected by the size and number of economic investment opportunities and the time lag between initial exploration and the beginning of production. The company has increased its investment emphasis on short-cycle projects, but these too are under pressure in the current market environment. In the Partitioned Zone between Saudi Arabia and Kuwait, production was shut-in beginning in May 2015. In December 2019, the governments of Saudi Arabia and Kuwait signed a memorandum of understanding to allow production to restart in the Partitioned Zone. In mid-February 2020, pre-startup activities commenced, and production resumed in July 2020. The financial effects from the loss of production in 2019 and first half 2020 were not significant. During the fourth quarter 2020, oil equivalent production in the Partitioned Zone averaged 40 thousand barrels per day. Chevron has interests in Venezuelan crude oil assets, including those operated by Petropiar, Petroboscan and Petroindependiente. While the operating environment in Venezuela has been deteriorating for some time, Petropiar, Petroboscan, and Petroindependiente have conducted activities consistent with the authorization provided pursuant to general licenses issued by the United States government. During the second quarter 2020, the company completed its evaluation of the carrying value of its Venezuelan investments in line with its accounting policies and concluded that given the current operating environment and overall outlook, which created significant uncertainties regarding the recovery of the company’s investment, an other than temporary loss of value had occurred, which resulted in a full impairment of its investment in the country totaling $2.6 billion and change in accounting treatment from equity method to non-equity method of accounting. As a result, the company also removed approximately 160 million barrels of proved reserves and stopped reporting production in the country effective July 2020. The company remains committed to its people, assets and operations in Venezuela. Net proved reserves for consolidated companies and affiliated companies totaled 11.1 billion barrels of oil-equivalent at year-end 2020, a decrease of 3 percent from year-end 2019. The reserve replacement ratio in 2020 was 74 percent. The 5 and 10 year reserve replacement ratios were 99 percent and 106 percent, respectively. Refer to Table V beginning on page 103 for a tabulation of the company’s proved net oil and gas reserves by geographic area, at the beginning of 2018 and each year-end from 2018 through 2020, and an accompanying discussion of major changes to proved reserves by geographic area for the three-year period ending December 31, 2020. Response to Market Conditions and COVID-19: Upstream Travel restrictions and other constraints on global economic activity in 2020 in response to COVID-19 caused a significant decrease in demand for oil and gas. This led to lower price realizations across all commodities. While critical asset integrity and reliability activities progressed throughout the year, locations with high COVID-19 infection rates deferred non-essential work and demobilized non-essential personnel to reduce the COVID-19 exposure risk to our workforce. Despite the challenges posed by the pandemic, progress continues on the FGP/WPMP project at Tengiz. In the second quarter the project construction workforce was demobilized to 20 percent of planned levels, which slowed the overall construction pace. In the third quarter, the rate of infections in Kazakhstan slowed, allowing remobilization of the FGP/ WPMP construction workforce to begin. In the fourth quarter, staffing levels at FGP/WPMP returned to 95 percent of desired fourth quarter remobilization levels, however a worldwide resurgence of infections prevented the remaining 5 percent of the workforce from returning to work and slowed progress on the project. Extended rotations, COVID testing and isolation protocols are in place to minimize the spread of the virus. Given the uncertain timeline for remobilizing all personnel and safely sustaining activity levels, it is too early to provide meaningful information regarding impacts on project cost and schedule. Facility maintenance turnarounds are being adjusted and, in certain cases, deferred into 2021. In some cases, turnarounds have been extended in duration and/or reduced in scope in response to the pandemic. As a result of the reduction in capital expenditures, new production is expected to be lower in the near term as drilling and completion activities are scaled back, most notably in the Permian Basin, Gulf of Mexico, and Argentina. Exploration activities and projects not yet in execution phase have been deferred, which may impact production in future years. Production levels were curtailed in 2020 largely because of reductions imposed by OPEC+ nations in Kazakhstan, Nigeria and Angola. In the fourth quarter, OPEC+ curtailments eased slightly relative to the third quarter. Production has also been curtailed due to market conditions, most notably in Thailand. Additionally, operators of assets where the company has non-operated interests also curtailed production. Production curtailments of approximately 106 thousand barrels of oil equivalent per day were recorded in 2020. In the first quarter of 2021, we expect curtailments to be approximately 40 thousand barrels of oil equivalent per day, predominately related to OPEC+ restrictions. Decreased capital expenditures, lower activity levels, delays in future development timing, and lower commodity prices have resulted in reductions to Chevron’s proved reserve quantities for 2020. For more information on reserves, refer to Table V beginning on page 103. As some countries face a resurgence of the virus, regulatory and in-country conditions could impact logistics and material movement and pose a risk to business continuity. We are taking precautionary measures to reduce the risk of exposure to and spread of the COVID-19 virus through screening, testing and, when appropriate, quarantining workforce and visitors upon arrival to our operated facilities. Refer to the “Results of Operations” section on pages 37 and 38 for additional discussion of the company’s upstream business. Downstream Earnings for the downstream segment are closely tied to margins on the refining, manufacturing and marketing of products that include gasoline, diesel, jet fuel, lubricants, fuel oil, fuel and lubricant additives, and petrochemicals. Industry margins are sometimes volatile and can be affected by the global and regional supply-and-demand balance for refined products and petrochemicals, and by changes in the price of crude oil, other refinery and petrochemical feedstocks, and natural gas. Industry margins can also be influenced by inventory levels, geopolitical events, costs of materials and services, refinery or chemical plant capacity utilization, maintenance programs, and disruptions at refineries or chemical plants resulting from unplanned outages due to severe weather, fires or other operational events. Other factors affecting profitability for downstream operations include the reliability and efficiency of the company’s refining, marketing and petrochemical assets, the effectiveness of its crude oil and product supply functions, and the volatility of tanker-charter rates for the company’s shipping operations, which are driven by the industry’s demand for crude oil and product tankers. Other factors beyond the company’s control include the general level of inflation and energy costs to operate the company’s refining, marketing and petrochemical assets and changes in tax laws and regulations. The company’s most significant marketing areas are the West Coast and Gulf Coast of the United States and Asia. Chevron operates or has significant ownership interests in refineries in each of these areas. Response to Market Conditions and COVID-19: Downstream Beginning in March 2020 and continuing into the first quarter 2021, demand for refined products (primarily jet fuel and motor gasoline) has been below prior year levels as a result of travel restrictions and other constraints on economic activity implemented in many countries to combat the spread of the COVID-19 virus. Product prices also fell sharply, and although economic activity has somewhat rebounded from lows experienced in April, refining margins continued to be at or near historic lows due to lower demand and pressure from 34 35 Chevron Corporation 2020 Annual Report 35 173155_Annual_Report_10-K.indd 35 173155_Annual_Report_10-K.indd 35 3/5/21 6:04 PM 3/5/21 6:04 PM Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations a global oil product surplus. Chevron continued to take steps to maximize diesel production, given the decline in jet fuel and motor gasoline demand, to fuel transportation that keeps global supply chains moving. The company is actively monitoring supply and demand dynamics as every region is experiencing different recovery trends. The company is adjusting the schedule for planned maintenance activity across its refining network and idling certain processing units to adjust for lower demand, reduce costs, manage inventories and, most importantly, protect the safety of employees and contractors. As of mid-February 2021, Chevron’s refining crude utilization was approximately 80 to 85 percent and sales were down year-over-year approximately 50 percent for jet fuel, approximately 5 percent for motor gasoline, while diesel sales were relatively flat. It is unclear how long these conditions will persist, but the company will continue to take actions necessary to protect the health and well-being of people, the environment and its operations as conditions evolve. Refer to the “Results of Operations” section on page 38 for additional discussion of the company’s downstream operations. All Other consists of worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities and technology companies. Operating Developments Key operating developments and other events during 2020 and early 2021 included the following: Upstream Azerbaijan Completed the sale of the company’s interest in the Azeri-Chirag-Gunashli fields and Baku-Tbilisi-Ceyhan pipeline. Colombia Completed the sale of the company’s interest in the offshore Chuchupa and onshore Ballena natural gas fields. Philippines Completed the sale of the company’s interest in the Malampaya field in March. United States Completed the acquisition of Noble Energy, Inc. United States Completed the sale of the Appalachia natural gas business. Downstream Australia Completed the acquisition of Puma Energy (Australia) Holdings Pty Ltd. Other United States Chevron’s joint venture, CalBioGas LLC, successfully achieved first renewable natural gas production from dairy farms in California and marketed it as an alternative fuel for heavy-duty trucks and buses. United States Announced the formation of a joint venture with Brightmark LLC to produce and market renewable natural gas. United States Announced an investment in Zap Energy Inc., a start-up company developing a next-generation modular nuclear reactor. United States Announced an investment in Blue Planet Systems Corporation, a startup that manufactures and develops carbonate aggregates and carbon capture technology intended to reduce the carbon intensity of industrial operations. United States Announced an agreement with Algonquin Power & Utilities Corp. seeking to co-develop renewable power projects that will provide electricity to strategic assets across Chevron’s global portfolio. Under the four-year agreement, Chevron plans to generate more than 500 megawatts of its energy demand from renewable sources. United States Announced a non-binding offer in February 2021 to acquire the outstanding common units of Noble Midstream Partners LP not already owned by Chevron. Common Stock Dividends The 2020 annual dividend was $5.16 per share, making 2020 the 33rd consecutive year that the company increased its annual per share dividend payout. In January 2021, the company’s Board of Directors declared a quarterly dividend of $1.29 per share. Results of Operations The following section presents the results of operations and variances on an after-tax basis for the company’s business segments – Upstream and Downstream – as well as for “All Other.” Earnings are also presented for the U.S. and international geographic areas of the Upstream and Downstream business segments. Refer to Note 12, beginning on page 74, for a discussion of the company’s “reportable segments.” This section should also be read in conjunction with the discussion in “Business Environment and Outlook” on pages 31 through 36. Refer to the “Selected Operating Data” table on page 41 for a three-year comparison of production volumes, refined product sales volumes, and refinery inputs. A discussion of variances between 2019 and 2018 can be found in the “Results of Operations” section on pages 33 through 34 of the company’s 2019 Annual Report on Form 10-K filed with the SEC on February 22, 2020. U.S. Upstream Millions of dollars Earnings (Loss) 2020 2019 $ (1,608) $ (5,094) $ 2018 3,278 U.S. upstream reported a loss of $1.61 billion in 2020, compared with a loss of $5.09 billion in 2019. The smaller loss was largely due to the absence of fourth quarter 2019 impairment charges of $8.17 billion, primarily associated with Appalachia shale and Big Foot, partially offset by lower crude oil realizations of $3.36 billion and second quarter 2020 impairments and write-offs of $1.20 billion. The company’s average realization for U.S. crude oil and natural gas liquids in 2020 was $30.53 per barrel compared with $48.54 in 2019. The average natural gas realization was $0.98 per thousand cubic feet in 2020, compared with $1.09 in 2019. Net oil-equivalent production in 2020 averaged 1.06 million barrels per day, up 14 percent from 2019. Production increases from shale and tight properties in the Permian Basin and 58,000 barrels per day of production from the Noble acquisition were partially offset by normal field declines. The net liquids component of oil-equivalent production for 2020 averaged 790,000 barrels per day, up 9 percent from 2019. Net natural gas production averaged 1.61 billion cubic feet per day in 2020, up 31 percent from 2019. International Upstream Millions of dollars Earnings (Loss)* *Includes foreign currency effects: 2020 (825) (285) $ $ $ $ 2019 2018 7,670 $ 10,038 (323) $ 545 Common Stock Repurchase Program The company purchased $1.75 billion of its common stock in 2020 under its stock repurchase programs. The stock repurchase program was suspended in March 2020. International upstream reported a loss of $825 million in 2020, compared with earnings of $7.67 billion in 2019. The decrease was primarily due to lower crude oil and natural gas realizations of $4.6 billion and $1.2 billion, respectively, 36 Chevron Corporation 2020 Annual Report 36 37 173155_Annual_Report_10-K.indd 36 173155_Annual_Report_10-K.indd 36 3/5/21 6:04 PM 3/5/21 6:04 PM a global oil product surplus. Chevron continued to take steps to maximize diesel production, given the decline in jet fuel and motor gasoline demand, to fuel transportation that keeps global supply chains moving. The company is actively monitoring supply and demand dynamics as every region is experiencing different recovery trends. The company is adjusting the schedule for planned maintenance activity across its refining network and idling certain processing units to adjust for lower demand, reduce costs, manage inventories and, most importantly, protect the safety of employees and contractors. As of mid-February 2021, Chevron’s refining crude utilization was approximately 80 to 85 percent and sales were down year-over-year approximately 50 percent for jet fuel, approximately 5 percent for motor gasoline, while diesel sales were relatively flat. It is unclear how long these conditions will persist, but the company will continue to take actions necessary to protect the health and well-being of people, the environment and its operations as conditions evolve. Refer to the “Results of Operations” section on page 38 for additional discussion of the company’s downstream operations. All Other consists of worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities and technology companies. Operating Developments Key operating developments and other events during 2020 and early 2021 included the following: Azerbaijan Completed the sale of the company’s interest in the Azeri-Chirag-Gunashli fields and Baku-Tbilisi-Ceyhan Colombia Completed the sale of the company’s interest in the offshore Chuchupa and onshore Ballena natural gas fields. Philippines Completed the sale of the company’s interest in the Malampaya field in March. United States Completed the acquisition of Noble Energy, Inc. United States Completed the sale of the Appalachia natural gas business. Australia Completed the acquisition of Puma Energy (Australia) Holdings Pty Ltd. United States Chevron’s joint venture, CalBioGas LLC, successfully achieved first renewable natural gas production from dairy farms in California and marketed it as an alternative fuel for heavy-duty trucks and buses. United States Announced the formation of a joint venture with Brightmark LLC to produce and market renewable natural United States Announced an investment in Zap Energy Inc., a start-up company developing a next-generation modular United States Announced an investment in Blue Planet Systems Corporation, a startup that manufactures and develops carbonate aggregates and carbon capture technology intended to reduce the carbon intensity of industrial operations. United States Announced an agreement with Algonquin Power & Utilities Corp. seeking to co-develop renewable power projects that will provide electricity to strategic assets across Chevron’s global portfolio. Under the four-year agreement, Chevron plans to generate more than 500 megawatts of its energy demand from renewable sources. United States Announced a non-binding offer in February 2021 to acquire the outstanding common units of Noble Midstream Partners LP not already owned by Chevron. Common Stock Dividends The 2020 annual dividend was $5.16 per share, making 2020 the 33rd consecutive year that the company increased its annual per share dividend payout. In January 2021, the company’s Board of Directors declared a quarterly dividend of $1.29 per share. Upstream pipeline. Downstream Other gas. nuclear reactor. Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The following section presents the results of operations and variances on an after-tax basis for the company’s business segments – Upstream and Downstream – as well as for “All Other.” Earnings are also presented for the U.S. and international geographic areas of the Upstream and Downstream business segments. Refer to Note 12, beginning on page 74, for a discussion of the company’s “reportable segments.” This section should also be read in conjunction with the discussion in “Business Environment and Outlook” on pages 31 through 36. Refer to the “Selected Operating Data” table on page 41 for a three-year comparison of production volumes, refined product sales volumes, and refinery inputs. A discussion of variances between 2019 and 2018 can be found in the “Results of Operations” section on pages 33 through 34 of the company’s 2019 Annual Report on Form 10-K filed with the SEC on February 22, 2020. U.S. Upstream Millions of dollars Earnings (Loss) 2020 2019 2018 $ (1,608) $ (5,094) $ 3,278 U.S. upstream reported a loss of $1.61 billion in 2020, compared with a loss of $5.09 billion in 2019. The smaller loss was largely due to the absence of fourth quarter 2019 impairment charges of $8.17 billion, primarily associated with Appalachia shale and Big Foot, partially offset by lower crude oil realizations of $3.36 billion and second quarter 2020 impairments and write-offs of $1.20 billion. The company’s average realization for U.S. crude oil and natural gas liquids in 2020 was $30.53 per barrel compared with $48.54 in 2019. The average natural gas realization was $0.98 per thousand cubic feet in 2020, compared with $1.09 in 2019. Net oil-equivalent production in 2020 averaged 1.06 million barrels per day, up 14 percent from 2019. Production increases from shale and tight properties in the Permian Basin and 58,000 barrels per day of production from the Noble acquisition were partially offset by normal field declines. The net liquids component of oil-equivalent production for 2020 averaged 790,000 barrels per day, up 9 percent from 2019. Net natural gas production averaged 1.61 billion cubic feet per day in 2020, up 31 percent from 2019. International Upstream Millions of dollars Earnings (Loss)* *Includes foreign currency effects: 2020 (825) (285) $ $ $ $ 2019 2018 7,670 $ 10,038 (323) $ 545 Common Stock Repurchase Program The company purchased $1.75 billion of its common stock in 2020 under its stock repurchase programs. The stock repurchase program was suspended in March 2020. International upstream reported a loss of $825 million in 2020, compared with earnings of $7.67 billion in 2019. The decrease was primarily due to lower crude oil and natural gas realizations of $4.6 billion and $1.2 billion, respectively, 36 37 Chevron Corporation 2020 Annual Report 37 173155_Annual_Report_10-K.indd 37 173155_Annual_Report_10-K.indd 37 3/5/21 6:04 PM 3/5/21 6:04 PM Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations higher charges of $1.4 billion for impairments and write-offs (charges of $3.6 billion in 2020 compared to $2.2 billion in 2019), and lower crude oil sales volumes of $1.1 billion. Lower gains on asset sales of $730 million also contributed to the decrease and were largely offset by lower operating expenses of $710 million. Foreign currency effects had a favorable impact on earnings of $38 million between periods. The company’s average realization for international crude oil and natural gas liquids in 2020 was $36.07 per barrel compared with $58.14 in 2019. The average natural gas realization was $4.59 per thousand cubic feet in 2020 compared with $5.83 in 2019. International net oil-equivalent production was 2.03 million barrels per day in 2020, down 5 percent from 2019. The decrease was due to production curtailments associated with OPEC+ restrictions and market conditions, and asset sale related decreases of 94,000 barrels per day, partially offset by higher production entitlement effects and volumes associated with the Noble acquisition. The net liquids component of international oil-equivalent production was 1.08 million barrels per day in 2020, down 6 percent from 2019. International net natural gas production of 5.68 billion cubic feet per day in 2020 decreased 4 percent from 2019. U.S. Downstream Millions of dollars Earnings (Loss) 2020 2019 2018 $ (571) $ 1,559 $ 2,103 U.S. downstream reported a loss of $571 million in 2020, compared with earnings of $1.56 billion in 2019. The decrease was primarily due to lower margins on refined product sales of $1.08 billion and lower sales volumes of $1.00 billion. Lower equity earnings from the 50 percent-owned CPChem of $220 million also contributed to the decrease. These were partially offset by lower operating expenses of $220 million. Total refined product sales of 1.00 million barrels per day in 2020 were down 20 percent from 2019, mainly due to lower jet fuel, gasoline, and diesel demand associated with the COVID-19 pandemic. Comparative amounts for certain income statement categories are shown below. A discussion of variances between 2019 and 2018 can be found in the “Consolidated Statement of Income” section on pages 34 through 36 of the company’s 2019 Annual Consolidated Statement of Income Report on Form 10-K. Millions of dollars Sales and other operating revenues and lower refined product volumes. Millions of dollars Income (loss) from equity affiliates Sales and other operating revenues decreased in 2020 mainly due to lower refined product, crude oil and natural gas prices, 2020 2019 2018 $ 94,471 $ 139,865 $ 158,902 2020 2019 $ (472) $ 3,968 $ 2018 6,327 Income from equity affiliates decreased in 2020 mainly due to the full impairment of Petropiar and Petroboscan in Venezuela and lower upstream-related earnings from Tengizchevroil in Kazakhstan. Refer to Note 13, beginning on page 77, for a discussion of Chevron’s investments in affiliated companies. Millions of dollars Other income 2020 2019 $ 693 $ 2,683 $ 2018 1,110 Other income decreased in 2020 mainly due to the absence of the receipt of the 2019 Anadarko merger termination fee, lower gains on asset sales and unfavorable swings in foreign currency effects. Millions of dollars Purchased crude oil and products 2020 2019 2018 $ 50,488 $ 80,113 $ 94,578 Crude oil and product purchases decreased $29.6 billion in 2020, primarily due to lower crude oil and refined product prices and lower refined product and crude oil volumes. Millions of dollars Operating, selling, general and administrative expenses International Downstream Millions of dollars Earnings* *Includes foreign currency effects: 2020 618 (152) $ $ $ $ 2019 922 17 $ $ 2018 1,695 71 Operating, selling, general and administrative expenses decreased $1.0 billion in 2020. The decrease is primarily due to lower services and fees, expenses for non-operated upstream properties, materials and supplies expense and lower transportation expense, partially offset by higher severance costs. International downstream earned $618 million in 2020, compared with $922 million in 2019. The decrease in earnings was largely due to lower margins on refined product sales of $160 million, primarily resulting from unfavorable inventory effects. Unfavorable tax items of $110 million also contributed to the decrease. Partially offsetting the decrease in earnings were lower operating expenses of $130 million. Foreign currency effects had an unfavorable impact on earnings of $169 million between periods. Total refined product sales of 1.22 million barrels per day in 2020 were down 8 percent from 2019, mainly due to lower jet fuel demand associated with the COVID-19 pandemic. Exploration expenses in 2020 increased primarily due to higher charges for well write-offs. Depreciation, depletion and amortization expenses decreased in 2020 primarily due to lower impairments. All Other Millions of dollars Net charges* *Includes foreign currency effects: 2020 (3,157) (208) $ $ $ $ 2019 2018 (2,133) $ (2,290) 2 $ (5) Taxes other than on income increased in 2020 primarily due to higher regulatory expenses and property taxes, partially offset by lower taxes on production, payroll tax and sales and use tax. All Other consists of worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities, and technology companies. Net charges in 2020 increased $1.02 billion from 2019. The change between periods was mainly due to the absence of the second quarter 2019 Anadarko merger termination fee, higher pension expenses, severance and Noble acquisition costs, partially offset by the absence of a prior year tax charge and favorable tax items. Foreign currency effects increased net charges by $210 million between periods. 38 Chevron Corporation 2020 Annual Report 38 Interest and debt expenses decreased in 2020 mainly due to lower interest rates, partially offset by higher debt balances. Other components of net periodic benefit costs increased in 2020 primarily due to higher pension settlement costs. 39 Millions of dollars Exploration expense Millions of dollars Depreciation, depletion and amortization Millions of dollars Taxes other than on income Millions of dollars Interest and debt expense Millions of dollars Other components of net periodic benefit costs 2020 2019 2018 $ 24,536 $ 25,528 $ 24,382 2020 2019 $ 1,537 $ 770 $ 2018 1,210 2020 2019 2018 $ 19,508 $ 29,218 $ 19,419 2020 2019 $ 4,499 $ 4,136 $ 2020 2019 697 $ 798 $ 2020 2019 880 $ 417 $ $ $ 2018 4,867 2018 748 2018 560 173155_Annual_Report_10-K.indd 38 173155_Annual_Report_10-K.indd 38 3/5/21 6:04 PM 3/5/21 6:04 PM Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations higher charges of $1.4 billion for impairments and write-offs (charges of $3.6 billion in 2020 compared to $2.2 billion in 2019), and lower crude oil sales volumes of $1.1 billion. Lower gains on asset sales of $730 million also contributed to the decrease and were largely offset by lower operating expenses of $710 million. Foreign currency effects had a favorable impact on earnings of $38 million between periods. The company’s average realization for international crude oil and natural gas liquids in 2020 was $36.07 per barrel compared with $58.14 in 2019. The average natural gas realization was $4.59 per thousand cubic feet in 2020 compared with $5.83 in International net oil-equivalent production was 2.03 million barrels per day in 2020, down 5 percent from 2019. The decrease was due to production curtailments associated with OPEC+ restrictions and market conditions, and asset sale related decreases of 94,000 barrels per day, partially offset by higher production entitlement effects and volumes associated with the The net liquids component of international oil-equivalent production was 1.08 million barrels per day in 2020, down 6 percent from 2019. International net natural gas production of 5.68 billion cubic feet per day in 2020 decreased 4 percent 2019. Noble acquisition. from 2019. U.S. Downstream Millions of dollars Earnings (Loss) 2020 2019 $ (571) $ 1,559 $ 2018 2,103 U.S. downstream reported a loss of $571 million in 2020, compared with earnings of $1.56 billion in 2019. The decrease was primarily due to lower margins on refined product sales of $1.08 billion and lower sales volumes of $1.00 billion. Lower equity earnings from the 50 percent-owned CPChem of $220 million also contributed to the decrease. These were partially offset by lower operating expenses of $220 million. Total refined product sales of 1.00 million barrels per day in 2020 were down 20 percent from 2019, mainly due to lower jet fuel, gasoline, and diesel demand associated with the COVID-19 pandemic. 2020 618 (152) $ $ $ $ 2019 922 17 $ $ 2018 1,695 71 International downstream earned $618 million in 2020, compared with $922 million in 2019. The decrease in earnings was largely due to lower margins on refined product sales of $160 million, primarily resulting from unfavorable inventory effects. Unfavorable tax items of $110 million also contributed to the decrease. Partially offsetting the decrease in earnings were lower operating expenses of $130 million. Foreign currency effects had an unfavorable impact on earnings of $169 million between periods. Total refined product sales of 1.22 million barrels per day in 2020 were down 8 percent from 2019, mainly due to lower jet fuel demand associated with the COVID-19 pandemic. International Downstream Millions of dollars Earnings* *Includes foreign currency effects: All Other Millions of dollars Net charges* *Includes foreign currency effects: 2020 (3,157) (208) $ $ $ $ 2019 2018 (2,133) $ (2,290) 2 $ (5) All Other consists of worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities, and technology companies. Net charges in 2020 increased $1.02 billion from 2019. The change between periods was mainly due to the absence of the second quarter 2019 Anadarko merger termination fee, higher pension expenses, severance and Noble acquisition costs, partially offset by the absence of a prior year tax charge and favorable tax items. Foreign currency effects increased net charges by $210 million between periods. 38 Consolidated Statement of Income Comparative amounts for certain income statement categories are shown below. A discussion of variances between 2019 and 2018 can be found in the “Consolidated Statement of Income” section on pages 34 through 36 of the company’s 2019 Annual Report on Form 10-K. Millions of dollars Sales and other operating revenues 2020 2019 2018 $ 94,471 $ 139,865 $ 158,902 Sales and other operating revenues decreased in 2020 mainly due to lower refined product, crude oil and natural gas prices, and lower refined product volumes. Millions of dollars Income (loss) from equity affiliates 2020 2019 2018 $ (472) $ 3,968 $ 6,327 Income from equity affiliates decreased in 2020 mainly due to the full impairment of Petropiar and Petroboscan in Venezuela and lower upstream-related earnings from Tengizchevroil in Kazakhstan. Refer to Note 13, beginning on page 77, for a discussion of Chevron’s investments in affiliated companies. Millions of dollars Other income 2020 2019 2018 $ 693 $ 2,683 $ 1,110 Other income decreased in 2020 mainly due to the absence of the receipt of the 2019 Anadarko merger termination fee, lower gains on asset sales and unfavorable swings in foreign currency effects. Millions of dollars Purchased crude oil and products 2020 2019 2018 $ 50,488 $ 80,113 $ 94,578 Crude oil and product purchases decreased $29.6 billion in 2020, primarily due to lower crude oil and refined product prices and lower refined product and crude oil volumes. Millions of dollars Operating, selling, general and administrative expenses 2020 2019 2018 $ 24,536 $ 25,528 $ 24,382 Operating, selling, general and administrative expenses decreased $1.0 billion in 2020. The decrease is primarily due to lower services and fees, expenses for non-operated upstream properties, materials and supplies expense and lower transportation expense, partially offset by higher severance costs. Millions of dollars Exploration expense 2020 2019 2018 $ 1,537 $ 770 $ 1,210 Exploration expenses in 2020 increased primarily due to higher charges for well write-offs. Millions of dollars Depreciation, depletion and amortization 2020 2019 2018 $ 19,508 $ 29,218 $ 19,419 Depreciation, depletion and amortization expenses decreased in 2020 primarily due to lower impairments. Millions of dollars Taxes other than on income 2020 2019 2018 $ 4,499 $ 4,136 $ 4,867 Taxes other than on income increased in 2020 primarily due to higher regulatory expenses and property taxes, partially offset by lower taxes on production, payroll tax and sales and use tax. Millions of dollars Interest and debt expense 2020 2019 $ 697 $ 798 $ Interest and debt expenses decreased in 2020 mainly due to lower interest rates, partially offset by higher debt balances. Millions of dollars Other components of net periodic benefit costs 2020 2019 $ 880 $ 417 $ Other components of net periodic benefit costs increased in 2020 primarily due to higher pension settlement costs. 2018 748 2018 560 39 Chevron Corporation 2020 Annual Report 39 173155_Annual_Report_10-K.indd 39 173155_Annual_Report_10-K.indd 39 3/5/21 6:04 PM 3/5/21 6:04 PM Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations Millions of dollars Income tax expense (benefit) 2020 2019 2018 $ (1,892) $ 2,691 $ 5,715 Selected Operating Data1,2 The decrease in income tax expense in 2020 of $4.58 billion is due to the decrease in total income before tax for the company of $12.99 billion. The decrease in income before taxes for the company is primarily the result of lower crude oil prices partially offset by lower impairments and project write off charges. U.S. income before tax decreased from a loss of $5.48 billion in 2019 to a loss of $5.70 billion in 2020. This decrease in earnings before tax was primarily driven by the effect of lower crude oil prices in the U.S. and the absence of the Anadarko merger fee, partially offset by lower impairment charges and higher production. The U.S. tax benefit increased from $1.17 billion in 2019 to $1.58 billion in 2020 primarily due to the increase in before-tax loss. International income before tax decreased from $11.02 billion in 2019 to a loss of $1.75 billion in 2020. This decrease was primarily driven by the effect of lower crude oil and natural gas prices, lower production, higher impairments and other charges. The lower before-tax income primarily drove the $4.17 billion decrease in international income tax expense, from a charge of $3.86 billion in 2019 to a benefit of $308 million in 2020. Refer also to the discussion of the effective income tax rate in Note 15 beginning on page 79. U.S. Upstream Net Crude Oil and Natural Gas Liquids Production (MBPD) 2019 2018 Net Crude Oil and Natural Gas Liquids Production (MBPD)4 Net Natural Gas Production (MMCFPD)3 Net Oil-Equivalent Production (MBOEPD) Sales of Natural Gas (MMCFPD) Sales of Natural Gas Liquids (MBPD) Revenues from Net Production Liquids ($/Bbl) Natural Gas ($/MCF) International Upstream Net Natural Gas Production (MMCFPD)3 Net Oil-Equivalent Production (MBOEPD)4 Sales of Natural Gas (MMCFPD) Sales of Natural Gas Liquids (MBPD) Revenues from Liftings Liquids ($/Bbl) Natural Gas ($/MCF) Worldwide Upstream United States International Total Net Oil-Equivalent Production (MBOEPD)4 U.S. Downstream Gasoline Sales (MBPD)5 Other Refined Product Sales (MBPD) Total Refined Product Sales (MBPD) Sales of Natural Gas Liquids (MBPD) Refinery Input (MBPD)6 International Downstream Gasoline Sales (MBPD)5 Other Refined Product Sales (MBPD) Total Refined Product Sales (MBPD)7 Sales of Natural Gas Liquids (MBPD) Refinery Input (MBPD)8 Includes company share of equity affiliates. Includes net production of synthetic oil: United States International Canada Venezuela affiliate Includes branded and unbranded gasoline. 110,000 barrels per day. Includes sales of affiliates (MBPD): 1 3 4 5 6 7 8 2 MBPD – thousands of barrels per day; MMCFPD – millions of cubic feet per day; MBOEPD – thousands of barrels of oil-equivalents per day; Bbl – barrel; MCF – thousands of cubic feet. Oil-equivalent gas (OEG) conversion ratio is 6,000 cubic feet of natural gas = 1 barrel of crude oil. Includes natural gas consumed in operations (MMCFPD): In May 2019, the company acquired the Pasadena Refinery in Pasadena, Texas, which has an operable capacity of In September 2018, the company sold its interest in the Cape Town Refinery in Cape Town, South Africa, which had an operable capacity of 110,000 barrels per day. 379 373 $ $ $ $ $ $ $ $ 48.54 1.09 $ $ 58.14 5.83 $ $ 724 1,225 929 4,016 130 1,141 5,932 2,129 5,869 34 929 2,129 3,058 667 583 1,250 101 947 289 1,038 1,327 72 617 36 602 53 3 618 1,034 791 3,481 110 58.17 1.86 1,164 5,855 2,139 5,604 34 64.25 6.29 791 2,139 2,930 627 591 1,218 74 905 336 1,101 1,437 62 706 35 584 53 24 2020 790 1,607 1,058 3,894 208 30.53 0.98 1,078 5,683 2,025 5,634 46 36.07 4.59 1,058 2,025 3,083 581 422 1,003 25 793 264 957 1,221 74 584 37 566 54 — 348 40 Chevron Corporation 2020 Annual Report 40 41 173155_Annual_Report_10-K.indd 40 173155_Annual_Report_10-K.indd 40 3/5/21 6:04 PM 3/5/21 6:04 PM Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations Millions of dollars Income tax expense (benefit) 2020 2019 $ (1,892) $ 2,691 $ 2018 5,715 Selected Operating Data1,2 The decrease in income tax expense in 2020 of $4.58 billion is due to the decrease in total income before tax for the company of $12.99 billion. The decrease in income before taxes for the company is primarily the result of lower crude oil prices partially offset by lower impairments and project write off charges. U.S. income before tax decreased from a loss of $5.48 billion in 2019 to a loss of $5.70 billion in 2020. This decrease in earnings before tax was primarily driven by the effect of lower crude oil prices in the U.S. and the absence of the Anadarko merger fee, partially offset by lower impairment charges and higher production. The U.S. tax benefit increased from $1.17 billion in 2019 to $1.58 billion in 2020 primarily due to the increase in before-tax loss. International income before tax decreased from $11.02 billion in 2019 to a loss of $1.75 billion in 2020. This decrease was primarily driven by the effect of lower crude oil and natural gas prices, lower production, higher impairments and other charges. The lower before-tax income primarily drove the $4.17 billion decrease in international income tax expense, from a charge of $3.86 billion in 2019 to a benefit of $308 million in 2020. Refer also to the discussion of the effective income tax rate in Note 15 beginning on page 79. U.S. Upstream Net Crude Oil and Natural Gas Liquids Production (MBPD) Net Natural Gas Production (MMCFPD)3 Net Oil-Equivalent Production (MBOEPD) Sales of Natural Gas (MMCFPD) Sales of Natural Gas Liquids (MBPD) Revenues from Net Production Liquids ($/Bbl) Natural Gas ($/MCF) International Upstream Net Crude Oil and Natural Gas Liquids Production (MBPD)4 Net Natural Gas Production (MMCFPD)3 Net Oil-Equivalent Production (MBOEPD)4 Sales of Natural Gas (MMCFPD) Sales of Natural Gas Liquids (MBPD) Revenues from Liftings Liquids ($/Bbl) Natural Gas ($/MCF) Worldwide Upstream Net Oil-Equivalent Production (MBOEPD)4 United States International Total U.S. Downstream Gasoline Sales (MBPD)5 Other Refined Product Sales (MBPD) Total Refined Product Sales (MBPD) Sales of Natural Gas Liquids (MBPD) Refinery Input (MBPD)6 International Downstream Gasoline Sales (MBPD)5 Other Refined Product Sales (MBPD) Total Refined Product Sales (MBPD)7 Sales of Natural Gas Liquids (MBPD) Refinery Input (MBPD)8 1 Includes company share of equity affiliates. 2019 2018 2020 790 1,607 1,058 3,894 208 724 1,225 929 4,016 130 618 1,034 791 3,481 110 58.17 1.86 1,164 5,855 2,139 5,604 34 64.25 6.29 791 2,139 2,930 627 591 1,218 74 905 336 1,101 1,437 62 706 $ $ 30.53 0.98 $ $ 48.54 1.09 $ $ 1,078 5,683 2,025 5,634 46 1,141 5,932 2,129 5,869 34 $ $ 36.07 4.59 $ $ 58.14 5.83 $ $ 1,058 2,025 3,083 581 422 1,003 25 793 264 957 1,221 74 584 929 2,129 3,058 667 583 1,250 101 947 289 1,038 1,327 72 617 2 MBPD – thousands of barrels per day; MMCFPD – millions of cubic feet per day; MBOEPD – thousands of barrels of oil-equivalents per day; Bbl – barrel; MCF – thousands of cubic feet. Oil-equivalent gas (OEG) conversion ratio is 6,000 cubic feet of natural gas = 1 barrel of crude oil. Includes natural gas consumed in operations (MMCFPD): 3 United States International 4 Includes net production of synthetic oil: Canada Venezuela affiliate 37 566 54 — 36 602 53 3 5 6 7 8 Includes branded and unbranded gasoline. In May 2019, the company acquired the Pasadena Refinery in Pasadena, Texas, which has an operable capacity of 110,000 barrels per day. Includes sales of affiliates (MBPD): In September 2018, the company sold its interest in the Cape Town Refinery in Cape Town, South Africa, which had an operable capacity of 110,000 barrels per day. 348 379 35 584 53 24 373 40 41 Chevron Corporation 2020 Annual Report 41 173155_Annual_Report_10-K.indd 41 173155_Annual_Report_10-K.indd 41 3/5/21 6:04 PM 3/5/21 6:04 PM Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Sources and uses of cash The strength of the company’s balance sheet enabled it to fund any timing differences throughout the year between cash inflows and outflows. Cash, Cash Equivalents, Marketable Securities and Time Deposits Total balances were $5.6 billion and $5.7 billion at December 31, 2020 and 2019, respectively. Cash provided by operating activities in 2020 was $10.6 billion, compared to $27.3 billion in 2019, primarily due to lower crude oil prices. Cash provided by operating activities was net of contributions to employee pension plans of approximately $1.2 billion in 2020 and $1.4 billion in 2019. Cash provided by investing activities included proceeds and deposits related to asset sales of $2.9 billion in 2020 and $2.8 billion in 2019. Restricted cash of $1.1 billion and $1.2 billion at December 31, 2020 and 2019, respectively, was held in cash and short-term marketable securities and recorded as “Deferred charges and other assets” and “Prepaid expenses and other current assets” on the Consolidated Balance Sheet. These amounts are generally associated with upstream decommissioning activities, tax payments, funds held in escrow for tax-deferred exchanges and refundable deposits related to pending asset sales. Dividends Dividends paid to common stockholders were $9.7 billion in 2020 and $9.0 billion in 2019. page 83. Debt and Finance Lease Liabilities Total debt and finance lease liabilities were $44.3 billion at December 31, 2020, up from $27.0 billion at year-end 2019. The $17.3 billion increase in total debt and finance lease liabilities during 2020 was primarily due to the company’s issuance of long-term public bonds of $8.0 billion in May 2020 and $4.0 billion in August 2020, and the assumption of debt with a fair value of $9.4 billion as part of the transaction to acquire Noble in October 2020. In January 2021, Chevron U.S.A. Inc. (CUSA) issued bonds, guaranteed by Chevron Corporation, in exchange for the Noble debt. More information on bond issuances is included in Note 18 on page 84. These amounts were partially offset by repayment of long-term notes that matured in 2020. The company’s debt and finance lease liabilities due within one year, consisting primarily of commercial paper, redeemable long-term obligations and the current portion of long-term debt, totaled $11.4 billion at December 31, 2020, compared with $13.0 billion at year-end 2019. Of these amounts, $9.825 billion and $9.75 billion were reclassified to long-term debt at the end of 2020 and 2019, respectively. At year-end 2020, settlement of these obligations was not expected to require the use of working capital in 2021, as the company had the intent and the ability, as evidenced by committed credit facilities, to refinance them on a long-term basis. The company has an automatic shelf registration statement that expires in August 2023 for an unspecified amount of nonconvertible debt securities issued by Chevron Corporation or CUSA. The major debt rating agencies routinely evaluate the company’s debt, and the company’s cost of borrowing can increase or decrease depending on these debt ratings. The company has outstanding public bonds issued by Chevron Corporation, CUSA, Noble and Texaco Capital Inc. Most of these securities are the obligations of, or guaranteed by, Chevron Corporation and are rated AA- by Standard and Poor’s Corporation and Aa2 by Moody’s Investors Service. The company’s U.S. commercial paper is rated A-1+ by Standard and Poor’s and P-1 by Moody’s. All of these ratings denote high-quality, investment-grade securities. The company’s future debt level is dependent primarily on results of operations, cash that may be generated from asset dispositions, the capital program, lending commitments to affiliates and shareholder distributions. Based on its high-quality debt ratings, the company believes that it has substantial borrowing capacity to meet unanticipated cash requirements. During extended periods of low prices for crude oil and natural gas and narrow margins for refined products and commodity chemicals, the company has the flexibility to modify capital spending plans and discontinue or curtail the stock repurchase program to provide flexibility to continue paying the common stock dividend and also remain committed to retaining the company’s high-quality debt ratings. Committed Credit Facilities Information related to committed credit facilities is included in Note 17, Short-Term Debt, on Summarized Financial Information for Guarantee of Securities of Subsidiaries In August 2020, long-term public bonds were issued by CUSA and fully and unconditionally guaranteed on an unsecured basis by Chevron Corporation (together the “Obligor Group”). In March 2020, the U.S. Securities and Exchange Commission (SEC) issued a final rule that amended the disclosure requirements with respect to certain guaranteed securities registered or being registered in Rule 3-10 of Regulation S-X and adopted new Rule 13-01 of Regulation S-X. These amendments were effective January 4, 2021. Accordingly, as disclosed in the tables below, summary financial information is presented for Chevron Corporation, as Guarantor, excluding its consolidated subsidiaries, and CUSA, as the issuer, excluding its consolidated subsidiaries. The summary financial information of the Obligor Group is presented on a combined basis and transactions between the combined entities have been eliminated. Financial information for non-guarantor entities has been excluded. 42 Chevron Corporation 2020 Annual Report 42 173155_Annual_Report_10-K.indd 42 173155_Annual_Report_10-K.indd 42 3/5/21 6:04 PM 3/5/21 6:04 PM Sales and other operating revenues Sales and other operating revenues – related party Total costs and other deductions Total costs and other deductions – related party Net income (loss) Current assets Current assets – related party Other assets Current liabilities Current liabilities – related party Other liabilities Total net equity (deficit) Year Ended Year Ended December 31, 2020 December 31, 2019 (Millions of dollars) (unaudited) $ $ $ $ At December 31, At December 31, (Millions of dollars) (unaudited) 49,636 17,044 57,575 14,052 (1,610) $ $ $ 2020 9,196 5,719 48,993 20,965 55,273 34,983 82,206 24,336 87,287 22,632 2,173 2019 10,180 952 50,595 25,187 46,237 25,622 (47,313) $ (35,319) Common Stock Repurchase Program On February 1, 2019, the company announced that the Board of Directors authorized a new stock repurchase program with a maximum dollar limit of $25 billion and no set term limits. As of December 31, 2020, the company had purchased a total of 48.6 million shares for $5.5 billion, resulting in $19.5 billion remaining under the program authorized in February 2019. On March 24, 2020, the company announced the suspension of the stock repurchase program in response to depressed market conditions following the global outbreak of the COVID-19 pandemic. No shares were purchased under the program after this announcement. Repurchases may be made from time to time in the open market, by block purchases, in privately negotiated transactions or in such other manner as determined by the company. The timing of the repurchases and the actual amount repurchased will depend on a variety of factors, including the market price of the company’s shares, general market and economic 43 Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Sources and uses of cash inflows and outflows. The strength of the company’s balance sheet enabled it to fund any timing differences throughout the year between cash Cash, Cash Equivalents, Marketable Securities and Time Deposits Total balances were $5.6 billion and $5.7 billion at December 31, 2020 and 2019, respectively. Cash provided by operating activities in 2020 was $10.6 billion, compared to $27.3 billion in 2019, primarily due to lower crude oil prices. Cash provided by operating activities was net of contributions to employee pension plans of approximately $1.2 billion in 2020 and $1.4 billion in 2019. Cash provided by investing activities included proceeds and deposits related to asset sales of $2.9 billion in 2020 and $2.8 billion in 2019. Restricted cash of $1.1 billion and $1.2 billion at December 31, 2020 and 2019, respectively, was held in cash and short-term marketable securities and recorded as “Deferred charges and other assets” and “Prepaid expenses and other current assets” on the Consolidated Balance Sheet. These amounts are generally associated with upstream decommissioning activities, tax payments, funds held in escrow for tax-deferred exchanges and refundable deposits related to pending asset sales. Dividends Dividends paid to common stockholders were $9.7 billion in 2020 and $9.0 billion in 2019. Debt and Finance Lease Liabilities Total debt and finance lease liabilities were $44.3 billion at December 31, 2020, up from $27.0 billion at year-end 2019. The $17.3 billion increase in total debt and finance lease liabilities during 2020 was primarily due to the company’s issuance of long-term public bonds of $8.0 billion in May 2020 and $4.0 billion in August 2020, and the assumption of debt with a fair value of $9.4 billion as part of the transaction to acquire Noble in October 2020. In January 2021, Chevron U.S.A. Inc. (CUSA) issued bonds, guaranteed by Chevron Corporation, in exchange for the Noble debt. More information on bond issuances is included in Note 18 on page 84. These amounts were partially offset by repayment of long-term notes that matured in 2020. The company’s debt and finance lease liabilities due within one year, consisting primarily of commercial paper, redeemable long-term obligations and the current portion of long-term debt, totaled $11.4 billion at December 31, 2020, compared with $13.0 billion at year-end 2019. Of these amounts, $9.825 billion and $9.75 billion were reclassified to long-term debt at the end of 2020 and 2019, respectively. At year-end 2020, settlement of these obligations was not expected to require the use of working capital in 2021, as the company had the intent and the ability, as evidenced by committed credit facilities, to refinance them on a long-term basis. The company has an automatic shelf registration statement that expires in August 2023 for an unspecified amount of nonconvertible debt securities issued by Chevron Corporation or CUSA. 42 The major debt rating agencies routinely evaluate the company’s debt, and the company’s cost of borrowing can increase or decrease depending on these debt ratings. The company has outstanding public bonds issued by Chevron Corporation, CUSA, Noble and Texaco Capital Inc. Most of these securities are the obligations of, or guaranteed by, Chevron Corporation and are rated AA- by Standard and Poor’s Corporation and Aa2 by Moody’s Investors Service. The company’s U.S. commercial paper is rated A-1+ by Standard and Poor’s and P-1 by Moody’s. All of these ratings denote high-quality, investment-grade securities. The company’s future debt level is dependent primarily on results of operations, cash that may be generated from asset dispositions, the capital program, lending commitments to affiliates and shareholder distributions. Based on its high-quality debt ratings, the company believes that it has substantial borrowing capacity to meet unanticipated cash requirements. During extended periods of low prices for crude oil and natural gas and narrow margins for refined products and commodity chemicals, the company has the flexibility to modify capital spending plans and discontinue or curtail the stock repurchase program to provide flexibility to continue paying the common stock dividend and also remain committed to retaining the company’s high-quality debt ratings. Committed Credit Facilities Information related to committed credit facilities is included in Note 17, Short-Term Debt, on page 83. Summarized Financial Information for Guarantee of Securities of Subsidiaries In August 2020, long-term public bonds were issued by CUSA and fully and unconditionally guaranteed on an unsecured basis by Chevron Corporation (together the “Obligor Group”). In March 2020, the U.S. Securities and Exchange Commission (SEC) issued a final rule that amended the disclosure requirements with respect to certain guaranteed securities registered or being registered in Rule 3-10 of Regulation S-X and adopted new Rule 13-01 of Regulation S-X. These amendments were effective January 4, 2021. Accordingly, as disclosed in the tables below, summary financial information is presented for Chevron Corporation, as Guarantor, excluding its consolidated subsidiaries, and CUSA, as the issuer, excluding its consolidated subsidiaries. The summary financial information of the Obligor Group is presented on a combined basis and transactions between the combined entities have been eliminated. Financial information for non-guarantor entities has been excluded. Sales and other operating revenues Sales and other operating revenues – related party Total costs and other deductions Total costs and other deductions – related party Net income (loss) Current assets Current assets – related party Other assets Current liabilities Current liabilities – related party Other liabilities Total net equity (deficit) Year Ended December 31, 2020 Year Ended December 31, 2019 (Millions of dollars) (unaudited) $ $ $ 49,636 $ 17,044 57,575 14,052 (1,610) $ 82,206 24,336 87,287 22,632 2,173 At December 31, 2020 At December 31, 2019 (Millions of dollars) (unaudited) $ 9,196 5,719 48,993 20,965 55,273 34,983 10,180 952 50,595 25,187 46,237 25,622 $ (47,313) $ (35,319) Common Stock Repurchase Program On February 1, 2019, the company announced that the Board of Directors authorized a new stock repurchase program with a maximum dollar limit of $25 billion and no set term limits. As of December 31, 2020, the company had purchased a total of 48.6 million shares for $5.5 billion, resulting in $19.5 billion remaining under the program authorized in February 2019. On March 24, 2020, the company announced the suspension of the stock repurchase program in response to depressed market conditions following the global outbreak of the COVID-19 pandemic. No shares were purchased under the program after this announcement. Repurchases may be made from time to time in the open market, by block purchases, in privately negotiated transactions or in such other manner as determined by the company. The timing of the repurchases and the actual amount repurchased will depend on a variety of factors, including the market price of the company’s shares, general market and economic 43 Chevron Corporation 2020 Annual Report 43 173155_Annual_Report_10-K.indd 43 173155_Annual_Report_10-K.indd 43 3/5/21 6:04 PM 3/5/21 6:04 PM Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations conditions, and other factors. The stock repurchase program does not obligate the company to acquire any particular amount of common stock, and it may be suspended or discontinued at any time. Capital and Exploratory Expenditures Capital and exploratory expenditures by business segment for 2020, 2019 and 2018 are as follows: Millions of dollars U.S. Int’l. 2020 Total U.S. Int’l. 2019 Total U.S. Int’l. 2018 Total Upstream Downstream All Other Total $ 5,130 1,021 226 $ 5,784 1,325 13 $10,914 2,346 239 $ 8,197 1,868 365 $ 9,627 920 17 $17,824 2,788 382 $ 7,128 1,582 243 $ 10,529 611 13 $ 17,657 2,193 256 $ 6,377 $ 7,122 $13,499 $ 10,430 $ 10,564 $20,994 $ 8,953 $ 11,153 $ 20,106 Total, Excluding Equity in Affiliates $ 6,053 $ 3,464 $ 9,517 $ 10,062 $ 4,820 $14,882 $ 8,651 $ 5,739 $ 14,390 Total reported expenditures for 2020 were $13.5 billion, including $4.0 billion for the company’s share of equity-affiliate expenditures, which did not require cash outlays by the company. The acquisition of Noble is not included in the company’s capital and exploratory expenditures. For more information on the Noble acquisition, see page 96 in Note 29. In 2019, expenditures were $21.0 billion, including the company’s share of affiliates’ expenditures of $6.1 billion. Of the $13.5 billion of expenditures in 2020, 81 percent, or $10.9 billion, related to upstream activities. Approximately 85 percent was expended for upstream operations in 2019. International upstream accounted for 53 percent of the worldwide upstream investment in 2020 and 54 percent in 2019. The company estimates that 2021 organic capital and exploratory expenditures will be $14 billion, including $4.2 billion of spending by affiliates. This is in line with 2020 expenditures, and reflects a robust portfolio of upstream and downstream investments, highlighted by the FGP/WPMP project at the Tengiz field in Kazakhstan and the company’s Permian Basin position. In the upstream business, approximately $6.5 billion is allocated to currently producing assets, including about $2.0 billion for Permian unconventional development. Approximately $3.5 billion of the upstream program is planned for major capital projects underway, of which about 75 percent is associated with FGP/WPMP at the Tengiz field in Kazakhstan. Additionally, $1.5 billion is allocated to exploration, early stage development projects, and midstream activities. The company monitors crude oil market conditions and is able to adjust future capital outlays should oil price conditions deteriorate. Worldwide downstream spending in 2021 is estimated to be $2.1 billion, with $1.2 billion estimated for projects in the United States. Investments in technology businesses and other corporate operations in 2021 are budgeted at $0.4 billion. Noncontrolling Interests The company had noncontrolling interests of $1.0 billion at December 31, 2020 and $1.0 billion at December 31, 2019. Distributions to noncontrolling interests totaled $24 million and $18 million in 2020 and 2019, respectively. Included within noncontrolling interests for 2020 is $120 million of redeemable noncontrolling interest associated with Noble Midstream. Pension Obligations Information related to pension plan contributions is included beginning on page 87 in Note 21, Employee Benefit Plans, under the heading “Cash Contributions and Benefit Payments.” Financial Ratios and Metrics company and its performance over time: The following represent several metrics the company believes are useful measures to monitor the financial health of the Current Ratio Current assets divided by current liabilities, which indicates the company’s ability to repay its short-term liabilities with short-term assets. The current ratio in all periods was adversely affected by the fact that Chevron’s inventories are valued on a last-in, first-out basis. At year-end 2020, the book value of inventory was lower than replacement costs, based on average acquisition costs during the year, by approximately $2.7 billion. Interest Coverage Ratio Income before income tax expense, plus interest and debt expense and amortization of capitalized interest, less net income attributable to noncontrolling interests, divided by before-tax interest costs. This ratio indicates the company’s ability to pay interest on outstanding debt. The company’s interest coverage ratio in 2020 was lower than 2019 Millions of dollars Current assets Current liabilities Current Ratio due to lower income. Millions of dollars Income (Loss) Before Income Tax Expense Plus: Interest and debt expense Plus: Before-tax amortization of capitalized interest Less: Net income attributable to noncontrolling interests Subtotal for calculation Total financing interest and debt costs Interest Coverage Ratio Millions of dollars Net cash provided by operating activities Less: Capital expenditures Free Cash Flow 2019. Millions of dollars Short-term debt Long-term debt Total debt Free Cash Flow The cash provided by operating activities less cash capital expenditures, which represents the cash available to creditors and investors after investing in the business. Debt Ratio Total debt as a percentage of total debt plus Chevron Corporation Stockholders’ Equity, which indicates the company’s leverage. The company’s debt ratio was 25.2 percent at year-end 2020, compared with 15.8 percent at year-end Total Chevron Corporation Stockholders’ Equity 131,688 144,213 154,554 Total debt plus total Chevron Corporation Stockholders’ Equity $ 176,003 $ 171,186 $ 189,013 Debt Ratio 25.2 % 15.8 % 18.2 % $ $ $ At December 31 2018 34,021 27,171 1.3 2019 28,329 26,530 1.1 Year ended December 31 2020 2019 2018 $ (7,453) $ 5,536 $ 20,575 Year ended December 31 798 240 (79) 6,653 817 8.1 2019 27,314 14,116 13,198 2019 3,282 23,691 26,973 748 280 36 21,567 921 23.4 2018 30,618 13,792 16,826 2018 5,726 28,733 34,459 $ $ $ $ At December 31 $ $ $ $ 2020 26,078 22,183 1.2 697 205 (18) (6,533) 735 (8.9) 2020 10,577 8,922 1,655 2020 1,548 42,767 44,315 $ $ $ $ 44 Chevron Corporation 2020 Annual Report 44 45 173155_Annual_Report_10-K.indd 44 173155_Annual_Report_10-K.indd 44 3/5/21 6:04 PM 3/5/21 6:04 PM Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations conditions, and other factors. The stock repurchase program does not obligate the company to acquire any particular amount Financial Ratios and Metrics of common stock, and it may be suspended or discontinued at any time. Capital and Exploratory Expenditures Capital and exploratory expenditures by business segment for 2020, 2019 and 2018 are as follows: Millions of dollars Upstream Downstream All Other Total 2020 Total 2,346 239 U.S. 8,197 1,868 365 Int’l. 920 17 2019 Total 2,788 382 U.S. 7,128 1,582 243 Int’l. 611 13 2018 Total 2,193 256 $10,914 $ $ 9,627 $17,824 $ 10,529 $ 17,657 7,122 $13,499 $ 10,430 $ 10,564 $20,994 8,953 $ 11,153 $ 20,106 Int’l. 5,784 1,325 13 U.S. 5,130 1,021 226 6,377 6,053 $ $ $ $ $ $ $ $ $ Total, Excluding Equity in Affiliates 3,464 $ 9,517 $ 10,062 $ 4,820 $14,882 8,651 $ 5,739 $ 14,390 Total reported expenditures for 2020 were $13.5 billion, including $4.0 billion for the company’s share of equity-affiliate expenditures, which did not require cash outlays by the company. The acquisition of Noble is not included in the company’s capital and exploratory expenditures. For more information on the Noble acquisition, see page 96 in Note 29. In 2019, expenditures were $21.0 billion, including the company’s share of affiliates’ expenditures of $6.1 billion. Of the $13.5 billion of expenditures in 2020, 81 percent, or $10.9 billion, related to upstream activities. Approximately 85 percent was expended for upstream operations in 2019. International upstream accounted for 53 percent of the worldwide upstream investment in 2020 and 54 percent in 2019. The company estimates that 2021 organic capital and exploratory expenditures will be $14 billion, including $4.2 billion of spending by affiliates. This is in line with 2020 expenditures, and reflects a robust portfolio of upstream and downstream investments, highlighted by the FGP/WPMP project at the Tengiz field in Kazakhstan and the company’s Permian Basin position. In the upstream business, approximately $6.5 billion is allocated to currently producing assets, including about $2.0 billion for Permian unconventional development. Approximately $3.5 billion of the upstream program is planned for major capital projects underway, of which about 75 percent is associated with FGP/WPMP at the Tengiz field in Kazakhstan. Additionally, $1.5 billion is allocated to exploration, early stage development projects, and midstream activities. The company monitors crude oil market conditions and is able to adjust future capital outlays should oil price conditions deteriorate. United States. Worldwide downstream spending in 2021 is estimated to be $2.1 billion, with $1.2 billion estimated for projects in the Investments in technology businesses and other corporate operations in 2021 are budgeted at $0.4 billion. Noncontrolling Interests The company had noncontrolling interests of $1.0 billion at December 31, 2020 and $1.0 billion at December 31, 2019. Distributions to noncontrolling interests totaled $24 million and $18 million in 2020 and 2019, respectively. Included within noncontrolling interests for 2020 is $120 million of redeemable noncontrolling interest associated with Noble Midstream. Pension Obligations Information related to pension plan contributions is included beginning on page 87 in Note 21, Employee Benefit Plans, under the heading “Cash Contributions and Benefit Payments.” The following represent several metrics the company believes are useful measures to monitor the financial health of the company and its performance over time: Current Ratio Current assets divided by current liabilities, which indicates the company’s ability to repay its short-term liabilities with short-term assets. The current ratio in all periods was adversely affected by the fact that Chevron’s inventories are valued on a last-in, first-out basis. At year-end 2020, the book value of inventory was lower than replacement costs, based on average acquisition costs during the year, by approximately $2.7 billion. Millions of dollars Current assets Current liabilities Current Ratio $ 2020 26,078 22,183 1.2 $ 2019 28,329 26,530 1.1 At December 31 2018 $ 34,021 27,171 1.3 Interest Coverage Ratio Income before income tax expense, plus interest and debt expense and amortization of capitalized interest, less net income attributable to noncontrolling interests, divided by before-tax interest costs. This ratio indicates the company’s ability to pay interest on outstanding debt. The company’s interest coverage ratio in 2020 was lower than 2019 due to lower income. Millions of dollars Income (Loss) Before Income Tax Expense Plus: Interest and debt expense Plus: Before-tax amortization of capitalized interest Less: Net income attributable to noncontrolling interests Subtotal for calculation Total financing interest and debt costs Interest Coverage Ratio $ $ 2020 (7,453) 697 205 (18) (6,533) $ 735 $ (8.9) Year ended December 31 2018 2019 5,536 798 240 (79) 6,653 817 8.1 $ $ 20,575 748 280 36 21,567 921 23.4 Free Cash Flow The cash provided by operating activities less cash capital expenditures, which represents the cash available to creditors and investors after investing in the business. Millions of dollars Net cash provided by operating activities Less: Capital expenditures Free Cash Flow 2020 10,577 8,922 Year ended December 31 2018 2019 $ 27,314 14,116 $ 30,618 13,792 1,655 $ 13,198 $ 16,826 $ $ Debt Ratio Total debt as a percentage of total debt plus Chevron Corporation Stockholders’ Equity, which indicates the company’s leverage. The company’s debt ratio was 25.2 percent at year-end 2020, compared with 15.8 percent at year-end 2019. Millions of dollars Short-term debt Long-term debt Total debt $ 2020 1,548 42,767 44,315 $ 2019 3,282 23,691 26,973 At December 31 2018 $ 5,726 28,733 34,459 Total Chevron Corporation Stockholders’ Equity 131,688 144,213 154,554 Total debt plus total Chevron Corporation Stockholders’ Equity $ 176,003 $ 171,186 $ 189,013 Debt Ratio 25.2 % 15.8 % 18.2 % 44 45 Chevron Corporation 2020 Annual Report 45 173155_Annual_Report_10-K.indd 45 173155_Annual_Report_10-K.indd 45 3/5/21 6:04 PM 3/5/21 6:04 PM Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations Net Debt Ratio Total debt less cash and cash equivalents, time deposits, and marketable securities as a percentage of total debt less cash and cash equivalents, time deposits, and marketable securities, plus Chevron Corporation Stockholders’ Equity, which indicates the company’s leverage, net of its cash balances. Millions of dollars Short-term debt Long-term debt Total Debt Less: Cash and cash equivalents Less: Time deposits Less: Marketable securities Total adjusted debt Total Chevron Corporation Stockholders’ Equity $ 2020 1,548 42,767 44,315 5,596 — 31 38,688 131,688 $ At December 31 2018 $ 5,726 28,733 34,459 9,342 950 53 2019 3,282 23,691 26,973 5,686 — 63 21,224 24,114 144,213 154,554 Total adjusted debt plus total Chevron Corporation Stockholders’ Equity $ 170,376 $ 165,437 $ 178,668 Net Debt Ratio 22.7 % 12.8 % 13.5 % Information on ARO’s is contained in Note 23 beginning on page 94 Capital Employed The sum of Chevron Corporation Stockholders’ Equity, total debt and noncontrolling interests, which represents the net investment in the business. or liquidity in any single period. Millions of dollars Chevron Corporation Stockholders’ Equity Plus: Short-term debt Plus: Long-term debt Plus: Noncontrolling interest $ 2020 131,688 1,548 42,767 1,038 At December 31 2018 2019 $ 144,213 3,282 23,691 995 $ 154,554 5,726 28,733 1,088 Capital Employed at December 31 $ 177,041 $ 172,181 $ 190,101 Return on Average Capital Employed (ROCE) Net income attributable to Chevron (adjusted for after-tax interest expense and noncontrolling interest) divided by average capital employed. Average capital employed is computed by averaging the sum of capital employed at the beginning and end of the year. ROCE is a ratio intended to measure annual earnings as a percentage of historical investments in the business. Millions of dollars Net income attributable to Chevron Plus: After-tax interest and debt expense Plus: Noncontrolling interest Net income after adjustments Average capital employed Return on Average Capital Employed $ 2020 (5,543) 658 (18) (4,903) $ Year ended December 31 2018 2019 2,924 761 (79) 3,606 $ 14,824 713 36 15,573 $ 174,611 $ 181,141 $ 189,092 (2.8) % 2.0 % 8.2 % Return on Stockholders’ Equity (ROSE) Net income attributable to Chevron divided by average Chevron Corporation Stockholders’ Equity. Average stockholder’s equity is computed by averaging the sum of stockholder’s equity at the beginning and end of the year. ROSE is a ratio intended to measure earnings as a percentage of shareholder investments. Millions of dollars Net income attributable to Chevron Chevron Corporation Stockholders’ Equity at December 31 Average Chevron Corporation Stockholders’ Equity 2020 Year ended December 31 2018 2019 $ (5,543) 131,688 137,951 $ 2,924 144,213 149,384 $ 14,824 154,554 151,339 Return on Average Stockholders’ Equity (4.0) % 2.0 % 9.8 % 46 Chevron Corporation 2020 Annual Report 46 173155_Annual_Report_10-K.indd 46 173155_Annual_Report_10-K.indd 46 3/5/21 6:04 PM 3/5/21 6:04 PM Off-Balance-Sheet Arrangements, Contractual Obligations, Guarantees and Other Contingencies Long-Term Unconditional Purchase Obligations and Commitments, Including Throughput and Take-or-Pay Agreements Information related to these matters is included on page 92 in Note 22, Other Contingencies and Commitments. The following table summarizes the company’s significant contractual obligations: Millions of dollars On Balance Sheet:2 Short-Term Debt3, 4 Long-Term Debt3, 4 Leases Interest4 Off Balance Sheet: Throughput and Take-or-Pay Agreements5 Other Unconditional Purchase Obligations5 Total1 2021 2022-2023 2024-2025 After 2025 Payments Due by Period $ 1,362 $ 1,362 $ — $ — $ — 40,732 5,119 9,357 13,186 1,464 — 1,580 866 817 211 21,848 1,394 1,469 2,045 468 5,650 702 1,105 2,236 489 13,234 1,443 5,917 8,088 296 1. Excludes contributions for pensions and other postretirement benefit plans and ARO. Information on employee benefit plans is contained in Note 21 beginning on page 87. 2. Does not include amounts related to the company’s income tax liabilities associated with uncertain tax positions. The company is unable to make reasonable estimates of the periods in which such liabilities may become payable. The company does not expect settlement of such liabilities to have a material effect on its consolidated financial position 3. $9.825 billion of short-term debt that the company expects to refinance is included in long-term debt. The repayment schedule above reflects the projected repayment of the entire amounts in the 2022–2023 period. The amounts represent only the principal balance. 4. Excludes finance lease liabilities. 5. Does not include commodity purchase obligations that are not fixed or determinable. These obligations are generally monetized in a relatively short period of time through sales transactions or similar agreements with third parties. Examples include obligations to purchase LNG, regasified natural gas and refinery products at indexed prices. Direct Guarantees Millions of dollars Commitments. Guarantee of nonconsolidated affiliate or joint-venture obligations $ 391 $ 176 $ 77 $ 78 $ 60 Additional information related to guarantees is included on page 92 in Note 22, Other Contingencies and Commitments. Indemnifications Information related to indemnifications is included on page 92 in Note 22, Other Contingencies and Total 2021 2022-2023 2024-2025 After 2025 Commitment Expiration by Period Financial and Derivative Instrument Market Risk The market risk associated with the company’s portfolio of financial and derivative instruments is discussed below. The estimates of financial exposure to market risk do not represent the company’s projection of future market changes. The actual impact of future market changes could differ materially due to factors discussed elsewhere in this report, including those set forth under the heading “Risk Factors” in Part I, Item 1A of the company’s Annual Report on Form 10-K. Derivative Commodity Instruments Chevron is exposed to market risks related to the price volatility of crude oil, refined products, natural gas, natural gas liquids, liquefied natural gas and refinery feedstocks. The company uses derivative commodity instruments to manage these exposures on a portion of its activity, including firm commitments and anticipated transactions for the purchase, sale and storage of crude oil, refined products, natural gas, natural gas liquids, liquefied natural gas and feedstock for company refineries. The company also uses derivative commodity instruments for limited trading purposes. The results of these activities were not material to the company’s financial position, results of operations or cash flows in 2020. The company’s market exposure positions are monitored on a daily basis by an internal Risk Control group in accordance with the company’s risk management policies. The company’s risk management practices and its compliance with policies are reviewed by the Audit Committee of the company’s Board of Directors. Derivatives beyond those designated as normal purchase and normal sale contracts are recorded at fair value on the Consolidated Balance Sheet with resulting gains and losses reflected in income. Fair values are derived principally from published market quotes and other independent third-party quotes. The change in fair value of Chevron’s derivative commodity instruments in 2020 was not material to the company’s results of operations. 47 Net Debt Ratio Total debt less cash and cash equivalents, time deposits, and marketable securities as a percentage of total debt less cash and cash equivalents, time deposits, and marketable securities, plus Chevron Corporation Stockholders’ Equity, which indicates the company’s leverage, net of its cash balances. Millions of dollars Short-term debt Long-term debt Total Debt Less: Cash and cash equivalents Less: Time deposits Less: Marketable securities Total adjusted debt Total Chevron Corporation Stockholders’ Equity Millions of dollars Chevron Corporation Stockholders’ Equity Plus: Short-term debt Plus: Long-term debt Plus: Noncontrolling interest Capital Employed at December 31 Millions of dollars Net income attributable to Chevron Plus: After-tax interest and debt expense Plus: Noncontrolling interest Net income after adjustments Average capital employed Return on Average Capital Employed Total adjusted debt plus total Chevron Corporation Stockholders’ Equity $ 170,376 $ 165,437 $ 178,668 Capital Employed The sum of Chevron Corporation Stockholders’ Equity, total debt and noncontrolling interests, which represents the net investment in the business. Return on Average Capital Employed (ROCE) Net income attributable to Chevron (adjusted for after-tax interest expense and noncontrolling interest) divided by average capital employed. Average capital employed is computed by averaging the sum of capital employed at the beginning and end of the year. ROCE is a ratio intended to measure annual earnings as a percentage of historical investments in the business. $ $ $ 2020 1,548 42,767 44,315 5,596 — 31 38,688 131,688 At December 31 2018 5,726 28,733 34,459 9,342 950 53 24,114 154,554 2019 3,282 23,691 26,973 5,686 — 63 21,224 144,213 2020 2019 2018 At December 31 $ 131,688 $ 144,213 $ 154,554 1,548 42,767 1,038 3,282 23,691 995 5,726 28,733 1,088 $ 177,041 $ 172,181 $ 190,101 Year ended December 31 2020 2019 2018 $ (5,543) $ 2,924 $ 14,824 658 (18) 761 (79) 713 36 (4,903) 3,606 15,573 $ 174,611 $ 181,141 $ 189,092 (2.8) % 2.0 % 8.2 % Year ended December 31 2020 2019 2018 $ (5,543) $ 2,924 $ 14,824 131,688 137,951 144,213 149,384 154,554 151,339 Return on Stockholders’ Equity (ROSE) Net income attributable to Chevron divided by average Chevron Corporation Stockholders’ Equity. Average stockholder’s equity is computed by averaging the sum of stockholder’s equity at the beginning and end of the year. ROSE is a ratio intended to measure earnings as a percentage of shareholder investments. Millions of dollars Net income attributable to Chevron Chevron Corporation Stockholders’ Equity at December 31 Average Chevron Corporation Stockholders’ Equity Return on Average Stockholders’ Equity (4.0) % 2.0 % 9.8 % 46 Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations Off-Balance-Sheet Arrangements, Contractual Obligations, Guarantees and Other Contingencies Long-Term Unconditional Purchase Obligations and Commitments, Including Throughput and Take-or-Pay Agreements Information related to these matters is included on page 92 in Note 22, Other Contingencies and Commitments. The following table summarizes the company’s significant contractual obligations: Millions of dollars On Balance Sheet:2 Short-Term Debt3, 4 Long-Term Debt3, 4 Leases Interest4 Off Balance Sheet: Throughput and Take-or-Pay Agreements5 Other Unconditional Purchase Obligations5 $ Total1 1,362 40,732 5,119 9,357 13,186 1,464 Payments Due by Period 2021 2022-2023 2024-2025 After 2025 $ 1,362 — 1,580 866 $ — 21,848 1,394 1,469 $ — 5,650 702 1,105 $ — 13,234 1,443 5,917 817 211 2,045 468 2,236 489 8,088 296 Net Debt Ratio 22.7 % 12.8 % 13.5 % Information on ARO’s is contained in Note 23 beginning on page 94 1. Excludes contributions for pensions and other postretirement benefit plans and ARO. Information on employee benefit plans is contained in Note 21 beginning on page 87. 2. Does not include amounts related to the company’s income tax liabilities associated with uncertain tax positions. The company is unable to make reasonable estimates of the periods in which such liabilities may become payable. The company does not expect settlement of such liabilities to have a material effect on its consolidated financial position or liquidity in any single period. 3. $9.825 billion of short-term debt that the company expects to refinance is included in long-term debt. The repayment schedule above reflects the projected repayment of the entire amounts in the 2022–2023 period. The amounts represent only the principal balance. 4. Excludes finance lease liabilities. 5. Does not include commodity purchase obligations that are not fixed or determinable. These obligations are generally monetized in a relatively short period of time through sales transactions or similar agreements with third parties. Examples include obligations to purchase LNG, regasified natural gas and refinery products at indexed prices. Direct Guarantees Millions of dollars Total 2021 Commitment Expiration by Period 2024-2025 After 2025 2022-2023 Guarantee of nonconsolidated affiliate or joint-venture obligations $ 391 $ 176 $ 77 $ 78 $ 60 Additional information related to guarantees is included on page 92 in Note 22, Other Contingencies and Commitments. Indemnifications Information related to indemnifications is included on page 92 in Note 22, Other Contingencies and Commitments. Financial and Derivative Instrument Market Risk The market risk associated with the company’s portfolio of financial and derivative instruments is discussed below. The estimates of financial exposure to market risk do not represent the company’s projection of future market changes. The actual impact of future market changes could differ materially due to factors discussed elsewhere in this report, including those set forth under the heading “Risk Factors” in Part I, Item 1A of the company’s Annual Report on Form 10-K. Derivative Commodity Instruments Chevron is exposed to market risks related to the price volatility of crude oil, refined products, natural gas, natural gas liquids, liquefied natural gas and refinery feedstocks. The company uses derivative commodity instruments to manage these exposures on a portion of its activity, including firm commitments and anticipated transactions for the purchase, sale and storage of crude oil, refined products, natural gas, natural gas liquids, liquefied natural gas and feedstock for company refineries. The company also uses derivative commodity instruments for limited trading purposes. The results of these activities were not material to the company’s financial position, results of operations or cash flows in 2020. The company’s market exposure positions are monitored on a daily basis by an internal Risk Control group in accordance with the company’s risk management policies. The company’s risk management practices and its compliance with policies are reviewed by the Audit Committee of the company’s Board of Directors. Derivatives beyond those designated as normal purchase and normal sale contracts are recorded at fair value on the Consolidated Balance Sheet with resulting gains and losses reflected in income. Fair values are derived principally from published market quotes and other independent third-party quotes. The change in fair value of Chevron’s derivative commodity instruments in 2020 was not material to the company’s results of operations. 47 Chevron Corporation 2020 Annual Report 47 173155_Annual_Report_10-K.indd 47 173155_Annual_Report_10-K.indd 47 3/5/21 6:04 PM 3/5/21 6:04 PM Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations The company uses the Monte Carlo simulation method as its Value-at-Risk (VaR) model to estimate the maximum potential loss in fair value, at the 95 percent confidence level with a one-day holding period, from the effect of adverse changes in market conditions on derivative commodity instruments held or issued. Based on these inputs, the VaR for the company’s primary risk exposures in the area of derivative commodity instruments at December 31, 2020 and 2019 was not material to the company’s cash flows or results of operations. Foreign Currency The company may enter into foreign currency derivative contracts to manage some of its foreign currency exposures. These exposures include revenue and anticipated purchase transactions, including foreign currency capital expenditures and lease commitments. The foreign currency derivative contracts, if any, are recorded at fair value on the balance sheet with resulting gains and losses reflected in income. There were no material open foreign currency derivative contracts at December 31, 2020. Interest Rates The company may enter into interest rate swaps from time to time as part of its overall strategy to manage the interest rate risk on its debt. Interest rate swaps, if any, are recorded at fair value on the balance sheet with resulting gains and losses reflected in income. At year-end 2020, the company had no interest rate swaps. Transactions With Related Parties Chevron enters into a number of business arrangements with related parties, principally its equity affiliates. These arrangements include long-term supply or offtake agreements and long-term purchase agreements. Refer to “Other Information” on page 77, in Note 13, Investments and Advances, for further discussion. Management believes these agreements have been negotiated on terms consistent with those that would have been negotiated with an unrelated party. Litigation and Other Contingencies MTBE Information related to methyl tertiary butyl ether (MTBE) matters is included on page 78 in Note 14 under the heading “MTBE.” Ecuador Information related to Ecuador matters is included in Note 14 under the heading “Ecuador,” beginning on page 78. Environmental The following table displays the annual changes to the company’s before-tax environmental remediation reserves, including those for U.S. federal Superfund sites and analogous sites under state laws. Millions of dollars Balance at January 1 Net Additions Expenditures Balance at December 31 $ 2020 1,234 179 (274) $ 2019 1,327 200 (293) $ 2018 1,429 197 (299) $ 1,139 $ 1,234 $ 1,327 The company records asset retirement obligations when there is a legal obligation associated with the retirement of long- lived assets and the liability can be reasonably estimated. These asset retirement obligations include costs related to environmental issues. The liability balance of approximately $13.6 billion for asset retirement obligations at year-end 2020 related primarily to upstream properties. For the company’s other ongoing operating assets, such as refineries and chemicals facilities, no provisions are made for exit or cleanup costs that may be required when such assets reach the end of their useful lives unless a decision to sell or otherwise decommission the facility has been made, as the indeterminate settlement dates for the asset retirements prevent estimation of the fair value of the asset retirement obligation. Refer to the discussion below for additional information on environmental matters and their impact on Chevron, and on the company’s 2020 environmental expenditures. Refer to Note 22 on page 93 for additional discussion of environmental remediation provisions and year-end reserves. Refer also to Note 23 on page 94 for additional discussion of the company’s asset retirement obligations. Suspended Wells Information related to suspended wells is included in Note 19, Accounting for Suspended Exploratory Wells, beginning on page 85. information becomes known. Income Taxes Information related to income tax contingencies is included on pages 79 through 82 in Note 15 and page 92 in Note 22 under the heading “Income Taxes.” The discussion in this section of “critical” accounting estimates and assumptions is according to the disclosure guidelines of the Securities and Exchange Commission (SEC), wherein: 48 Chevron Corporation 2020 Annual Report 48 49 173155_Annual_Report_10-K.indd 48 173155_Annual_Report_10-K.indd 48 3/5/21 6:04 PM 3/5/21 6:04 PM Other Contingencies Information related to other contingencies is included on page 93 in Note 22 to the Consolidated Financial Statements under the heading “Other Contingencies.” Environmental Matters The company is subject to various international, federal, state and local environmental, health and safety laws, regulations and market-based programs. These laws, regulations and programs continue to evolve and are expected to increase in both number and complexity over time and govern not only the manner in which the company conducts its operations, but also the products it sells. For example, international agreements and national, regional, and state legislation and regulatory measures that aim to limit or reduce greenhouse gas (GHG) emissions are currently in various stages of implementation. Consideration of GHG issues and the responses to those issues through international agreements and national, regional or state legislation or regulations are integrated into the company’s strategy and planning, capital investment reviews and risk management tools and processes, where applicable. They are also factored into the company’s long-range supply, demand and energy price forecasts. These forecasts reflect long-range effects from renewable fuel penetration, energy efficiency standards, climate- related policy actions, and demand response to oil and natural gas prices. In addition, legislation and regulations intended to address hydraulic fracturing also continue to evolve at the national, state and local levels. Refer to “Risk Factors” in Part I, Item 1A, on pages 18 through 23 of the company’s Annual Report on Form 10-K for a discussion of some of the inherent risks of increasingly restrictive environmental and other regulation that could materially impact the company’s results of operations or financial condition. Most of the costs of complying with existing laws and regulations pertaining to company operations and products are embedded in the normal costs of doing business. However, it is not possible to predict with certainty the amount of additional investments in new or existing technology or facilities or the amounts of increased operating costs to be incurred in the future to: prevent, control, reduce or eliminate releases of hazardous materials or other pollutants into the environment; remediate and restore areas damaged by prior releases of hazardous materials; or comply with new environmental laws or regulations. Although these costs may be significant to the results of operations in any single period, the company does not presently expect them to have a material adverse effect on the company’s liquidity or financial position. Accidental leaks and spills requiring cleanup may occur in the ordinary course of business. The company may incur expenses for corrective actions at various owned and previously owned facilities and at third-party-owned waste disposal sites used by the company. An obligation may arise when operations are closed or sold or at non-Chevron sites where company products have been handled or disposed of. Most of the expenditures to fulfill these obligations relate to facilities and sites where past operations followed practices and procedures that were considered acceptable at the time but now require investigative or remedial work or both to meet current standards. Using definitions and guidelines established by the American Petroleum Institute, Chevron estimated its worldwide environmental spending in 2020 at approximately $2.0 billion for its consolidated companies. Included in these expenditures were approximately $0.5 billion of environmental capital expenditures and $1.5 billion of costs associated with the prevention, control, abatement or elimination of hazardous substances and pollutants from operating, closed or divested sites, and the decommissioning and restoration of sites. For 2021, total worldwide environmental capital expenditures are estimated at $0.5 billion. These capital costs are in addition to the ongoing costs of complying with environmental regulations and the costs to remediate previously contaminated sites. Critical Accounting Estimates and Assumptions Management makes many estimates and assumptions in the application of accounting principles generally accepted in the United States of America (GAAP) that may have a material impact on the company’s consolidated financial statements and related disclosures and on the comparability of such information over different reporting periods. Such estimates and assumptions affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. Estimates and assumptions are based on management’s experience and other information available prior to the issuance of the financial statements. Materially different results can occur as circumstances change and additional Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations The company uses the Monte Carlo simulation method as its Value-at-Risk (VaR) model to estimate the maximum potential loss in fair value, at the 95 percent confidence level with a one-day holding period, from the effect of adverse changes in market conditions on derivative commodity instruments held or issued. Based on these inputs, the VaR for the company’s primary risk exposures in the area of derivative commodity instruments at December 31, 2020 and 2019 was not material to the company’s cash flows or results of operations. Foreign Currency The company may enter into foreign currency derivative contracts to manage some of its foreign currency exposures. These exposures include revenue and anticipated purchase transactions, including foreign currency capital expenditures and lease commitments. The foreign currency derivative contracts, if any, are recorded at fair value on the balance sheet with resulting gains and losses reflected in income. There were no material open foreign currency derivative contracts at December 31, 2020. Interest Rates The company may enter into interest rate swaps from time to time as part of its overall strategy to manage the interest rate risk on its debt. Interest rate swaps, if any, are recorded at fair value on the balance sheet with resulting gains and losses reflected in income. At year-end 2020, the company had no interest rate swaps. Transactions With Related Parties Chevron enters into a number of business arrangements with related parties, principally its equity affiliates. These arrangements include long-term supply or offtake agreements and long-term purchase agreements. Refer to “Other Information” on page 77, in Note 13, Investments and Advances, for further discussion. Management believes these agreements have been negotiated on terms consistent with those that would have been negotiated with an unrelated party. Litigation and Other Contingencies heading “MTBE.” MTBE Information related to methyl tertiary butyl ether (MTBE) matters is included on page 78 in Note 14 under the Ecuador Information related to Ecuador matters is included in Note 14 under the heading “Ecuador,” beginning on page 78. Environmental The following table displays the annual changes to the company’s before-tax environmental remediation reserves, including those for U.S. federal Superfund sites and analogous sites under state laws. Millions of dollars Balance at January 1 Net Additions Expenditures Balance at December 31 1,234 $ 1,327 $ 2019 200 (293) 2018 1,429 197 (299) 2020 179 (274) $ $ 1,139 $ 1,234 $ 1,327 The company records asset retirement obligations when there is a legal obligation associated with the retirement of long- lived assets and the liability can be reasonably estimated. These asset retirement obligations include costs related to environmental issues. The liability balance of approximately $13.6 billion for asset retirement obligations at year-end 2020 related primarily to upstream properties. For the company’s other ongoing operating assets, such as refineries and chemicals facilities, no provisions are made for exit or cleanup costs that may be required when such assets reach the end of their useful lives unless a decision to sell or otherwise decommission the facility has been made, as the indeterminate settlement dates for the asset retirements prevent estimation of the fair value of the asset retirement obligation. Refer to the discussion below for additional information on environmental matters and their impact on Chevron, and on the company’s 2020 environmental expenditures. Refer to Note 22 on page 93 for additional discussion of environmental remediation provisions and year-end reserves. Refer also to Note 23 on page 94 for additional discussion of the company’s asset retirement obligations. Wells, beginning on page 85. Suspended Wells Information related to suspended wells is included in Note 19, Accounting for Suspended Exploratory Income Taxes Information related to income tax contingencies is included on pages 79 through 82 in Note 15 and page 92 in Note 22 under the heading “Income Taxes.” Other Contingencies Information related to other contingencies is included on page 93 in Note 22 to the Consolidated Financial Statements under the heading “Other Contingencies.” Environmental Matters The company is subject to various international, federal, state and local environmental, health and safety laws, regulations and market-based programs. These laws, regulations and programs continue to evolve and are expected to increase in both number and complexity over time and govern not only the manner in which the company conducts its operations, but also the products it sells. For example, international agreements and national, regional, and state legislation and regulatory measures that aim to limit or reduce greenhouse gas (GHG) emissions are currently in various stages of implementation. Consideration of GHG issues and the responses to those issues through international agreements and national, regional or state legislation or regulations are integrated into the company’s strategy and planning, capital investment reviews and risk management tools and processes, where applicable. They are also factored into the company’s long-range supply, demand and energy price forecasts. These forecasts reflect long-range effects from renewable fuel penetration, energy efficiency standards, climate- related policy actions, and demand response to oil and natural gas prices. In addition, legislation and regulations intended to address hydraulic fracturing also continue to evolve at the national, state and local levels. Refer to “Risk Factors” in Part I, Item 1A, on pages 18 through 23 of the company’s Annual Report on Form 10-K for a discussion of some of the inherent risks of increasingly restrictive environmental and other regulation that could materially impact the company’s results of operations or financial condition. Most of the costs of complying with existing laws and regulations pertaining to company operations and products are embedded in the normal costs of doing business. However, it is not possible to predict with certainty the amount of additional investments in new or existing technology or facilities or the amounts of increased operating costs to be incurred in the future to: prevent, control, reduce or eliminate releases of hazardous materials or other pollutants into the environment; remediate and restore areas damaged by prior releases of hazardous materials; or comply with new environmental laws or regulations. Although these costs may be significant to the results of operations in any single period, the company does not presently expect them to have a material adverse effect on the company’s liquidity or financial position. Accidental leaks and spills requiring cleanup may occur in the ordinary course of business. The company may incur expenses for corrective actions at various owned and previously owned facilities and at third-party-owned waste disposal sites used by the company. An obligation may arise when operations are closed or sold or at non-Chevron sites where company products have been handled or disposed of. Most of the expenditures to fulfill these obligations relate to facilities and sites where past operations followed practices and procedures that were considered acceptable at the time but now require investigative or remedial work or both to meet current standards. Using definitions and guidelines established by the American Petroleum Institute, Chevron estimated its worldwide environmental spending in 2020 at approximately $2.0 billion for its consolidated companies. Included in these expenditures were approximately $0.5 billion of environmental capital expenditures and $1.5 billion of costs associated with the prevention, control, abatement or elimination of hazardous substances and pollutants from operating, closed or divested sites, and the decommissioning and restoration of sites. For 2021, total worldwide environmental capital expenditures are estimated at $0.5 billion. These capital costs are in addition to the ongoing costs of complying with environmental regulations and the costs to remediate previously contaminated sites. Critical Accounting Estimates and Assumptions Management makes many estimates and assumptions in the application of accounting principles generally accepted in the United States of America (GAAP) that may have a material impact on the company’s consolidated financial statements and related disclosures and on the comparability of such information over different reporting periods. Such estimates and assumptions affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. Estimates and assumptions are based on management’s experience and other information available prior to the issuance of the financial statements. Materially different results can occur as circumstances change and additional information becomes known. The discussion in this section of “critical” accounting estimates and assumptions is according to the disclosure guidelines of the Securities and Exchange Commission (SEC), wherein: 48 49 Chevron Corporation 2020 Annual Report 49 173155_Annual_Report_10-K.indd 49 173155_Annual_Report_10-K.indd 49 3/5/21 6:04 PM 3/5/21 6:04 PM Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations 1. 2. the nature of the estimates and assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters, or the susceptibility of such matters to change; and the impact of the estimates and assumptions on the company’s financial condition or operating performance is material. The development and selection of accounting estimates and assumptions, including those deemed “critical,” and the associated disclosures in this discussion have been discussed by management with the Audit Committee of the Board of Directors. The areas of accounting and the associated “critical” estimates and assumptions made by the company are as follows: Oil and Gas Reserves Crude oil and natural gas reserves are estimates of future production that impact certain asset and expense accounts included in the Consolidated Financial Statements. Proved reserves are the estimated quantities of oil and gas that geoscience and engineering data demonstrate with reasonable certainty to be economically producible in the future under existing economic conditions, operating methods and government regulations. Proved reserves include both developed and undeveloped volumes. Proved developed reserves represent volumes expected to be recovered through existing wells with existing equipment and operating methods. Proved undeveloped reserves are volumes expected to be recovered from new wells on undrilled proved acreage, or from existing wells where a relatively major expenditure is required for recompletion. Variables impacting Chevron’s estimated volumes of crude oil and natural gas reserves include field performance, available technology, commodity prices, and development and production costs. The estimates of crude oil and natural gas reserves are important to the timing of expense recognition for costs incurred and to the valuation of certain oil and gas producing assets. Impacts of oil and gas reserves on Chevron’s Consolidated Financial Statements, using the successful efforts method of accounting, include the following: 1. Amortization – Capitalized exploratory drilling and development costs are depreciated on a unit-of-production (UOP) basis using proved developed reserves. Acquisition costs of proved properties are amortized on a UOP basis using total proved reserves. During 2020, Chevron’s UOP Depreciation, Depletion and Amortization (DD&A) for oil and gas properties was $13.0 billion, and proved developed reserves at the beginning of 2020 were 6.4 billion barrels for consolidated companies. If the estimates of proved reserves used in the UOP calculations for consolidated operations had been lower by 5 percent across all oil and gas properties, UOP DD&A in 2020 would have increased by approximately $700 million. 2. Impairment – Oil and gas reserves are used in assessing oil and gas producing properties for impairment. A significant reduction in the estimated reserves of a property would trigger an impairment review. Proved reserves (and, in some cases, a portion of unproved resources) are used to estimate future production volumes in the cash flow model. For a further discussion of estimates and assumptions used in impairment assessments, see Impairment of Properties, Plant and Equipment and Investments in Affiliates below. Refer to Table V, “Reserve Quantity Information,” beginning on page 103, for the changes in proved reserve estimates for the three years ended December 31, 2020, and to Table VII, “Changes in the Standardized Measure of Discounted Future Net Cash Flows From Proved Reserves” on page 111 for estimates of proved reserve values for each of the three years ended December 31, 2020. This Oil and Gas Reserves commentary should be read in conjunction with the Properties, Plant and Equipment section of Note 1, beginning on page 64, which includes a description of the “successful efforts” method of accounting for oil and gas exploration and production activities. Impairment of Properties, Plant and Equipment and Investments in Affiliates The company assesses its properties, plant and equipment (PP&E) for possible impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. If the carrying value of an asset exceeds the future undiscounted cash flows expected from the asset, an impairment charge is recorded for the excess of carrying value of the asset over its estimated fair value. Determination as to whether and how much an asset is impaired involves management estimates on highly uncertain matters, such as future commodity prices, operating expenses, production profiles, and the outlook for global or regional market supply-and-demand conditions for crude oil, natural gas, commodity chemicals and refined products. However, the impairment reviews and calculations are based on assumptions that are generally consistent with the company’s business plans and long-term investment decisions. Refer also to the discussion of impairments of properties, plant and equipment in Note 16 on page 82 and to the section on Properties, Plant and Equipment in Note 1, “Summary of Significant Accounting Policies,” beginning on page 64. The company performs impairment assessments when triggering events arise to determine whether any write-down in the carrying value of an asset or asset group is required. For example, when significant downward revisions to crude oil and natural gas reserves are made for any single field or concession, an impairment review is performed to determine if the carrying value of the asset remains recoverable. Similarly, a significant downward revision in the company’s crude oil or natural gas price outlook would trigger impairment reviews for impacted upstream assets. In addition, impairments could occur due to changes in national, state or local environmental regulations or laws, including those designed to stop or impede the development or production of oil and gas. Also, if the expectation of sale of a particular asset or asset group in any period has been deemed more likely than not, an impairment review is performed, and if the estimated net proceeds exceed the carrying value of the asset or asset group, no impairment charge is required. Such calculations are reviewed each period until the asset or asset group is disposed. Assets that are not impaired on a held-and-used basis could possibly become impaired if a decision is made to sell such assets. That is, the assets would be impaired if they are classified as held-for-sale and the estimated proceeds from the sale, less costs to sell, are less than the assets’ associated carrying values. Investments in common stock of affiliates that are accounted for under the equity method, as well as investments in other securities of these equity investees, are reviewed for impairment when the fair value of the investment falls below the company’s carrying value. When this occurs, a determination must be made as to whether this loss is other-than-temporary, in which case the investment is impaired. Because of the number of differing assumptions potentially affecting whether an investment is impaired in any period or the amount of the impairment, a sensitivity analysis is not practicable. In 2020, the company recorded impairments and write-offs for certain oil and gas properties primarily due to downward revisions to its oil and gas price outlook. In addition, the company fully impaired its investments in Petropiar and Petroboscan after completing an evaluation of the carrying value of its Venezuelan investments in line with its accounting policies and concluding that given the current operating environment and overall outlook, which create significant uncertainties regarding the recovery of the company’s investment, an other than temporary loss of value had occurred. In 2019, the company recorded impairments and write-offs for certain oil and gas properties following the review and approval of its business plan and capital expenditure program. As a result of the company’s disciplined approach to capital allocation and a downward revision in its longer-term commodity price outlook, the company reduced funding to various natural gas-related upstream opportunities including Appalachia shale, Kitimat LNG and other international projects. In addition, the revised long-term oil price outlook resulted in an impairment of Big Foot. A sensitivity analysis of the impact on earnings for these periods if other assumptions had been used in impairment reviews and impairment calculations is not practicable, given the broad range of the company’s PP&E and the number of assumptions involved in the estimates. That is, favorable changes to some assumptions might have avoided the need to impair any assets in these periods, whereas unfavorable changes might have caused an additional unknown number of other assets to become impaired, or resulted in larger impacts on impaired assets. Asset Retirement Obligations In the determination of fair value for an asset retirement obligation (ARO), the company uses various assumptions and judgments, including such factors as the existence of a legal obligation, estimated amounts and timing of settlements, discount and inflation rates, and the expected impact of advances in technology and process improvements. A sensitivity analysis of the ARO impact on earnings for 2020 is not practicable, given the broad range of the company’s long-lived assets and the number of assumptions involved in the estimates. That is, favorable changes to some assumptions would have reduced estimated future obligations, thereby lowering accretion expense and amortization costs, whereas unfavorable changes would have the opposite effect. Refer to Note 23 on page 94 for additional discussions on asset retirement obligations. assumptions. Pension and Other Postretirement Benefit Plans Note 21, beginning on page 87, includes information on the funded status of the company’s pension and other postretirement benefit (OPEB) plans reflected on the Consolidated Balance Sheet; the components of pension and OPEB expense reflected on the Consolidated Statement of Income; and the related underlying The determination of pension plan expense and obligations is based on a number of actuarial assumptions. Two critical assumptions are the expected long-term rate of return on plan assets and the discount rate applied to pension plan obligations. Critical assumptions in determining expense and obligations for OPEB plans, which provide for certain health care and life insurance benefits for qualifying retired employees and which are not funded, are the discount rate and the assumed health care cost-trend rates. Information related to the company’s processes to develop these assumptions is included on page 89 in Note 21 under the relevant headings. Actual rates may vary significantly from estimates because of unanticipated changes beyond the company’s control. 50 Chevron Corporation 2020 Annual Report 50 51 173155_Annual_Report_10-K.indd 50 173155_Annual_Report_10-K.indd 50 3/5/21 6:04 PM 3/5/21 6:04 PM Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations 1. the nature of the estimates and assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters, or the susceptibility of such matters to change; and 2. the impact of the estimates and assumptions on the company’s financial condition or operating performance is material. The development and selection of accounting estimates and assumptions, including those deemed “critical,” and the associated disclosures in this discussion have been discussed by management with the Audit Committee of the Board of Directors. The areas of accounting and the associated “critical” estimates and assumptions made by the company are as follows: Oil and Gas Reserves Crude oil and natural gas reserves are estimates of future production that impact certain asset and expense accounts included in the Consolidated Financial Statements. Proved reserves are the estimated quantities of oil and gas that geoscience and engineering data demonstrate with reasonable certainty to be economically producible in the future under existing economic conditions, operating methods and government regulations. Proved reserves include both developed and undeveloped volumes. Proved developed reserves represent volumes expected to be recovered through existing wells with existing equipment and operating methods. Proved undeveloped reserves are volumes expected to be recovered from new wells on undrilled proved acreage, or from existing wells where a relatively major expenditure is required for recompletion. Variables impacting Chevron’s estimated volumes of crude oil and natural gas reserves include field performance, available technology, commodity prices, and development and production costs. The estimates of crude oil and natural gas reserves are important to the timing of expense recognition for costs incurred and to the valuation of certain oil and gas producing assets. Impacts of oil and gas reserves on Chevron’s Consolidated Financial Statements, using the successful efforts method of accounting, include the following: 1. Amortization – Capitalized exploratory drilling and development costs are depreciated on a unit-of-production (UOP) basis using proved developed reserves. Acquisition costs of proved properties are amortized on a UOP basis using total proved reserves. During 2020, Chevron’s UOP Depreciation, Depletion and Amortization (DD&A) for oil and gas properties was $13.0 billion, and proved developed reserves at the beginning of 2020 were 6.4 billion barrels for consolidated companies. If the estimates of proved reserves used in the UOP calculations for consolidated operations had been lower by 5 percent across all oil and gas properties, UOP DD&A in 2020 would have increased by approximately $700 million. 2. Impairment – Oil and gas reserves are used in assessing oil and gas producing properties for impairment. A significant reduction in the estimated reserves of a property would trigger an impairment review. Proved reserves (and, in some cases, a portion of unproved resources) are used to estimate future production volumes in the cash flow model. For a further discussion of estimates and assumptions used in impairment assessments, see Impairment of Properties, Plant and Equipment and Investments in Affiliates below. Refer to Table V, “Reserve Quantity Information,” beginning on page 103, for the changes in proved reserve estimates for the three years ended December 31, 2020, and to Table VII, “Changes in the Standardized Measure of Discounted Future Net Cash Flows From Proved Reserves” on page 111 for estimates of proved reserve values for each of the three years ended December 31, 2020. This Oil and Gas Reserves commentary should be read in conjunction with the Properties, Plant and Equipment section of Note 1, beginning on page 64, which includes a description of the “successful efforts” method of accounting for oil and gas exploration and production activities. Impairment of Properties, Plant and Equipment and Investments in Affiliates The company assesses its properties, plant and equipment (PP&E) for possible impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. If the carrying value of an asset exceeds the future undiscounted cash flows expected from the asset, an impairment charge is recorded for the excess of carrying value of the asset over its estimated fair value. Determination as to whether and how much an asset is impaired involves management estimates on highly uncertain matters, such as future commodity prices, operating expenses, production profiles, and the outlook for global or regional market supply-and-demand conditions for crude oil, natural gas, commodity chemicals and refined products. However, the impairment reviews and calculations are based on assumptions that are generally consistent with the company’s business plans and long-term investment decisions. Refer also to the discussion of impairments of properties, plant and equipment in Note 16 on page 82 and to the section on Properties, Plant and Equipment in Note 1, “Summary of Significant Accounting Policies,” beginning on page 64. 50 The company performs impairment assessments when triggering events arise to determine whether any write-down in the carrying value of an asset or asset group is required. For example, when significant downward revisions to crude oil and natural gas reserves are made for any single field or concession, an impairment review is performed to determine if the carrying value of the asset remains recoverable. Similarly, a significant downward revision in the company’s crude oil or natural gas price outlook would trigger impairment reviews for impacted upstream assets. In addition, impairments could occur due to changes in national, state or local environmental regulations or laws, including those designed to stop or impede the development or production of oil and gas. Also, if the expectation of sale of a particular asset or asset group in any period has been deemed more likely than not, an impairment review is performed, and if the estimated net proceeds exceed the carrying value of the asset or asset group, no impairment charge is required. Such calculations are reviewed each period until the asset or asset group is disposed. Assets that are not impaired on a held-and-used basis could possibly become impaired if a decision is made to sell such assets. That is, the assets would be impaired if they are classified as held-for-sale and the estimated proceeds from the sale, less costs to sell, are less than the assets’ associated carrying values. Investments in common stock of affiliates that are accounted for under the equity method, as well as investments in other securities of these equity investees, are reviewed for impairment when the fair value of the investment falls below the company’s carrying value. When this occurs, a determination must be made as to whether this loss is other-than-temporary, in which case the investment is impaired. Because of the number of differing assumptions potentially affecting whether an investment is impaired in any period or the amount of the impairment, a sensitivity analysis is not practicable. In 2020, the company recorded impairments and write-offs for certain oil and gas properties primarily due to downward revisions to its oil and gas price outlook. In addition, the company fully impaired its investments in Petropiar and Petroboscan after completing an evaluation of the carrying value of its Venezuelan investments in line with its accounting policies and concluding that given the current operating environment and overall outlook, which create significant uncertainties regarding the recovery of the company’s investment, an other than temporary loss of value had occurred. In 2019, the company recorded impairments and write-offs for certain oil and gas properties following the review and approval of its business plan and capital expenditure program. As a result of the company’s disciplined approach to capital allocation and a downward revision in its longer-term commodity price outlook, the company reduced funding to various natural gas-related upstream opportunities including Appalachia shale, Kitimat LNG and other international projects. In addition, the revised long-term oil price outlook resulted in an impairment of Big Foot. A sensitivity analysis of the impact on earnings for these periods if other assumptions had been used in impairment reviews and impairment calculations is not practicable, given the broad range of the company’s PP&E and the number of assumptions involved in the estimates. That is, favorable changes to some assumptions might have avoided the need to impair any assets in these periods, whereas unfavorable changes might have caused an additional unknown number of other assets to become impaired, or resulted in larger impacts on impaired assets. Asset Retirement Obligations In the determination of fair value for an asset retirement obligation (ARO), the company uses various assumptions and judgments, including such factors as the existence of a legal obligation, estimated amounts and timing of settlements, discount and inflation rates, and the expected impact of advances in technology and process improvements. A sensitivity analysis of the ARO impact on earnings for 2020 is not practicable, given the broad range of the company’s long-lived assets and the number of assumptions involved in the estimates. That is, favorable changes to some assumptions would have reduced estimated future obligations, thereby lowering accretion expense and amortization costs, whereas unfavorable changes would have the opposite effect. Refer to Note 23 on page 94 for additional discussions on asset retirement obligations. Pension and Other Postretirement Benefit Plans Note 21, beginning on page 87, includes information on the funded status of the company’s pension and other postretirement benefit (OPEB) plans reflected on the Consolidated Balance Sheet; the components of pension and OPEB expense reflected on the Consolidated Statement of Income; and the related underlying assumptions. The determination of pension plan expense and obligations is based on a number of actuarial assumptions. Two critical assumptions are the expected long-term rate of return on plan assets and the discount rate applied to pension plan obligations. Critical assumptions in determining expense and obligations for OPEB plans, which provide for certain health care and life insurance benefits for qualifying retired employees and which are not funded, are the discount rate and the assumed health care cost-trend rates. Information related to the company’s processes to develop these assumptions is included on page 89 in Note 21 under the relevant headings. Actual rates may vary significantly from estimates because of unanticipated changes beyond the company’s control. 51 Chevron Corporation 2020 Annual Report 51 173155_Annual_Report_10-K.indd 51 173155_Annual_Report_10-K.indd 51 3/5/21 6:04 PM 3/5/21 6:04 PM impact on the company’s consolidated financial statements and financial or operational performance in any given period” in “Risk Factors” in Part I, Item 1A, on page 23 of the company’s Annual Report on Form 10-K. New Accounting Standards Refer to Note 4 beginning on page 69 for information regarding new accounting standards. Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations For 2020, the company used an expected long-term rate of return of 6.5 percent and a discount rate for service costs of 3.3 percent and a discount rate for interest cost of 2.6 percent for the primary U.S. pension plan. The actual return for 2020 was 9.4 percent. For the 10 years ended December 31, 2020, actual asset returns averaged 7.9 percent for this plan. Additionally, with the exception of three years within this 10-year period, actual asset returns for this plan equaled or exceeded 6.5 percent during each year. Total pension expense for 2020 was $1.5 billion. An increase in the expected long-term return on plan assets or the discount rate would reduce pension plan expense, and vice versa. As an indication of the sensitivity of pension expense to the long- term rate of return assumption, a 1 percent increase in this assumption for the company’s primary U.S. pension plan, which accounted for about 67 percent of companywide pension expense, would have reduced total pension plan expense for 2020 by approximately $88 million. A 1 percent increase in the discount rates for this same plan would have reduced pension expense for 2020 by approximately $269 million. The aggregate funded status recognized at December 31, 2020, was a net liability of approximately $6.2 billion. An increase in the discount rate would decrease the pension obligation, thus changing the funded status of a plan. At December 31, 2020, the company used a discount rate of 2.4 percent to measure the obligations for the primary U.S. pension plan. As an indication of the sensitivity of pension liabilities to the discount rate assumption, a 0.25 percent increase in the discount rate applied to the company’s primary U.S. pension plan, which accounted for about 61 percent of the companywide pension obligation, would have reduced the plan obligation by approximately $475 million, and would have decreased the plan’s underfunded status from approximately $3.2 billion to $2.8 billion. For the company’s OPEB plans, expense for 2020 was $57 million, and the total liability, all unfunded at the end of 2020, was $2.7 billion. For the primary U.S. OPEB plan, the company used a discount rate for service cost of 3.4 percent and a discount rate for interest cost of 2.7 percent to measure expense in 2020, and a 2.4 percent discount rate to measure the benefit obligations at December 31, 2020. Discount rate changes, similar to those used in the pension sensitivity analysis, resulted in an immaterial impact on 2020 OPEB expense and OPEB liabilities at the end of 2020. Differences between the various assumptions used to determine expense and the funded status of each plan and actual experience are included in actuarial gain/loss. Refer to page 88 in Note 21 for more information on the $7.4 billion of before-tax actuarial losses recorded by the company as of December 31, 2020, In addition, information related to company contributions is included on page 91 in Note 21 under the heading “Cash Contributions and Benefit Payments.” Business Combinations – Purchase-Price Allocation Accounting for business combinations requires the allocation of the company’s purchase price to the various assets and liabilities of the acquired business at their respective fair values. The company uses all available information to make these fair value determinations. Determining the fair values of assets acquired generally involves assumptions regarding the amounts and timing of future revenues and expenditures, as well as discount rates. For additional discussion of purchase price allocations, refer to Note 29 beginning on page 96. Contingent Losses Management also makes judgments and estimates in recording liabilities for claims, litigation, tax matters and environmental remediation. Actual costs can frequently vary from estimates for a variety of reasons. For example, the costs for settlement of claims and litigation can vary from estimates based on differing interpretations of laws, opinions on culpability and assessments on the amount of damages. Similarly, liabilities for environmental remediation are subject to change because of changes in laws, regulations and their interpretation, the determination of additional information on the extent and nature of site contamination, and improvements in technology. Under the accounting rules, a liability is generally recorded for these types of contingencies if management determines the loss to be both probable and estimable. The company generally reports these losses as “Operating expenses” or “Selling, general and administrative expenses” on the Consolidated Statement of Income. An exception to this handling is for income tax matters, for which benefits are recognized only if management determines the tax position is “more likely than not” (i.e., likelihood greater than 50 percent) to be allowed by the tax jurisdiction. For additional discussion of income tax uncertainties, refer to Note 22 beginning on page 92. Refer also to the business segment discussions elsewhere in this section for the effect on earnings from losses associated with certain litigation, environmental remediation and tax matters for the three years ended December 31, 2020. An estimate as to the sensitivity to earnings for these periods if other assumptions had been used in recording these liabilities is not practicable because of the number of contingencies that must be assessed, the number of underlying assumptions and the wide range of reasonably possible outcomes, both in terms of the probability of loss and the estimates of such loss. For in management’s estimates and assumptions may have a material further to “Changes information, refer 52 Chevron Corporation 2020 Annual Report 52 53 173155_Annual_Report_10-K.indd 52 173155_Annual_Report_10-K.indd 52 3/5/21 6:04 PM 3/5/21 6:04 PM For 2020, the company used an expected long-term rate of return of 6.5 percent and a discount rate for service costs of 3.3 percent and a discount rate for interest cost of 2.6 percent for the primary U.S. pension plan. The actual return for 2020 was 9.4 percent. For the 10 years ended December 31, 2020, actual asset returns averaged 7.9 percent for this plan. Additionally, with the exception of three years within this 10-year period, actual asset returns for this plan equaled or exceeded 6.5 percent during each year. Total pension expense for 2020 was $1.5 billion. An increase in the expected long-term return on plan assets or the discount rate would reduce pension plan expense, and vice versa. As an indication of the sensitivity of pension expense to the long- term rate of return assumption, a 1 percent increase in this assumption for the company’s primary U.S. pension plan, which accounted for about 67 percent of companywide pension expense, would have reduced total pension plan expense for 2020 by approximately $88 million. A 1 percent increase in the discount rates for this same plan would have reduced pension expense for 2020 by approximately $269 million. The aggregate funded status recognized at December 31, 2020, was a net liability of approximately $6.2 billion. An increase in the discount rate would decrease the pension obligation, thus changing the funded status of a plan. At December 31, 2020, the company used a discount rate of 2.4 percent to measure the obligations for the primary U.S. pension plan. As an indication of the sensitivity of pension liabilities to the discount rate assumption, a 0.25 percent increase in the discount rate applied to the company’s primary U.S. pension plan, which accounted for about 61 percent of the companywide pension obligation, would have reduced the plan obligation by approximately $475 million, and would have decreased the plan’s underfunded status from approximately $3.2 billion to $2.8 billion. For the company’s OPEB plans, expense for 2020 was $57 million, and the total liability, all unfunded at the end of 2020, was $2.7 billion. For the primary U.S. OPEB plan, the company used a discount rate for service cost of 3.4 percent and a discount rate for interest cost of 2.7 percent to measure expense in 2020, and a 2.4 percent discount rate to measure the benefit obligations at December 31, 2020. Discount rate changes, similar to those used in the pension sensitivity analysis, resulted in an immaterial impact on 2020 OPEB expense and OPEB liabilities at the end of 2020. Differences between the various assumptions used to determine expense and the funded status of each plan and actual experience are included in actuarial gain/loss. Refer to page 88 in Note 21 for more information on the $7.4 billion of before-tax actuarial losses recorded by the company as of December 31, 2020, In addition, information related to company contributions is included on page 91 in Note 21 under the heading “Cash Contributions and Benefit Payments.” Business Combinations – Purchase-Price Allocation Accounting for business combinations requires the allocation of the company’s purchase price to the various assets and liabilities of the acquired business at their respective fair values. The company uses all available information to make these fair value determinations. Determining the fair values of assets acquired generally involves assumptions regarding the amounts and timing of future revenues and expenditures, as well as discount rates. For additional discussion of purchase price allocations, refer to Note 29 beginning on page 96. Contingent Losses Management also makes judgments and estimates in recording liabilities for claims, litigation, tax matters and environmental remediation. Actual costs can frequently vary from estimates for a variety of reasons. For example, the costs for settlement of claims and litigation can vary from estimates based on differing interpretations of laws, opinions on culpability and assessments on the amount of damages. Similarly, liabilities for environmental remediation are subject to change because of changes in laws, regulations and their interpretation, the determination of additional information on the extent and nature of site contamination, and improvements in technology. Under the accounting rules, a liability is generally recorded for these types of contingencies if management determines the loss to be both probable and estimable. The company generally reports these losses as “Operating expenses” or “Selling, general and administrative expenses” on the Consolidated Statement of Income. An exception to this handling is for income tax matters, for which benefits are recognized only if management determines the tax position is “more likely than not” (i.e., likelihood greater than 50 percent) to be allowed by the tax jurisdiction. For additional discussion of income tax uncertainties, refer to Note 22 beginning on page 92. Refer also to the business segment discussions elsewhere in this section for the effect on earnings from losses associated with certain litigation, environmental remediation and tax matters for the three years ended December 31, 2020. An estimate as to the sensitivity to earnings for these periods if other assumptions had been used in recording these liabilities is not practicable because of the number of contingencies that must be assessed, the number of underlying assumptions and the wide range of reasonably possible outcomes, both in terms of the probability of loss and the estimates of such loss. For further information, refer to “Changes in management’s estimates and assumptions may have a material 52 Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations impact on the company’s consolidated financial statements and financial or operational performance in any given period” in “Risk Factors” in Part I, Item 1A, on page 23 of the company’s Annual Report on Form 10-K. New Accounting Standards Refer to Note 4 beginning on page 69 for information regarding new accounting standards. 53 Chevron Corporation 2020 Annual Report 53 173155_Annual_Report_10-K.indd 53 173155_Annual_Report_10-K.indd 53 3/5/21 6:04 PM 3/5/21 6:04 PM 965 831 510 (56) 568 (165) 1,172 165 1,196 1,331 538 1,238 (2,515) 83 Revenues and Other Income Sales and other operating revenues Income from equity affiliates Other income $ 24,843 $ 23,997 $ 15,926 $ 29,705 $ 34,574 $ 34,779 $ 36,323 $ 34,189 1,062 (51) Quarterly Results Unaudited Millions of dollars, except per-share amounts 4th Q 3rd Q 2nd Q 2020 1st Q 4th Q 3rd Q 2nd Q 2019 1st Q Management’s Responsibility for Financial Statements To the Stockholders of Chevron Corporation Management of Chevron Corporation is responsible for preparing the accompanying consolidated financial statements and the related information appearing in this report. The statements were prepared in accordance with accounting principles generally accepted in the United States of America and fairly represent the transactions and financial position of the company. The financial statements include amounts that are based on management’s best estimates and judgments. As stated in its report included herein, the independent registered public accounting firm of PricewaterhouseCoopers LLP has audited the company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). The Board of Directors of Chevron has an Audit Committee composed of directors who are not officers or employees of the company. The Audit Committee meets regularly with members of management, the internal auditors and the independent registered public accounting firm to review accounting, internal control, auditing and financial reporting matters. Both the internal auditors and the independent registered public accounting firm have free and direct access to the Audit Committee without the presence of management. The company’s management has evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness of the company’s disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2020. Based on that evaluation, management concluded that the company’s disclosure controls are effective in ensuring that information required to be recorded, processed, summarized and reported, are done within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Management’s Report on Internal Control Over Financial Reporting The company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f). The company’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the company’s internal control over financial reporting based on the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the results of this evaluation, the company’s management concluded that internal control over financial reporting was effective as of December 31, The company excluded Noble from our assessment of internal control over financial reporting as of December 31, 2020 because it was acquired by the company in a business combination during 2020. Total assets and total revenues of Noble, a wholly-owned subsidiary, represent eight percent and one percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2020. The effectiveness of the company’s internal control over financial reporting as of December 31, 2020, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report included herein. Michael K. Wirth Chairman of the Board Pierre R. Breber Vice President and Chief Executive Officer and Chief Financial Officer David A. Inchausti Vice President and Controller February 25, 2021 Total Revenues and Other Income 25,246 24,451 13,494 31,501 36,350 36,116 38,850 35,200 Costs and Other Deductions Purchased crude oil and products Operating expenses Selling, general and administrative expenses Exploration expenses Depreciation, depletion and amortization Taxes other than on income Interest and debt expense Other components of net periodic benefit costs 13,387 4,898 1,129 367 4,486 1,276 199 461 13,448 4,604 832 117 4,017 1,091 164 222 8,144 5,530 1,569 895 6,717 965 172 99 15,509 5,291 683 158 4,288 1,167 162 98 19,693 5,987 1,129 272 16,429 969 178 98 19,882 5,325 954 168 4,361 1,059 197 121 20,835 5,187 1,076 141 4,334 1,047 198 97 19,703 4,886 984 189 4,094 1,061 225 101 Total Costs and Other Deductions 26,203 24,495 24,091 27,356 44,755 32,067 32,915 31,243 Income (Loss) Before Income Tax Expense Income Tax Expense (Benefit) (957) (301) (44) 165 (10,597) (2,320) 4,145 564 (8,405) (1,738) 4,049 1,469 5,935 1,645 3,957 1,315 Net Income (Loss) $ (656) $ (209) $ (8,277) $ 3,581 $ (6,667) $ 2,580 $ 4,290 $ 2,642 Less: Net income attributable to noncontrolling interests 9 (2) (7) (18) (57) — (15) (7) Net Income (Loss) Attributable to Chevron Corporation $ (665) $ (207) $ (8,270) $ 3,599 $ (6,610) $ 2,580 $ 4,305 $ 2,649 Per Share of Common Stock Net Income (Loss) Attributable to Chevron Corporation – Basic – Diluted Dividends per share $ $ $ (0.33) $ (0.33) $ (0.12) $ (0.12) $ (4.44) $ (4.44) $ 1.93 $ 1.93 $ (3.51) $ (3.51) $ 1.38 $ 1.36 $ 2.28 $ 2.27 $ 1.40 1.39 1.29 $ 1.29 $ 1.29 $ 1.29 $ 1.19 $ 1.19 $ 1.19 $ 1.19 2020. 54 Chevron Corporation 2020 Annual Report 54 55 173155_Annual_Report_10-K.indd 54 173155_Annual_Report_10-K.indd 54 3/5/21 6:04 PM 3/5/21 6:04 PM Millions of dollars, except per-share amounts 4th Q 3rd Q 2nd Q 4th Q 3rd Q 2nd Q 2020 1st Q 2019 1st Q Quarterly Results Unaudited Revenues and Other Income Sales and other operating revenues Income from equity affiliates Other income Total Revenues and Other Income Costs and Other Deductions Purchased crude oil and products Operating expenses Selling, general and administrative expenses Exploration expenses Depreciation, depletion and amortization Taxes other than on income Interest and debt expense Other components of net periodic benefit costs $ 24,843 $ 23,997 $ 15,926 $ 29,705 $ 34,574 $ 34,779 $ 36,323 $ 34,189 568 (165) 510 (56) (2,515) 83 965 831 538 1,238 1,172 165 1,196 1,331 1,062 (51) 25,246 24,451 13,494 31,501 36,350 36,116 38,850 35,200 13,387 4,898 1,129 367 4,486 1,276 199 461 13,448 4,604 832 117 4,017 1,091 164 222 8,144 5,530 1,569 895 6,717 965 172 99 15,509 5,291 683 158 4,288 1,167 162 98 19,693 5,987 1,129 272 16,429 969 178 98 19,882 5,325 954 168 4,361 1,059 197 121 20,835 5,187 1,076 141 4,334 1,047 198 97 19,703 4,886 984 189 4,094 1,061 225 101 Total Costs and Other Deductions 26,203 24,495 24,091 27,356 44,755 32,067 32,915 31,243 Income (Loss) Before Income Tax Expense Income Tax Expense (Benefit) (957) (301) (44) 165 (10,597) (2,320) 4,145 564 (8,405) (1,738) 4,049 1,469 5,935 1,645 3,957 1,315 Net Income (Loss) $ (656) $ (209) $ (8,277) $ 3,581 $ (6,667) $ 2,580 $ 4,290 $ 2,642 Less: Net income attributable to noncontrolling interests 9 (2) (7) (18) (57) — (15) (7) Net Income (Loss) Attributable to Chevron Corporation $ (665) $ (207) $ (8,270) $ 3,599 $ (6,610) $ 2,580 $ 4,305 $ 2,649 Per Share of Common Stock Net Income (Loss) Attributable to Chevron Corporation – Basic – Diluted Dividends per share $ 1.29 $ 1.29 $ 1.29 $ 1.29 $ 1.19 $ 1.19 $ (0.33) $ (0.12) $ (4.44) $ $ (0.33) $ (0.12) $ (4.44) $ 1.93 1.93 $ (3.51) $ $ (3.51) $ 1.38 1.36 $ $ $ 2.28 2.27 1.19 $ $ $ 1.40 1.39 1.19 Management’s Responsibility for Financial Statements To the Stockholders of Chevron Corporation Management of Chevron Corporation is responsible for preparing the accompanying consolidated financial statements and the related information appearing in this report. The statements were prepared in accordance with accounting principles generally accepted in the United States of America and fairly represent the transactions and financial position of the company. The financial statements include amounts that are based on management’s best estimates and judgments. As stated in its report included herein, the independent registered public accounting firm of PricewaterhouseCoopers LLP has audited the company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). The Board of Directors of Chevron has an Audit Committee composed of directors who are not officers or employees of the company. The Audit Committee meets regularly with members of management, the internal auditors and the independent registered public accounting firm to review accounting, internal control, auditing and financial reporting matters. Both the internal auditors and the independent registered public accounting firm have free and direct access to the Audit Committee without the presence of management. The company’s management has evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness of the company’s disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2020. Based on that evaluation, management concluded that the company’s disclosure controls are effective in ensuring that information required to be recorded, processed, summarized and reported, are done within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Management’s Report on Internal Control Over Financial Reporting The company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f). The company’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the company’s internal control over financial reporting based on the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the results of this evaluation, the company’s management concluded that internal control over financial reporting was effective as of December 31, 2020. The company excluded Noble from our assessment of internal control over financial reporting as of December 31, 2020 because it was acquired by the company in a business combination during 2020. Total assets and total revenues of Noble, a wholly-owned subsidiary, represent eight percent and one percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2020. The effectiveness of the company’s internal control over financial reporting as of December 31, 2020, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report included herein. Michael K. Wirth Chairman of the Board and Chief Executive Officer February 25, 2021 Pierre R. Breber Vice President and Chief Financial Officer David A. Inchausti Vice President and Controller 54 55 Chevron Corporation 2020 Annual Report 55 173155_Annual_Report_10-K.r1.indd 55 173155_Annual_Report_10-K.r1.indd 55 3/12/21 4:55 PM 3/12/21 4:55 PM Report of Independent Registered Public Accounting Firm detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the To the Board of Directors and Shareholders of Chevron Corporation: Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheet of Chevron Corporation and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of income, of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Noble Energy, Inc. from its assessment of internal control over financial reporting as of December 31, 2020 because it was acquired by the Company in a purchase business combination during 2020. We have also excluded Noble Energy, Inc. from our audit of internal control over financial reporting. Noble Energy, Inc. is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent eight percent and one percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2020. Definition and Limitations of Internal Control over Financial Reporting Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. financial statements. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. The Impact of Proved Crude Oil and Natural Gas Reserves on Upstream Property, Plant, and Equipment, Net As described in Notes 1 and 16 to the consolidated financial statements, the Company’s upstream property, plant and equipment, net balance was $140.2 billion as of December 31, 2020, and depreciation, depletion and amortization expense was $18.0 billion, including impairments of $2.8 billion for the year ended December 31, 2020. The Company follows the successful efforts method of accounting for crude oil and natural gas exploration and production activities. Depreciation and depletion of all capitalized costs of proved crude oil and natural gas producing properties, except mineral interests, are expensed using the unit-of-production method, generally by individual field, as the proved developed reserves are produced. Depletion expenses for capitalized costs of proved mineral interests are recognized using the unit-of-production method by individual field as the related proved reserves are produced. As disclosed by management, variables impacting the Company’s estimated volumes of crude oil and natural gas reserves include field performance, available technology, commodity prices, and development and production costs. Reserves are estimated by Company asset teams composed of earth scientists and engineers. As part of the internal control process related to reserves estimation, the Company maintains a Reserves Advisory Committee (RAC) (the Company’s earth scientists, engineers and RAC are collectively referred to as “management’s specialists”). The principal considerations for our determination that performing procedures relating to the impact of proved crude oil and natural gas reserves on upstream property, plant, and equipment, net is a critical audit matter are (i) the significant judgment by management, including the use of management’s specialists, when developing the estimates of proved crude oil and natural gas reserves, which in turn led to (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence obtained related to the data, methods and assumptions used by management and its specialists in developing the estimates of crude oil and natural gas reserve volumes. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s estimates of proved crude oil and natural gas reserves. The work of management’s specialists was used in performing the procedures to evaluate the reasonableness of the proved crude oil and natural gas reserve volumes. As a basis for using this work, the specialists’ qualifications were understood and the Company’s relationship with the specialists was assessed. The procedures performed also included evaluation of the methods and assumptions used by the specialists, tests of the data used by the specialists and an evaluation of the specialists’ findings. Acquisition of Noble Energy, Inc.—Valuation of Crude Oil and Natural Gas Properties As described in Note 29 to the consolidated financial statements, the Company acquired Noble Energy, Inc. (“Noble”) in an acquisition accounted for as a business combination, which required assets acquired and liabilities assumed to be measured at their acquisition date fair values, including approximately $15 billion related to the fair values of acquired oil and gas properties. Management applied significant judgment in estimating the fair value of properties acquired, which involved use of a discounted cash flow approach that incorporated internally generated price assumptions and production profiles, and operating cost and development cost assumptions. The principal considerations for our determination that performing procedures relating to the valuation of crude oil and natural gas properties from the acquisition of Noble is a critical audit matter are (i) the significant judgment by management, including the use of management’s specialists as defined in the previous Critical Audit Matter, when developing the fair value measurement of acquired crude oil and natural gas properties; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating significant assumptions used in the discounted cash flow approach related to price, production profiles and discount rates; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. 57 A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management timely and directors of regarding prevention or reasonable assurance the company; and (iii) provide 56 Chevron Corporation 2020 Annual Report 56 173155_Annual_Report_10-K.indd 56 173155_Annual_Report_10-K.indd 56 3/5/21 6:04 PM 3/5/21 6:04 PM Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Chevron Corporation: Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheet of Chevron Corporation and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of income, of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Noble Energy, Inc. from its assessment of internal control over financial reporting as of December 31, 2020 because it was acquired by the Company in a purchase business combination during 2020. We have also excluded Noble Energy, Inc. from our audit of internal control over financial reporting. Noble Energy, Inc. is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent eight percent and one percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2020. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely 56 detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. The Impact of Proved Crude Oil and Natural Gas Reserves on Upstream Property, Plant, and Equipment, Net As described in Notes 1 and 16 to the consolidated financial statements, the Company’s upstream property, plant and equipment, net balance was $140.2 billion as of December 31, 2020, and depreciation, depletion and amortization expense was $18.0 billion, including impairments of $2.8 billion for the year ended December 31, 2020. The Company follows the successful efforts method of accounting for crude oil and natural gas exploration and production activities. Depreciation and depletion of all capitalized costs of proved crude oil and natural gas producing properties, except mineral interests, are expensed using the unit-of-production method, generally by individual field, as the proved developed reserves are produced. Depletion expenses for capitalized costs of proved mineral interests are recognized using the unit-of-production method by individual field as the related proved reserves are produced. As disclosed by management, variables impacting the Company’s estimated volumes of crude oil and natural gas reserves include field performance, available technology, commodity prices, and development and production costs. Reserves are estimated by Company asset teams composed of earth scientists and engineers. As part of the internal control process related to reserves estimation, the Company maintains a Reserves Advisory Committee (RAC) (the Company’s earth scientists, engineers and RAC are collectively referred to as “management’s specialists”). The principal considerations for our determination that performing procedures relating to the impact of proved crude oil and natural gas reserves on upstream property, plant, and equipment, net is a critical audit matter are (i) the significant judgment by management, including the use of management’s specialists, when developing the estimates of proved crude oil and natural gas reserves, which in turn led to (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence obtained related to the data, methods and assumptions used by management and its specialists in developing the estimates of crude oil and natural gas reserve volumes. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s estimates of proved crude oil and natural gas reserves. The work of management’s specialists was used in performing the procedures to evaluate the reasonableness of the proved crude oil and natural gas reserve volumes. As a basis for using this work, the specialists’ qualifications were understood and the Company’s relationship with the specialists was assessed. The procedures performed also included evaluation of the methods and assumptions used by the specialists, tests of the data used by the specialists and an evaluation of the specialists’ findings. Acquisition of Noble Energy, Inc.—Valuation of Crude Oil and Natural Gas Properties As described in Note 29 to the consolidated financial statements, the Company acquired Noble Energy, Inc. (“Noble”) in an acquisition accounted for as a business combination, which required assets acquired and liabilities assumed to be measured at their acquisition date fair values, including approximately $15 billion related to the fair values of acquired oil and gas properties. Management applied significant judgment in estimating the fair value of properties acquired, which involved use of a discounted cash flow approach that incorporated internally generated price assumptions and production profiles, and operating cost and development cost assumptions. The principal considerations for our determination that performing procedures relating to the valuation of crude oil and natural gas properties from the acquisition of Noble is a critical audit matter are (i) the significant judgment by management, including the use of management’s specialists as defined in the previous Critical Audit Matter, when developing the fair value measurement of acquired crude oil and natural gas properties; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating significant assumptions used in the discounted cash flow approach related to price, production profiles and discount rates; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. 57 Chevron Corporation 2020 Annual Report 57 173155_Annual_Report_10-K.indd 57 173155_Annual_Report_10-K.indd 57 3/5/21 6:04 PM 3/5/21 6:04 PM Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of acquired crude oil and natural gas properties. These procedures also included, among others, (i) testing management’s process for developing the fair value measurement of the acquired crude oil and natural gas properties; (ii) evaluating the appropriateness of the discounted cash flow approach; (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow approach; and (iv) evaluating the reasonableness of significant assumptions used by management related to price, production profiles and discount rates. Evaluating production profile assumptions involved evaluating the reasonableness of the assumptions as compared to historical results of Noble, as well as third party data. Evaluating price assumptions involved comparing the prices to third party data and underlying contracts. Professionals with specialized skill and knowledge were used to assist in the evaluation of the discounted cash flow approach and discount rates used. The work of management’s specialists was used in performing the procedures to evaluate the reasonableness of the proved crude oil and natural gas reserve volumes included in production profile assumptions as stated in the Critical Audit Matter titled “The Impact of Proved Crude Oil and Natural Gas Reserves on Upstream Property, Plant, and Equipment, Net”. As a basis for using this work, the specialists’ qualifications were understood, and the Company’s relationship with the specialists was assessed. The procedures performed also included evaluation of the methods and assumptions used by the specialists, tests of the data used by the specialists, and an evaluation of the specialists’ findings. San Francisco, California February 25, 2021 We have served as the Company’s auditor since 1935. Consolidated Statement of Income Millions of dollars, except per-share amounts Revenues and Other Income Sales and other operating revenues Income (loss) from equity affiliates Other income Total Revenues and Other Income Costs and Other Deductions Purchased crude oil and products Operating expenses Selling, general and administrative expenses Exploration expenses Depreciation, depletion and amortization Taxes other than on income Interest and debt expense Other components of net periodic benefit costs Total Costs and Other Deductions Income (Loss) Before Income Tax Expense Income Tax Expense (Benefit) Net Income (Loss) Less: Net income (loss) attributable to noncontrolling interests Net Income (Loss) Attributable to Chevron Corporation Per Share of Common Stock Net Income (Loss) Attributable to Chevron Corporation - Basic - Diluted See accompanying Notes to the Consolidated Financial Statements. Year ended December 31 2020 2019 2018 $ 94,471 $ 139,865 $ 158,902 (472) 693 3,968 2,683 6,327 1,110 94,692 146,516 166,339 80,113 21,385 4,143 770 29,218 4,136 798 417 5,536 2,691 2,845 (79) 94,578 20,544 3,838 1,210 19,419 4,867 748 560 20,575 5,715 14,860 36 102,145 140,980 145,764 50,488 20,323 4,213 1,537 19,508 4,499 697 880 (7,453) (1,892) (5,561) (18) (5,543) (2.96) (2.96) $ $ $ $ $ $ 2,924 $ 14,824 1.55 1.54 $ $ 7.81 7.74 58 Chevron Corporation 2020 Annual Report 58 59 173155_Annual_Report_10-K.indd 58 173155_Annual_Report_10-K.indd 58 3/5/21 6:04 PM 3/5/21 6:04 PM Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of acquired crude oil and natural gas properties. These procedures also included, among others, (i) testing management’s process for developing the fair value measurement of the acquired crude oil and natural gas properties; (ii) evaluating the appropriateness of the discounted cash flow approach; (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow approach; and (iv) evaluating the reasonableness of significant assumptions used by management related to price, production profiles and discount rates. Evaluating production profile assumptions involved evaluating the reasonableness of the assumptions as compared to historical results of Noble, as well as third party data. Evaluating price assumptions involved comparing the prices to third party data and underlying contracts. Professionals with specialized skill and knowledge were used to assist in the evaluation of the discounted cash flow approach and discount rates used. The work of management’s specialists was used in performing the procedures to evaluate the reasonableness of the proved crude oil and natural gas reserve volumes included in production profile assumptions as stated in the Critical Audit Matter titled “The Impact of Proved Crude Oil and Natural Gas Reserves on Upstream Property, Plant, and Equipment, Net”. As a basis for using this work, the specialists’ qualifications were understood, and the Company’s relationship with the specialists was assessed. The procedures performed also included evaluation of the methods and assumptions used by the specialists, tests of the data used by the specialists, and an evaluation of the specialists’ findings. San Francisco, California February 25, 2021 We have served as the Company’s auditor since 1935. Consolidated Statement of Income Millions of dollars, except per-share amounts Revenues and Other Income Sales and other operating revenues Income (loss) from equity affiliates Other income Total Revenues and Other Income Costs and Other Deductions Purchased crude oil and products Operating expenses Selling, general and administrative expenses Exploration expenses Depreciation, depletion and amortization Taxes other than on income Interest and debt expense Other components of net periodic benefit costs Total Costs and Other Deductions Income (Loss) Before Income Tax Expense Income Tax Expense (Benefit) Net Income (Loss) Less: Net income (loss) attributable to noncontrolling interests Year ended December 31 2020 2019 2018 $ 94,471 (472) 693 94,692 $ 139,865 $ 3,968 2,683 146,516 158,902 6,327 1,110 166,339 50,488 20,323 4,213 1,537 19,508 4,499 697 880 80,113 21,385 4,143 770 29,218 4,136 798 417 94,578 20,544 3,838 1,210 19,419 4,867 748 560 102,145 140,980 145,764 (7,453) (1,892) (5,561) (18) 5,536 2,691 2,845 (79) 20,575 5,715 14,860 36 Net Income (Loss) Attributable to Chevron Corporation $ (5,543) $ 2,924 $ 14,824 Per Share of Common Stock Net Income (Loss) Attributable to Chevron Corporation - Basic - Diluted See accompanying Notes to the Consolidated Financial Statements. $ $ (2.96) (2.96) $ $ 1.55 $ 1.54 $ 7.81 7.74 58 59 Chevron Corporation 2020 Annual Report 59 173155_Annual_Report_10-K.indd 59 173155_Annual_Report_10-K.indd 59 3/5/21 6:04 PM 3/5/21 6:04 PM Consolidated Statement of Comprehensive Income Millions of dollars Consolidated Balance Sheet Millions of dollars, except per-share amounts Net Income (Loss) Currency translation adjustment Unrealized net change arising during period Unrealized holding gain (loss) on securities Net gain (loss) arising during period Derivatives Net derivatives loss on hedge transactions Income taxes on derivatives transactions Total Defined benefit plans Actuarial gain (loss) Amortization to net income of net actuarial loss and settlements Actuarial gain (loss) arising during period 1,107 (2,004) 519 (2,404) Prior service credits (cost) Amortization to net income of net prior service costs and curtailments Prior service (costs) credits arising during period Defined benefit plans sponsored by equity affiliates - benefit (cost) Income tax benefit (cost) on defined benefit plans Total Other Comprehensive Gain (Loss), Net of Tax Comprehensive Income Comprehensive loss (income) attributable to noncontrolling interests (23) — (104) 369 (655) (622) (6,183) 18 4 (28) (33) 510 (1,432) (1,446) 1,399 79 Year ended December 31 2020 2019 2018 $ (5,561) $ 2,845 $ 14,860 35 (2) — — — (18) 2 (1) 3 2 (19) (5) — — — 792 85 (13) (26) 23 (230) 631 607 15,467 (36) Comprehensive Income (Loss) Attributable to Chevron Corporation $ (6,165) $ 1,478 $ 15,431 See accompanying Notes to the Consolidated Financial Statements. 60 Chevron Corporation 2020 Annual Report 60 61 173155_Annual_Report_10-K.indd 60 173155_Annual_Report_10-K.indd 60 3/5/21 6:04 PM 3/5/21 6:04 PM Accounts and notes receivable (less allowance: 2020 - $284; 2019 - $746) Assets Cash and cash equivalents Marketable securities Inventories: Chemicals Crude oil and petroleum products Materials, supplies and other Total inventories Prepaid expenses and other current assets Total Current Assets Long-term receivables, net Investments and advances Properties, plant and equipment, at cost Less: Accumulated depreciation, depletion and amortization Properties, plant and equipment, net Deferred charges and other assets Goodwill Assets held for sale Total Assets Liabilities and Equity Short-term debt Accounts payable Accrued liabilities Federal and other taxes on income Other taxes payable Total Current Liabilities Long-term debt1 Noncurrent deferred income taxes Noncurrent employee benefit plans Total Liabilities2 Deferred credits and other noncurrent obligations issued at December 31, 2020 and 2019) Capital in excess of par value Retained earnings Accumulated other comprehensive losses Deferred compensation and benefit plan trust Preferred stock (authorized 100,000,000 shares; $1.00 par value; none issued) Common stock (authorized 6,000,000,000 shares; $0.75 par value; 2,442,676,580 shares Treasury stock, at cost (2020 - 517,490,263 shares; 2019 - 560,508,479 shares) Total Chevron Corporation Stockholders’ Equity Noncontrolling interests (2020 includes $120 redeemable noncontrolling interest) Total Equity Total Liabilities and Equity 1 Includes finance lease liabilities of $447 and $282 at December 31, 2020 and 2019, respectively. 2 Refer to Note 22, “Other Contingencies and Commitments” beginning on page 92. See accompanying Notes to the Consolidated Financial Statements. At December 31 2020 2019 $ $ 5,596 31 11,471 3,576 457 1,643 5,676 3,304 26,078 589 39,052 345,232 188,614 156,618 11,950 4,402 1,101 239,790 1,548 10,950 7,812 921 952 22,183 42,767 20,328 12,569 9,217 — 1,832 16,829 160,377 (5,612) (240) (41,498) 131,688 1,038 132,726 $ $ $ $ $ 107,064 $ 5,686 63 13,325 3,722 492 1,634 5,848 3,407 28,329 1,511 38,688 326,722 176,228 150,494 10,532 4,463 3,411 237,428 3,282 14,103 6,589 1,554 1,002 26,530 23,691 20,445 13,688 7,866 92,220 — 1,832 17,265 174,945 (4,990) (240) (44,599) 144,213 995 145,208 $ 239,790 $ 237,428 Net Income (Loss) Currency translation adjustment Unrealized net change arising during period Unrealized holding gain (loss) on securities Net gain (loss) arising during period Derivatives Net derivatives loss on hedge transactions Income taxes on derivatives transactions Total Defined benefit plans Actuarial gain (loss) Amortization to net income of net actuarial loss and settlements Actuarial gain (loss) arising during period Prior service credits (cost) Amortization to net income of net prior service costs and curtailments Prior service (costs) credits arising during period Defined benefit plans sponsored by equity affiliates - benefit (cost) Income tax benefit (cost) on defined benefit plans Total Other Comprehensive Gain (Loss), Net of Tax Comprehensive Income Comprehensive loss (income) attributable to noncontrolling interests 35 (2) — — — 1,107 (2,004) (23) — (104) 369 (655) (622) (6,183) 18 (18) (1) 2 3 2 519 (2,404) 4 (28) (33) 510 (1,432) (1,446) 1,399 79 (19) (5) — — — 792 85 (13) (26) 23 (230) 631 607 15,467 (36) Comprehensive Income (Loss) Attributable to Chevron Corporation $ (6,165) $ 1,478 $ 15,431 See accompanying Notes to the Consolidated Financial Statements. Consolidated Statement of Comprehensive Income Millions of dollars Consolidated Balance Sheet Millions of dollars, except per-share amounts Year ended December 31 2020 2019 2018 $ (5,561) $ 2,845 $ 14,860 Assets Cash and cash equivalents Marketable securities Accounts and notes receivable (less allowance: 2020 - $284; 2019 - $746) Inventories: $ At December 31 2020 2019 5,596 31 11,471 3,576 457 1,643 5,676 3,304 26,078 589 39,052 345,232 188,614 156,618 11,950 4,402 1,101 $ 5,686 63 13,325 3,722 492 1,634 5,848 3,407 28,329 1,511 38,688 326,722 176,228 150,494 10,532 4,463 3,411 $ 239,790 $ 237,428 $ $ 1,548 10,950 7,812 921 952 22,183 42,767 20,328 12,569 9,217 3,282 14,103 6,589 1,554 1,002 26,530 23,691 20,445 13,688 7,866 $ 107,064 $ 92,220 — — 1,832 16,829 160,377 (5,612) (240) (41,498) 131,688 1,038 132,726 1,832 17,265 174,945 (4,990) (240) (44,599) 144,213 995 145,208 $ 239,790 $ 237,428 Crude oil and petroleum products Chemicals Materials, supplies and other Total inventories Prepaid expenses and other current assets Total Current Assets Long-term receivables, net Investments and advances Properties, plant and equipment, at cost Less: Accumulated depreciation, depletion and amortization Properties, plant and equipment, net Deferred charges and other assets Goodwill Assets held for sale Total Assets Liabilities and Equity Short-term debt Accounts payable Accrued liabilities Federal and other taxes on income Other taxes payable Total Current Liabilities Long-term debt1 Deferred credits and other noncurrent obligations Noncurrent deferred income taxes Noncurrent employee benefit plans Total Liabilities2 Preferred stock (authorized 100,000,000 shares; $1.00 par value; none issued) Common stock (authorized 6,000,000,000 shares; $0.75 par value; 2,442,676,580 shares issued at December 31, 2020 and 2019) Capital in excess of par value Retained earnings Accumulated other comprehensive losses Deferred compensation and benefit plan trust Treasury stock, at cost (2020 - 517,490,263 shares; 2019 - 560,508,479 shares) Total Chevron Corporation Stockholders’ Equity Noncontrolling interests (2020 includes $120 redeemable noncontrolling interest) Total Equity Total Liabilities and Equity 1 Includes finance lease liabilities of $447 and $282 at December 31, 2020 and 2019, respectively. 2 Refer to Note 22, “Other Contingencies and Commitments” beginning on page 92. See accompanying Notes to the Consolidated Financial Statements. 60 61 Chevron Corporation 2020 Annual Report 61 173155_Annual_Report_10-K.indd 61 173155_Annual_Report_10-K.indd 61 3/5/21 6:04 PM 3/5/21 6:04 PM Consolidated Statement of Cash Flows Millions of dollars Consolidated Statement of Equity Amounts in millions of dollars Operating Activities Net Income (Loss) Adjustments Depreciation, depletion and amortization Dry hole expense Distributions more (less) than income from equity affiliates Net before-tax gains on asset retirements and sales Net foreign currency effects Deferred income tax provision Net decrease (increase) in operating working capital Decrease (increase) in long-term receivables Net decrease (increase) in other deferred charges Cash contributions to employee pension plans Other Net Cash Provided by Operating Activities Investing Activities Cash acquired from Noble Energy, Inc. Capital expenditures Proceeds and deposits related to asset sales and returns of investment Net maturities of (investments in) time deposits Net sales (purchases) of marketable securities Net repayment (borrowing) of loans by equity affiliates Net Cash Used for Investing Activities Financing Activities Net borrowings (repayments) of short-term obligations Proceeds from issuances of long-term debt Repayments of long-term debt and other financing obligations Cash dividends - common stock Distributions to noncontrolling interests Net sales (purchases) of treasury shares Net Cash Provided by (Used for) Financing Activities Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash Net Change in Cash, Cash Equivalents and Restricted Cash Cash, Cash Equivalents and Restricted Cash at January 1 Year ended December 31 2020 2019 2018 Common Stock1 Acc. Other Retained Earnings Comprehensive Income (Loss) Treasury Stock (at cost) Chevron Corp. Stockholders’ Equity Noncontrolling Interests Total Equity Balance at December 31, 2017 $ 18,440 $ 174,106 $ (3,589) $ (40,833) $ 148,124 $ 1,195 $ 149,319 $ (5,561) $ 2,845 $ 14,860 Treasury stock transactions 264 19,508 1,036 2,015 (760) 619 (3,604) (1,652) 296 (248) (1,213) 141 10,577 373 (8,922) 2,968 — 35 (1,419) 29,218 172 (2,073) (1,367) 272 (1,966) 1,494 502 (69) (1,362) (352) 27,314 — (14,116) 2,951 950 2 (1,245) (6,965) (11,458) 651 12,308 (5,489) (9,651) (24) (1,531) (2,821) — (5,025) (8,959) (18) (2,935) 19,419 687 (3,580) (619) 123 1,050 (718) 418 — (1,035) 13 30,618 — (13,792) 2,392 (950) (51) 111 (12,290) 2,021 218 (6,741) (8,502) (91) (604) (3,736) (19,758) (13,699) (50) (174) 6,911 332 (3,570) 10,481 (91) 4,538 5,943 Cash, Cash Equivalents and Restricted Cash at December 31 $ 6,737 $ 6,911 $ 10,481 See accompanying Notes to the Consolidated Financial Statements. 62 Chevron Corporation 2020 Annual Report 62 63 173155_Annual_Report_10-K.indd 62 173155_Annual_Report_10-K.indd 62 3/5/21 6:04 PM 3/5/21 6:04 PM Balance at December 31, 2019 $ 18,857 $ 174,945 $ (4,990) $ (44,599) $ 144,213 $ 995 $ 145,208 Balance at December 31, 2018 $ 18,704 $ 180,987 $ (3,544) $ (41,593) $ 154,554 $ 1,088 $ 155,642 Treasury stock transactions 153 Net income (loss) Cash dividends Stock dividends Other comprehensive income Purchases of treasury shares Issuances of treasury shares Other changes, net Net income (loss) Cash dividends Stock dividends Other comprehensive income Purchases of treasury shares Issuances of treasury shares Other changes, net Treasury stock transactions Noble Acquisition3 Net income (loss) Cash dividends Stock dividends Other comprehensive income Purchases of treasury shares Issuances of treasury shares Other changes, net — — — — — — — — — — — — — — 84 — — — — — — — (520) Balance at December 31, 2017 2,442,676,580 Balance at December 31, 2018 2,442,676,580 Balance at December 31, 2019 2,442,676,580 Balance at December 31, 2020 2,442,676,580 Purchases Issuances Purchases Issuances Purchases Issuances — 14,824 (8,502) (3) — — — 562 — 2,924 (8,959) (3) — — — (4) — — (5,543) (9,651) (5) — — — 631 Issued2 — — — — — — (1,446) — — — — 607 — — (562) — — — — — — — — — — — — — — — (622) (1,751) 991 — — — — — — — — — — — — — — — — — (4,039) 1,033 4,629 (1,757) 229 — Treasury (537,974,695) (14,912,039) 13,047,844 (539,838,890) (33,955,300) 13,285,711 (560,508,479) (17,577,457) 60,595,673 (517,490,263) 264 14,824 (8,502) (3) 607 (1,751) 991 — 153 2,924 (8,959) (3) (1,446) (4,039) 1,033 (4) 84 4,109 (5,543) (9,651) (5) (622) (1,757) 229 631 (91) — 36 — — — — (52) — (79) (18) — — — — 4 — 779 (18) (24) — — — — (694) 264 14,860 (8,593) (1,751) (3) 607 991 (52) 153 2,845 (8,977) (3) (1,446) (4,039) 1,033 — 84 4,888 (5,561) (9,675) (5) (622) (1,757) 229 (63) Outstanding 1,904,701,885 (14,912,039) 13,047,844 1,902,837,690 (33,955,300) 13,285,711 1,882,168,101 (17,577,457) 60,595,673 1,925,186,317 Balance at December 31, 2020 $ 18,421 $ 160,377 $ (5,612) $ (41,498) $ 131,688 $ 1,038 $ 132,726 Common Stock Share Activity 1 Beginning and ending balances for all periods include capital in excess of par, common stock issued at par for $1,832, and $(240) associated with Chevron’s Benefit 2 Beginning and ending total issued share balances include 14,168,000 shares associated with Chevron’s Benefit Plan Trust. Plan Trust. Changes reflect capital in excess of par. 3 Includes $120 redeemable noncontrolling interest. See accompanying Notes to the Consolidated Financial Statements. Operating Activities Net Income (Loss) Adjustments Depreciation, depletion and amortization Dry hole expense Distributions more (less) than income from equity affiliates Net before-tax gains on asset retirements and sales Net foreign currency effects Deferred income tax provision Net decrease (increase) in operating working capital Decrease (increase) in long-term receivables Net decrease (increase) in other deferred charges Cash contributions to employee pension plans Other Net Cash Provided by Operating Activities Investing Activities Cash acquired from Noble Energy, Inc. Capital expenditures Proceeds and deposits related to asset sales and returns of investment Net maturities of (investments in) time deposits Net sales (purchases) of marketable securities Net repayment (borrowing) of loans by equity affiliates Net Cash Used for Investing Activities Financing Activities Net borrowings (repayments) of short-term obligations Proceeds from issuances of long-term debt Repayments of long-term debt and other financing obligations Cash dividends - common stock Distributions to noncontrolling interests Net sales (purchases) of treasury shares Year ended December 31 2020 2019 2018 $ (5,561) $ 2,845 $ 14,860 19,508 1,036 2,015 (760) 619 (3,604) (1,652) 296 (248) (1,213) 141 10,577 373 (8,922) 2,968 — 35 (1,419) (6,965) 651 12,308 (5,489) (9,651) (24) (1,531) (3,736) (50) (174) 6,911 29,218 172 (2,073) (1,367) 272 (1,966) 1,494 502 (69) (1,362) (352) 27,314 — (14,116) 2,951 950 2 (1,245) (11,458) (2,821) — (5,025) (8,959) (18) (2,935) 332 (3,570) 10,481 19,419 687 (3,580) (619) 123 1,050 (718) 418 — (1,035) 13 30,618 — (13,792) 2,392 (950) (51) 111 (12,290) 2,021 218 (6,741) (8,502) (91) (604) (91) 4,538 5,943 Consolidated Statement of Cash Flows Millions of dollars Consolidated Statement of Equity Amounts in millions of dollars Common Stock1 Retained Earnings Acc. Other Comprehensive Income (Loss) Treasury Stock (at cost) Chevron Corp. Stockholders’ Equity Noncontrolling Interests Total Equity Balance at December 31, 2017 $ 18,440 $ 174,106 $ (3,589) $ (40,833) $ 148,124 $ 1,195 $ 149,319 Treasury stock transactions Net income (loss) Cash dividends Stock dividends Other comprehensive income Purchases of treasury shares Issuances of treasury shares Other changes, net 264 — — — — — — — — 14,824 (8,502) (3) — — — 562 — — — — 607 — — (562) — — — — — (1,751) 991 — 264 14,824 (8,502) (3) 607 (1,751) 991 — — 36 (91) — — — — (52) 264 14,860 (8,593) (3) 607 (1,751) 991 (52) Balance at December 31, 2018 $ 18,704 $ 180,987 $ (3,544) $ (41,593) $ 154,554 $ 1,088 $ 155,642 Treasury stock transactions Net income (loss) Cash dividends Stock dividends Other comprehensive income Purchases of treasury shares Issuances of treasury shares Other changes, net 153 — — — — — — — — 2,924 (8,959) (3) — — — (4) — — — — (1,446) — — — — — — — — (4,039) 1,033 — 153 2,924 (8,959) (3) (1,446) (4,039) 1,033 (4) — (79) (18) — — — — 4 153 2,845 (8,977) (3) (1,446) (4,039) 1,033 — Balance at December 31, 2019 $ 18,857 $ 174,945 $ (4,990) $ (44,599) $ 144,213 $ 995 $ 145,208 Treasury stock transactions Noble Acquisition3 Net income (loss) Cash dividends Stock dividends Other comprehensive income Purchases of treasury shares Issuances of treasury shares Other changes, net 84 (520) — — — — — — — — — (5,543) (9,651) (5) — — — 631 — — — — — (622) — — — — 4,629 — — — — (1,757) 229 — 84 4,109 (5,543) (9,651) (5) (622) (1,757) 229 631 — 779 (18) (24) — — — — (694) 84 4,888 (5,561) (9,675) (5) (622) (1,757) 229 (63) Balance at December 31, 2020 $ 18,421 $ 160,377 $ (5,612) $ (41,498) $ 131,688 $ 1,038 $ 132,726 Net Cash Provided by (Used for) Financing Activities (19,758) (13,699) Balance at December 31, 2017 2,442,676,580 Issued2 Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash Net Change in Cash, Cash Equivalents and Restricted Cash Cash, Cash Equivalents and Restricted Cash at January 1 Cash, Cash Equivalents and Restricted Cash at December 31 $ 6,737 $ 6,911 $ 10,481 See accompanying Notes to the Consolidated Financial Statements. Purchases Issuances — — Balance at December 31, 2018 2,442,676,580 Purchases Issuances — — Balance at December 31, 2019 2,442,676,580 Purchases Issuances — — Balance at December 31, 2020 2,442,676,580 Common Stock Share Activity Treasury (537,974,695) (14,912,039) 13,047,844 (539,838,890) (33,955,300) 13,285,711 (560,508,479) (17,577,457) 60,595,673 (517,490,263) Outstanding 1,904,701,885 (14,912,039) 13,047,844 1,902,837,690 (33,955,300) 13,285,711 1,882,168,101 (17,577,457) 60,595,673 1,925,186,317 1 Beginning and ending balances for all periods include capital in excess of par, common stock issued at par for $1,832, and $(240) associated with Chevron’s Benefit Plan Trust. Changes reflect capital in excess of par. 2 Beginning and ending total issued share balances include 14,168,000 shares associated with Chevron’s Benefit Plan Trust. 3 Includes $120 redeemable noncontrolling interest. See accompanying Notes to the Consolidated Financial Statements. 62 63 Chevron Corporation 2020 Annual Report 63 173155_Annual_Report_10-K.indd 63 173155_Annual_Report_10-K.indd 63 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Note 1 Summary of Significant Accounting Policies General The company’s Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America. These require the use of estimates and assumptions that affect the assets, liabilities, revenues and expenses reported in the financial statements, as well as amounts included in the notes thereto, including discussion and disclosure of contingent liabilities. Although the company uses its best estimates and judgments, actual results could differ from these estimates as circumstances change and additional information becomes known. Subsidiary and Affiliated Companies The Consolidated Financial Statements include the accounts of controlled subsidiary companies more than 50 percent-owned and any variable interest entities in which the company is the primary beneficiary. Undivided interests in oil and gas joint ventures and certain other assets are consolidated on a proportionate basis. Investments in and advances to affiliates in which the company has a substantial ownership interest of approximately 20 percent to 50 percent, or for which the company exercises significant influence but not control over policy decisions, are accounted for by the equity method. Investments in affiliates are assessed for possible impairment when events indicate that the fair value of the investment may be below the company’s carrying value. When such a condition is deemed to be other than temporary, the carrying value of the investment is written down to its fair value, and the amount of the write-down is included in net income. In making the determination as to whether a decline is other than temporary, the company considers such factors as the duration and extent of the decline, the investee’s financial performance, and the company’s ability and intention to retain its investment for a period that will be sufficient to allow for any anticipated recovery in the investment’s market value. The new cost basis of investments in these equity investees is not changed for subsequent recoveries in fair value. Differences between the company’s carrying value of an equity investment and its underlying equity in the net assets of the affiliate are assigned to the extent practicable to specific assets and liabilities based on the company’s analysis of the various factors giving rise to the difference. When appropriate, the company’s share of the affiliate’s reported earnings is adjusted quarterly to reflect the difference between these allocated values and the affiliate’s historical book values. Noncontrolling Interests Ownership interests in the company’s subsidiaries held by parties other than the parent are presented separately from the parent’s equity on the Consolidated Balance Sheet. The amount of consolidated net income attributable to the parent and the noncontrolling interests are both presented on the face of the Consolidated Statement of Income and Consolidated Statement of Equity. Included within noncontrolling interest is redeemable noncontrolling interest. Fair Value Measurements The three levels of the fair value hierarchy of inputs the company uses to measure the fair value of an asset or a liability are as follows. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are inputs other than quoted prices included within Level 1 that are directly or indirectly observable for the asset or liability. Level 3 inputs are inputs that are not observable in the market. Derivatives The majority of the company’s activity in derivative commodity instruments is intended to manage the financial risk posed by physical transactions. For some of this derivative activity, generally limited to large, discrete or infrequently occurring transactions, the company may elect to apply fair value or cash flow hedge accounting. For other similar derivative instruments, generally because of the short-term nature of the contracts or their limited use, the company does not apply hedge accounting, and changes in the fair value of those contracts are reflected in current income. For the company’s commodity trading activity, gains and losses from derivative instruments are reported in current income. The company may enter into interest rate swaps from time to time as part of its overall strategy to manage the interest rate risk on its debt. Interest rate swaps related to a portion of the company’s fixed-rate debt, if any, may be accounted for as fair value hedges. Interest rate swaps related to floating-rate debt, if any, are recorded at fair value on the balance sheet with resulting gains and losses reflected in income. Where Chevron is a party to master netting arrangements, fair value receivable and payable amounts recognized for derivative instruments executed with the same counterparty are generally offset on the balance sheet. Inventories Crude oil, petroleum products and chemicals inventories are generally stated at cost, using a last-in, first-out method. In the aggregate, these costs are below market. “Materials, supplies and other” inventories are primarily stated at cost or net realizable value. 64 Chevron Corporation 2020 Annual Report 64 173155_Annual_Report_10-K.indd 64 173155_Annual_Report_10-K.indd 64 3/5/21 6:04 PM 3/5/21 6:04 PM Properties, Plant and Equipment The successful efforts method is used for crude oil and natural gas exploration and production activities. All costs for development wells, related plant and equipment, proved mineral interests in crude oil and natural gas properties, and related asset retirement obligation (ARO) assets are capitalized. Costs of exploratory wells are capitalized pending determination of whether the wells found proved reserves. Costs of wells that are assigned proved reserves remain capitalized. Costs also are capitalized for exploratory wells that have found crude oil and natural gas reserves even if the reserves cannot be classified as proved when the drilling is completed, provided the exploratory well has found a sufficient quantity of reserves to justify its completion as a producing well and the company is making sufficient progress assessing the reserves and the economic and operating viability of the project. All other exploratory wells and costs are expensed. Refer to Note 19, beginning on page 85, for additional discussion of accounting for suspended exploratory well costs. Long-lived assets to be held and used, including proved crude oil and natural gas properties, are assessed for possible impairment by comparing their carrying values with their associated undiscounted, future net cash flows. Events that can trigger assessments for possible impairments include write-downs of proved reserves based on field performance, significant decreases in the market value of an asset (including changes to the commodity price forecast), significant change in the extent or manner of use of or a physical change in an asset, and a more-likely-than-not expectation that a long-lived asset or asset group will be sold or otherwise disposed of significantly sooner than the end of its previously estimated useful life. Impaired assets are written down to their estimated fair values, generally their discounted, future net cash flows. For proved crude oil and natural gas properties, the company performs impairment reviews on a country, concession, PSC, development area or field basis, as appropriate. In Downstream, impairment reviews are performed on the basis of a refinery, a plant, a marketing/lubricants area or distribution area, as appropriate. Impairment amounts are recorded as incremental “Depreciation, depletion and amortization” expense. Long-lived assets that are held for sale are evaluated for possible impairment by comparing the carrying value of the asset with its fair value less the cost to sell. If the net book value exceeds the fair value less cost to sell, the asset is considered impaired and adjusted to the lower value. Refer to Note 7, beginning on page 71, relating to fair value measurements. The fair value of a liability for an ARO is recorded as an asset and a liability when there is a legal obligation associated with the retirement of a long-lived asset and the amount can be reasonably estimated. Refer also to Note 23, on page 94, relating to AROs. Depreciation and depletion of all capitalized costs of proved crude oil and natural gas producing properties, except mineral interests, are expensed using the unit-of-production method, generally by individual field, as the proved developed reserves are produced. Depletion expenses for capitalized costs of proved mineral interests are recognized using the unit-of-production method by individual field as the related proved reserves are produced. Impairments of capitalized costs of unproved mineral interests are expensed. The capitalized costs of all other plant and equipment are depreciated or amortized over their estimated useful lives. In general, the declining-balance method is used to depreciate plant and equipment in the United States; the straight-line method is generally used to depreciate international plant and equipment and to amortize finance lease right-of-use assets. Gains or losses are not recognized for normal retirements of properties, plant and equipment subject to composite group amortization or depreciation. Gains or losses from abnormal retirements are recorded as expenses, and from sales as “Other income.” capitalized. Expenditures for maintenance (including those for planned major maintenance projects), repairs and minor renewals to maintain facilities in operating condition are generally expensed as incurred. Major replacements and renewals are Leases Leases are classified as operating or finance leases. Both operating and finance leases recognize lease liabilities and associated right-of-use assets. The company has elected the short-term lease exception and therefore only recognizes right-of-use assets and lease liabilities for leases with a term greater than one year. The company has elected the practical expedient to not separate non-lease components from lease components for most asset classes except for certain asset classes that have significant non-lease (i.e., service) components. Where leases are used in joint ventures, the company recognizes 100 percent of the right-of-use assets and lease liabilities when the company is the sole signatory for the lease (in most cases, where the company is the operator of a joint venture). Lease costs reflect only the costs associated with the operator’s working interest share. The lease term includes the committed lease term identified in the contract, taking into account renewal and termination options that management is 65 Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Note 1 Summary of Significant Accounting Policies General The company’s Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America. These require the use of estimates and assumptions that affect the assets, liabilities, revenues and expenses reported in the financial statements, as well as amounts included in the notes thereto, including discussion and disclosure of contingent liabilities. Although the company uses its best estimates and judgments, actual results could differ from these estimates as circumstances change and additional information becomes known. Subsidiary and Affiliated Companies The Consolidated Financial Statements include the accounts of controlled subsidiary companies more than 50 percent-owned and any variable interest entities in which the company is the primary beneficiary. Undivided interests in oil and gas joint ventures and certain other assets are consolidated on a proportionate basis. Investments in and advances to affiliates in which the company has a substantial ownership interest of approximately 20 percent to 50 percent, or for which the company exercises significant influence but not control over policy decisions, are accounted for by the equity method. Investments in affiliates are assessed for possible impairment when events indicate that the fair value of the investment may be below the company’s carrying value. When such a condition is deemed to be other than temporary, the carrying value of the investment is written down to its fair value, and the amount of the write-down is included in net income. In making the determination as to whether a decline is other than temporary, the company considers such factors as the duration and extent of the decline, the investee’s financial performance, and the company’s ability and intention to retain its investment for a period that will be sufficient to allow for any anticipated recovery in the investment’s market value. The new cost basis of investments in these equity investees is not changed for subsequent recoveries in fair value. Differences between the company’s carrying value of an equity investment and its underlying equity in the net assets of the affiliate are assigned to the extent practicable to specific assets and liabilities based on the company’s analysis of the various factors giving rise to the difference. When appropriate, the company’s share of the affiliate’s reported earnings is adjusted quarterly to reflect the difference between these allocated values and the affiliate’s historical book values. Noncontrolling Interests Ownership interests in the company’s subsidiaries held by parties other than the parent are presented separately from the parent’s equity on the Consolidated Balance Sheet. The amount of consolidated net income attributable to the parent and the noncontrolling interests are both presented on the face of the Consolidated Statement of Income and Consolidated Statement of Equity. Included within noncontrolling interest is redeemable noncontrolling interest. Fair Value Measurements The three levels of the fair value hierarchy of inputs the company uses to measure the fair value of an asset or a liability are as follows. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are inputs other than quoted prices included within Level 1 that are directly or indirectly observable for the asset or liability. Level 3 inputs are inputs that are not observable in the market. Derivatives The majority of the company’s activity in derivative commodity instruments is intended to manage the financial risk posed by physical transactions. For some of this derivative activity, generally limited to large, discrete or infrequently occurring transactions, the company may elect to apply fair value or cash flow hedge accounting. For other similar derivative instruments, generally because of the short-term nature of the contracts or their limited use, the company does not apply hedge accounting, and changes in the fair value of those contracts are reflected in current income. For the company’s commodity trading activity, gains and losses from derivative instruments are reported in current income. The company may enter into interest rate swaps from time to time as part of its overall strategy to manage the interest rate risk on its debt. Interest rate swaps related to a portion of the company’s fixed-rate debt, if any, may be accounted for as fair value hedges. Interest rate swaps related to floating-rate debt, if any, are recorded at fair value on the balance sheet with resulting gains and losses reflected in income. Where Chevron is a party to master netting arrangements, fair value receivable and payable amounts recognized for derivative instruments executed with the same counterparty are generally offset on the balance sheet. Inventories Crude oil, petroleum products and chemicals inventories are generally stated at cost, using a last-in, first-out method. In the aggregate, these costs are below market. “Materials, supplies and other” inventories are primarily stated at cost or net realizable value. 64 Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Properties, Plant and Equipment The successful efforts method is used for crude oil and natural gas exploration and production activities. All costs for development wells, related plant and equipment, proved mineral interests in crude oil and natural gas properties, and related asset retirement obligation (ARO) assets are capitalized. Costs of exploratory wells are capitalized pending determination of whether the wells found proved reserves. Costs of wells that are assigned proved reserves remain capitalized. Costs also are capitalized for exploratory wells that have found crude oil and natural gas reserves even if the reserves cannot be classified as proved when the drilling is completed, provided the exploratory well has found a sufficient quantity of reserves to justify its completion as a producing well and the company is making sufficient progress assessing the reserves and the economic and operating viability of the project. All other exploratory wells and costs are expensed. Refer to Note 19, beginning on page 85, for additional discussion of accounting for suspended exploratory well costs. Long-lived assets to be held and used, including proved crude oil and natural gas properties, are assessed for possible impairment by comparing their carrying values with their associated undiscounted, future net cash flows. Events that can trigger assessments for possible impairments include write-downs of proved reserves based on field performance, significant decreases in the market value of an asset (including changes to the commodity price forecast), significant change in the extent or manner of use of or a physical change in an asset, and a more-likely-than-not expectation that a long-lived asset or asset group will be sold or otherwise disposed of significantly sooner than the end of its previously estimated useful life. Impaired assets are written down to their estimated fair values, generally their discounted, future net cash flows. For proved crude oil and natural gas properties, the company performs impairment reviews on a country, concession, PSC, development area or field basis, as appropriate. In Downstream, impairment reviews are performed on the basis of a refinery, a plant, a marketing/lubricants area or distribution area, as appropriate. Impairment amounts are recorded as incremental “Depreciation, depletion and amortization” expense. Long-lived assets that are held for sale are evaluated for possible impairment by comparing the carrying value of the asset with its fair value less the cost to sell. If the net book value exceeds the fair value less cost to sell, the asset is considered impaired and adjusted to the lower value. Refer to Note 7, beginning on page 71, relating to fair value measurements. The fair value of a liability for an ARO is recorded as an asset and a liability when there is a legal obligation associated with the retirement of a long-lived asset and the amount can be reasonably estimated. Refer also to Note 23, on page 94, relating to AROs. Depreciation and depletion of all capitalized costs of proved crude oil and natural gas producing properties, except mineral interests, are expensed using the unit-of-production method, generally by individual field, as the proved developed reserves are produced. Depletion expenses for capitalized costs of proved mineral interests are recognized using the unit-of-production method by individual field as the related proved reserves are produced. Impairments of capitalized costs of unproved mineral interests are expensed. The capitalized costs of all other plant and equipment are depreciated or amortized over their estimated useful lives. In general, the declining-balance method is used to depreciate plant and equipment in the United States; the straight-line method is generally used to depreciate international plant and equipment and to amortize finance lease right-of-use assets. Gains or losses are not recognized for normal retirements of properties, plant and equipment subject to composite group amortization or depreciation. Gains or losses from abnormal retirements are recorded as expenses, and from sales as “Other income.” Expenditures for maintenance (including those for planned major maintenance projects), repairs and minor renewals to maintain facilities in operating condition are generally expensed as incurred. Major replacements and renewals are capitalized. Leases Leases are classified as operating or finance leases. Both operating and finance leases recognize lease liabilities and associated right-of-use assets. The company has elected the short-term lease exception and therefore only recognizes right-of-use assets and lease liabilities for leases with a term greater than one year. The company has elected the practical expedient to not separate non-lease components from lease components for most asset classes except for certain asset classes that have significant non-lease (i.e., service) components. Where leases are used in joint ventures, the company recognizes 100 percent of the right-of-use assets and lease liabilities when the company is the sole signatory for the lease (in most cases, where the company is the operator of a joint venture). Lease costs reflect only the costs associated with the operator’s working interest share. The lease term includes the committed lease term identified in the contract, taking into account renewal and termination options that management is 65 Chevron Corporation 2020 Annual Report 65 173155_Annual_Report_10-K.indd 65 173155_Annual_Report_10-K.indd 65 3/5/21 6:04 PM 3/5/21 6:04 PM Changes in Accumulated Other Comprehensive Losses The change in Accumulated Other Comprehensive Losses (AOCL) presented on the Consolidated Balance Sheet and the impact of significant amounts reclassified from AOCL on information presented in the Consolidated Statement of Income for the year ended December 31, 2020, are reflected in the table below. Balance at December 31, 2017 $ (105) $ (5) $ (2) $ (3,477) $ (3,589) Components of Other Comprehensive Income (Loss)1: Before Reclassifications Reclassifications2 Net Other Comprehensive Income (Loss) Stranded Tax Reclassification to Retained Earnings3 Components of Other Comprehensive Income (Loss)1: Before Reclassifications Reclassifications2 Net Other Comprehensive Income (Loss) Balance at December 31, 2019 Components of Other Comprehensive Income (Loss)1: Before Reclassifications Reclassifications2 Net Other Comprehensive Income (Loss) Balance at December 31, 2020 1 All amounts are net of tax. Currency Translation Adjustments Unrealized Holding Gains (Losses) on Securities Derivatives Benefit Plans Total Defined (19) — (19) — (18) — (18) 35 — 35 (5) — (5) — 2 — 2 (2) — (2) — — — — (1) 3 2 — — — 28 603 631 (562) (1,838) 406 (1,432) (1,487) 832 (655) 4 603 607 (562) (1,855) 409 (1,446) (1,454) 832 (622) $ (142) $ (8) $ — $ (4,840) $ (4,990) $ (107) $ (10) $ — $ (5,495) $ (5,612) Balance at December 31, 2018 $ (124) $ (10) $ (2) $ (3,408) $ (3,544) 2 Refer to Note 21 beginning on page 87, for reclassified components totaling $1,084 that are included in employee benefit costs for the year ended December 31, 2020. Related income taxes for the same period, totaling $252, are reflected in Income Tax Expense on the Consolidated Statement of Income. All other reclassified amounts were insignificant. 3 Stranded tax reclassification to retained earnings per ASU 2018-02. Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts reasonably certain to exercise. The company uses its incremental borrowing rate as a proxy for the discount rate based on the term of the lease unless the implicit rate is available. Note 2 Goodwill Goodwill resulting from a business combination is not subject to amortization. The company tests such goodwill at the reporting unit level for impairment annually at December 31, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Environmental Expenditures Environmental expenditures that relate to ongoing operations or to conditions caused by past operations are expensed. Expenditures that create future benefits or contribute to future revenue generation are capitalized. Liabilities related to future remediation costs are recorded when environmental assessments or cleanups or both are probable and the costs can be reasonably estimated. For crude oil, natural gas and mineral-producing properties, a liability for an ARO is made in accordance with accounting standards for asset retirement and environmental obligations. Refer to Note 23, on page 94, for a discussion of the company’s AROs. For federal Superfund sites and analogous sites under state laws, the company records a liability for its designated share of the probable and estimable costs, and probable amounts for other potentially responsible parties when mandated by the regulatory agencies because the other parties are not able to pay their respective shares. The gross amount of environmental liabilities is based on the company’s best estimate of future costs using currently available technology and applying current regulations and the company’s own internal environmental policies. Future amounts are not discounted. Recoveries or reimbursements are recorded as assets when receipt is reasonably assured. Currency Translation The U.S. dollar is the functional currency for substantially all of the company’s consolidated operations and those of its equity affiliates. For those operations, all gains and losses from currency remeasurement are included in current period income. The cumulative translation effects for those few entities, both consolidated and affiliated, using functional currencies other than the U.S. dollar are included in “Currency translation adjustment” on the Consolidated Statement of Equity. Revenue Recognition The company accounts for each delivery order of crude oil, natural gas, petroleum and chemical products as a separate performance obligation. Revenue is recognized when the performance obligation is satisfied, which typically occurs at the point in time when control of the product transfers to the customer. Payment is generally due within 30 days of delivery. The company accounts for delivery transportation as a fulfillment cost, not a separate performance obligation, and recognizes these costs as an operating expense in the period when revenue for the related commodity is recognized. Revenue is measured as the amount the company expects to receive in exchange for transferring commodities to the customer. The company’s commodity sales are typically based on prevailing market-based prices and may include discounts and allowances. Until market prices become known under terms of the company’s contracts, the transaction price included in revenue is based on the company’s estimate of the most likely outcome. Discounts and allowances are estimated using a combination of historical and recent data trends. When deliveries contain multiple products, an observable standalone selling price is generally used to measure revenue for each product. The company includes estimates in the transaction price only to the extent that a significant reversal of revenue is not probable in subsequent periods. Stock Options and Other Share-Based Compensation The company issues stock options and other share-based compensation to certain employees. For equity awards, such as stock options, total compensation cost is based on the grant date fair value, and for liability awards, such as stock appreciation rights, total compensation cost is based on the settlement value. The company recognizes stock-based compensation expense for all awards over the service period required to earn the award, which is the shorter of the vesting period or the time period in which an employee becomes eligible to retain the award at retirement. The company’s Long-Term Incentive Plan (LTIP) awards include stock options and stock appreciation rights, which have graded vesting provisions by which one-third of each award vests on each of the first, second and third anniversaries of the date of grant. In addition, performance shares granted under the company’s LTIP will vest at the end of the three-year performance period. For awards granted under the company’s LTIP beginning in 2017, stock options and stock appreciation rights have graded vesting by which one third of each award vests annually on each January 31 on or after the first anniversary of the grant date. Standard restricted stock unit awards have cliff vesting by which the total award will vest on January 31 on or after the fifth anniversary of the grant date, subject to adjustment upon termination pursuant to the satisfaction of certain criteria. The company amortizes these awards on a straight-line basis. 66 Chevron Corporation 2020 Annual Report 66 67 173155_Annual_Report_10-K.indd 66 173155_Annual_Report_10-K.indd 66 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts reasonably certain to exercise. The company uses its incremental borrowing rate as a proxy for the discount rate based on the term of the lease unless the implicit rate is available. Goodwill Goodwill resulting from a business combination is not subject to amortization. The company tests such goodwill at the reporting unit level for impairment annually at December 31, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Environmental Expenditures Environmental expenditures that relate to ongoing operations or to conditions caused by past operations are expensed. Expenditures that create future benefits or contribute to future revenue generation are capitalized. Liabilities related to future remediation costs are recorded when environmental assessments or cleanups or both are probable and the costs can be reasonably estimated. For crude oil, natural gas and mineral-producing properties, a liability for an ARO is made in accordance with accounting standards for asset retirement and environmental obligations. Refer to Note 23, on page 94, for a discussion of the company’s AROs. For federal Superfund sites and analogous sites under state laws, the company records a liability for its designated share of the probable and estimable costs, and probable amounts for other potentially responsible parties when mandated by the regulatory agencies because the other parties are not able to pay their respective shares. The gross amount of environmental liabilities is based on the company’s best estimate of future costs using currently available technology and applying current regulations and the company’s own internal environmental policies. Future amounts are not discounted. Recoveries or reimbursements are recorded as assets when receipt is reasonably assured. Currency Translation The U.S. dollar is the functional currency for substantially all of the company’s consolidated operations and those of its equity affiliates. For those operations, all gains and losses from currency remeasurement are included in current period income. The cumulative translation effects for those few entities, both consolidated and affiliated, using functional currencies other than the U.S. dollar are included in “Currency translation adjustment” on the Consolidated Statement of Equity. Revenue Recognition The company accounts for each delivery order of crude oil, natural gas, petroleum and chemical products as a separate performance obligation. Revenue is recognized when the performance obligation is satisfied, which typically occurs at the point in time when control of the product transfers to the customer. Payment is generally due within 30 days of delivery. The company accounts for delivery transportation as a fulfillment cost, not a separate performance obligation, and recognizes these costs as an operating expense in the period when revenue for the related commodity is recognized. Revenue is measured as the amount the company expects to receive in exchange for transferring commodities to the customer. The company’s commodity sales are typically based on prevailing market-based prices and may include discounts and allowances. Until market prices become known under terms of the company’s contracts, the transaction price included in revenue is based on the company’s estimate of the most likely outcome. Discounts and allowances are estimated using a combination of historical and recent data trends. When deliveries contain multiple products, an observable standalone selling price is generally used to measure revenue for each product. The company includes estimates in the transaction price only to the extent that a significant reversal of revenue is not probable in subsequent periods. Stock Options and Other Share-Based Compensation The company issues stock options and other share-based compensation to certain employees. For equity awards, such as stock options, total compensation cost is based on the grant date fair value, and for liability awards, such as stock appreciation rights, total compensation cost is based on the settlement value. The company recognizes stock-based compensation expense for all awards over the service period required to earn the award, which is the shorter of the vesting period or the time period in which an employee becomes eligible to retain the award at retirement. The company’s Long-Term Incentive Plan (LTIP) awards include stock options and stock appreciation rights, which have graded vesting provisions by which one-third of each award vests on each of the first, second and third anniversaries of the date of grant. In addition, performance shares granted under the company’s LTIP will vest at the end of the three-year performance period. For awards granted under the company’s LTIP beginning in 2017, stock options and stock appreciation rights have graded vesting by which one third of each award vests annually on each January 31 on or after the first anniversary of the grant date. Standard restricted stock unit awards have cliff vesting by which the total award will vest on January 31 on or after the fifth anniversary of the grant date, subject to adjustment upon termination pursuant to the satisfaction of certain criteria. The company amortizes these awards on a straight-line basis. 66 Note 2 Changes in Accumulated Other Comprehensive Losses The change in Accumulated Other Comprehensive Losses (AOCL) presented on the Consolidated Balance Sheet and the impact of significant amounts reclassified from AOCL on information presented in the Consolidated Statement of Income for the year ended December 31, 2020, are reflected in the table below. Currency Translation Adjustments Unrealized Holding Gains (Losses) on Securities Derivatives Defined Benefit Plans Total Balance at December 31, 2017 $ (105) $ (5) $ (2) $ (3,477) $ (3,589) Components of Other Comprehensive Income (Loss)1: Before Reclassifications Reclassifications2 Net Other Comprehensive Income (Loss) Stranded Tax Reclassification to Retained Earnings3 (19) — (19) — (5) — (5) — — — — — 28 603 631 (562) 4 603 607 (562) Balance at December 31, 2018 $ (124) $ (10) $ (2) $ (3,408) $ (3,544) Components of Other Comprehensive Income (Loss)1: Before Reclassifications Reclassifications2 Net Other Comprehensive Income (Loss) Balance at December 31, 2019 Components of Other Comprehensive Income (Loss)1: Before Reclassifications Reclassifications2 Net Other Comprehensive Income (Loss) Balance at December 31, 2020 (18) — (18) 2 — 2 (1) 3 2 (1,838) 406 (1,432) (1,855) 409 (1,446) $ (142) $ (8) $ — $ (4,840) $ (4,990) 35 — 35 (2) — (2) $ (107) $ (10) $ — — — — (1,487) 832 (655) (1,454) 832 (622) $ (5,495) $ (5,612) 1 All amounts are net of tax. 2 Refer to Note 21 beginning on page 87, for reclassified components totaling $1,084 that are included in employee benefit costs for the year ended December 31, 2020. Related income taxes for the same period, totaling $252, are reflected in Income Tax Expense on the Consolidated Statement of Income. All other reclassified amounts were insignificant. 3 Stranded tax reclassification to retained earnings per ASU 2018-02. 67 Chevron Corporation 2020 Annual Report 67 173155_Annual_Report_10-K.indd 67 173155_Annual_Report_10-K.indd 67 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Note 3 Information Relating to the Consolidated Statement of Cash Flows Distributions more (less) than income from equity affiliates includes the following: Distributions from equity affiliates (Income) loss from equity affiliates Distributions more (less) than income from equity affiliates Net decrease (increase) in operating working capital was composed of the following: Decrease (increase) in accounts and notes receivable Decrease (increase) in inventories Decrease (increase) in prepaid expenses and other current assets Increase (decrease) in accounts payable and accrued liabilities Increase (decrease) in income and other taxes payable Net decrease (increase) in operating working capital Net cash provided by operating activities includes the following cash payments: Interest on debt (net of capitalized interest) Income taxes Proceeds and deposits related to asset sales and returns of investment consisted of the following gross amounts: Proceeds and deposits related to asset sales Returns of investment from equity affiliates Proceeds and deposits related to asset sales and returns of investment Net maturities (investments) of time deposits consisted of the following gross amounts: Investments in time deposits Maturities of time deposits Net maturities of (investments in) time deposits Net sales (purchases) of marketable securities consisted of the following gross amounts: Marketable securities purchased Marketable securities sold Net sales (purchases) of marketable securities Net repayment (borrowing) of loans by equity affiliates: Borrowing of loans by equity affiliates Repayment of loans by equity affiliates Net repayment (borrowing) of loans by equity affiliates Net borrowings (repayments) of short-term obligations consisted of the following gross and net amounts: Proceeds from issuances of short-term obligations Repayments of short-term obligations Net borrowings (repayments) of short-term obligations with three months or less maturity Net borrowings (repayments) of short-term obligations Net sales (purchases) of treasury shares consists of the following gross and net amounts: Shares issued for share-based compensation plans Shares purchased under share repurchase and deferred compensation plans Net sales (purchases) of treasury shares $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2020 Year ended December 31 2018 2019 1,543 472 $ 1,895 (3,968) $ 2,747 (6,327) 2,015 $ (2,073) $ (3,580) $ 2,423 284 (87) (3,576) (696) $ 1,852 7 (323) (109) 67 (1,652) $ 1,494 $ 437 (424) (149) (494) (88) (718) $ 810 4,817 736 4,748 720 2,987 2,891 77 $ $ $ 2,809 142 2,968 $ 2,951 $ — — — — 35 35 (3,925) 2,506 $ $ $ $ $ $ — 950 950 $ (1) $ 3 2 $ (1,350) $ 105 (1,419) $ (1,245) $ 2,000 392 2,392 (950) — (950) (51) — (51) — 111 111 $ 10,846 (9,771) (424) $ 2,586 (1,430) (3,977) 2,486 (4,136) 3,671 651 $ (2,821) $ 2,021 226 (1,757) $ 1,104 (4,039) $ 1,147 (1,751) (1,531) $ (2,935) $ (604) The “Other” line in the Operating Activities section includes changes in postretirement benefits obligations and other long- term liabilities. The Consolidated Statement of Cash Flows excludes changes to the Consolidated Balance Sheet that did not affect cash. “Distributions more (less) than income from equity affiliates,” “Depreciation, depletion and amortization,” “Deferred income tax provision,” “Dry hole expense,” and “Net decrease (increase) in operating working capital” collectively include approximately $4.8 billion in non-cash reductions in 2020 relating to impairments and other non-cash charges. “Depreciation, depletion and amortization,” “Deferred income tax provision,” and “Dry hole expense” collectively include approximately $9.3 billion in non-cash reductions recorded in 2019 relating to impairments and other non-cash charges. Refer also to Note 23, on page 94, for a discussion of revisions to the company’s AROs that also did not involve cash receipts or payments for the three years ending December 31, 2020. 68 Chevron Corporation 2020 Annual Report 68 173155_Annual_Report_10-K.indd 68 173155_Annual_Report_10-K.indd 68 3/5/21 6:04 PM 3/5/21 6:04 PM Refer also to Note 29 on page 96 for a discussion of the all-stock acquisition of Noble. The cash received as a result of the acquisition is reflected on the Consolidated Statement of Cash Flows as “Cash acquired from Noble Energy, Inc.” Other changes to the Consolidated Balance Sheet resulting from the acquisition that did not affect cash are not reflected on the Consolidated Statement of Cash Flows. The major components of “Capital expenditures” and the reconciliation of this amount to the reported capital and exploratory expenditures, including equity affiliates, are presented in the following table. Capital and exploratory expenditures, including equity affiliates $ 13,499 $ 20,994 $ * Excludes non-cash movements of $816 in 2020, $(239) in 2019 and $25 in 2018. The table below quantifies the beginning and ending balances of restricted cash and restricted cash equivalents in the Consolidated Balance Sheet: Year ended December 31 $ $ 13,839 $ 2020 8,492 136 327 (33) 8,922 500 53 42 9,517 3,982 2019 140 124 13 598 181 (13) 14,882 6,112 2018 13,384 65 344 (1) 523 75 — 14,390 5,716 20,106 14,116 13,792 Year ended December 31 2020 5,596 365 776 6,737 2019 5,686 452 773 6,911 $ $ $ $ 2018 9,342 341 798 10,481 $ $ Additions to properties, plant and equipment * Additions to investments Current-year dry hole expenditures Payments for other assets and liabilities, net Capital expenditures Expensed exploration expenditures Assets acquired through finance leases and other obligations Payments for other assets and liabilities, net Capital and exploratory expenditures, excluding equity affiliates Company’s share of expenditures by equity affiliates Cash and cash equivalents Restricted cash included in “Prepaid expenses and other current assets” Restricted cash included in “Deferred charges and other assets” Total cash, cash equivalents and restricted cash Note 4 New Accounting Standards refer to Note 28 on page 96. Note 5 Lease Commitments 69 Financial Instruments—Credit Losses (Topic 326) Effective January 1, 2020, Chevron adopted Accounting Standards Update (ASU) 2016-13 and its related amendments. For additional information on the company’s expected credit losses, The company enters into leasing arrangements as a lessee; any lessor arrangements are not significant. Operating lease arrangements mainly involve land, bareboat charters, terminals, drill ships, drilling rigs, time chartered vessels, office buildings and warehouses, and exploration and production equipment. Finance leases primarily include facilities, vessels, office buildings, and production equipment. presentation, are as follows: Details of the right-of-use assets and lease liabilities for operating and finance leases, including the balance sheet Note 3 Information Relating to the Consolidated Statement of Cash Flows Distributions more (less) than income from equity affiliates includes the following: Distributions from equity affiliates (Income) loss from equity affiliates Distributions more (less) than income from equity affiliates Net decrease (increase) in operating working capital was composed of the following: Decrease (increase) in accounts and notes receivable Decrease (increase) in inventories Decrease (increase) in prepaid expenses and other current assets Increase (decrease) in accounts payable and accrued liabilities Increase (decrease) in income and other taxes payable Net decrease (increase) in operating working capital Net cash provided by operating activities includes the following cash payments: Interest on debt (net of capitalized interest) Proceeds and deposits related to asset sales and returns of investment consisted of the following gross Income taxes amounts: Proceeds and deposits related to asset sales Returns of investment from equity affiliates Proceeds and deposits related to asset sales and returns of investment Net maturities (investments) of time deposits consisted of the following gross amounts: Net sales (purchases) of marketable securities consisted of the following gross amounts: Investments in time deposits Maturities of time deposits Net maturities of (investments in) time deposits Marketable securities purchased Marketable securities sold Net sales (purchases) of marketable securities Net repayment (borrowing) of loans by equity affiliates: Borrowing of loans by equity affiliates Repayment of loans by equity affiliates Net repayment (borrowing) of loans by equity affiliates amounts: Proceeds from issuances of short-term obligations Repayments of short-term obligations Net borrowings (repayments) of short-term obligations consisted of the following gross and net Net borrowings (repayments) of short-term obligations with three months or less maturity Net borrowings (repayments) of short-term obligations Net sales (purchases) of treasury shares consists of the following gross and net amounts: Shares issued for share-based compensation plans Shares purchased under share repurchase and deferred compensation plans Net sales (purchases) of treasury shares 2020 1,543 472 2,015 2,423 284 (87) (3,576) (696) (1,652) 720 2,987 2,891 77 2,968 35 35 (3,925) 2,506 (1,419) 10,846 (9,771) (424) 651 226 (1,757) (1,531) $ $ $ $ $ $ $ $ $ $ $ $ $ $ Year ended December 31 2019 2018 1,895 $ (3,968) (2,073) $ 1,852 $ 7 (323) (109) 67 1,494 810 4,817 2,809 142 2,951 $ $ $ $ $ $ 3 2 (1,350) $ 105 (1,245) $ 2,747 (6,327) (3,580) 437 (424) (149) (494) (88) (718) 736 4,748 2,000 392 2,392 (950) — (950) (51) — (51) — 111 111 2,586 $ (1,430) (3,977) 2,486 (4,136) 3,671 (2,821) $ 2,021 1,104 $ (4,039) (2,935) $ 1,147 (1,751) (604) — $ — — $ — $ 950 950 — $ (1) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ The “Other” line in the Operating Activities section includes changes in postretirement benefits obligations and other long- term liabilities. The Consolidated Statement of Cash Flows excludes changes to the Consolidated Balance Sheet that did not affect cash. “Distributions more (less) than income from equity affiliates,” “Depreciation, depletion and amortization,” “Deferred income tax provision,” “Dry hole expense,” and “Net decrease (increase) in operating working capital” collectively include approximately $4.8 billion in non-cash reductions in 2020 relating to impairments and other non-cash charges. “Depreciation, depletion and amortization,” “Deferred income tax provision,” and “Dry hole expense” collectively include approximately $9.3 billion in non-cash reductions recorded in 2019 relating to impairments and other non-cash charges. Refer also to Note 23, on page 94, for a discussion of revisions to the company’s AROs that also did not involve cash receipts or payments for the three years ending December 31, 2020. 68 Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Refer also to Note 29 on page 96 for a discussion of the all-stock acquisition of Noble. The cash received as a result of the acquisition is reflected on the Consolidated Statement of Cash Flows as “Cash acquired from Noble Energy, Inc.” Other changes to the Consolidated Balance Sheet resulting from the acquisition that did not affect cash are not reflected on the Consolidated Statement of Cash Flows. The major components of “Capital expenditures” and the reconciliation of this amount to the reported capital and exploratory expenditures, including equity affiliates, are presented in the following table. Additions to properties, plant and equipment * Additions to investments Current-year dry hole expenditures Payments for other assets and liabilities, net Capital expenditures Expensed exploration expenditures Assets acquired through finance leases and other obligations Payments for other assets and liabilities, net Capital and exploratory expenditures, excluding equity affiliates Company’s share of expenditures by equity affiliates $ $ 2020 8,492 136 327 (33) 8,922 500 53 42 9,517 3,982 Year ended December 31 2018 2019 $ 13,839 140 124 13 14,116 598 181 (13) 14,882 6,112 13,384 65 344 (1) 13,792 523 75 — 14,390 5,716 20,106 Capital and exploratory expenditures, including equity affiliates $ 13,499 $ 20,994 $ * Excludes non-cash movements of $816 in 2020, $(239) in 2019 and $25 in 2018. The table below quantifies the beginning and ending balances of restricted cash and restricted cash equivalents in the Consolidated Balance Sheet: Cash and cash equivalents Restricted cash included in “Prepaid expenses and other current assets” Restricted cash included in “Deferred charges and other assets” Total cash, cash equivalents and restricted cash 2020 5,596 365 776 6,737 $ $ Year ended December 31 2018 2019 $ $ 5,686 452 773 9,342 341 798 $ 6,911 $ 10,481 Note 4 New Accounting Standards Financial Instruments—Credit Losses (Topic 326) Effective January 1, 2020, Chevron adopted Accounting Standards Update (ASU) 2016-13 and its related amendments. For additional information on the company’s expected credit losses, refer to Note 28 on page 96. Note 5 Lease Commitments The company enters into leasing arrangements as a lessee; any lessor arrangements are not significant. Operating lease arrangements mainly involve land, bareboat charters, terminals, drill ships, drilling rigs, time chartered vessels, office buildings and warehouses, and exploration and production equipment. Finance leases primarily include facilities, vessels, office buildings, and production equipment. Details of the right-of-use assets and lease liabilities for operating and finance leases, including the balance sheet presentation, are as follows: 69 Chevron Corporation 2020 Annual Report 69 173155_Annual_Report_10-K.indd 69 173155_Annual_Report_10-K.indd 69 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Deferred charges and other assets Properties, plant and equipment, net Right-of-use assets1 Accrued Liabilities Short-term Debt Current lease liabilities Deferred credits and other noncurrent obligations Long-term Debt Noncurrent lease liabilities Total lease liabilities Weighted-average remaining lease term (in years) Weighted-average discount rate At December 31, 2020 At December 31, 2019 Operating Leases Finance Leases Operating Leases Finance Leases $ $ $ $ $ $ 3,949 — 3,949 1,291 — 1,291 2,615 — 2,615 $ 3,906 $ — 455 455 — 186 186 — 447 447 633 $ $ $ $ $ $ 4,074 — 4,074 1,277 — 1,277 2,608 — 2,608 $ 3,885 $ — 329 329 — 18 18 — 282 282 300 7.2 2.8% 10.4 3.9% 5.2 3.2% 16.0 4.7% 1 Includes non-cash additions of $1,353 and $164 in 2020, and $1,201 and $184 in 2019 for right-of-use assets obtained in exchange for new and modified lease liabilities for operating and finance leases, respectively. 2020 includes $566 in operating lease right-of-use assets and $566 lease liabilities associated with the Puma acquisition. 2020 also includes $124 in operating lease right-of-use assets and $148 lease liabilities, and $112 in finance lease right-of-use assets and $309 lease liabilities associated with the Noble acquisition. Total lease costs consist of both amounts recognized in the Consolidated Statement of Income during the period and amounts capitalized as part of the cost of another asset. Total lease costs incurred for operating and finance leases were as follows: Operating lease costs1, 2 Finance lease costs Total lease costs 1 Net rental expense of $816 for 2018. 2 Includes variable and short-term lease costs. Cash paid for amounts included in the measurement of lease liabilities was as follows: Operating cash flows from operating leases Investing cash flows from operating leases Operating cash flows from finance leases Financing cash flows from finance leases $ $ $ Year-ended December 31 2019 2020 2,551 45 2,596 $ $ 2,621 66 2,687 Year-ended December 31 2019 2020 $ 1,744 762 14 34 1,574 1,047 13 24 At December 31, 2020, the estimated future undiscounted cash flows for operating and finance leases were as follows: Year 2021 2022 2023 2024 2025 Thereafter Total Less: Amounts representing interest Total lease liabilities Operating Leases At December 31, 2020 Finance Leases $ $ $ $ 1,376 779 497 338 255 1,112 4,357 $ 451 3,906 $ 204 60 58 56 53 331 762 129 633 Additionally, the company has $907 in future undiscounted cash flows for operating leases not yet commenced. These leases are primarily for a drill ship and drilling rigs. For those leasing arrangements where the underlying asset is not yet constructed, the lessor is primarily involved in the design and construction of the asset. Note 6 Summarized Financial Data – Chevron U.S.A. Inc. Chevron U.S.A. Inc. (CUSA) is a major subsidiary of Chevron Corporation. CUSA and its subsidiaries manage and operate most of Chevron’s U.S. businesses. Assets include those related to the exploration and production of crude oil, natural gas and natural gas liquids and those associated with the refining, marketing, supply and distribution of products derived from petroleum, excluding most of the regulated pipeline operations of Chevron. CUSA also holds the company’s investment in the Chevron Phillips Chemical Company LLC joint venture, which is accounted for using the equity method. The summarized financial information for CUSA and its consolidated subsidiaries is as follows: Sales and other operating revenues Total costs and other deductions Net income (loss) attributable to CUSA Current assets Other assets Current liabilities Other liabilities Total CUSA net equity Memo: Total debt Note 7 Fair Value Measurements $ $ 2020 67,950 72,575 (2,676) Year ended December 31 2019 109,314 116,365 (5,061) 2020 10,555 48,054 12,403 14,102 32,104 7,133 $ $ $ $ At December 31 2018 125,076 121,351 4,334 2019 13,059 50,796 18,291 12,565 32,999 3,222 $ $ $ The tables on the next page show the fair value hierarchy for assets and liabilities measured at fair value on a recurring and nonrecurring basis at December 31, 2020 and December 31, 2019. Marketable Securities The company calculates fair value for its marketable securities based on quoted market prices for identical assets. The fair values reflect the cash that would have been received if the instruments were sold at December 31, 2020. Derivatives The company records its derivative instruments – other than any commodity derivative contracts that are designated as normal purchase and normal sale – on the Consolidated Balance Sheet at fair value, with the offsetting amount to the Consolidated Statement of Income. Derivatives classified as Level 1 include futures, swaps and options contracts traded in active markets such as the New York Mercantile Exchange. Derivatives classified as Level 2 include swaps, options and forward contracts principally with financial institutions and other oil and gas companies, the fair values of which are obtained from third-party broker quotes, industry pricing services and exchanges. The company obtains multiple sources of pricing information for the Level 2 instruments. Since this pricing information is generated from observable market data, it has historically been very consistent. The company does not materially adjust this information. Properties, Plant and Equipment The company reported impairments for certain upstream properties during 2020 primarily due to downward revisions to its oil and gas price outlook. The impact of these impairments is included in “Depreciation, depletion and amortization” on the Consolidated Statement of Income. The company reported impairments for certain upstream properties in 2019 primarily due to capital allocation decisions and a lower long-term commodity price outlook. Investments and Advances In 2020, the company fully impaired its investments in Petropiar and Petroboscan in Venezuela. The impact of these impairments is included in “Income (loss) from equity affiliates” on the Consolidated Statement of Income. The company reported impairments for certain upstream equity companies in 2019 primarily due to capital allocation decisions and lower long-term commodity price outlook. 70 Chevron Corporation 2020 Annual Report 70 71 173155_Annual_Report_10-K.indd 70 173155_Annual_Report_10-K.indd 70 3/5/21 6:04 PM 3/5/21 6:04 PM Deferred charges and other assets Properties, plant and equipment, net Right-of-use assets1 Accrued Liabilities Short-term Debt Current lease liabilities Long-term Debt Noncurrent lease liabilities Total lease liabilities Deferred credits and other noncurrent obligations At December 31, 2020 At December 31, 2019 Operating Leases Finance Leases Operating Leases Finance Leases $ $ $ $ 3,949 — 3,949 1,291 — 1,291 2,615 — 2,615 3,906 $ $ $ $ — 455 455 — 186 186 — 447 447 633 $ $ $ $ 4,074 — 4,074 1,277 — 1,277 2,608 — 2,608 3,885 Weighted-average remaining lease term (in years) Weighted-average discount rate 7.2 2.8% 10.4 3.9% 5.2 3.2% 16.0 4.7% 1 Includes non-cash additions of $1,353 and $164 in 2020, and $1,201 and $184 in 2019 for right-of-use assets obtained in exchange for new and modified lease liabilities for operating and finance leases, respectively. 2020 includes $566 in operating lease right-of-use assets and $566 lease liabilities associated with the Puma acquisition. 2020 also includes $124 in operating lease right-of-use assets and $148 lease liabilities, and $112 in finance lease right-of-use assets and $309 lease liabilities associated with the Noble acquisition. Total lease costs consist of both amounts recognized in the Consolidated Statement of Income during the period and amounts capitalized as part of the cost of another asset. Total lease costs incurred for operating and finance leases were as follows: Cash paid for amounts included in the measurement of lease liabilities was as follows: At December 31, 2020, the estimated future undiscounted cash flows for operating and finance leases were as follows: Operating lease costs1, 2 Finance lease costs Total lease costs 1 Net rental expense of $816 for 2018. 2 Includes variable and short-term lease costs. Operating cash flows from operating leases Investing cash flows from operating leases Operating cash flows from finance leases Financing cash flows from finance leases Year 2021 2022 2023 2024 2025 Thereafter Total Less: Amounts representing interest Total lease liabilities $ $ $ $ $ $ $ — 329 329 — 18 18 — 282 282 300 2019 2,621 66 2,687 2019 1,574 1,047 13 24 204 60 58 56 53 331 762 129 633 Year-ended December 31 Year-ended December 31 2020 2,551 45 2,596 2020 1,744 762 14 34 1,376 $ 779 497 338 255 1,112 4,357 451 3,906 $ $ $ $ $ $ $ $ At December 31, 2020 Operating Leases Finance Leases Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Note 6 Summarized Financial Data – Chevron U.S.A. Inc. Chevron U.S.A. Inc. (CUSA) is a major subsidiary of Chevron Corporation. CUSA and its subsidiaries manage and operate most of Chevron’s U.S. businesses. Assets include those related to the exploration and production of crude oil, natural gas and natural gas liquids and those associated with the refining, marketing, supply and distribution of products derived from petroleum, excluding most of the regulated pipeline operations of Chevron. CUSA also holds the company’s investment in the Chevron Phillips Chemical Company LLC joint venture, which is accounted for using the equity method. The summarized financial information for CUSA and its consolidated subsidiaries is as follows: Sales and other operating revenues Total costs and other deductions Net income (loss) attributable to CUSA Current assets Other assets Current liabilities Other liabilities Total CUSA net equity Memo: Total debt $ 2020 67,950 72,575 (2,676) $ Year ended December 31 2018 2019 $ 109,314 116,365 (5,061) 125,076 121,351 4,334 $ 2020 10,555 48,054 12,403 14,102 32,104 $ At December 31 2019 13,059 50,796 18,291 12,565 32,999 7,133 $ 3,222 $ $ $ Note 7 Fair Value Measurements The tables on the next page show the fair value hierarchy for assets and liabilities measured at fair value on a recurring and nonrecurring basis at December 31, 2020 and December 31, 2019. Marketable Securities The company calculates fair value for its marketable securities based on quoted market prices for identical assets. The fair values reflect the cash that would have been received if the instruments were sold at December 31, 2020. Derivatives The company records its derivative instruments – other than any commodity derivative contracts that are designated as normal purchase and normal sale – on the Consolidated Balance Sheet at fair value, with the offsetting amount to the Consolidated Statement of Income. Derivatives classified as Level 1 include futures, swaps and options contracts traded in active markets such as the New York Mercantile Exchange. Derivatives classified as Level 2 include swaps, options and forward contracts principally with financial institutions and other oil and gas companies, the fair values of which are obtained from third-party broker quotes, industry pricing services and exchanges. The company obtains multiple sources of pricing information for the Level 2 instruments. Since this pricing information is generated from observable market data, it has historically been very consistent. The company does not materially adjust this information. Properties, Plant and Equipment The company reported impairments for certain upstream properties during 2020 primarily due to downward revisions to its oil and gas price outlook. The impact of these impairments is included in “Depreciation, depletion and amortization” on the Consolidated Statement of Income. The company reported impairments for certain upstream properties in 2019 primarily due to capital allocation decisions and a lower long-term commodity price outlook. Investments and Advances In 2020, the company fully impaired its investments in Petropiar and Petroboscan in Venezuela. The impact of these impairments is included in “Income (loss) from equity affiliates” on the Consolidated Statement of Income. The company reported impairments for certain upstream equity companies in 2019 primarily due to capital allocation decisions and lower long-term commodity price outlook. Additionally, the company has $907 in future undiscounted cash flows for operating leases not yet commenced. These leases are primarily for a drill ship and drilling rigs. For those leasing arrangements where the underlying asset is not yet constructed, the lessor is primarily involved in the design and construction of the asset. 70 71 Chevron Corporation 2020 Annual Report 71 173155_Annual_Report_10-K.indd 71 173155_Annual_Report_10-K.indd 71 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Assets and Liabilities Measured at Fair Value on a Recurring Basis Marketable securities Derivatives Total assets at fair value Derivatives Total liabilities at fair value Total Level 1 At December 31, 2020 Level 3 Level 2 Total Level 1 At December 31, 2019 Level 3 Level 2 $ $ $ 31$ 74 105 $ 173 31$ 37 68 $ 58 —$ 37 37 $ 115 — $ — — $ — 173 $ 58 $ 115 $ — $ 63$ 11 74 $ 74 74 $ 63$ 1 —$ 10 64 $ 10 $ 26 48 26 $ 48 $ — — — — — Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Total Level 1 Level 2 Level 3 At December 31 Before-Tax Loss Year 2020 Total Level 1 Level 2 Level 3 At December 31 Before-Tax Loss Year 2019 Properties, plant and equipment, net (held and used) $ 2,443 $ — $ 20 $ 2,423 $ 2,599 $ 2,177 $ — $ — $ 2,177 $ Properties, plant and equipment, net (held for sale) Investments and advances 1,418 28 — — 1,418 — — 28 193 2,555 1,412 52 — — 1,412 30 — 22 2,095 8,702 594 Total nonrecurring assets at fair value $ 3,889 $ — $ 1,438 $ 2,451 $ 5,347 $ 3,641 $ — $ 1,442 $ 2,199 $ 11,391 At year-end 2020, the company had assets measured at fair value Level 3 using unobservable inputs of $2,451. The carrying value of these assets were written down to fair value based on estimates derived from internal discounted cash flow models. Cash flows were determined using estimates of future production, an outlook of future price based on published prices and a discount rate believed to be consistent with those used by principal market participants. The significant Level 3 inputs were attributed to two assets, one in an international location where volumes and price were primarily based on natural gas, and the second was in a U.S. location where volumes and price were primarily based on crude. Assets and Liabilities Not Required to Be Measured at Fair Value The company holds cash equivalents and time deposits in U.S. and non-U.S. portfolios. The instruments classified as cash equivalents are primarily bank time deposits with maturities of 90 days or less and money market funds. “Cash and cash equivalents” had carrying/fair values of $5,596 and $5,686 at December 31, 2020, and December 31, 2019, respectively. The fair values of cash, cash equivalents and bank time deposits are classified as Level 1 and reflect the cash that would have been received if the instruments were settled at December 31, 2020. “Cash and cash equivalents” do not include investments with a carrying/fair value of $1,141 and $1,225 at December 31, 2020, and December 31, 2019, respectively. At December 31, 2020, these investments are classified as Level 1 and include restricted funds related to certain upstream decommissioning activities, tax payments and a financing program, which are reported in “Deferred charges and other assets” on the Consolidated Balance Sheet. Long-term debt, excluding finance lease liabilities, of $30,805 and $13,659 at December 31, 2020, and December 31, 2019, respectively, had estimated fair values of $34,390 and $14,326, respectively. Long-term debt primarily includes corporate issued bonds. The fair value of corporate bonds is $32,123 and classified as Level 1. The fair value of other long-term debt is $2,267 and classified as Level 2. The carrying values of short-term financial assets and liabilities on the Consolidated Balance Sheet approximate their fair values. Fair value remeasurements of other financial instruments at December 31, 2020 and 2019, were not material. Note 8 Financial and Derivative Instruments Derivative Commodity Instruments The company’s derivative commodity instruments principally include crude oil, natural gas and refined product futures, swaps, options, and forward contracts. None of the company’s derivative instruments is designated as a hedging instrument, although certain of the company’s affiliates make such designation. The company’s derivatives are not material to the company’s financial position, results of operations or liquidity. The company believes it has no material market or credit risks to its operations, financial position or liquidity as a result of its commodity derivative activities. 72 Chevron Corporation 2020 Annual Report 72 The company uses derivative commodity instruments traded on the New York Mercantile Exchange and on electronic platforms of the Inter-Continental Exchange and Chicago Mercantile Exchange. In addition, the company enters into swap contracts and option contracts principally with major financial institutions and other oil and gas companies in the “over-the-counter” markets, which are governed by International Swaps and Derivatives Association agreements and other master netting arrangements. Depending on the nature of the derivative transactions, bilateral collateral arrangements may also be required. Derivative instruments measured at fair value at December 31, 2020, December 31, 2019, and December 31, 2018, and their classification on the Consolidated Balance Sheet and Consolidated Statement of Income are below: Consolidated Balance Sheet: Fair Value of Derivatives Not Designated as Hedging Instruments Type of Contract Balance Sheet Classification Accounts and notes receivable, net Long-term receivables, net Commodity Commodity Commodity Commodity Total assets at fair value Total liabilities at fair value Accounts payable Deferred credits and other noncurrent obligations Type of Derivative Contract Commodity Commodity Commodity Statement of Income Classification Sales and other operating revenues Purchased crude oil and products Other income Consolidated Statement of Income: The Effect of Derivatives Not Designated as Hedging Instruments 2020 73 1 74 172 1 173 $ $ $ $ At December 31 2019 $ $ $ $ 11 — 11 74 — 74 Gain/(Loss) Year ended December 31 2020 2019 69 $ (291) $ (36) 7 (17) (2) 40 $ (310) $ 2018 135 (33) 3 105 $ $ The table below represents gross and net derivative assets and liabilities subject to netting agreements on the Consolidated Balance Sheet at December 31, 2020 and December 31, 2019. Consolidated Balance Sheet: The Effect of Netting Derivative Assets and Liabilities At December 31, 2020 Derivative Assets Derivative Liabilities At December 31, 2019 Derivative Assets Derivative Liabilities Gross Amounts Recognized Gross Amounts Offset Net Amounts Presented Gross Amounts Not Offset Net Amounts $ $ $ $ 818 917 656 719 $ $ $ $ 744 744 645 645 $ $ $ $ 74 173 11 74 $ $ $ $ — $ — $ — $ — $ 74 173 11 74 Derivative assets and liabilities are classified on the Consolidated Balance Sheet as accounts and notes receivable, long-term receivables, accounts payable, and deferred credits and other noncurrent obligations. Amounts not offset on the Consolidated Balance Sheet represent positions that do not meet all the conditions for “a right of offset.” Concentrations of Credit Risk The company’s financial instruments that are exposed to concentrations of credit risk consist primarily of its cash equivalents, time deposits, marketable securities, derivative financial instruments and trade receivables. The company’s short-term investments are placed with a wide array of financial institutions with high credit ratings. Company investment policies limit the company’s exposure both to credit risk and to concentrations of credit risk. Similar policies on diversification and creditworthiness are applied to the company’s counterparties in derivative instruments. The trade receivable balances, reflecting the company’s diversified sources of revenue, are dispersed among the company’s broad customer base worldwide. As a result, the company believes concentrations of credit risk are limited. The company routinely assesses the financial strength of its customers. When the financial strength of a customer is not considered sufficient, alternative risk mitigation measures may be deployed, including requiring pre-payments, letters of credit or other acceptable collateral instruments to support sales to customers. 73 173155_Annual_Report_10-K.indd 72 173155_Annual_Report_10-K.indd 72 3/5/21 6:04 PM 3/5/21 6:04 PM Assets and Liabilities Measured at Fair Value on a Recurring Basis Marketable securities Derivatives Total assets at fair value Derivatives Total liabilities at fair value At December 31, 2020 At December 31, 2019 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 $ $ $ 31 $ 74 105 $ 173 173 $ 31 $ 37 68 $ 58 58 $ — $ 37 37 $ 115 — $ — — $ — 115 $ — $ 63 $ 11 74 $ 74 74 $ 63 $ 1 64 $ 26 26 $ — $ 10 10 $ 48 48 $ — — — — — Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis At December 31 Before-Tax Loss Year 2019 8,702 594 11,391 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 At December 31 Before-Tax Loss Year 2020 Properties, plant and equipment, net (held Properties, plant and equipment, net (held and used) for sale) Investments and advances $ 2,443 $ — $ 20 $ 2,423 $ 2,599 $ 2,177 $ — $ — $ 2,177 $ 2,095 1,418 28 — 1,418 — — — 28 193 2,555 1,412 52 — 1,412 — 30 — 22 Total nonrecurring assets at fair value $ 3,889 $ — $ 1,438 $ 2,451 $ 5,347 $ 3,641 $ — $ 1,442 $ 2,199 $ At year-end 2020, the company had assets measured at fair value Level 3 using unobservable inputs of $2,451. The carrying value of these assets were written down to fair value based on estimates derived from internal discounted cash flow models. Cash flows were determined using estimates of future production, an outlook of future price based on published prices and a discount rate believed to be consistent with those used by principal market participants. The significant Level 3 inputs were attributed to two assets, one in an international location where volumes and price were primarily based on natural gas, and the second was in a U.S. location where volumes and price were primarily based on crude. Assets and Liabilities Not Required to Be Measured at Fair Value The company holds cash equivalents and time deposits in U.S. and non-U.S. portfolios. The instruments classified as cash equivalents are primarily bank time deposits with maturities of 90 days or less and money market funds. “Cash and cash equivalents” had carrying/fair values of $5,596 and $5,686 at December 31, 2020, and December 31, 2019, respectively. The fair values of cash, cash equivalents and bank time deposits are classified as Level 1 and reflect the cash that would have been received if the instruments were settled at December 31, 2020. “Cash and cash equivalents” do not include investments with a carrying/fair value of $1,141 and $1,225 at December 31, 2020, and December 31, 2019, respectively. At December 31, 2020, these investments are classified as Level 1 and include restricted funds related to certain upstream decommissioning activities, tax payments and a financing program, which are reported in “Deferred charges and other assets” on the Consolidated Balance Sheet. Long-term debt, excluding finance lease liabilities, of $30,805 and $13,659 at December 31, 2020, and December 31, 2019, respectively, had estimated fair values of $34,390 and $14,326, respectively. Long-term debt primarily includes corporate issued bonds. The fair value of corporate bonds is $32,123 and classified as Level 1. The fair value of other long-term debt is $2,267 and classified as Level 2. The carrying values of short-term financial assets and liabilities on the Consolidated Balance Sheet approximate their fair values. Fair value remeasurements of other financial instruments at December 31, 2020 and 2019, were not material. Note 8 Financial and Derivative Instruments Derivative Commodity Instruments The company’s derivative commodity instruments principally include crude oil, natural gas and refined product futures, swaps, options, and forward contracts. None of the company’s derivative instruments is designated as a hedging instrument, although certain of the company’s affiliates make such designation. The company’s derivatives are not material to the company’s financial position, results of operations or liquidity. The company believes it has no material market or credit risks to its operations, financial position or liquidity as a result of its commodity derivative activities. 72 Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts The company uses derivative commodity instruments traded on the New York Mercantile Exchange and on electronic platforms of the Inter-Continental Exchange and Chicago Mercantile Exchange. In addition, the company enters into swap contracts and option contracts principally with major financial institutions and other oil and gas companies in the “over-the-counter” markets, which are governed by International Swaps and Derivatives Association agreements and other master netting arrangements. Depending on the nature of the derivative transactions, bilateral collateral arrangements may also be required. Derivative instruments measured at fair value at December 31, 2020, December 31, 2019, and December 31, 2018, and their classification on the Consolidated Balance Sheet and Consolidated Statement of Income are below: Consolidated Balance Sheet: Fair Value of Derivatives Not Designated as Hedging Instruments Type of Contract Balance Sheet Classification Commodity Commodity Accounts and notes receivable, net Long-term receivables, net Total assets at fair value Commodity Commodity Total liabilities at fair value Accounts payable Deferred credits and other noncurrent obligations 2020 73 1 74 172 1 173 $ $ $ $ At December 31 2019 $ $ $ $ 11 — 11 74 — 74 Consolidated Statement of Income: The Effect of Derivatives Not Designated as Hedging Instruments Type of Derivative Contract Commodity Commodity Commodity Statement of Income Classification Sales and other operating revenues Purchased crude oil and products Other income $ $ Gain/(Loss) Year ended December 31 2018 2019 2020 69 $ (36) 7 (291) $ (17) (2) 40 $ (310) $ 135 (33) 3 105 The table below represents gross and net derivative assets and liabilities subject to netting agreements on the Consolidated Balance Sheet at December 31, 2020 and December 31, 2019. Consolidated Balance Sheet: The Effect of Netting Derivative Assets and Liabilities At December 31, 2020 Derivative Assets Derivative Liabilities At December 31, 2019 Derivative Assets Derivative Liabilities Gross Amounts Recognized Gross Amounts Offset Net Amounts Presented Gross Amounts Not Offset Net Amounts $ $ $ $ 818 917 656 719 $ $ $ $ 744 744 645 645 $ $ $ $ 74 173 11 74 $ $ $ $ — — — — $ $ $ $ 74 173 11 74 Derivative assets and liabilities are classified on the Consolidated Balance Sheet as accounts and notes receivable, long-term receivables, accounts payable, and deferred credits and other noncurrent obligations. Amounts not offset on the Consolidated Balance Sheet represent positions that do not meet all the conditions for “a right of offset.” Concentrations of Credit Risk The company’s financial instruments that are exposed to concentrations of credit risk consist primarily of its cash equivalents, time deposits, marketable securities, derivative financial instruments and trade receivables. The company’s short-term investments are placed with a wide array of financial institutions with high credit ratings. Company investment policies limit the company’s exposure both to credit risk and to concentrations of credit risk. Similar policies on diversification and creditworthiness are applied to the company’s counterparties in derivative instruments. The trade receivable balances, reflecting the company’s diversified sources of revenue, are dispersed among the company’s broad customer base worldwide. As a result, the company believes concentrations of credit risk are limited. The company routinely assesses the financial strength of its customers. When the financial strength of a customer is not considered sufficient, alternative risk mitigation measures may be deployed, including requiring pre-payments, letters of credit or other acceptable collateral instruments to support sales to customers. 73 Chevron Corporation 2020 Annual Report 73 173155_Annual_Report_10-K.indd 73 173155_Annual_Report_10-K.indd 73 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Note 9 Assets Held for Sale At December 31, 2020, the company classified $1,101 of net properties, plant and equipment as “Assets held for sale” on the Consolidated Balance Sheet. These assets are associated with upstream operations that are anticipated to be sold in the next 12 months. The revenues and earnings contributions of these assets in 2020 were not material. Note 10 Equity Retained earnings at December 31, 2020 and 2019, included $26,532 and $25,319, respectively, for the company’s share of undistributed earnings of equity affiliates. At December 31, 2020, about 67 million shares of Chevron’s common stock remained available for issuance from the 260 million shares that were reserved for issuance under the Chevron Long-Term Incentive Plan. In addition, 644,376 shares remain available for issuance from the 1,600,000 shares of the company’s common stock that were reserved for awards under the Chevron Corporation Non-Employee Directors’ Equity Compensation and Deferral Plan. Note 11 Earnings Per Share Basic earnings per share (EPS) is based upon “Net Income (Loss) Attributable to Chevron Corporation” (“earnings”) and includes the effects of deferrals of salary and other compensation awards that are invested in Chevron stock units by certain officers and employees of the company. Diluted EPS includes the effects of these items as well as the dilutive effects of outstanding stock options awarded under the company’s stock option programs (refer to Note 20, “Stock Options and Other Share-Based Compensation,” beginning on page 86). The table below sets forth the computation of basic and diluted EPS: 2020 Year ended December 31 2018 2019 Basic EPS Calculation Earnings available to common stockholders - Basic1 $ (5,543) $ 2,924 $ 14,824 1,870 — 1,870 1,882 — 1,882 (2.96) $ 1.55 $ 1,897 1 1,898 7.81 (5,543) $ 2,924 $ 14,824 $ $ Net Income (Loss) Attributable to Chevron Corporation $ (5,543) $ 2,924 $ Segment Assets Segment assets do not include intercompany investments or receivables. Assets at year-end 2020 and 2019 Weighted-average number of common shares outstanding2 Add: Deferred awards held as stock units Total weighted-average number of common shares outstanding Earnings per share of common stock - Basic Diluted EPS Calculation Earnings available to common stockholders - Diluted1 Weighted-average number of common shares outstanding2 Add: Deferred awards held as stock units Add: Dilutive effect of employee stock-based awards Total weighted-average number of common shares outstanding 1,870 — — 1,870 1,882 — 13 1,895 1,897 1 16 1,914 7.74 Earnings per share of common stock - Diluted $ (2.96) $ 1.54 $ 1 There was no effect of dividend equivalents paid on stock units or dilutive impact of employee stock-based awards on earnings. 2 Millions of shares; 1 million shares of employee-based awards were not included in the 2020 diluted EPS calculation as the result would be anti-dilutive. Note 12 Operating Segments and Geographic Data Although each subsidiary of Chevron is responsible for its own affairs, Chevron Corporation manages its investments in these subsidiaries and their affiliates. The investments are grouped into two business segments, Upstream and Downstream, representing the company’s “reportable segments” and “operating segments.” Upstream operations consist primarily of exploring for, developing, producing and transporting crude oil and natural gas; liquefaction, transportation and regasification associated with liquefied natural gas (LNG); transporting crude oil by major international oil export pipelines; processing, transporting, storage and marketing of natural gas; and a gas-to-liquids plant. Downstream operations consist primarily of refining of crude oil into petroleum products; marketing of crude oil, refined products and lubricants; transporting of crude oil and refined products by pipeline, marine vessel, motor equipment and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives. All Other activities of the company include worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities, and technology activities. 74 Chevron Corporation 2020 Annual Report 74 173155_Annual_Report_10-K.indd 74 173155_Annual_Report_10-K.indd 74 3/5/21 6:04 PM 3/5/21 6:04 PM The company’s segments are managed by “segment managers” who report to the “chief operating decision maker” (CODM). The segments represent components of the company that engage in activities (a) from which revenues are earned and expenses are incurred; (b) whose operating results are regularly reviewed by the CODM, which makes decisions about resources to be allocated to the segments and assesses their performance; and (c) for which discrete financial information is available. The company’s primary country of operation is the United States of America, its country of domicile. Other components of the company’s operations are reported as “International” (outside the United States). Segment Earnings The company evaluates the performance of its operating segments on an after-tax basis, without considering the effects of debt financing interest expense or investment interest income, both of which are managed by the company on a worldwide basis. Corporate administrative costs are not allocated to the operating segments. However, operating segments are billed for the direct use of corporate services. Non billable costs remain at the corporate level in “All Other.” Earnings by major operating area are presented in the following table: Upstream United States International Total Upstream Downstream United States International Total Downstream Total Segment Earnings All Other Interest expense Interest income Other are as follows: Upstream United States International Goodwill Total Upstream Downstream United States International Total Downstream Total Segment Assets All Other United States International Total All Other Total Assets – United States Total Assets – International Goodwill Total Assets Year ended December 31 2020 2019 $ (5,094) $ (1,608) $ (825) (2,433) (571) 618 47 (2,386) (658) 52 (2,551) 7,670 2,576 1,559 922 2,481 5,057 (761) 181 (1,553) 2018 3,278 10,038 13,316 2,103 1,695 3,798 17,114 (713) 137 (1,714) 14,824 35,926 145,648 4,463 186,037 25,197 16,955 42,152 228,189 3,475 5,764 9,239 64,598 168,367 4,463 237,428 At December 31 2020 2019 $ 42,431 $ 144,476 4,402 191,309 23,490 16,096 39,586 230,895 4,017 4,878 8,895 69,938 165,450 4,402 $ 239,790 $ Segment Sales and Other Operating Revenues Operating segment sales and other operating revenues, including internal transfers, for the years 2020, 2019 and 2018, are presented in the table on the next page. Products are transferred between operating segments at internal product values that approximate market prices. 75 At December 31, 2020, the company classified $1,101 of net properties, plant and equipment as “Assets held for sale” on the Consolidated Balance Sheet. These assets are associated with upstream operations that are anticipated to be sold in the next 12 months. The revenues and earnings contributions of these assets in 2020 were not material. Retained earnings at December 31, 2020 and 2019, included $26,532 and $25,319, respectively, for the company’s share of undistributed earnings of equity affiliates. At December 31, 2020, about 67 million shares of Chevron’s common stock remained available for issuance from the 260 million shares that were reserved for issuance under the Chevron Long-Term Incentive Plan. In addition, 644,376 shares remain available for issuance from the 1,600,000 shares of the company’s common stock that were reserved for awards under the Chevron Corporation Non-Employee Directors’ Equity Compensation and Deferral Plan. Note 9 Assets Held for Sale Note 10 Equity Note 11 Earnings Per Share Basic earnings per share (EPS) is based upon “Net Income (Loss) Attributable to Chevron Corporation” (“earnings”) and includes the effects of deferrals of salary and other compensation awards that are invested in Chevron stock units by certain officers and employees of the company. Diluted EPS includes the effects of these items as well as the dilutive effects of outstanding stock options awarded under the company’s stock option programs (refer to Note 20, “Stock Options and Other Share-Based Compensation,” beginning on page 86). The table below sets forth the computation of basic and diluted EPS: Basic EPS Calculation Earnings available to common stockholders - Basic1 Weighted-average number of common shares outstanding2 Add: Deferred awards held as stock units Total weighted-average number of common shares outstanding Earnings per share of common stock - Basic Diluted EPS Calculation Earnings available to common stockholders - Diluted1 Weighted-average number of common shares outstanding2 Add: Deferred awards held as stock units Add: Dilutive effect of employee stock-based awards Total weighted-average number of common shares outstanding Year ended December 31 2020 2019 2018 (5,543) $ 2,924 $ 14,824 1,870 — 1,870 (2.96) $ (5,543) $ 1,870 — — 1,870 $ $ 1,882 — 1,882 1.55 2,924 1,882 — 13 1,895 1,897 1 1,898 7.81 14,824 1,897 1 16 1,914 7.74 $ $ $ $ Earnings per share of common stock - Diluted (2.96) $ 1.54 $ 1 There was no effect of dividend equivalents paid on stock units or dilutive impact of employee stock-based awards on earnings. 2 Millions of shares; 1 million shares of employee-based awards were not included in the 2020 diluted EPS calculation as the result would be anti-dilutive. Note 12 Operating Segments and Geographic Data Although each subsidiary of Chevron is responsible for its own affairs, Chevron Corporation manages its investments in these subsidiaries and their affiliates. The investments are grouped into two business segments, Upstream and Downstream, representing the company’s “reportable segments” and “operating segments.” Upstream operations consist primarily of exploring for, developing, producing and transporting crude oil and natural gas; liquefaction, transportation and regasification associated with liquefied natural gas (LNG); transporting crude oil by major international oil export pipelines; processing, transporting, storage and marketing of natural gas; and a gas-to-liquids plant. Downstream operations consist primarily of refining of crude oil into petroleum products; marketing of crude oil, refined products and lubricants; transporting of crude oil and refined products by pipeline, marine vessel, motor equipment and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives. All Other activities of the company include worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities, and technology activities. 74 Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts The company’s segments are managed by “segment managers” who report to the “chief operating decision maker” (CODM). The segments represent components of the company that engage in activities (a) from which revenues are earned and expenses are incurred; (b) whose operating results are regularly reviewed by the CODM, which makes decisions about resources to be allocated to the segments and assesses their performance; and (c) for which discrete financial information is available. The company’s primary country of operation is the United States of America, its country of domicile. Other components of the company’s operations are reported as “International” (outside the United States). Segment Earnings The company evaluates the performance of its operating segments on an after-tax basis, without considering the effects of debt financing interest expense or investment interest income, both of which are managed by the company on a worldwide basis. Corporate administrative costs are not allocated to the operating segments. However, operating segments are billed for the direct use of corporate services. Non billable costs remain at the corporate level in “All Other.” Earnings by major operating area are presented in the following table: Upstream United States International Total Upstream Downstream United States International Total Downstream Total Segment Earnings All Other Interest expense Interest income Other $ 2020 (1,608) $ (825) (2,433) (571) 618 47 (2,386) (658) 52 (2,551) Year ended December 31 2018 2019 (5,094) $ 7,670 2,576 1,559 922 2,481 5,057 (761) 181 (1,553) 3,278 10,038 13,316 2,103 1,695 3,798 17,114 (713) 137 (1,714) 14,824 Net Income (Loss) Attributable to Chevron Corporation $ (5,543) $ 2,924 $ Segment Assets Segment assets do not include intercompany investments or receivables. Assets at year-end 2020 and 2019 are as follows: Upstream United States International Goodwill Total Upstream Downstream United States International Total Downstream Total Segment Assets All Other United States International Total All Other Total Assets – United States Total Assets – International Goodwill Total Assets At December 31 2019 2020 $ 42,431 $ 144,476 4,402 191,309 23,490 16,096 39,586 230,895 4,017 4,878 8,895 69,938 165,450 4,402 $ 239,790 $ 35,926 145,648 4,463 186,037 25,197 16,955 42,152 228,189 3,475 5,764 9,239 64,598 168,367 4,463 237,428 Segment Sales and Other Operating Revenues Operating segment sales and other operating revenues, including internal transfers, for the years 2020, 2019 and 2018, are presented in the table on the next page. Products are transferred between operating segments at internal product values that approximate market prices. 75 Chevron Corporation 2020 Annual Report 75 173155_Annual_Report_10-K.indd 75 173155_Annual_Report_10-K.indd 75 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Revenues for the upstream segment are derived primarily from the production and sale of crude oil and natural gas, as well as the sale of third-party production of natural gas. Revenues for the downstream segment are derived from the refining and marketing of petroleum products such as gasoline, jet fuel, gas oils, lubricants, residual fuel oils and other products derived from crude oil. This segment also generates revenues from the manufacture and sale of fuel and lubricant additives and the transportation and trading of refined products and crude oil. “All Other” activities include revenues from insurance operations, real estate activities and technology companies. Year ended December 311 2018 2019 Upstream United States International Subtotal Intersegment Elimination – United States Intersegment Elimination – International Total Upstream Downstream United States International Subtotal Intersegment Elimination – United States Intersegment Elimination – International Total Downstream All Other United States International Subtotal Intersegment Elimination – United States Intersegment Elimination – International Total All Other Sales and Other Operating Revenues United States International Subtotal Intersegment Elimination – United States Intersegment Elimination – International $ $ 2020 14,577 26,804 41,381 (8,068) (7,002) 26,311 32,589 38,936 71,525 (2,150) (1,292) 68,083 744 15 759 (667) (15) 77 47,910 65,755 113,665 (10,885) (8,309) $ 23,358 35,628 58,986 (14,944) (12,335) 31,707 55,271 57,654 112,925 (3,924) (1,089) 107,912 1,064 20 1,084 (818) (20) 246 79,693 93,302 172,995 (19,686) (13,444) Total Sales and Other Operating Revenues $ 94,471 $ 139,865 $ 1 Other than the United States, no other country accounted for 10 percent or more of the company’s Sales and Other Operating Revenues. Segment Income Taxes Segment income tax expense for the years 2020, 2019 and 2018 is as follows: Upstream United States International Total Upstream Downstream United States International Total Downstream All Other $ 2020 (570) (415) (985) (192) 253 61 (968) $ (1,550) $ 3,492 1,942 392 170 562 187 Total Income Tax Expense (Benefit) $ (1,892) $ 2,691 $ Year ended December 31 2018 2019 22,891 37,822 60,713 (13,965) (13,679) 33,069 59,376 70,095 129,471 (2,742) (1,132) 125,597 1,022 22 1,044 (786) (22) 236 83,289 107,939 191,228 (17,493) (14,833) 158,902 811 4,687 5,498 534 328 862 (645) 5,715 Other Segment Information Additional information for the segmentation of major equity affiliates is contained in Note 13, on page 77. Information related to properties, plant and equipment by segment is contained in Note 16, on page 82. 76 Chevron Corporation 2020 Annual Report 76 173155_Annual_Report_10-K.indd 76 173155_Annual_Report_10-K.indd 76 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Note 13 Investments and Advances Upstream Tengizchevroil Petropiar Petroboscan Caspian Pipeline Consortium Angola LNG Limited Noble Midstream equity affiliates Other Total Upstream Downstream GS Caltex Corporation Other Total Downstream All Other Other Chevron Phillips Chemical Company LLC Equity in earnings, together with investments in and advances to companies accounted for using the equity method and other investments accounted for at or below cost, is shown in the following table. For certain equity affiliates, Chevron pays its share of some income taxes directly. For such affiliates, the equity in earnings does not include these taxes, which are reported on the Consolidated Statement of Income as “Income tax expense.” Investments and Advances At December 31 2020 2019 2020 Equity in Earnings Year ended December 31 2019 2018 $ 22,685 $ 20,214 $ $ 3,067 $ 3,614 1,238 (1,396) (1,112) 159 (166) (9) 146 (1,140) 630 (185) 223 668 — 80 (11) 155 (26) — (478) 2,787 880 13 288 1,181 — 317 357 170 172 — 19 4,649 1,034 373 273 1,680 (2) 6,327 — — 835 2,258 895 980 27,653 6,181 3,547 1,389 11,117 (14) 38,756 296 39,052 7,978 31,074 1,396 1,139 883 2,423 — 881 26,936 6,241 3,796 1,443 11,480 (14) 38,402 286 38,688 7,203 31,485 Total equity method Other non-equity method investments Total investments and advances Total United States Total International $ $ $ $ $ $ $ $ $ $ $ (472) $ 3,968 $ 709 (1,181) $ $ 641 3,327 $ $ 1,033 5,294 Descriptions of major affiliates and non-equity investments, including significant differences between the company’s carrying value of its investments and its underlying equity in the net assets of the affiliates, are as follows: Tengizchevroil Chevron has a 50 percent equity ownership interest in Tengizchevroil (TCO), which operates the Tengiz and Korolev crude oil fields in Kazakhstan. At December 31, 2020, the company’s carrying value of its investment in TCO was about $100 higher than the amount of underlying equity in TCO’s net assets. This difference results from Chevron acquiring a portion of its interest in TCO at a value greater than the underlying book value for that portion of TCO’s net assets. Included in the investment is a loan to TCO to fund the development of the Future Growth and Wellhead Pressure Management Project with a balance of $4,825. Petropiar Chevron has a 30 percent interest in Petropiar, a joint stock company which operates the heavy oil Huyapari Field and upgrading project in Venezuela’s Orinoco Belt. In 2020, the company fully impaired its investments in the Petropiar affiliate and, effective July 1, 2020, began accounting for this venture as a non-equity method investment. At December 31, 2020, the underlying equity in Petropiar’s net assets was approximately $1,500. Petroboscan Chevron has a 39.2 percent interest in Petroboscan, a joint stock company which operates the Boscan Field in Venezuela. In 2020, the company fully impaired its investments in the Petroboscan affiliate and, effective July 1, 2020, began accounting for this venture as a non-equity method investment. At December 31, 2020, the underlying equity in Petroboscan’s net assets was approximately $1,100. The company also has an outstanding long-term loan to Petroboscan of $560 at year-end 2020. Caspian Pipeline Consortium Chevron has a 15 percent interest in the Caspian Pipeline Consortium, which provides the critical export route for crude oil from both TCO and Karachaganak. Angola LNG Limited Chevron has a 36.4 percent interest in Angola LNG Limited, which processes and liquefies natural gas produced in Angola for delivery to international markets. Noble Midstream Equity Affiliates Noble Midstream, a fully consolidated subsidiary of Chevron, has equity investments in entities which operate midstream assets in the United States. At December 31, 2020, equity investments included 77 Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Note 13 Investments and Advances Equity in earnings, together with investments in and advances to companies accounted for using the equity method and other investments accounted for at or below cost, is shown in the following table. For certain equity affiliates, Chevron pays its share of some income taxes directly. For such affiliates, the equity in earnings does not include these taxes, which are reported on the Consolidated Statement of Income as “Income tax expense.” Upstream Tengizchevroil Petropiar Petroboscan Caspian Pipeline Consortium Angola LNG Limited Noble Midstream equity affiliates Other Total Upstream Downstream Chevron Phillips Chemical Company LLC GS Caltex Corporation Other Total Downstream All Other Other Total equity method Other non-equity method investments Total investments and advances Total United States Total International Investments and Advances At December 31 2019 2020 22,685 — — 835 2,258 895 980 27,653 6,181 3,547 1,389 11,117 (14) 38,756 296 39,052 7,978 31,074 $ $ $ $ $ 20,214 1,396 1,139 883 2,423 — 881 26,936 6,241 3,796 1,443 11,480 (14) 38,402 286 38,688 7,203 31,485 $ $ $ $ $ $ $ $ $ $ 2020 1,238 (1,396) (1,112) 159 (166) (9) 146 (1,140) 630 (185) 223 668 — Equity in Earnings Year ended December 31 2018 2019 $ 3,067 80 (11) 155 (26) — (478) 2,787 880 13 288 1,181 — 3,614 317 357 170 172 — 19 4,649 1,034 373 273 1,680 (2) 6,327 (472) $ 3,968 $ 709 (1,181) $ $ 641 3,327 $ $ 1,033 5,294 Descriptions of major affiliates and non-equity investments, including significant differences between the company’s carrying value of its investments and its underlying equity in the net assets of the affiliates, are as follows: Tengizchevroil Chevron has a 50 percent equity ownership interest in Tengizchevroil (TCO), which operates the Tengiz and Korolev crude oil fields in Kazakhstan. At December 31, 2020, the company’s carrying value of its investment in TCO was about $100 higher than the amount of underlying equity in TCO’s net assets. This difference results from Chevron acquiring a portion of its interest in TCO at a value greater than the underlying book value for that portion of TCO’s net assets. Included in the investment is a loan to TCO to fund the development of the Future Growth and Wellhead Pressure Management Project with a balance of $4,825. Petropiar Chevron has a 30 percent interest in Petropiar, a joint stock company which operates the heavy oil Huyapari Field and upgrading project in Venezuela’s Orinoco Belt. In 2020, the company fully impaired its investments in the Petropiar affiliate and, effective July 1, 2020, began accounting for this venture as a non-equity method investment. At December 31, 2020, the underlying equity in Petropiar’s net assets was approximately $1,500. Petroboscan Chevron has a 39.2 percent interest in Petroboscan, a joint stock company which operates the Boscan Field in Venezuela. In 2020, the company fully impaired its investments in the Petroboscan affiliate and, effective July 1, 2020, began accounting for this venture as a non-equity method investment. At December 31, 2020, the underlying equity in Petroboscan’s net assets was approximately $1,100. The company also has an outstanding long-term loan to Petroboscan of $560 at year-end 2020. Caspian Pipeline Consortium Chevron has a 15 percent interest in the Caspian Pipeline Consortium, which provides the critical export route for crude oil from both TCO and Karachaganak. Angola LNG Limited Chevron has a 36.4 percent interest in Angola LNG Limited, which processes and liquefies natural gas produced in Angola for delivery to international markets. Noble Midstream Equity Affiliates Noble Midstream, a fully consolidated subsidiary of Chevron, has equity investments in entities which operate midstream assets in the United States. At December 31, 2020, equity investments included Chevron Corporation 2020 Annual Report 77 Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Advantage Pipeline LLC (50 percent), Delaware Crossing LLC (50 percent), EPIC Crude Holdings (30 percent), EPIC Y-Grade (15 percent), EPIC Propane (15 percent), and Saddlehorn Pipeline Company, LLC (20 percent). Chevron Phillips Chemical Company LLC Chevron owns 50 percent of Chevron Phillips Chemical Company LLC. The other half is owned by Phillips 66. GS Caltex Corporation Chevron owns 50 percent of GS Caltex Corporation, a joint venture with GS Energy in South Korea. The joint venture imports, refines and markets petroleum products, petrochemicals and lubricants. Other Information “Sales and other operating revenues” on the Consolidated Statement of Income includes $6,038, $8,006 and $10,378 with affiliated companies for 2020, 2019 and 2018, respectively. “Purchased crude oil and products” includes $3,003, $5,694 and $6,598 with affiliated companies for 2020, 2019 and 2018, respectively. “Accounts and notes receivable” on the Consolidated Balance Sheet includes $807 and $810 due from affiliated companies at December 31, 2020 and 2019, respectively. “Accounts payable” includes $244 and $506 due to affiliated companies at December 31, 2020 and 2019, respectively. The following table provides summarized financial information on a 100 percent basis for all equity affiliates as well as Chevron’s total share, which includes Chevron’s net loans to affiliates of $5,153, $4,331 and $3,402 at December 31, 2020, 2019 and 2018, respectively. Year ended December 31 Total revenues Income before income tax expense Net income attributable to affiliates At December 31 Current assets Noncurrent assets Current liabilities Noncurrent liabilities $ $ $ $ 2020 49,093 5,682 4,704 17,087 97,468 12,164 25,586 2019 66,473 13,197 9,809 30,791 97,177 26,032 21,593 $ $ Affiliates 2018 84,469 16,693 13,321 32,657 87,614 26,006 20,000 $ $ $ $ 2020 21,641 2,550 2,034 7,328 43,247 5,052 5,884 Chevron Share 2018 $ $ 40,679 6,755 6,384 12,813 36,369 9,843 4,446 2019 32,628 5,954 4,366 12,998 41,531 10,610 5,068 Total affiliates’ net equity $ 76,805 $ 80,343 $ 74,265 $ 39,639 $ 38,851 $ 34,893 Note 14 Litigation MTBE Chevron and many other companies in the petroleum industry have used methyl tertiary butyl ether (MTBE) as a gasoline additive. Chevron is a party to six pending lawsuits and claims, the majority of which involve numerous other petroleum marketers and refiners. Resolution of these lawsuits and claims may ultimately require the company to correct or ameliorate the alleged effects on the environment of prior release of MTBE by the company or other parties. The company’s ultimate exposure related to pending lawsuits and claims is not determinable. The company no longer uses MTBE in the manufacture of gasoline in the United States. Ecuador Texaco Petroleum Company (Texpet), a subsidiary of Texaco Inc., was a minority member of an oil production consortium with Ecuadorian state-owned Petroecuador from 1967 until 1992. After termination of the consortium and a third-party environmental audit, Ecuador and the consortium parties entered into a settlement agreement specifying Texpet’s remediation obligations. Following Texpet’s completion of a three-year remediation program, Ecuador certified the remediation as proper and released Texpet and its affiliates from environmental liability. In May 2003, plaintiffs alleging environmental harm from the consortium’s activities sued Chevron in the Superior Court in Lago Agrio, Ecuador. In February 2011, that court entered a judgment against Chevron for approximately $9,500 plus additional punitive damages. An appellate panel affirmed, and Ecuador’s National Court of Justice ratified the judgment but nullified the punitive damages, resulting in a judgment of approximately $9,500. Ecuador’s highest Constitutional Court rejected Chevron’s final appeal in July 2018. In February 2011, Chevron sued the Lago Agrio plaintiffs and several of their lawyers and supporters in the U.S. District Court for the Southern District of New York (SDNY) for violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act and state law. The SDNY court ruled that the Ecuadorian judgment had been procured through fraud, bribery, and corruption, and prohibited the RICO defendants from seeking to enforce the Ecuadorian judgment in the United States or profiting from their illegal acts. The Court of Appeals for the Second Circuit affirmed, and the U.S. Supreme Court denied certiorari in June 2017, rendering final the U.S. judgment in favor of Chevron. The Lago Agrio plaintiffs sought to Chevron Corporation 2020 Annual Report 78 Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts have the Ecuadorian judgment recognized and enforced in Canada, Brazil, and Argentina. All of those recognition and enforcement actions were dismissed and resolved in Chevron’s favor. Chevron and Texpet filed an arbitration claim against Ecuador in September 2009 before an arbitral tribunal administered by the Permanent Court of Arbitration in The Hague, under the United States-Ecuador Bilateral Investment Treaty. In August 2018, the Tribunal issued an award holding that the Ecuadorian judgment was based on environmental claims that Ecuador had settled and released, and that it was procured through fraud, bribery, and corruption. According to the Tribunal, the Ecuadorian judgment “violates international public policy” and “should not be recognized or enforced by the courts of other States.” The Tribunal ordered Ecuador to remove the status of enforceability from the Ecuadorian judgment and to compensate Chevron for any injuries resulting from the judgment. The third and final phase of the arbitration, to determine the amount of compensation Ecuador owes to Chevron, is ongoing. In September 2020, the District Court of The Hague denied Ecuador’s request to set aside the Tribunal’s award, stating that it now is “common ground” between Ecuador and Chevron that the Ecuadorian judgment is fraudulent. In December 2020, Ecuador appealed the District Court’s decision to The Hague Court of Appeals. In a separate proceeding, Ecuador also admitted that the Ecuadorian judgment is fraudulent in a public filing with the Office of the United States Trade Representative in July 2020. Management’s Assessment The ultimate outcome of the foregoing matters, including any financial effect on Chevron, remains uncertain. Chevron continues to believe that the Ecuadorian judgment is illegitimate and unenforceable and that it does not provide any basis upon which an estimate of a reasonably possible loss or range of loss can be made. Note 15 Taxes Income Taxes Income tax expense (benefit) U.S. federal Current Deferred State and local Current Deferred Total United States International Current Deferred Total International $ 2020 (182) (1,315) 65 (152) (1,584) 1,833 (2,141) (308) Year ended December 31 2018 2019 $ (73) $ (1,074) 153 (172) (1,166) 4,577 (720) 3,857 (181) 738 183 (16) 724 4,662 329 4,991 5,715 Total income tax expense (benefit) $ (1,892) $ 2,691 $ The reconciliation between the U.S. statutory federal income tax rate and the company’s effective income tax rate is detailed in the following table: Income (loss) before income taxes United States International Total income (loss) before income taxes Theoretical tax (at U.S. statutory rate of 21% ) Effect of U.S. tax reform Equity affiliate accounting effect Effect of income taxes from international operations* State and local taxes on income, net of U.S. federal income tax benefit Prior year tax adjustments, claims and settlements Tax credits Other U.S.* Total income tax expense (benefit) Effective income tax rate 2020 (5,700) (1,753) (7,453) (1,565) — 211 (39) (65) (236) (33) (165) (1,892) $ $ 2019 2018 $ (5,483) $ 11,019 5,536 1,163 3 (687) 2,196 (18) 192 (18) (140) $ 2,691 $ 4,730 15,845 20,575 4,321 (26) (1,526) 3,132 162 (51) (163) (134) 5,715 25.4% 48.6% 27.8% * Includes one-time tax costs (benefits) associated with changes in uncertain tax positions and valuation allowances. The 2020 decrease in income tax expense of $4,583 is a result of the year-over-year decrease in total income before income tax expense, which is primarily due to lower crude oil prices in 2020, partially offset by lower impairment and write off Chevron Corporation 2020 Annual Report 79 Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts charges. The company’s effective tax rate changed from 49 percent in 2019 to 25 percent in 2020. The change in effective tax rate is a consequence of mix effect resulting from the absolute level of earnings or losses and whether they arose in higher or lower tax rate jurisdictions. The company records its deferred taxes on a tax-jurisdiction basis. The reported deferred tax balances are composed of the following: Deferred tax liabilities Properties, plant and equipment Investments and other Total deferred tax liabilities Deferred tax assets Foreign tax credits Asset retirement obligations/environmental reserves Employee benefits Deferred credits Tax loss carryforwards Other accrued liabilities Inventory Operating leases Miscellaneous Total deferred tax assets Deferred tax assets valuation allowance Total deferred taxes, net At December 31 2019 2020 $ $ 16,603 5,617 22,220 17,251 5,372 22,623 (10,585) (4,721) (3,856) (1,056) (6,701) (228) (633) (1,234) (3,685) (32,699) 17,762 (9,840) (4,329) (3,454) (1,083) (5,262) (441) (662) (1,211) (2,796) (29,078) 15,965 $ 7,283 $ 9,510 Deferred tax liabilities decreased by $403 from year-end 2019. The decrease to Properties, plant and equipment temporary differences was partially offset with an increase to Investments and other. The Properties, plant and equipment decrease was primarily due to upstream impairments. Deferred tax assets increased by $3,621 from year-end 2019. This increase was primarily related to increases in tax loss carryforwards for various locations, miscellaneous items related to foreign exchange and foreign tax credits acquired with the purchase of Noble. The overall valuation allowance relates to deferred tax assets for U.S. foreign tax credit carryforwards, tax loss carryforwards and temporary differences. The valuation allowance reduces the deferred tax assets to amounts that are, in management’s assessment, more likely than not to be realized. At the end of 2020, the company had gross tax loss carryforwards of approximately $19,763 and tax credit carryforwards of approximately $1,056, primarily related to various international tax jurisdictions. Whereas some of these tax loss carryforwards do not have an expiration date, others expire at various times from 2021 through 2034. U.S. foreign tax credit carryforwards of $10,585 will expire between 2021 and 2030. At December 31, 2020 and 2019, deferred taxes were classified on the Consolidated Balance Sheet as follows: Deferred charges and other assets Noncurrent deferred income taxes Total deferred income taxes, net At December 31 2019 $ $ (4,178) 13,688 9,510 2020 (5,286) 12,569 7,283 $ $ Income taxes are not accrued for unremitted earnings of international operations that have been or are intended to be reinvested indefinitely. The indefinite reinvestment assertion continues to apply for the purpose of determining deferred tax liabilities for U.S. state and foreign withholding tax purposes. U.S. state and foreign withholding taxes are not accrued for unremitted earnings of international operations that have been or are intended to be reinvested indefinitely. Undistributed earnings of international consolidated subsidiaries and affiliates for which no deferred income tax provision has been made for possible future remittances totaled approximately $52,100 at December 31, 2020. This amount represents earnings reinvested as part of the company’s ongoing international business. It is not practicable to estimate the amount of state and foreign taxes that might be payable on the possible remittance of earnings that are intended to be reinvested indefinitely. The company does not anticipate incurring significant additional taxes on remittances of earnings that are not indefinitely reinvested. Chevron Corporation 2020 Annual Report 80 Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts charges. The company’s effective tax rate changed from 49 percent in 2019 to 25 percent in 2020. The change in effective tax rate is a consequence of mix effect resulting from the absolute level of earnings or losses and whether they arose in The company records its deferred taxes on a tax-jurisdiction basis. The reported deferred tax balances are composed of the higher or lower tax rate jurisdictions. following: Asset retirement obligations/environmental reserves Deferred tax liabilities Properties, plant and equipment Investments and other Total deferred tax liabilities Deferred tax assets Foreign tax credits Employee benefits Deferred credits Tax loss carryforwards Other accrued liabilities Inventory Operating leases Miscellaneous Total deferred tax assets Deferred tax assets valuation allowance Total deferred taxes, net At December 31 2020 2019 $ $ 16,603 5,617 22,220 (10,585) (4,721) (3,856) (1,056) (6,701) (228) (633) (1,234) (3,685) (32,699) 17,762 17,251 5,372 22,623 (9,840) (4,329) (3,454) (1,083) (5,262) (441) (662) (1,211) (2,796) (29,078) 15,965 9,510 $ 7,283 $ Deferred tax liabilities decreased by $403 from year-end 2019. The decrease to Properties, plant and equipment temporary differences was partially offset with an increase to Investments and other. The Properties, plant and equipment decrease was primarily due to upstream impairments. Deferred tax assets increased by $3,621 from year-end 2019. This increase was primarily related to increases in tax loss carryforwards for various locations, miscellaneous items related to foreign exchange and foreign tax credits acquired with the purchase of Noble. The overall valuation allowance relates to deferred tax assets for U.S. foreign tax credit carryforwards, tax loss carryforwards and temporary differences. The valuation allowance reduces the deferred tax assets to amounts that are, in management’s assessment, more likely than not to be realized. At the end of 2020, the company had gross tax loss carryforwards of approximately $19,763 and tax credit carryforwards of approximately $1,056, primarily related to various international tax jurisdictions. Whereas some of these tax loss carryforwards do not have an expiration date, others expire at various times from 2021 through 2034. U.S. foreign tax credit carryforwards of $10,585 will expire between 2021 and 2030. At December 31, 2020 and 2019, deferred taxes were classified on the Consolidated Balance Sheet as follows: At December 31 2020 (5,286) 12,569 7,283 $ $ 2019 (4,178) 13,688 9,510 $ $ Deferred charges and other assets Noncurrent deferred income taxes Total deferred income taxes, net Income taxes are not accrued for unremitted earnings of international operations that have been or are intended to be reinvested indefinitely. The indefinite reinvestment assertion continues to apply for the purpose of determining deferred tax liabilities for U.S. state and foreign withholding tax purposes. U.S. state and foreign withholding taxes are not accrued for unremitted earnings of international operations that have been or are intended to be reinvested indefinitely. Undistributed earnings of international consolidated subsidiaries and affiliates for which no deferred income tax provision has been made for possible future remittances totaled approximately $52,100 at December 31, 2020. This amount represents earnings reinvested as part of the company’s ongoing international business. It is not practicable to estimate the amount of state and foreign taxes that might be payable on the possible remittance of earnings that are intended to be reinvested indefinitely. The company does not anticipate incurring significant additional taxes on remittances of earnings that are not indefinitely reinvested. 80 Uncertain Income Tax Positions The company recognizes a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” in the accounting standards for income taxes refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. The following table indicates the changes to the company’s unrecognized tax benefits for the years ended December 31, 2020, 2019 and 2018. The term “unrecognized tax benefits” in the accounting standards for income taxes refers to the differences between a tax position taken or expected to be taken in a tax return and the benefit measured and recognized in the financial statements. Interest and penalties are not included. Balance at January 1 $ Foreign currency effects Additions based on tax positions taken in current year Additions for tax positions taken in prior years Reductions for tax positions taken in prior years Settlements with taxing authorities in current year Reductions as a result of a lapse of the applicable statute of limitations $ 2020 4,987 2 253 437 (216) (429) (16) $ 2019 5,070 1 94 313 (194) (78) (219) Balance at December 31 $ 5,018 $ 4,987 $ 2018 4,828 (6) 239 153 (131) (13) — 5,070 Approximately 83 percent of the $5,018 of unrecognized tax benefits at December 31, 2020, would have an impact on the effective tax rate if subsequently recognized. Certain of these unrecognized tax benefits relate to tax carryforwards that may require a full valuation allowance at the time of any such recognition. Tax positions for Chevron and its subsidiaries and affiliates are subject to income tax audits by many tax jurisdictions throughout the world. For the company’s major tax jurisdictions, examinations of tax returns for certain prior tax years had not been completed as of December 31, 2020. For these jurisdictions, the latest years for which income tax examinations had been finalized were as follows: United States – 2013, Nigeria – 2007, Australia – 2009 and Kazakhstan – 2012. The company engages in ongoing discussions with tax authorities regarding the resolution of tax matters in the various jurisdictions. Both the outcome of these tax matters and the timing of resolution and/or closure of the tax audits are highly uncertain. However, it is reasonably possible that developments on tax matters in certain tax jurisdictions may result in significant increases or decreases in the company’s total unrecognized tax benefits within the next 12 months. Given the number of years that still remain subject to examination and the number of matters being examined in the various tax jurisdictions, the company is unable to estimate the range of possible adjustments to the balance of unrecognized tax benefits. On the Consolidated Statement of Income, the company reports interest and penalties related to liabilities for uncertain tax positions as “Income tax expense.” As of December 31, 2020, accrual benefit of $(95) for anticipated interest and penalty were included on the Consolidated Balance Sheet, compared with accrual charges of $30 as of year-end 2019. Income tax expense (benefit) associated with interest and penalties was $(124), $(3) and $8 in 2020, 2019 and 2018, respectively. 81 Chevron Corporation 2020 Annual Report 81 173155_Annual_Report_10-K.indd 81 173155_Annual_Report_10-K.indd 81 3/5/21 6:04 PM 3/5/21 6:04 PM Commercial paper1 Notes payable to banks and others with originating terms of one year or less Current maturities of long-term debt Current maturities of long-term finance leases Redeemable long-term obligations Long-term debt Subtotal Reclassified to long-term debt Total short-term debt At December 31 $ $ 2020 5,612 15 2,600 186 2,960 11,373 (9,825) 2019 4,654 228 5,054 18 3,078 13,032 (9,750) $ 1,548 $ 3,282 1 Weighted-average interest rates at December 31, 2020 and 2019, were 0.15% and 1.69%, respectively. Redeemable long-term obligations consist primarily of tax-exempt variable-rate put bonds that are included as current liabilities because they become redeemable at the option of the bondholders during the year following the balance sheet date. The company may periodically enter into interest rate swaps on a portion of its short-term debt. At December 31, 2020, the company had no interest rate swaps on short-term debt. At December 31, 2020, the company had $9,825 in 364-day committed credit facilities with various major banks that enable the refinancing of short-term obligations on a long-term basis. The credit facilities allow the company to convert any amounts outstanding into a term loan for a period of up to one year. This supports commercial paper borrowing and can also be used for general corporate purposes. The company’s practice has been to continually replace expiring commitments with new commitments on substantially the same terms, maintaining levels management believes appropriate. Any borrowings under the facility would be unsecured indebtedness at interest rates based on the London Interbank Offered Rate or an average of base lending rates published by specified banks and on terms reflecting the company’s strong credit rating. No borrowings were outstanding under this facility at December 31, 2020. The company classified $9,825 and $9,750 of short-term debt as long-term at December 31, 2020 and 2019, respectively. Settlement of these obligations is not expected to require the use of working capital within one year, and the company has both the intent and the ability, as evidenced by committed credit facilities, to refinance them on a long-term basis. Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Taxes Other Than on Income United States Excise and similar taxes on products and merchandise Consumer excise taxes collected on behalf of third parties Import duties and other levies Property and other miscellaneous taxes Payroll taxes Taxes on production Total United States International Excise and similar taxes on products and merchandise Consumer excise taxes collected on behalf of third parties Import duties and other levies Property and other miscellaneous taxes Payroll taxes Taxes on production Total International Total taxes other than on income Note 16 Properties, Plant and Equipment1 Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Year ended December 31 2018 2019 Note 17 Short-Term Debt $ $ 2020 4,566 (4,566) 7 2,248 235 317 2,807 2,367 (2,367) 39 1,461 117 75 1,692 $ 4,990 (4,990) 2 1,785 254 355 2,396 2,801 (2,801) 35 1,435 125 145 1,740 4,830 (4,830) 15 1,577 246 325 2,163 3,031 (3,031) 37 2,370 132 165 2,704 4,867 $ 4,499 $ 4,136 $ Gross Investment at Cost 2018 2019 2020 2020 At December 31 Net Investment 2018 2019 Additions at Cost2 2018 2019 2020 Year ended December 31 Depreciation Expense3 2018 2019 2020 Upstream United States International $ 96,555 $ 82,117 $ 88,155 $ 209,846 206,292 215,329 38,175 $ 31,082 $ 39,526 $ 13,067 $ 7,751 $ 6,434 $ 102,010 102,639 113,603 11,069 4,865 3,664 6,841 $ 15,222 $ 11,121 12,618 5,328 12,726 Total Upstream 306,401 288,409 303,484 140,185 133,721 153,129 24,136 11,415 11,299 17,962 27,840 18,054 Downstream United States International 26,499 7,993 25,968 7,480 24,685 7,237 11,101 3,395 11,398 3,114 10,838 3,023 638 573 1,452 355 1,259 278 851 283 869 256 751 282 Total Downstream 34,492 33,448 31,922 14,496 14,512 13,861 1,211 1,807 1,537 1,134 1,125 1,033 All Other United States International Total All Other 4,195 144 4,339 4,719 146 4,865 4,667 171 4,838 1,916 21 1,937 2,236 25 2,261 2,186 31 2,217 194 5 199 324 9 333 224 6 230 403 9 412 243 10 253 320 12 332 Total United States Total International 127,249 112,804 217,983 213,918 117,507 222,737 51,192 105,426 44,716 105,778 52,550 116,657 13,899 11,647 9,527 4,028 7,917 5,149 8,095 11,413 16,334 12,884 6,399 13,020 Total $ 345,232 $ 326,722 $ 340,244 $ 156,618 $ 150,494 $ 169,207 $ 25,546 $ 13,555 $ 13,066 $ 19,508 $ 29,218 $ 19,419 1 Other than the United States and Australia, no other country accounted for 10 percent or more of the company’s net properties, plant and equipment (PP&E) in 2020. Australia had PP&E of $48,060, $51,359 and $53,768 in 2020, 2019 and 2018, respectively. Gross Investment at Cost, Net Investment and Additions at Cost for 2020 each include $16,703 associated with the Noble acquisition. 2 Net of dry hole expense related to prior years’ expenditures of $709, $49 and $343 in 2020, 2019 and 2018, respectively. 3 Depreciation expense includes accretion expense of $560, $628 and $654 in 2020, 2019 and 2018, respectively, and impairments of $2,792, $10,797 and $735 in 2020, 2019 and 2018, respectively. 82 Chevron Corporation 2020 Annual Report 82 83 173155_Annual_Report_10-K.indd 82 173155_Annual_Report_10-K.indd 82 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Taxes Other Than on Income United States Excise and similar taxes on products and merchandise Consumer excise taxes collected on behalf of third parties Import duties and other levies Property and other miscellaneous taxes Payroll taxes Taxes on production Total United States International Payroll taxes Taxes on production Total International Excise and similar taxes on products and merchandise Consumer excise taxes collected on behalf of third parties Import duties and other levies Property and other miscellaneous taxes Note 16 Properties, Plant and Equipment1 $ 4,566 (4,566) $ 4,990 $ (4,990) 7 2,248 235 317 2,807 2,367 (2,367) 39 1,461 117 75 1,692 4,499 2 1,785 254 355 2,396 2,801 (2,801) 35 1,435 125 145 1,740 4,830 (4,830) 15 1,577 246 325 2,163 3,031 (3,031) 37 2,370 132 165 2,704 4,867 Total taxes other than on income $ $ 4,136 $ Upstream United States International Downstream United States International All Other United States International Total All Other Gross Investment at Cost Additions at Cost2 Depreciation Expense3 2020 2019 2018 2020 2019 2018 2020 2019 2018 2020 2019 2018 At December 31 Net Investment Year ended December 31 $ 96,555 $ 82,117 $ 88,155 $ 38,175 $ 31,082 $ 39,526 $ 13,067 $ 7,751 $ 6,434 $ 6,841 $ 15,222 $ 209,846 206,292 215,329 102,010 102,639 113,603 11,069 3,664 4,865 Total Upstream 306,401 288,409 303,484 140,185 133,721 153,129 24,136 11,415 11,299 Total Downstream 34,492 33,448 26,499 7,993 25,968 7,480 4,195 144 4,339 4,719 146 4,865 24,685 7,237 31,922 4,667 171 4,838 11,101 3,395 14,496 11,398 3,114 14,512 10,838 3,023 13,861 638 573 1,211 1,452 355 1,807 1,259 278 1,537 1,916 21 1,937 2,236 25 2,261 2,186 31 2,217 194 5 199 324 9 333 224 6 230 Total United States Total International 127,249 217,983 112,804 213,918 117,507 222,737 51,192 105,426 44,716 105,778 52,550 116,657 13,899 11,647 9,527 4,028 7,917 5,149 8,095 11,413 16,334 12,884 6,399 13,020 Total $ 345,232 $ 326,722 $ 340,244 $ 156,618 $ 150,494 $ 169,207 $ 25,546 $ 13,555 $ 13,066 $ 19,508 $ 29,218 $ 19,419 1 Other than the United States and Australia, no other country accounted for 10 percent or more of the company’s net properties, plant and equipment (PP&E) in 2020. Australia had PP&E of $48,060, $51,359 and $53,768 in 2020, 2019 and 2018, respectively. Gross Investment at Cost, Net Investment and Additions at Cost for 2020 each include 2 Net of dry hole expense related to prior years’ expenditures of $709, $49 and $343 in 2020, 2019 and 2018, respectively. 3 Depreciation expense includes accretion expense of $560, $628 and $654 in 2020, 2019 and 2018, respectively, and impairments of $2,792, $10,797 and $735 in 2020, 2019 $16,703 associated with the Noble acquisition. and 2018, respectively. 11,121 17,962 12,618 27,840 5,328 12,726 18,054 1,134 1,125 1,033 851 283 403 9 412 869 256 243 10 253 751 282 320 12 332 Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Year ended December 31 2020 2019 2018 Note 17 Short-Term Debt Commercial paper1 Notes payable to banks and others with originating terms of one year or less Current maturities of long-term debt Current maturities of long-term finance leases Redeemable long-term obligations Long-term debt Subtotal Reclassified to long-term debt Total short-term debt $ 2020 5,612 15 2,600 186 2,960 11,373 (9,825) At December 31 2019 $ 4,654 228 5,054 18 3,078 13,032 (9,750) $ 1,548 $ 3,282 1 Weighted-average interest rates at December 31, 2020 and 2019, were 0.15% and 1.69%, respectively. Redeemable long-term obligations consist primarily of tax-exempt variable-rate put bonds that are included as current liabilities because they become redeemable at the option of the bondholders during the year following the balance sheet date. The company may periodically enter into interest rate swaps on a portion of its short-term debt. At December 31, 2020, the company had no interest rate swaps on short-term debt. At December 31, 2020, the company had $9,825 in 364-day committed credit facilities with various major banks that enable the refinancing of short-term obligations on a long-term basis. The credit facilities allow the company to convert any amounts outstanding into a term loan for a period of up to one year. This supports commercial paper borrowing and can also be used for general corporate purposes. The company’s practice has been to continually replace expiring commitments with new commitments on substantially the same terms, maintaining levels management believes appropriate. Any borrowings under the facility would be unsecured indebtedness at interest rates based on the London Interbank Offered Rate or an average of base lending rates published by specified banks and on terms reflecting the company’s strong credit rating. No borrowings were outstanding under this facility at December 31, 2020. The company classified $9,825 and $9,750 of short-term debt as long-term at December 31, 2020 and 2019, respectively. Settlement of these obligations is not expected to require the use of working capital within one year, and the company has both the intent and the ability, as evidenced by committed credit facilities, to refinance them on a long-term basis. 82 83 Chevron Corporation 2020 Annual Report 83 173155_Annual_Report_10-K.indd 83 173155_Annual_Report_10-K.indd 83 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Note 18 Long-Term Debt Total long-term debt including finance lease liabilities at December 31, 2020, was $42,767. The company’s long-term debt outstanding at year-end 2020 and 2019 was as follows: Weighted Average Interest Rate (%)1 Range of Interest Rates (%)2 Principal Principal See Note 7, beginning on page 71, for information concerning the fair value of the company’s long-term debt. At December 31 2019 2020 requirements. Notes due 2021 Floating rate notes due 2021 Debentures due 2021 Notes due 2022 Floating rate notes due 2022 Notes due 2023 Floating rate notes due 2023 Notes due 2024 Notes due 2025 Notes due 2026 Notes due 2027 Notes due 2028 Notes due 2029 Notes due 2030 Debentures due 2031 Debentures due 2032 Notes due 2040 Notes due 2041 Notes due 2043 Notes due 2044 Notes due 2047 Notes due 2049 Notes due 2050 Debentures due 2097 Bank loans due 2021 - 2023 3.400% loan3 Medium-term notes, maturing from 2021 to 2038 Notes due 2020 Total including debt due within one year Debt due within one year Fair market valuation adjustment of Noble long-term debt Reclassified from short-term debt Unamortized discounts and debt issuance costs Finance lease liabilities4 Total long-term debt 0.913 2.179 0.594 2.377 0.676 3.291 1.724 2.379 8.414 2.763 1.530 6.131 $ 2.100 0.751 - 1.171 8.875 0.333 - 2.498 0.324 - 0.762 0.426 - 7.250 0.414 - 1.114 2.895 - 3.900 0.687 - 3.326 2.954 1.018 - 8.000 3.850 3.250 2.236 8.625 8.000 - 8.625 2.978 6.000 5.250 5.050 4.950 4.200 2.343 - 3.078 7.250 1.240 - 2.004 3.400 0.000 - 8.875 $ 1,350 650 40 3,800 1,000 4,800 800 1,650 4,000 2,250 2,000 600 500 1,500 108 222 500 850 1,000 850 500 500 1,750 84 1,948 218 37 — 1,350 650 40 3,400 650 3,000 — 1,000 750 2,250 — — — — 108 222 — — — — — — — — — 218 38 5,054 33,507 (2,600) 1,690 9,825 (102) 447 18,730 (5,054) — 9,750 (17) 282 $ 42,767 $ 23,691 Balance at December 31 1 Weighted-average interest rate at December 31, 2020 2 Range of interest rates at December 31, 2020. 3 Maturity date is conditional upon the occurrence of certain events. 2022 is the earliest period in which the loan may become payable 4 For details on finance lease liabilities, see Note 5 beginning on page 69 Chevron has an automatic shelf registration statement that expires in August 2023. This registration statement is for an unspecified amount of nonconvertible debt securities issued or guaranteed by Chevron Corporation or CUSA. Long-term debt excluding finance lease liabilities with a principal balance of $33,507 matures as follows: 2021 – $2,600; 2022 – $5,548; 2023 – $6,475; 2024 – $1,650; 2025 – $4,000; and after 2025 – $13,234. The company completed bond issuances of $8,000 and $4,000 in May and August 2020, respectively. Chevron also assumed total debt, including finance lease obligations, with a fair value of approximately $9,400, associated with the acquisition of Noble on October 5, 2020. Included in the debt assumed from Noble were senior notes, with an aggregate principal amount of $5,800, with interest rates ranging from 3.250 percent to 8.000 percent and maturity dates ranging from 2023 to 2049. On January 6, 2021, Chevron announced that the aggregate principal amount of $5,697 of prior Noble senior notes were exchanged for new 84 Chevron Corporation 2020 Annual Report 84 173155_Annual_Report_10-K.indd 84 173155_Annual_Report_10-K.indd 84 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts senior notes issued by CUSA, guaranteed by Chevron, and having the same interest rates and maturity dates as the Noble senior notes. The aggregate principal amount of $5,697 prior Noble notes were validly tendered and accepted and subsequently terminated. Following such termination, $103 aggregate principal amount remains outstanding across ten series of senior notes issued by Noble, for which Chevron provided no guarantee, and the indentures were modified to eliminate any financial reporting or credit rating requirements. In February 2021, the indenture governing Noble’s 7.250 percent senior debentures due 2097 was modified to provide a guarantee by Chevron and eliminate any financial reporting or credit rating Note 19 Accounting for Suspended Exploratory Wells The company continues to capitalize exploratory well costs after the completion of drilling when the well has found a sufficient quantity of reserves to justify completion as a producing well, and the business unit is making sufficient progress assessing the reserves and the economic and operating viability of the project. If either condition is not met or if the company obtains information that raises substantial doubt about the economic or operational viability of the project, the exploratory well would be assumed to be impaired, and its costs, net of any salvage value, would be charged to expense. The following table indicates the changes to the company’s suspended exploratory well costs for the three years ended December 31, 2020: Beginning balance at January 1 Additions to capitalized exploratory well costs pending the determination of proved reserves Reclassifications to wells, facilities and equipment based on the determination of proved reserves Capitalized exploratory well costs charged to expense Other* Ending balance at December 31 * 2020 represents fair value of well costs acquired in the Noble acquisition. 2019 represents property sales. The following table provides an aging of capitalized well costs and the number of projects for which exploratory well costs have been capitalized for a period greater than one year since the completion of drilling. The aging of the former Noble wells is based on the date the drilling was completed, rather than Chevron’s October 2020 acquisition of Noble. 2020 2019 2018 $ 3,041 $ 3,563 $ 3,702 28 (102) (667) 212 244 (500) (125) (141) 207 (13) (333) — $ 2,512 $ 3,041 $ 3,563 $ $ 2020 26 2,486 2,512 17 At December 31 2019 214 2,827 3,041 22 $ $ 2018 202 3,361 3,563 30 $ $ Exploratory well costs capitalized for a period of one year or less Exploratory well costs capitalized for a period greater than one year Number of projects with exploratory well costs that have been capitalized for a period greater than one year* * Certain projects have multiple wells or fields or both. Of the $2,486 of exploratory well costs capitalized for more than one year at December 31, 2020, $1,197 is related to 7 projects that had drilling activities underway or firmly planned for the near future. The $1,289 balance is related to 10 projects in areas requiring a major capital expenditure before production could begin and for which additional drilling efforts were not underway or firmly planned for the near future. Additional drilling was not deemed necessary because the presence of hydrocarbons had already been established, and other activities were in process to enable a future decision on project development. The projects for the $1,289 referenced above had the following activities associated with assessing the reserves and the projects’ economic viability: (a) $826 (seven projects) – undergoing front-end engineering and design with final investment decision expected within four years; (b) $463 (three projects) – development alternatives under review. While progress was being made on all 17 projects, the decision on the recognition of proved reserves under SEC rules in some cases may not occur for several years because of the complexity, scale and negotiations associated with the projects. More than half of these decisions are expected to occur in the next five years. 85 Total long-term debt including finance lease liabilities at December 31, 2020, was $42,767. The company’s long-term debt outstanding at year-end 2020 and 2019 was as follows: Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Note 18 Long-Term Debt Notes due 2021 Floating rate notes due 2021 Debentures due 2021 Notes due 2022 Floating rate notes due 2022 Notes due 2023 Floating rate notes due 2023 Notes due 2024 Notes due 2025 Notes due 2026 Notes due 2027 Notes due 2028 Notes due 2029 Notes due 2030 Notes due 2040 Notes due 2041 Notes due 2043 Notes due 2044 Notes due 2047 Notes due 2049 Notes due 2050 Debentures due 2031 Debentures due 2032 Debentures due 2097 Bank loans due 2021 - 2023 3.400% loan3 Medium-term notes, maturing from 2021 to 2038 Notes due 2020 Total including debt due within one year Debt due within one year Fair market valuation adjustment of Noble long-term debt Reclassified from short-term debt Unamortized discounts and debt issuance costs Finance lease liabilities4 Total long-term debt 1 Weighted-average interest rate at December 31, 2020 2 Range of interest rates at December 31, 2020. At December 31 2020 2019 Weighted Average Interest Rate (%)1 Range of Interest Rates (%)2 Principal Principal 0.913 0.751 - 1.171 2.100 $ 1,350 $ 2.179 0.594 2.377 0.676 3.291 1.724 8.875 0.333 - 2.498 0.324 - 0.762 0.426 - 7.250 0.414 - 1.114 2.895 - 3.900 0.687 - 3.326 2.379 1.018 - 8.000 8.414 8.000 - 8.625 2.763 2.343 - 3.078 1.530 1.240 - 2.004 6.131 0.000 - 8.875 2.954 3.850 3.250 2.236 8.625 2.978 6.000 5.250 5.050 4.950 4.200 7.250 3.400 650 40 3,800 1,000 4,800 800 1,650 4,000 2,250 2,000 600 500 1,500 108 222 500 850 850 500 500 1,000 1,750 84 1,948 218 37 — 33,507 (2,600) 1,690 9,825 (102) 447 1,350 650 40 3,400 650 3,000 — 1,000 750 2,250 108 222 — — — — — — — — — — — — — 218 38 5,054 18,730 (5,054) — 9,750 (17) 282 Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts senior notes issued by CUSA, guaranteed by Chevron, and having the same interest rates and maturity dates as the Noble senior notes. The aggregate principal amount of $5,697 prior Noble notes were validly tendered and accepted and subsequently terminated. Following such termination, $103 aggregate principal amount remains outstanding across ten series of senior notes issued by Noble, for which Chevron provided no guarantee, and the indentures were modified to eliminate any financial reporting or credit rating requirements. In February 2021, the indenture governing Noble’s 7.250 percent senior debentures due 2097 was modified to provide a guarantee by Chevron and eliminate any financial reporting or credit rating requirements. See Note 7, beginning on page 71, for information concerning the fair value of the company’s long-term debt. Note 19 Accounting for Suspended Exploratory Wells The company continues to capitalize exploratory well costs after the completion of drilling when the well has found a sufficient quantity of reserves to justify completion as a producing well, and the business unit is making sufficient progress assessing the reserves and the economic and operating viability of the project. If either condition is not met or if the company obtains information that raises substantial doubt about the economic or operational viability of the project, the exploratory well would be assumed to be impaired, and its costs, net of any salvage value, would be charged to expense. The following table indicates the changes to the company’s suspended exploratory well costs for the three years ended December 31, 2020: Beginning balance at January 1 Additions to capitalized exploratory well costs pending the determination of proved reserves Reclassifications to wells, facilities and equipment based on the determination of proved reserves Capitalized exploratory well costs charged to expense Other* Ending balance at December 31 * 2020 represents fair value of well costs acquired in the Noble acquisition. 2019 represents property sales. $ 2020 3,041 28 (102) (667) 212 $ $ 2019 3,563 244 (500) (125) (141) 2018 3,702 207 (13) (333) — $ 2,512 $ 3,041 $ 3,563 The following table provides an aging of capitalized well costs and the number of projects for which exploratory well costs have been capitalized for a period greater than one year since the completion of drilling. The aging of the former Noble wells is based on the date the drilling was completed, rather than Chevron’s October 2020 acquisition of Noble. $ 42,767 $ 23,691 Balance at December 31 Exploratory well costs capitalized for a period of one year or less Exploratory well costs capitalized for a period greater than one year $ 2020 26 2,486 At December 31 2018 2019 $ $ 214 2,827 202 3,361 $ 2,512 $ 3,041 $ 3,563 3 Maturity date is conditional upon the occurrence of certain events. 2022 is the earliest period in which the loan may become payable 4 For details on finance lease liabilities, see Note 5 beginning on page 69 Chevron has an automatic shelf registration statement that expires in August 2023. This registration statement is for an unspecified amount of nonconvertible debt securities issued or guaranteed by Chevron Corporation or CUSA. Long-term debt excluding finance lease liabilities with a principal balance of $33,507 matures as follows: 2021 – $2,600; 2022 – $5,548; 2023 – $6,475; 2024 – $1,650; 2025 – $4,000; and after 2025 – $13,234. The company completed bond issuances of $8,000 and $4,000 in May and August 2020, respectively. Chevron also assumed total debt, including finance lease obligations, with a fair value of approximately $9,400, associated with the acquisition of Noble on October 5, 2020. Included in the debt assumed from Noble were senior notes, with an aggregate principal amount of $5,800, with interest rates ranging from 3.250 percent to 8.000 percent and maturity dates ranging from 2023 to 2049. On January 6, 2021, Chevron announced that the aggregate principal amount of $5,697 of prior Noble senior notes were exchanged for new 84 Number of projects with exploratory well costs that have been capitalized for a period greater than one year* 17 22 30 * Certain projects have multiple wells or fields or both. Of the $2,486 of exploratory well costs capitalized for more than one year at December 31, 2020, $1,197 is related to 7 projects that had drilling activities underway or firmly planned for the near future. The $1,289 balance is related to 10 projects in areas requiring a major capital expenditure before production could begin and for which additional drilling efforts were not underway or firmly planned for the near future. Additional drilling was not deemed necessary because the presence of hydrocarbons had already been established, and other activities were in process to enable a future decision on project development. The projects for the $1,289 referenced above had the following activities associated with assessing the reserves and the projects’ economic viability: (a) $826 (seven projects) – undergoing front-end engineering and design with final investment decision expected within four years; (b) $463 (three projects) – development alternatives under review. While progress was being made on all 17 projects, the decision on the recognition of proved reserves under SEC rules in some cases may not occur for several years because of the complexity, scale and negotiations associated with the projects. More than half of these decisions are expected to occur in the next five years. 85 Chevron Corporation 2020 Annual Report 85 173155_Annual_Report_10-K.indd 85 173155_Annual_Report_10-K.indd 85 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts The $2,486 of suspended well costs capitalized for a period greater than one year as of December 31, 2020, represents 89 exploratory wells in 17 projects. The tables below contain the aging of these costs on a well and project basis: Aging based on drilling completion date of individual wells: Amount Number of wells 2000-2009 2010-2014 2015-2019 Total Aging based on drilling completion date of last suspended well in project: 2003-2012 2013-2016 2017-2020 Total $ $ $ $ 342 1,457 687 2,486 17 54 18 89 Amount Number of projects 1 Expected term is based on historical exercise and post-vesting cancellation data. 2 Volatility rate is based on historical stock prices over an appropriate period, generally equal to the expected term. 371 1,627 488 2,486 4 8 5 17 Expected term in years1 Volatility2 Risk-free interest rate based on zero coupon U.S. treasury note Dividend yield Weighted-average fair value per option granted 2020 6.6 20.8 % 1.5 % 4.0 % Year ended December 31 2019 6.6 20.5 % 2.6 % 3.8 % 2018 6.5 21.2 % 2.6 % 3.8 % $ 13.00 $ 15.82 $ 18.18 Note 20 Stock Options and Other Share-Based Compensation Compensation expense for stock options for 2020, 2019 and 2018 was $94 ($74 after tax), $81 ($64 after tax) and $105 ($83 after tax), respectively. In addition, compensation expense for stock appreciation rights, restricted stock, performance shares and restricted stock units was $96 ($76 after tax), $313 ($266 after tax) and $60 ($47 after tax) for 2020, 2019 and 2018, respectively. No significant stock-based compensation cost was capitalized at December 31, 2020, or December 31, 2019. Cash received in payment for option exercises under all share-based payment arrangements for 2020, 2019 and 2018 was $226, $1,090 and $1,159, respectively. Actual tax benefits realized for the tax deductions from option exercises were $8, $43 and $43 for 2020, 2019 and 2018, respectively. Cash paid to settle performance shares, restricted stock units and stock appreciation rights was $95, $119 and $157 for 2020, 2019 and 2018, respectively. Cash paid in 2020 included $11 million for Noble awards paid under change-in-control plan provisions. Awards under the Chevron Long-Term Incentive Plan (LTIP) may take the form of, but are not limited to, stock options, restricted stock, restricted stock units, stock appreciation rights, performance shares and nonstock grants. From April 2004 through May 2023, no more than 260 million shares may be issued under the LTIP. For awards issued on or after May 29, 2013, no more than 50 million of those shares may be in a form other than a stock option, stock appreciation right or award requiring full payment for shares by the award recipient. For the major types of awards issued before January 1, 2017, the contractual terms vary between three years for the performance shares and restricted stock units, and 10 years for the stock options and stock appreciation rights. For awards issued after January 1, 2017, contractual terms vary between three years for the performance shares and special restricted stock units, five years for standard restricted stock units and 10 years for the stock options and stock appreciation rights. Forfeitures for performance shares, restricted stock units, and stock appreciation rights are recognized as they occur. Forfeitures for stock options are estimated using historical forfeiture data dating back to 1990. Noble Share-Based Plans (Noble Plans) On the closing of the acquisition of Noble in October 2020, outstanding stock options granted under various Noble Plans were exchanged for fully vested Chevron options at a conversion rate of 0.1191 Chevron shares for each Noble share. These awards retained the same provision as the original Noble Plans. Awards issued may be exercised for up to 5 years after termination of employment, depending upon the termination type, or the original expiration date, whichever is earlier. Other awards issued under the Noble Plans included restricted stock, phantom stock units, and performance shares that retained the same provisions as the original Noble Plans. Upon termination of employment due to change-in-control, all unvested awards issued under the Noble Plans, including stock options, restricted stock, phantom stock units and performance shares become vested on the termination date. Fair Value and Assumptions The fair market values of stock options and stock appreciation rights granted in 2020, 2019 and 2018 were measured on the date of grant using the Black-Scholes option-pricing model, with the following weighted- average assumptions: 86 Chevron Corporation 2020 Annual Report 86 173155_Annual_Report_10-K.indd 86 173155_Annual_Report_10-K.indd 86 3/5/21 6:04 PM 3/5/21 6:04 PM A summary of option activity, including Noble, during 2020 is presented below: Shares (Thousands) Exercise Price Contractual Term (Years) Aggregate Intrinsic Value Weighted-Average Averaged Remaining Outstanding at January 1, 2020 Granted Exercised Forfeited Outstanding at December 31, 2020 Exercisable at December 31, 2020 86,641 8,281 (2,739) (2,033) 90,150 80,860 $ $ $ $ $ $ 103.22 150.98 78.92 110.72 108.17 107.65 4.11 3.59 $ $ 23 23 The total intrinsic value (i.e., the difference between the exercise price and the market price) of options exercised during 2020, 2019 and 2018 was $92, $516 and $506, respectively. During this period, the company continued its practice of issuing treasury shares upon exercise of these awards. As of December 31, 2020, there was $57 of total unrecognized before-tax compensation cost related to nonvested share- based compensation arrangements granted under the plan. That cost is expected to be recognized over a weighted-average period of 1.7 years. At January 1, 2020, the number of LTIP performance shares outstanding was equivalent to 4,386,784 shares. During 2020, 2,064,598 performance shares were granted, 676,282 shares vested with cash proceeds distributed to recipients and 1,340,303 shares were forfeited. At December 31, 2020, performance shares outstanding were 4,434,797. The fair value of the liability recorded for these instruments was $385, and was measured using the Monte Carlo simulation method. At January 1, 2020, the number of restricted stock units outstanding was equivalent to 2,512,345 shares. During 2020, 1,253,337 restricted stock units were granted, 165,007 units vested with cash proceeds distributed to recipients and 296,742 units were forfeited. At December 31, 2020, restricted stock units outstanding were 3,303,933. The fair value of the liability recorded for the vested portion of these instruments was $197, valued at the stock price as of December 31, 2020. In addition, outstanding stock appreciation rights that were granted under LTIP totaled approximately 4.1 million equivalent shares as of December 31, 2020. The fair value of the liability recorded for the vested portion of these instruments was $34. Note 21 Employee Benefit Plans The company has defined benefit pension plans for many employees. The company typically prefunds defined benefit plans as required by local regulations or in certain situations where prefunding provides economic advantages. In the United States, all qualified plans are subject to the Employee Retirement Income Security Act (ERISA) minimum funding standard. The company does not typically fund U.S. nonqualified pension plans that are not subject to funding requirements under laws and regulations because contributions to these pension plans may be less economic and investment returns may be less attractive than the company’s other investment alternatives. The company also sponsors other postretirement benefit (OPEB) plans that provide medical and dental benefits, as well as life insurance for some active and qualifying retired employees. The plans are unfunded, and the company and retirees share the costs. For the company’s main U.S. medical plan, the increase to the pre-Medicare company contribution for retiree medical coverage is limited to no more than 4 percent each year. Certain life insurance benefits are paid by the company. The company recognizes the overfunded or underfunded status of each of its defined benefit pension and OPEB plans as an asset or liability on the Consolidated Balance Sheet. 87 Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts The $2,486 of suspended well costs capitalized for a period greater than one year as of December 31, 2020, represents 89 exploratory wells in 17 projects. The tables below contain the aging of these costs on a well and project basis: Aging based on drilling completion date of individual wells: Amount Number of wells Aging based on drilling completion date of last suspended well in project: Amount Number of projects $ $ $ $ 342 1,457 687 2,486 371 1,627 488 2,486 17 54 18 89 4 8 5 17 2000-2009 2010-2014 2015-2019 Total 2003-2012 2013-2016 2017-2020 Total Note 20 Stock Options and Other Share-Based Compensation Compensation expense for stock options for 2020, 2019 and 2018 was $94 ($74 after tax), $81 ($64 after tax) and $105 ($83 after tax), respectively. In addition, compensation expense for stock appreciation rights, restricted stock, performance shares and restricted stock units was $96 ($76 after tax), $313 ($266 after tax) and $60 ($47 after tax) for 2020, 2019 and 2018, respectively. No significant stock-based compensation cost was capitalized at December 31, 2020, or December 31, 2019. Cash received in payment for option exercises under all share-based payment arrangements for 2020, 2019 and 2018 was $226, $1,090 and $1,159, respectively. Actual tax benefits realized for the tax deductions from option exercises were $8, $43 and $43 for 2020, 2019 and 2018, respectively. Cash paid to settle performance shares, restricted stock units and stock appreciation rights was $95, $119 and $157 for 2020, 2019 and 2018, respectively. Cash paid in 2020 included $11 million for Noble awards paid under change-in-control plan provisions. Awards under the Chevron Long-Term Incentive Plan (LTIP) may take the form of, but are not limited to, stock options, restricted stock, restricted stock units, stock appreciation rights, performance shares and nonstock grants. From April 2004 through May 2023, no more than 260 million shares may be issued under the LTIP. For awards issued on or after May 29, 2013, no more than 50 million of those shares may be in a form other than a stock option, stock appreciation right or award requiring full payment for shares by the award recipient. For the major types of awards issued before January 1, 2017, the contractual terms vary between three years for the performance shares and restricted stock units, and 10 years for the stock options and stock appreciation rights. For awards issued after January 1, 2017, contractual terms vary between three years for the performance shares and special restricted stock units, five years for standard restricted stock units and 10 years for the stock options and stock appreciation rights. Forfeitures for performance shares, restricted stock units, and stock appreciation rights are recognized as they occur. Forfeitures for stock options are estimated using historical forfeiture data dating back to 1990. Noble Share-Based Plans (Noble Plans) On the closing of the acquisition of Noble in October 2020, outstanding stock options granted under various Noble Plans were exchanged for fully vested Chevron options at a conversion rate of 0.1191 Chevron shares for each Noble share. These awards retained the same provision as the original Noble Plans. Awards issued may be exercised for up to 5 years after termination of employment, depending upon the termination type, or the original expiration date, whichever is earlier. Other awards issued under the Noble Plans included restricted stock, phantom stock units, and performance shares that retained the same provisions as the original Noble Plans. Upon termination of employment due to change-in-control, all unvested awards issued under the Noble Plans, including stock options, restricted stock, phantom stock units and performance shares become vested on the termination date. Fair Value and Assumptions The fair market values of stock options and stock appreciation rights granted in 2020, 2019 and 2018 were measured on the date of grant using the Black-Scholes option-pricing model, with the following weighted- average assumptions: 86 Expected term in years1 Volatility2 Risk-free interest rate based on zero coupon U.S. treasury note Dividend yield Weighted-average fair value per option granted 2020 6.6 20.8 % 1.5 % 4.0 % Year ended December 31 2019 2018 6.6 20.5 % 2.6 % 3.8 % 6.5 21.2 % 2.6 % 3.8 % $ 13.00 $ 15.82 $ 18.18 1 Expected term is based on historical exercise and post-vesting cancellation data. 2 Volatility rate is based on historical stock prices over an appropriate period, generally equal to the expected term. A summary of option activity, including Noble, during 2020 is presented below: Shares (Thousands) Weighted-Average Exercise Price Averaged Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding at January 1, 2020 Granted Exercised Forfeited Outstanding at December 31, 2020 Exercisable at December 31, 2020 86,641 8,281 (2,739) (2,033) 90,150 80,860 $ 103.22 $ 150.98 $ 78.92 $ 110.72 $ 108.17 $ 107.65 4.11 3.59 $ $ 23 23 The total intrinsic value (i.e., the difference between the exercise price and the market price) of options exercised during 2020, 2019 and 2018 was $92, $516 and $506, respectively. During this period, the company continued its practice of issuing treasury shares upon exercise of these awards. As of December 31, 2020, there was $57 of total unrecognized before-tax compensation cost related to nonvested share- based compensation arrangements granted under the plan. That cost is expected to be recognized over a weighted-average period of 1.7 years. At January 1, 2020, the number of LTIP performance shares outstanding was equivalent to 4,386,784 shares. During 2020, 2,064,598 performance shares were granted, 676,282 shares vested with cash proceeds distributed to recipients and 1,340,303 shares were forfeited. At December 31, 2020, performance shares outstanding were 4,434,797. The fair value of the liability recorded for these instruments was $385, and was measured using the Monte Carlo simulation method. At January 1, 2020, the number of restricted stock units outstanding was equivalent to 2,512,345 shares. During 2020, 1,253,337 restricted stock units were granted, 165,007 units vested with cash proceeds distributed to recipients and 296,742 units were forfeited. At December 31, 2020, restricted stock units outstanding were 3,303,933. The fair value of the liability recorded for the vested portion of these instruments was $197, valued at the stock price as of December 31, 2020. In addition, outstanding stock appreciation rights that were granted under LTIP totaled approximately 4.1 million equivalent shares as of December 31, 2020. The fair value of the liability recorded for the vested portion of these instruments was $34. Note 21 Employee Benefit Plans The company has defined benefit pension plans for many employees. The company typically prefunds defined benefit plans as required by local regulations or in certain situations where prefunding provides economic advantages. In the United States, all qualified plans are subject to the Employee Retirement Income Security Act (ERISA) minimum funding standard. The company does not typically fund U.S. nonqualified pension plans that are not subject to funding requirements under laws and regulations because contributions to these pension plans may be less economic and investment returns may be less attractive than the company’s other investment alternatives. The company also sponsors other postretirement benefit (OPEB) plans that provide medical and dental benefits, as well as life insurance for some active and qualifying retired employees. The plans are unfunded, and the company and retirees share the costs. For the company’s main U.S. medical plan, the increase to the pre-Medicare company contribution for retiree medical coverage is limited to no more than 4 percent each year. Certain life insurance benefits are paid by the company. The company recognizes the overfunded or underfunded status of each of its defined benefit pension and OPEB plans as an asset or liability on the Consolidated Balance Sheet. 87 Chevron Corporation 2020 Annual Report 87 173155_Annual_Report_10-K.indd 87 173155_Annual_Report_10-K.indd 87 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts The funded status of the company’s pension and OPEB plans for 2020 and 2019 follows: $ Change in Benefit Obligation Benefit obligation at January 1 Service cost Interest cost Plan participants’ contributions Plan amendments Actuarial (gain) loss Foreign currency exchange rate changes Benefits paid Divestitures/Acquisitions Curtailment Benefit obligation at December 31 Change in Plan Assets Fair value of plan assets at January 1 Actual return on plan assets Foreign currency exchange rate changes Employer contributions Plan participants’ contributions Benefits paid Divestitures/Acquisitions Fair value of plan assets at December 31 $ U.S. 14,465 497 353 — — 1,782 — (2,045) 22 92 15,166 10,177 848 — 950 — (2,045) — 9,930 2020 Int’l. 5,680 130 175 3 — 550 158 (368) — (21) 6,307 4,791 500 174 263 3 (368) — 5,363 $ Pension Benefits 2019 Int’l. U.S. $ 11,726 406 397 — — 2,922 — (1,035) 49 — 14,465 8,532 1,548 — 1,096 — (1,035) 36 10,177 4,820 139 199 4 29 673 121 (302) — (3) 5,680 4,142 566 115 266 4 (302) — 4,791 $ 2020 2,520 38 71 59 — 191 (1) (214) — (14) 2,650 — — — 155 59 (214) — — Other Benefits 2019 Projected benefit obligations Accumulated benefit obligations Fair value of plan assets U.S. 15,103 13,545 9,842 2020 Int’l. 2,084 1,622 600 Pension Benefits 2019 Int’l. 1,554 1,268 278 U.S. 14,401 12,718 10,091 $ $ $ $ $ 2,430 36 96 72 — 125 2 (240) (1) — 2,520 — — — 168 72 (240) — — Funded status at December 31 $ (5,236) $ (944) $ (4,288) $ (889) $ (2,650) $ (2,520) Amounts recognized on the Consolidated Balance Sheet for the company’s pension and OPEB plans at December 31, 2020 and 2019, include: Deferred charges and other assets Accrued liabilities Noncurrent employee benefit plans $ U.S. 24 (258) (5,002) $ 2020 Int’l. 547 (76) (1,415) Pension Benefits 2019 Int’l. U.S. $ $ 23 (239) (4,072) 413 (71) (1,231) $ Other Benefits 2019 $ — (174) (2,346) 2020 — (153) (2,497) Net amount recognized at December 31 $ (5,236) $ (944) $ (4,288) $ (889) $ (2,650) $ (2,520) For the years ended December 31, 2020 and December 31, 2019, the increase in benefit obligations was primarily due to actuarial losses caused by lower discount rates used to value the obligations. Amounts recognized on a before-tax basis in “Accumulated other comprehensive loss” for the company’s pension and OPEB plans were $7,278 and $6,357 at the end of 2020 and 2019, respectively. These amounts consisted of: Net actuarial loss Prior service (credit) costs Total recognized at December 31 U.S. 5,714 3 $ 2020 Int’l. 1,401 86 5,717 $ 1,487 $ $ Pension Benefits 2019 Int’l. U.S. $ $ 5,135 5 $ 5,140 $ 1,269 102 1,371 $ $ Other Benefits 2019 $ $ 74 (228) (154) 2020 260 (186) 74 The accumulated benefit obligations for all U.S. and international pension plans were $13,608 and $5,758, respectively, at December 31, 2020, and $12,781 and $5,203, respectively, at December 31, 2019. Information for U.S. and international pension plans with an accumulated benefit obligation in excess of plan assets at December 31, 2020 and 2019, was: 88 Chevron Corporation 2020 Annual Report 88 173155_Annual_Report_10-K.indd 88 173155_Annual_Report_10-K.indd 88 3/5/21 6:04 PM 3/5/21 6:04 PM The components of net periodic benefit cost and amounts recognized in the Consolidated Statement of Comprehensive Income for 2020, 2019 and 2018 are shown in the table below: Total net periodic benefit cost 1,299 190 Net Periodic Benefit Cost Service cost Interest cost Expected return on plan assets Amortization of prior service costs (credits) Recognized actuarial losses Settlement losses Curtailment losses (gains) Changes Recognized in Comprehensive Income Net actuarial (gain) loss during period Amortization of actuarial loss Prior service (credits) costs during period Amortization of prior service (costs) credits Total changes recognized in other comprehensive income Recognized in Net Periodic Benefit Cost and $ $ $ $ $ $ $ $ 2020 Int’l. $ 130 175 10 45 37 2 U.S. 497 353 2 385 620 92 (650) (209) 1,584 (1,005) — (2) 230 (98) — (17) U.S. 406 397 (565) 2 239 259 — 738 1,939 (498) — (2) Pension Benefits 2018 Int’l. 141 206 (253) 10 29 33 3 169 12 (62) 23 (13) U.S. 480 370 (636) 2 304 411 — 931 151 (715) — (2) 2019 Int’l. 139 199 (231) 11 21 3 16 158 338 (24) 29 (30) Other Benefits 2020 2019 2018 38 71 — 3 — (28) (27) 57 190 (4) — 42 36 96 — (28) (3) — — 101 128 3 (1) 28 (28) 42 94 — 15 — — 123 (248) (15) 3 28 577 115 1,439 313 (566) (40) 228 158 (232) Other Comprehensive Income $ 1,876 $ 305 $ 2,177 $ 471 $ 365 $ 129 $ 285 $ 259 $ (109) Assumptions The following weighted-average assumptions were used to determine benefit obligations and net periodic benefit costs for years ended December 31: 2020 Int’l. Pension Benefits 2019 Int’l. 2018 Int’l. U.S. U.S. U.S. 2020 2019 2018 Other Benefits Assumptions used to determine benefit obligations: Assumptions used to determine net periodic benefit cost: Discount rate Rate of compensation increase Discount rate for service cost Discount rate for interest cost Expected return on plan assets Rate of compensation increase 2.4% 2.4% 4.5% 4.0% 3.1% 3.2% 4.2% 4.4% 4.5% 4.0% 4.5% 4.0% 3.3% 3.2% 2.6% 3.2% 6.5% 4.5% 4.5% 4.0% 4.4% 4.4% 3.7% 3.9% 3.7% 4.4% 3.0% 3.9% 6.8% 5.6% 6.8% 5.5% 4.5% 4.0% 4.5% 4.0% 2.6% N/A 3.5% 3.0% N/A N/A 3.2% N/A 4.6% 4.2% N/A N/A 4.4% N/A 3.9% 3.5% N/A N/A Expected Return on Plan Assets The company’s estimated long-term rates of return on pension assets are driven primarily by actual historical asset-class returns, an assessment of expected future performance, advice from external actuarial firms and the incorporation of specific asset-class risk factors. Asset allocations are periodically updated using pension plan asset/ liability studies, and the company’s estimated long-term rates of return are consistent with these studies. For 2020, the company used an expected long-term rate of return of 6.50 percent for U.S. pension plan assets, which account for 65 percent of the company’s pension plan assets. In both 2019 and 2018, the company used a long-term rate of return of 6.75 percent for these plans. The market-related value of assets of the main U.S. pension plan used in the determination of pension expense was based on the market values in the three months preceding the year-end measurement date. Management considers the three-month time period long enough to minimize the effects of distortions from day-to-day market volatility and still be contemporaneous to the end of the year. For other plans, market value of assets as of year-end is used in calculating the pension expense. 89 Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts The funded status of the company’s pension and OPEB plans for 2020 and 2019 follows: Pension Benefits Other Benefits 2020 2019 Projected benefit obligations Accumulated benefit obligations Fair value of plan assets $ U.S. 15,103 13,545 9,842 $ 2020 Int’l. 2,084 1,622 600 $ Pension Benefits 2019 Int’l. $ 1,554 1,268 278 U.S. 14,401 12,718 10,091 $ 14,465 $ 5,680 $ 11,726 $ 4,820 $ 2,520 $ 2,430 The components of net periodic benefit cost and amounts recognized in the Consolidated Statement of Comprehensive Income for 2020, 2019 and 2018 are shown in the table below: Net Periodic Benefit Cost Service cost Interest cost Expected return on plan assets Amortization of prior service costs (credits) Recognized actuarial losses Settlement losses Curtailment losses (gains) 2020 Int’l. U.S. $ $ 497 353 (650) 2 385 620 92 $ 130 175 (209) 10 45 37 2 $ 2019 Int’l. 139 199 (231) 11 21 3 U.S. $ 406 397 (565) 2 239 259 —16 Total net periodic benefit cost 1,299 190 738 158 Changes Recognized in Comprehensive Income Net actuarial (gain) loss during period Amortization of actuarial loss Prior service (credits) costs during period Amortization of prior service (costs) credits Total changes recognized in other comprehensive income Recognized in Net Periodic Benefit Cost and 1,584 (1,005) — (2) 230 (98) — (17) 1,939 (498) — (2) 338 (24) 29 (30) Pension Benefits 2018 Int’l. U.S. $ 480 370 (636) 2 304 411 — 931 151 (715) — (2) 141 206 (253) 10 29 33 3 169 12 (62) 23 (13) Other Benefits 2018 2019 2020 $ 38 71 — (28) 3 — (27) 57 $ $ 36 96 — (28) (3) — — 42 94 — (28) 15 — — 101 123 190 (4) — 42 128 3 (1) 28 (248) (15) 3 28 577 115 1,439 313 (566) (40) 228 158 (232) Other Comprehensive Income $ 1,876 $ 305 $ 2,177 $ 471 $ 365 $ 129 $ 285 $ 259 $ (109) Assumptions The following weighted-average assumptions were used to determine benefit obligations and net periodic benefit costs for years ended December 31: Assumptions used to determine benefit obligations: Discount rate Rate of compensation increase Assumptions used to determine net periodic benefit cost: Discount rate for service cost Discount rate for interest cost Expected return on plan assets Rate of compensation increase 2020 Int’l. U.S. U.S. Pension Benefits 2018 Int’l. U.S. 2019 Int’l. 2.4% 4.5% 2.4% 4.0% 3.1% 4.5% 3.2% 4.0% 4.2% 4.5% 4.4% 4.0% 3.3% 2.6% 6.5% 4.5% 3.2% 3.2% 4.5% 4.0% 4.4% 3.7% 6.8% 4.5% 4.4% 4.4% 5.6% 4.0% 3.7% 3.0% 6.8% 4.5% 3.9% 3.9% 5.5% 4.0% 2020 2.6% N/A 3.5% 3.0% N/A N/A Other Benefits 2018 2019 3.2% N/A 4.6% 4.2% N/A N/A 4.4% N/A 3.9% 3.5% N/A N/A Expected Return on Plan Assets The company’s estimated long-term rates of return on pension assets are driven primarily by actual historical asset-class returns, an assessment of expected future performance, advice from external actuarial firms and the incorporation of specific asset-class risk factors. Asset allocations are periodically updated using pension plan asset/ liability studies, and the company’s estimated long-term rates of return are consistent with these studies. For 2020, the company used an expected long-term rate of return of 6.50 percent for U.S. pension plan assets, which account for 65 percent of the company’s pension plan assets. In both 2019 and 2018, the company used a long-term rate of return of 6.75 percent for these plans. The market-related value of assets of the main U.S. pension plan used in the determination of pension expense was based on the market values in the three months preceding the year-end measurement date. Management considers the three-month time period long enough to minimize the effects of distortions from day-to-day market volatility and still be contemporaneous to the end of the year. For other plans, market value of assets as of year-end is used in calculating the pension expense. 89 Chevron Corporation 2020 Annual Report 89 173155_Annual_Report_10-K.indd 89 173155_Annual_Report_10-K.indd 89 3/5/21 6:04 PM 3/5/21 6:04 PM Change in Benefit Obligation Benefit obligation at January 1 Service cost Interest cost Plan participants’ contributions Plan amendments Actuarial (gain) loss Foreign currency exchange rate changes Benefits paid Divestitures/Acquisitions Curtailment Benefit obligation at December 31 Change in Plan Assets Fair value of plan assets at January 1 Actual return on plan assets Foreign currency exchange rate changes Employer contributions Plan participants’ contributions Benefits paid Divestitures/Acquisitions Fair value of plan assets at December 31 U.S. 497 353 — — 1,782 (2,045) — 22 92 15,166 10,177 848 — 950 — (2,045) — 9,930 U.S. 406 397 — — 2,922 (1,035) — 49 — 14,465 8,532 1,548 1,096 — — 36 (1,035) 10,177 2019 Int’l. 139 199 4 29 673 121 (302) — (3) 5,680 4,142 566 115 266 4 (302) — 4,791 (889) 38 71 59 — 191 (1) (214) — (14) 2,650 — — — 155 59 (214) — — 36 96 72 — 125 2 (240) (1) — 2,520 — — — 168 72 (240) — — Funded status at December 31 $ (5,236) $ (944) $ (4,288) $ $ (2,650) $ (2,520) Amounts recognized on the Consolidated Balance Sheet for the company’s pension and OPEB plans at December 31, 2020 and 2019, include: Deferred charges and other assets Accrued liabilities Noncurrent employee benefit plans U.S. 24 $ (258) (5,002) 2020 Int’l. 547 (76) (1,415) $ $ Pension Benefits U.S. 23 $ (239) (4,072) 2019 Int’l. 413 (71) (1,231) Other Benefits 2019 — (174) (2,346) (2,520) 2020 — (153) (2,497) (2,650) Net amount recognized at December 31 (5,236) $ (944) (4,288) $ (889) For the years ended December 31, 2020 and December 31, 2019, the increase in benefit obligations was primarily due to actuarial losses caused by lower discount rates used to value the obligations. Amounts recognized on a before-tax basis in “Accumulated other comprehensive loss” for the company’s pension and OPEB plans were $7,278 and $6,357 at the end of 2020 and 2019, respectively. These amounts consisted of: Net actuarial loss Prior service (credit) costs Total recognized at December 31 U.S. 5,714 3 5,717 $ $ $ $ 2020 Int’l. 1,401 86 1,487 Pension Benefits U.S. 5,135 5 5,140 $ $ 2019 Int’l. 1,269 102 1,371 Other Benefits 2019 74 (228) (154) 2020 260 (186) 74 The accumulated benefit obligations for all U.S. and international pension plans were $13,608 and $5,758, respectively, at December 31, 2020, and $12,781 and $5,203, respectively, at December 31, 2019. Information for U.S. and international pension plans with an accumulated benefit obligation in excess of plan assets at December 31, 2020 and 2019, was: $ $ $ $ $ $ $ $ $ $ $ $ 2020 Int’l. 130 175 3 — 550 158 (368) — (21) 6,307 4,791 500 174 263 3 (368) — 5,363 88 Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Discount Rate The discount rate assumptions used to determine the U.S. and international pension and OPEB plan obligations and expense reflect the rate at which benefits could be effectively settled, and are equal to the equivalent single rate resulting from yield curve analysis. This analysis considered the projected benefit payments specific to the company’s plans and the yields on high-quality bonds. The projected cash flows were discounted to the valuation date using the yield curve for the main U.S. pension and OPEB plans. The effective discount rates derived from this analysis at the end of 2020 were 2.4 for the main U.S. pension plan and 2.4 for the main U.S. OPEB plan. The discount rates for these plans at the end of 2019 were 3.1 and 3.1 percent, respectively, while in 2018 they were 4.2 and 4.3 percent for these plans, respectively. Other Benefit Assumptions For the measurement of accumulated postretirement benefit obligation at December 31, 2020, for the main U.S. OPEB plan, the assumed health care cost-trend rates start with 6.1 percent in 2021 and gradually decline to 4.5 percent for 2027 and beyond. For this measurement at December 31, 2019, the assumed health care cost-trend rates started with 6.8 percent in 2020 and gradually declined to 4.5 percent for 2025 and beyond. Plan Assets and Investment Strategy The fair value measurements of the company’s pension plans for 2020 and 2019 are as follows: Total Level 1 Level 2 Level 3 U.S. NAV Total Level 1 Level 2 Level 3 Int’l. NAV At December 31, 2019 Equities U.S.1 International Collective Trusts/Mutual Funds2 Fixed Income Government Corporate Bank Loans Mortgage/Asset Backed Collective Trusts/Mutual Funds2 Mixed Funds3 Real Estate4 Alternative Investments Cash and Cash Equivalents Other5 $ 1,769 $ 1,769 $ 1,958 1,079 523 1,444 120 1 963 — 1,089 924 235 72 1,958 52 — — — — — — — — 228 (5) — $ — $ — — — — 1,027 — — $ 471 $ 422 184 471 $ — $ — $ — — 421 178 6 — — 1 — 523 1,444 113 1 — — — — 7 29 — — 7 — — — — — — 44 — — — — 963 — 1,089 924 — 4 265 493 — 4 2,230 84 277 — 338 23 144 — — — 5 7 — — 334 — 121 490 — 4 — 77 — — 2 21 — 3 — — — — 55 — — 2 — — — — 2,225 — 222 — 2 — Total at December 31, 2019 $ 10,177 $ 4,002 $ 2,117 $ 51 $ 4,007 $ 4,791 $ 1,388 $ 715 $ 61 $ 2,627 At December 31, 2020 Equities U.S.1 International Collective Trusts/Mutual Funds2 Fixed Income Government Corporate Bank Loans Mortgage/Asset Backed Collective Trusts/Mutual Funds2 Mixed Funds3 Real Estate4 Alternative Investments Cash and Cash Equivalents Other5 $ 2,286 $ 2,286 $ 2,211 1,107 231 778 129 1 1,901 — 1,018 — 221 47 2,210 48 — — — — 13 — — — 209 (19) — $ — $ — — 1 — 1,059 — — $ 443 $ 373 192 443 $ — $ — $ — 373 — 185 7 — — — — 231 778 127 1 — — — — 12 22 — — 2 — — — — — — 41 — — — — 1,888 — 1,018 — — 3 240 578 — 4 2,520 127 448 — 417 21 125 10 — — 4 38 — — 408 (2) 115 568 — 4 — 89 — — 3 19 — — — — — — 45 — — 4 — — — — 2,516 — 403 — 6 — Total at December 31, 2020 $ 9,930 $ 4,747 $ 1,171 $ 44 $ 3,968 $ 5,363 $ 1,406 $ 798 $ 49 $ 3,110 1 U.S. equities include investments in the company’s common stock in the amount of $4 at December 31, 2020, and $6 at December 31, 2019. 2 Collective Trusts/Mutual Funds for U.S. plans are entirely index funds; for International plans, they are mostly unit trust and index funds. 3 Mixed funds are composed of funds that invest in both equity and fixed-income instruments in order to diversify and lower risk. 4 The year-end valuations of the U.S. real estate assets are based on third-party appraisals that occur at least once a year for each property in the portfolio. 5 The “Other” asset class includes net payables for securities purchased but not yet settled (Level 1); dividends and interest- and tax-related receivables (Level 2); insurance contracts (Level 3); and investments in private-equity limited partnerships (NAV). 90 Chevron Corporation 2020 Annual Report 90 173155_Annual_Report_10-K.indd 90 173155_Annual_Report_10-K.indd 90 3/5/21 6:04 PM 3/5/21 6:04 PM The effects of fair value measurements using significant unobservable inputs on changes in Level 3 plan assets are outlined below: Total at December 31, 2018 Actual Return on Plan Assets: Assets held at the reporting date Assets sold during the period Purchases, Sales and Settlements Transfers in and/or out of Level 3 Total at December 31, 2019 Actual Return on Plan Assets: Assets held at the reporting date Assets sold during the period Purchases, Sales and Settlements Transfers in and/or out of Level 3 Total at December 31, 2020 Equity Fixed Income International Corporate Bank Loans Real Estate Other 1 $ $ $ 56 $ 46 $ $ $ $ (1) — — 1 1 — — — — 1 $ $ 21 1 — (19) — — — (3) — 3 $ — $ 5 — — — 2 7 — — (5) — 2 $ $ — — (1) — 55 — (10) — — 45 $ $ (1) — 1 — 46 1 — (2) — 45 $ $ Total 129 (1) — (19) 3 112 1 (10) (10) — 93 The primary investment objectives of the pension plans are to achieve the highest rate of total return within prudent levels of risk and liquidity, to diversify and mitigate potential downside risk associated with the investments, and to provide adequate liquidity for benefit payments and portfolio management. The company’s U.S. and U.K. pension plans comprise 91 percent of the total pension assets. Both the U.S. and U.K. plans have an Investment Committee that regularly meets during the year to review the asset holdings and their returns. To assess the plans’ investment performance, long-term asset allocation policy benchmarks have been established. For the primary U.S. pension plan, the company’s Investment Committee has established the following approved asset allocation ranges: Equities 40–65 percent, Fixed Income 20–40 percent, Real Estate 0–15 percent, Alternative Investments 0–5 percent and Cash 0–25 percent. For the U.K. pension plan, the U.K. Board of Trustees has established the following asset allocation guidelines: Equities 10–30 percent, Fixed Income 55–85 percent, Real Estate 5–15 percent, and Cash 0– 5 percent. The other significant international pension plans also have established maximum and minimum asset allocation ranges that vary by plan. Actual asset allocation within approved ranges is based on a variety of factors, including market conditions and illiquidity constraints. To mitigate concentration and other risks, assets are invested across multiple asset classes with active investment managers and passive index funds. The company does not prefund its OPEB obligations. Cash Contributions and Benefit Payments In 2020, the company contributed $950 and $263 to its U.S. and international pension plans, respectively. In 2021, the company expects contributions to be approximately $1,050 to its U.S. plans and $200 to its international pension plans. Actual contribution amounts are dependent upon investment returns, changes in pension obligations, regulatory environments, tax law changes and other economic factors. Additional funding may ultimately be required if investment returns are insufficient to offset increases in plan obligations. The company anticipates paying OPEB benefits of approximately $153 in 2021; $155 was paid in 2020. The following benefit payments, which include estimated future service, are expected to be paid by the company in the next 10 years: 2021 2022 2023 2024 2025 2026-2030 Pension Benefits Other U.S. Int’l. Benefits $ 1,779 $ $ 919 1,069 1,097 1,068 4,856 658 220 225 243 250 1,400 153 162 158 154 151 706 Employee Savings Investment Plan Eligible employees of Chevron and certain of its subsidiaries participate in the Chevron Employee Savings Investment Plan (ESIP). Compensation expense for the ESIP totaled $281, $284 and $270 in 2020, 2019 and 2018, respectively. 91 $ 2 $ 45 $ Total 129 (1) — (19) 3 112 1 (10) (10) — 93 (1) — 1 — 46 1 — (2) — 45 $ $ — — — — 1 $ — — (3) — — (1) — — 1 1 — (19) — 1 $ 3 $ $ — — — 2 7 — — (5) — $ — — (1) — 55 — (10) — — Equity International Corporate Fixed Income Bank Loans Real Estate Other 1 $ 21 $ 5 $ 56 $ 46 $ Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts The effects of fair value measurements using significant unobservable inputs on changes in Level 3 plan assets are outlined below: Total at December 31, 2018 Actual Return on Plan Assets: Assets held at the reporting date Assets sold during the period Purchases, Sales and Settlements Transfers in and/or out of Level 3 Total at December 31, 2019 Actual Return on Plan Assets: Assets held at the reporting date Assets sold during the period Purchases, Sales and Settlements Transfers in and/or out of Level 3 Total at December 31, 2020 $ $ $ Discount Rate The discount rate assumptions used to determine the U.S. and international pension and OPEB plan obligations and expense reflect the rate at which benefits could be effectively settled, and are equal to the equivalent single rate resulting from yield curve analysis. This analysis considered the projected benefit payments specific to the company’s plans and the yields on high-quality bonds. The projected cash flows were discounted to the valuation date using the yield curve for the main U.S. pension and OPEB plans. The effective discount rates derived from this analysis at the end of 2020 were 2.4 for the main U.S. pension plan and 2.4 for the main U.S. OPEB plan. The discount rates for these plans at the end of 2019 were 3.1 and 3.1 percent, respectively, while in 2018 they were 4.2 and 4.3 percent for these plans, respectively. Other Benefit Assumptions For the measurement of accumulated postretirement benefit obligation at December 31, 2020, for the main U.S. OPEB plan, the assumed health care cost-trend rates start with 6.1 percent in 2021 and gradually decline to 4.5 percent for 2027 and beyond. For this measurement at December 31, 2019, the assumed health care cost-trend rates started with 6.8 percent in 2020 and gradually declined to 4.5 percent for 2025 and beyond. Plan Assets and Investment Strategy The fair value measurements of the company’s pension plans for 2020 and 2019 are as follows: Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 $ 1,769 $ 1,769 $ — $ — $ $ 471 $ 471 $ — $ — $ At December 31, 2019 Equities U.S.1 International Fixed Income Government Corporate Bank Loans Collective Trusts/Mutual Funds2 Mortgage/Asset Backed Collective Trusts/Mutual Funds2 Mixed Funds3 Real Estate4 Alternative Investments Cash and Cash Equivalents Other5 At December 31, 2020 Equities U.S.1 International Fixed Income Government Corporate Bank Loans Collective Trusts/Mutual Funds2 Mortgage/Asset Backed Collective Trusts/Mutual Funds2 Mixed Funds3 Real Estate4 Alternative Investments Cash and Cash Equivalents Other5 1,958 1,079 523 1,444 120 1,089 1 963 — 924 235 72 2,211 1,107 231 778 129 1 1,901 — 1,018 — 221 47 1,958 228 (5) 2,210 52 — — — — — — — — 48 — — — — 13 — — — 209 (19) 523 1,444 113 — — 1 — — — — 7 29 — — 231 778 127 1 — — — — 12 22 2,230 2,225 Int’l. NAV — — 178 — — — — — 222 — 2 — — — 185 — — — — — 403 — 6 — 1 — — 3 — — — — 55 — — 2 — — — — — — — — 45 — — 4 421 6 144 — — — 5 7 — — 334 — 373 7 125 10 — — 4 38 — — 408 (2) — — 121 490 — 4 — 77 — — 2 21 — — 115 568 — 4 — 89 — — 3 19 $ $ 422 184 265 493 — 4 84 277 — 338 23 373 192 240 578 — 4 127 448 — 417 21 2,520 2,516 U.S. NAV 1,027 — — — — — — 963 — 1,089 924 — 4 1,059 — — — — — — — — — 3 1,888 1,018 — — — — 7 — — — — — — 44 1 — — — 2 — — — — — — 41 90 Total at December 31, 2019 $ 10,177 $ 4,002 $ 2,117 $ 51 $ 4,007 4,791 $ 1,388 $ 715 $ 61 $ 2,627 $ 2,286 $ 2,286 $ — $ — $ 443 $ 443 $ — $ — $ The primary investment objectives of the pension plans are to achieve the highest rate of total return within prudent levels of risk and liquidity, to diversify and mitigate potential downside risk associated with the investments, and to provide adequate liquidity for benefit payments and portfolio management. The company’s U.S. and U.K. pension plans comprise 91 percent of the total pension assets. Both the U.S. and U.K. plans have an Investment Committee that regularly meets during the year to review the asset holdings and their returns. To assess the plans’ investment performance, long-term asset allocation policy benchmarks have been established. For the primary U.S. pension plan, the company’s Investment Committee has established the following approved asset allocation ranges: Equities 40–65 percent, Fixed Income 20–40 percent, Real Estate 0–15 percent, Alternative Investments 0–5 percent and Cash 0–25 percent. For the U.K. pension plan, the U.K. Board of Trustees has established the following asset allocation guidelines: Equities 10–30 percent, Fixed Income 55–85 percent, Real Estate 5–15 percent, and Cash 0– 5 percent. The other significant international pension plans also have established maximum and minimum asset allocation ranges that vary by plan. Actual asset allocation within approved ranges is based on a variety of factors, including market conditions and illiquidity constraints. To mitigate concentration and other risks, assets are invested across multiple asset classes with active investment managers and passive index funds. The company does not prefund its OPEB obligations. Cash Contributions and Benefit Payments In 2020, the company contributed $950 and $263 to its U.S. and international pension plans, respectively. In 2021, the company expects contributions to be approximately $1,050 to its U.S. plans and $200 to its international pension plans. Actual contribution amounts are dependent upon investment returns, changes in pension obligations, regulatory environments, tax law changes and other economic factors. Additional funding may ultimately be required if investment returns are insufficient to offset increases in plan obligations. The company anticipates paying OPEB benefits of approximately $153 in 2021; $155 was paid in 2020. The following benefit payments, which include estimated future service, are expected to be paid by the company in the next 10 years: Total at December 31, 2020 $ 9,930 $ 4,747 $ 1,171 $ 44 $ 3,968 $ 5,363 $ 1,406 $ 798 $ 49 $ 3,110 1 U.S. equities include investments in the company’s common stock in the amount of $4 at December 31, 2020, and $6 at December 31, 2019. 2 Collective Trusts/Mutual Funds for U.S. plans are entirely index funds; for International plans, they are mostly unit trust and index funds. 3 Mixed funds are composed of funds that invest in both equity and fixed-income instruments in order to diversify and lower risk. 4 The year-end valuations of the U.S. real estate assets are based on third-party appraisals that occur at least once a year for each property in the portfolio. 5 The “Other” asset class includes net payables for securities purchased but not yet settled (Level 1); dividends and interest- and tax-related receivables (Level 2); insurance contracts (Level 3); and investments in private-equity limited partnerships (NAV). 2021 2022 2023 2024 2025 2026-2030 $ Pension Benefits Int’l. U.S. Other Benefits $ 1,779 919 1,069 1,097 1,068 4,856 $ 658 220 225 243 250 1,400 153 162 158 154 151 706 Employee Savings Investment Plan Eligible employees of Chevron and certain of its subsidiaries participate in the Chevron Employee Savings Investment Plan (ESIP). Compensation expense for the ESIP totaled $281, $284 and $270 in 2020, 2019 and 2018, respectively. 91 Chevron Corporation 2020 Annual Report 91 173155_Annual_Report_10-K.indd 91 173155_Annual_Report_10-K.indd 91 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Benefit Plan Trusts Prior to its acquisition by Chevron, Texaco established a benefit plan trust for funding obligations under some of its benefit plans. At year-end 2020, the trust contained 14.2 million shares of Chevron treasury stock. The trust will sell the shares or use the dividends from the shares to pay benefits only to the extent that the company does not pay such benefits. The company intends to continue to pay its obligations under the benefit plans. The trustee will vote the shares held in the trust as instructed by the trust’s beneficiaries. The shares held in the trust are not considered outstanding for earnings-per-share purposes until distributed or sold by the trust in payment of benefit obligations. Prior to its acquisition by Chevron, Unocal established various grantor trusts to fund obligations under some of its benefit plans, including the deferred compensation and supplemental retirement plans. At December 31, 2020 and 2019, trust assets of $36 and $35, respectively, were invested primarily in interest-earning accounts. Employee Incentive Plans The Chevron Incentive Plan is an annual cash bonus plan for eligible employees that links awards to corporate, business unit and individual performance in the prior year. Charges to expense for cash bonuses were $462, $826 and $1,048 in 2020, 2019 and 2018, respectively. Chevron also has the LTIP for officers and other regular salaried employees of the company and its subsidiaries who hold positions of significant responsibility. Awards under the LTIP consist of stock options and other share-based compensation that are described in Note 20, beginning on page 86. Note 22 Other Contingencies and Commitments Income Taxes The company calculates its income tax expense and liabilities quarterly. These liabilities generally are subject to audit and are not finalized with the individual taxing authorities until several years after the end of the annual period for which income taxes have been calculated. Refer to Note 15, beginning on page 79, for a discussion of the periods for which tax returns have been audited for the company’s major tax jurisdictions and a discussion for all tax jurisdictions of the differences between the amount of tax benefits recognized in the financial statements and the amount taken or expected to be taken in a tax return. Settlement of open tax years, as well as other tax issues in countries where the company conducts its businesses, are not expected to have a material effect on the consolidated financial position or liquidity of the company and, in the opinion of management, adequate provisions have been made for all years under examination or subject to future examination. Guarantees The company has two guarantees to equity affiliates totaling $391. Of this amount, $137 is associated with a financing arrangement with an equity affiliate. Over the approximate 1-year remaining term of this guarantee, the maximum amount will be reduced as payments are made by the affiliate. The remaining amount of $254 is associated with certain payments under a terminal use agreement entered into by an equity affiliate. Over the approximate 7-year remaining term of this guarantee, the maximum guarantee amount will be reduced as certain fees are paid by the affiliate. There are numerous cross-indemnity agreements with the affiliate and the other partners to permit recovery of amounts paid under the guarantee. Chevron has recorded no liability for either guarantee. Indemnifications In the acquisition of Unocal, the company assumed certain indemnities relating to contingent environmental liabilities associated with assets that were sold in 1997. The acquirer of those assets shared in certain environmental remediation costs up to a maximum obligation of $200, which had been reached at December 31, 2009. Under the indemnification agreement, after reaching the $200 obligation, Chevron is solely responsible until April 2022, when the indemnification expires. The environmental conditions or events that are subject to these indemnities must have arisen prior to the sale of the assets in 1997. Although the company has provided for known obligations under this indemnity that are probable and reasonably estimable, the amount of additional future costs may be material to results of operations in the period in which they are recognized. The company does not expect these costs will have a material effect on its consolidated financial position or liquidity. Long-Term Unconditional Purchase Obligations and Commitments, Including Throughput and Take-or-Pay Agreements The company and its subsidiaries have certain contingent liabilities with respect to long-term unconditional purchase obligations and commitments, including throughput and take-or-pay agreements, some of which may relate to suppliers’ financing arrangements. The agreements typically provide goods and services, such as pipeline and storage capacity, utilities, and petroleum products, to be used or sold in the ordinary course of the company’s business. The aggregate approximate amounts of required payments under these various commitments are: 2021 – $1,000; 2022 – $1,200; 2023 – $1,300; 2024 – $1,300; 2025 – $1,400; 2026 and after – $8,400. A portion of these commitments may 92 Chevron Corporation 2020 Annual Report 92 ultimately be shared with project partners. Total payments under the agreements were approximately $500 in 2020, $800 in 2019 and $1,400 in 2018. Environmental The company is subject to loss contingencies pursuant to laws, regulations, private claims and legal proceedings related to environmental matters that are subject to legal settlements or that in the future may require the company to take action to correct or ameliorate the effects on the environment of prior release of chemicals or petroleum substances, including MTBE, by the company or other parties. Such contingencies may exist for various operating, closed and divested sites, including, but not limited to, federal Superfund sites and analogous sites under state laws, refineries, chemical plants, marketing facilities, crude oil fields, and mining sites. Although the company has provided for known environmental obligations that are probable and reasonably estimable, it is likely that the company will continue to incur additional liabilities. The amount of additional future costs are not fully determinable due to such factors as the unknown magnitude of possible contamination, the unknown timing and extent of the corrective actions that may be required, the determination of the company’s liability in proportion to other responsible parties, and the extent to which such costs are recoverable from third parties. These future costs may be material to results of operations in the period in which they are recognized, but the company does not expect these costs will have a material effect on its consolidated financial position or liquidity. Chevron’s environmental reserve as of December 31, 2020, was $1,139. Included in this balance was $247 related to remediation activities at approximately 145 sites for which the company had been identified as a potentially responsible party under the provisions of the federal Superfund law or analogous state laws which provide for joint and several liability for all responsible parties. Any future actions by regulatory agencies to require Chevron to assume other potentially responsible parties’ costs at designated hazardous waste sites are not expected to have a material effect on the company’s results of operations, consolidated financial position or liquidity. Of the remaining year-end 2020 environmental reserves balance of $892, $611 is related to the company’s U.S. downstream operations, $47 to its international downstream operations, $233 to upstream operations and $1 to other businesses. Liabilities at all sites were primarily associated with the company’s plans and activities to remediate soil or groundwater contamination or both. position or liquidity. The company manages environmental liabilities under specific sets of regulatory requirements, which in the United States include the Resource Conservation and Recovery Act and various state and local regulations. No single remediation site at year-end 2020 had a recorded liability that was material to the company’s results of operations, consolidated financial Refer to Note 23 on page 94 for a discussion of the company’s asset retirement obligations. Other Contingencies Governmental and other entities in California and other jurisdictions have filed legal proceedings against fossil fuel producing companies, including Chevron, purporting to seek legal and equitable relief to address alleged impacts of climate change. Further such proceedings are likely to be filed by other parties. The unprecedented legal theories set forth in these proceedings entail the possibility of damages liability and injunctions against the production of all fossil fuels that, while we believe remote, could have a material adverse effect on the company’s results of operations and financial condition. Management believes that these proceedings are legally and factually meritless and detract from constructive efforts to address the important policy issues presented by climate change, and will vigorously defend against such proceedings. Seven coastal parishes and the State of Louisiana have filed 43 separate lawsuits in Louisiana against numerous oil and gas companies seeking damages for coastal erosion in or near oil fields located within Louisiana’s coastal zone under Louisiana’s State and Local Coastal Resources Management Act (SLCRMA). Chevron entities are defendants in 39 of these cases. The lawsuits allege that the defendants’ historical operations were conducted without necessary permits or failed to comply with permits obtained and seek damages and other relief, including the costs of restoring coastal wetlands allegedly impacted by oil field operations. Plaintiffs’ SLCRMA theories are unprecedented; thus, there remains significant uncertainty about the scope of the claims and alleged damages and any potential effects on the company’s results of operations and financial condition. Management believes that the claims lack legal and factual merit and will continue to vigorously defend against such proceedings. Chevron receives claims from and submits claims to customers; trading partners; joint venture partners; U.S. federal, state and local regulatory bodies; governments; contractors; insurers; suppliers; and individuals. The amounts of these claims, 93 173155_Annual_Report_10-K.indd 92 173155_Annual_Report_10-K.indd 92 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Benefit Plan Trusts Prior to its acquisition by Chevron, Texaco established a benefit plan trust for funding obligations under some of its benefit plans. At year-end 2020, the trust contained 14.2 million shares of Chevron treasury stock. The trust will sell the shares or use the dividends from the shares to pay benefits only to the extent that the company does not pay such benefits. The company intends to continue to pay its obligations under the benefit plans. The trustee will vote the shares held in the trust as instructed by the trust’s beneficiaries. The shares held in the trust are not considered outstanding for earnings-per-share purposes until distributed or sold by the trust in payment of benefit obligations. Prior to its acquisition by Chevron, Unocal established various grantor trusts to fund obligations under some of its benefit plans, including the deferred compensation and supplemental retirement plans. At December 31, 2020 and 2019, trust assets of $36 and $35, respectively, were invested primarily in interest-earning accounts. Employee Incentive Plans The Chevron Incentive Plan is an annual cash bonus plan for eligible employees that links awards to corporate, business unit and individual performance in the prior year. Charges to expense for cash bonuses were $462, $826 and $1,048 in 2020, 2019 and 2018, respectively. Chevron also has the LTIP for officers and other regular salaried employees of the company and its subsidiaries who hold positions of significant responsibility. Awards under the LTIP consist of stock options and other share-based compensation that are described in Note 20, beginning on page 86. Note 22 Other Contingencies and Commitments Income Taxes The company calculates its income tax expense and liabilities quarterly. These liabilities generally are subject to audit and are not finalized with the individual taxing authorities until several years after the end of the annual period for which income taxes have been calculated. Refer to Note 15, beginning on page 79, for a discussion of the periods for which tax returns have been audited for the company’s major tax jurisdictions and a discussion for all tax jurisdictions of the differences between the amount of tax benefits recognized in the financial statements and the amount taken or expected to be taken in a tax return. Settlement of open tax years, as well as other tax issues in countries where the company conducts its businesses, are not expected to have a material effect on the consolidated financial position or liquidity of the company and, in the opinion of management, adequate provisions have been made for all years under examination or subject to future examination. Guarantees The company has two guarantees to equity affiliates totaling $391. Of this amount, $137 is associated with a financing arrangement with an equity affiliate. Over the approximate 1-year remaining term of this guarantee, the maximum amount will be reduced as payments are made by the affiliate. The remaining amount of $254 is associated with certain payments under a terminal use agreement entered into by an equity affiliate. Over the approximate 7-year remaining term of this guarantee, the maximum guarantee amount will be reduced as certain fees are paid by the affiliate. There are numerous cross-indemnity agreements with the affiliate and the other partners to permit recovery of amounts paid under the guarantee. Chevron has recorded no liability for either guarantee. Indemnifications In the acquisition of Unocal, the company assumed certain indemnities relating to contingent environmental liabilities associated with assets that were sold in 1997. The acquirer of those assets shared in certain environmental remediation costs up to a maximum obligation of $200, which had been reached at December 31, 2009. Under the indemnification agreement, after reaching the $200 obligation, Chevron is solely responsible until April 2022, when the indemnification expires. The environmental conditions or events that are subject to these indemnities must have arisen prior to the sale of the assets in 1997. Although the company has provided for known obligations under this indemnity that are probable and reasonably estimable, the amount of additional future costs may be material to results of operations in the period in which they are recognized. The company does not expect these costs will have a material effect on its consolidated financial position or liquidity. Long-Term Unconditional Purchase Obligations and Commitments, Including Throughput and Take-or-Pay Agreements The company and its subsidiaries have certain contingent liabilities with respect to long-term unconditional purchase obligations and commitments, including throughput and take-or-pay agreements, some of which may relate to suppliers’ financing arrangements. The agreements typically provide goods and services, such as pipeline and storage capacity, utilities, and petroleum products, to be used or sold in the ordinary course of the company’s business. The aggregate approximate amounts of required payments under these various commitments are: 2021 – $1,000; 2022 – $1,200; 2023 – $1,300; 2024 – $1,300; 2025 – $1,400; 2026 and after – $8,400. A portion of these commitments may 92 ultimately be shared with project partners. Total payments under the agreements were approximately $500 in 2020, $800 in 2019 and $1,400 in 2018. Environmental The company is subject to loss contingencies pursuant to laws, regulations, private claims and legal proceedings related to environmental matters that are subject to legal settlements or that in the future may require the company to take action to correct or ameliorate the effects on the environment of prior release of chemicals or petroleum substances, including MTBE, by the company or other parties. Such contingencies may exist for various operating, closed and divested sites, including, but not limited to, federal Superfund sites and analogous sites under state laws, refineries, chemical plants, marketing facilities, crude oil fields, and mining sites. Although the company has provided for known environmental obligations that are probable and reasonably estimable, it is likely that the company will continue to incur additional liabilities. The amount of additional future costs are not fully determinable due to such factors as the unknown magnitude of possible contamination, the unknown timing and extent of the corrective actions that may be required, the determination of the company’s liability in proportion to other responsible parties, and the extent to which such costs are recoverable from third parties. These future costs may be material to results of operations in the period in which they are recognized, but the company does not expect these costs will have a material effect on its consolidated financial position or liquidity. Chevron’s environmental reserve as of December 31, 2020, was $1,139. Included in this balance was $247 related to remediation activities at approximately 145 sites for which the company had been identified as a potentially responsible party under the provisions of the federal Superfund law or analogous state laws which provide for joint and several liability for all responsible parties. Any future actions by regulatory agencies to require Chevron to assume other potentially responsible parties’ costs at designated hazardous waste sites are not expected to have a material effect on the company’s results of operations, consolidated financial position or liquidity. Of the remaining year-end 2020 environmental reserves balance of $892, $611 is related to the company’s U.S. downstream operations, $47 to its international downstream operations, $233 to upstream operations and $1 to other businesses. Liabilities at all sites were primarily associated with the company’s plans and activities to remediate soil or groundwater contamination or both. The company manages environmental liabilities under specific sets of regulatory requirements, which in the United States include the Resource Conservation and Recovery Act and various state and local regulations. No single remediation site at year-end 2020 had a recorded liability that was material to the company’s results of operations, consolidated financial position or liquidity. Refer to Note 23 on page 94 for a discussion of the company’s asset retirement obligations. Other Contingencies Governmental and other entities in California and other jurisdictions have filed legal proceedings against fossil fuel producing companies, including Chevron, purporting to seek legal and equitable relief to address alleged impacts of climate change. Further such proceedings are likely to be filed by other parties. The unprecedented legal theories set forth in these proceedings entail the possibility of damages liability and injunctions against the production of all fossil fuels that, while we believe remote, could have a material adverse effect on the company’s results of operations and financial condition. Management believes that these proceedings are legally and factually meritless and detract from constructive efforts to address the important policy issues presented by climate change, and will vigorously defend against such proceedings. Seven coastal parishes and the State of Louisiana have filed 43 separate lawsuits in Louisiana against numerous oil and gas companies seeking damages for coastal erosion in or near oil fields located within Louisiana’s coastal zone under Louisiana’s State and Local Coastal Resources Management Act (SLCRMA). Chevron entities are defendants in 39 of these cases. The lawsuits allege that the defendants’ historical operations were conducted without necessary permits or failed to comply with permits obtained and seek damages and other relief, including the costs of restoring coastal wetlands allegedly impacted by oil field operations. Plaintiffs’ SLCRMA theories are unprecedented; thus, there remains significant uncertainty about the scope of the claims and alleged damages and any potential effects on the company’s results of operations and financial condition. Management believes that the claims lack legal and factual merit and will continue to vigorously defend against such proceedings. Chevron receives claims from and submits claims to customers; trading partners; joint venture partners; U.S. federal, state and local regulatory bodies; governments; contractors; insurers; suppliers; and individuals. The amounts of these claims, 93 Chevron Corporation 2020 Annual Report 93 173155_Annual_Report_10-K.indd 93 173155_Annual_Report_10-K.indd 93 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts individually and in the aggregate, may be significant and take lengthy periods to resolve, and may result in gains or losses in future periods. Note 25 Other Financial Information The company and its affiliates also continue to review and analyze their operations and may close, retire, sell, exchange, acquire or restructure assets to achieve operational or strategic benefits and to improve competitiveness and profitability. These activities, individually or together, may result in significant gains or losses in future periods. Note 23 Asset Retirement Obligations The company records the fair value of a liability for an asset retirement obligation (ARO) both as an asset and a liability when there is a legal obligation associated with the retirement of a tangible long-lived asset and the liability can be reasonably estimated. The legal obligation to perform the asset retirement activity is unconditional, even though uncertainty may exist about the timing and/or method of settlement that may be beyond the company’s control. This uncertainty about the timing and/or method of settlement is factored into the measurement of the liability when sufficient information exists to reasonably estimate fair value. Recognition of the ARO includes: (1) the present value of a liability and offsetting asset, (2) the subsequent accretion of that liability and depreciation of the asset, and (3) the periodic review of the ARO liability estimates and discount rates. AROs are primarily recorded for the company’s crude oil and natural gas producing assets. No significant AROs associated with any legal obligations to retire downstream long-lived assets have been recognized, as indeterminate settlement dates for the asset retirements prevent estimation of the fair value of the associated ARO. The company performs periodic reviews of its downstream long-lived assets for any changes in facts and circumstances that might require recognition of a retirement obligation. The following table indicates the changes to the company’s before-tax asset retirement obligations in 2020, 2019 and 2018: Balance at January 1 Liabilities assumed in the Noble acquisition Liabilities incurred Liabilities settled Accretion expense Revisions in estimated cash flows Balance at December 31 $ 2020 12,832 630 10 (1,661) 560 1,245 $ $ 2019 14,050 — 32 (1,694) 628 (184) 2018 14,214 — 96 (830) 654 (84) $ 13,616 $ 12,832 $ 14,050 In the table above, the amount associated with “Revisions in estimated cash flows” in 2020 reflects increased cost estimates to decommission wells, equipment and facilities. The long-term portion of the $13,616 balance at the end of 2020 was $11,877. Note 24 Revenue Revenue from contracts with customers is presented in “Sales and other operating revenue” along with some activity that is accounted for outside the scope of Accounting Standard Codification (ASC) 606, which is not material to this line, on the Consolidated Statement of Income. Purchases and sales of inventory with the same counterparty that are entered into in contemplation of one another (including buy/sell arrangements) are combined and recorded on a net basis and reported in “Purchased crude oil and products” on the Consolidated Statement of Income. Refer to Note 12 beginning on page 74 for additional information on the company’s segmentation of revenue. Receivables related to revenue from contracts with customers are included in “Accounts and notes receivable, net” on the Consolidated Balance Sheet, net of the allowance for doubtful accounts. The net balance of these receivables was $7,631 and $9,247 at December 31, 2020 and December 31, 2019, respectively. Other items included in “Accounts and notes receivable, net” represent amounts due from partners for their share of joint venture operating and project costs and amounts due from others, primarily related to derivatives, leases, buy/sell arrangements and product exchanges, which are accounted for outside the scope of ASC 606. Contract assets and related costs are reflected in “Prepaid expenses and other current assets” and contract liabilities are reflected in “Accrued liabilities” and “Deferred credits and other noncurrent obligations” on the Consolidated Balance Sheet. Amounts for these items are not material to the company’s financial position. 94 Chevron Corporation 2020 Annual Report 94 Earnings in 2020 included after-tax gains of approximately $765 relating to the sale of certain properties. Of this amount, approximately $30 and $735 related to downstream and upstream, respectively. Earnings in 2019 included after-tax gains of approximately $1,500 relating to the sale of certain properties, of which approximately $50 and $1,450 related to downstream and upstream assets, respectively. Earnings in 2018 included after-tax gains of approximately $630 relating to the sale of certain properties, of which approximately $365 and $265 related to downstream and upstream assets, respectively. Earnings in 2020 included after-tax charges of approximately $4,800 for impairments and other asset write-offs related to upstream. Earnings in 2019 included after-tax charges of approximately $10,400 for impairments and other asset write-offs related to upstream. Earnings in 2018 included after-tax charges of approximately $2,000 for impairments and Excess of replacement cost over the carrying value of inventories (LIFO method) LIFO profits (losses) on inventory drawdowns included in earnings Foreign currency effects* * Includes $(152), $(28) and $416 in 2020, 2019 and 2018, respectively, for the company’s share of equity affiliates’ foreign currency effects. The company has $4,402 in goodwill on the Consolidated Balance Sheet, all of which is in the upstream segment and primarily related to the 2005 acquisition of Unocal. The company tested this goodwill for impairment during 2020, and no Summarized Financial Data – Chevron Phillips Chemical Company LLC Chevron has a 50 percent equity ownership interest in Chevron Phillips Chemical Company LLC (CPChem). Refer to Note 13, on page 77, for a discussion of CPChem operations. Summarized financial information for 100 percent of CPChem is other asset write-offs related to upstream. Other financial information is as follows: Total financing interest and debt costs Less: Capitalized interest Interest and debt expense Research and development expenses impairment was required. Note 26 presented in the table below: Sales and other operating revenues Costs and other deductions Net income attributable to CPChem Current assets Other assets Current liabilities Other liabilities Total CPChem net equity Year ended December 31 2020 735 38 697 435 2,749 (147) (645) 2019 817 19 798 500 4,513 (9) (304) $ $ $ $ $ $ $ $ $ $ $ $ 2018 921 173 748 453 5,134 26 611 $ $ $ $ $ $ Year ended December 31 $ $ 2020 8,407 7,221 1,260 2019 9,333 7,863 1,760 At December 31 2018 11,310 9,812 2,069 2019 2,554 14,314 1,247 3,174 12,447 $ $ $ 2020 2,816 14,210 1,394 3,380 12,252 $ $ Note 27 Restructuring and Reorganization Costs In 2020, the company recorded severance accruals and adjustments for employee reduction programs related to enterprise- wide restructuring, which are expected to be substantially completed by the end of 2021. A before-tax charge of $859 ($670 after-tax) was recorded in 2020, with $690 reported as “Operating expenses” and $169 reported as “Selling, general and administrative expenses” on the Consolidated Statement of Income. Approximately $127 ($97 after-tax) is associated with terminations in U.S. Upstream, $288 ($228 after-tax) in International Upstream, $112 ($85 after-tax) in U.S. Downstream, $69 ($54 after-tax) in International Downstream and $263 ($206 after-tax) in All Other. 95 173155_Annual_Report_10-K.indd 94 173155_Annual_Report_10-K.indd 94 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts individually and in the aggregate, may be significant and take lengthy periods to resolve, and may result in gains or losses in future periods. The company and its affiliates also continue to review and analyze their operations and may close, retire, sell, exchange, acquire or restructure assets to achieve operational or strategic benefits and to improve competitiveness and profitability. These activities, individually or together, may result in significant gains or losses in future periods. Note 23 Asset Retirement Obligations The company records the fair value of a liability for an asset retirement obligation (ARO) both as an asset and a liability when there is a legal obligation associated with the retirement of a tangible long-lived asset and the liability can be reasonably estimated. The legal obligation to perform the asset retirement activity is unconditional, even though uncertainty may exist about the timing and/or method of settlement that may be beyond the company’s control. This uncertainty about the timing and/or method of settlement is factored into the measurement of the liability when sufficient information exists to reasonably estimate fair value. Recognition of the ARO includes: (1) the present value of a liability and offsetting asset, (2) the subsequent accretion of that liability and depreciation of the asset, and (3) the periodic review of the ARO liability estimates and discount rates. AROs are primarily recorded for the company’s crude oil and natural gas producing assets. No significant AROs associated with any legal obligations to retire downstream long-lived assets have been recognized, as indeterminate settlement dates for the asset retirements prevent estimation of the fair value of the associated ARO. The company performs periodic reviews of its downstream long-lived assets for any changes in facts and circumstances that might require recognition of a retirement obligation. The following table indicates the changes to the company’s before-tax asset retirement obligations in 2020, 2019 and 2018: 2020 2019 2018 $ 12,832 $ 14,050 $ 14,214 630 10 (1,661) 560 1,245 — 32 (1,694) 628 (184) — 96 (830) 654 (84) $ 13,616 $ 12,832 $ 14,050 Balance at January 1 Liabilities assumed in the Noble acquisition Liabilities incurred Liabilities settled Accretion expense Revisions in estimated cash flows Balance at December 31 $11,877. Note 24 Revenue In the table above, the amount associated with “Revisions in estimated cash flows” in 2020 reflects increased cost estimates to decommission wells, equipment and facilities. The long-term portion of the $13,616 balance at the end of 2020 was Revenue from contracts with customers is presented in “Sales and other operating revenue” along with some activity that is accounted for outside the scope of Accounting Standard Codification (ASC) 606, which is not material to this line, on the Consolidated Statement of Income. Purchases and sales of inventory with the same counterparty that are entered into in contemplation of one another (including buy/sell arrangements) are combined and recorded on a net basis and reported in “Purchased crude oil and products” on the Consolidated Statement of Income. Refer to Note 12 beginning on page 74 for additional information on the company’s segmentation of revenue. Receivables related to revenue from contracts with customers are included in “Accounts and notes receivable, net” on the Consolidated Balance Sheet, net of the allowance for doubtful accounts. The net balance of these receivables was $7,631 and $9,247 at December 31, 2020 and December 31, 2019, respectively. Other items included in “Accounts and notes receivable, net” represent amounts due from partners for their share of joint venture operating and project costs and amounts due from others, primarily related to derivatives, leases, buy/sell arrangements and product exchanges, which are accounted for outside the scope of ASC 606. Contract assets and related costs are reflected in “Prepaid expenses and other current assets” and contract liabilities are reflected in “Accrued liabilities” and “Deferred credits and other noncurrent obligations” on the Consolidated Balance Sheet. Amounts for these items are not material to the company’s financial position. 94 Note 25 Other Financial Information Earnings in 2020 included after-tax gains of approximately $765 relating to the sale of certain properties. Of this amount, approximately $30 and $735 related to downstream and upstream, respectively. Earnings in 2019 included after-tax gains of approximately $1,500 relating to the sale of certain properties, of which approximately $50 and $1,450 related to downstream and upstream assets, respectively. Earnings in 2018 included after-tax gains of approximately $630 relating to the sale of certain properties, of which approximately $365 and $265 related to downstream and upstream assets, respectively. Earnings in 2020 included after-tax charges of approximately $4,800 for impairments and other asset write-offs related to upstream. Earnings in 2019 included after-tax charges of approximately $10,400 for impairments and other asset write-offs related to upstream. Earnings in 2018 included after-tax charges of approximately $2,000 for impairments and other asset write-offs related to upstream. Other financial information is as follows: Total financing interest and debt costs Less: Capitalized interest Interest and debt expense Research and development expenses Excess of replacement cost over the carrying value of inventories (LIFO method) LIFO profits (losses) on inventory drawdowns included in earnings Foreign currency effects* 2020 735 38 697 435 2,749 (147) (645) $ $ $ $ $ $ Year ended December 31 2018 2019 $ $ $ $ $ $ 817 19 798 500 4,513 (9) (304) $ $ $ $ $ $ 921 173 748 453 5,134 26 611 * Includes $(152), $(28) and $416 in 2020, 2019 and 2018, respectively, for the company’s share of equity affiliates’ foreign currency effects. The company has $4,402 in goodwill on the Consolidated Balance Sheet, all of which is in the upstream segment and primarily related to the 2005 acquisition of Unocal. The company tested this goodwill for impairment during 2020, and no impairment was required. Note 26 Summarized Financial Data – Chevron Phillips Chemical Company LLC Chevron has a 50 percent equity ownership interest in Chevron Phillips Chemical Company LLC (CPChem). Refer to Note 13, on page 77, for a discussion of CPChem operations. Summarized financial information for 100 percent of CPChem is presented in the table below: Sales and other operating revenues Costs and other deductions Net income attributable to CPChem Current assets Other assets Current liabilities Other liabilities Total CPChem net equity $ 2020 8,407 7,221 1,260 Year ended December 31 2018 2019 $ $ 9,333 7,863 1,760 11,310 9,812 2,069 $ At December 31 2019 $ 2,554 14,314 1,247 3,174 2020 2,816 14,210 1,394 3,380 $ 12,252 $ 12,447 Note 27 Restructuring and Reorganization Costs In 2020, the company recorded severance accruals and adjustments for employee reduction programs related to enterprise- wide restructuring, which are expected to be substantially completed by the end of 2021. A before-tax charge of $859 ($670 after-tax) was recorded in 2020, with $690 reported as “Operating expenses” and $169 reported as “Selling, general and administrative expenses” on the Consolidated Statement of Income. Approximately $127 ($97 after-tax) is associated with terminations in U.S. Upstream, $288 ($228 after-tax) in International Upstream, $112 ($85 after-tax) in U.S. Downstream, $69 ($54 after-tax) in International Downstream and $263 ($206 after-tax) in All Other. 95 Chevron Corporation 2020 Annual Report 95 173155_Annual_Report_10-K.indd 95 173155_Annual_Report_10-K.indd 95 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts During 2020, the company made payments of $396 associated with these liabilities. The following table summarizes the accrued severance liability, which is classified as current on the Consolidated Balance Sheet. a fair value of $9,231. immediately after the acquisition. As part of the transaction, the company recognized long-term debt and finance leases with Balance at January 1, 2020 Accruals/Adjustments Payments Balance at December 31, 2020 Amounts Before Tax $ $ 7 859 (396) 470 Note 28 Financial Instruments—Credit Losses Chevron adopted Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses, and its related amendments at the effective date of January 1, 2020. The standard replaces the “incurred loss model” and requires an estimate of expected credit losses, measured over the contractual life of a financial instrument, that considers forecast of future economic conditions in addition to information about past events and current conditions. The cumulative-effect adjustment to the opening retained earnings at January 1, 2020 was a reduction of $25, representing a decrease to the net accounts and notes receivable balances shown on the company’s consolidated balance sheet on page 61. Chevron’s expected credit loss allowance balance was $671 as of December 31, 2020 and $849 as of December 31, 2019, with a majority of the allowance relating to non-trade receivable balances. A reduction in the allowance for non-trade receivables of $550 was recorded in the second quarter as an agreement was reached with a government joint venture partner that resulted in the write-off of the associated receivable balances. Additionally, new allowances of $265 were recorded in the second and third quarters associated with other than trade receivables. The majority of the company’s receivable balance is concentrated in trade receivables, with a balance of $9.5 billion as of December 31, 2020, which reflects the company’s diversified sources of revenues and is dispersed across the company’s broad worldwide customer base. As a result, the company believes the concentration of credit risk is limited. The company routinely assesses the financial strength of its customers. When the financial strength of a customer is not considered sufficient, alternative risk mitigation measures may be deployed, including requiring pre-payments, letters of credit or other acceptable forms of collateral. Once credit is extended and a receivable balance exists, the company applies a quantitative calculation to current trade receivable balances that reflects credit risk predictive analysis, including probability of default and loss given default, which takes into consideration current and forward-looking market data as well as the company’s historical loss data. This statistical approach becomes the basis of the company’s expected credit loss allowance for current trade receivables with payment terms that are typically short-term in nature, with most due in less than 90 days. The company continues to monitor credit risk in response to the COVID-19 pandemic and the significant reduction in crude prices resulting from decreased demand associated with government-mandated travel restrictions. Chevron’s non-trade receivable balance was $3.3 billion as of December 31, 2020, which includes receivables from certain governments in their capacity as joint venture partners. Joint venture partner balances that are paid as per contract terms or not yet due are subject to the statistical analysis described above while past due balances are subject to additional qualitative management quarterly review. This management review includes review of reasonable and supportable repayment forecasts. Non-trade receivables also include employee and tax receivables that are deemed immaterial and low risk. Equity affiliate loans are also considered non-trade and during the second quarter 2020 review, a $560 allowance was recognized within “Investments and advances” on the Consolidated Balance Sheet. Note 29 Acquisition of Noble Energy, Inc. On October 5, 2020, the company acquired Noble Energy, Inc., an independent oil and gas exploration and production company. Noble’s principal upstream operations are in the United States, the Eastern Mediterranean and West Africa. Noble’s operations also include an integrated midstream business in the United States. The acquisition of Noble provides the company with low-cost proved reserves, attractive undeveloped resources and cash-generating assets. The aggregate purchase price of Noble was $4,109, with approximately 58 million shares of Chevron common stock issued as consideration in the transaction, representing approximately 3 percent of shares of Chevron common stock outstanding The acquisition was accounted for as a business combination under ASC 805, which requires assets acquired and liabilities assumed to be measured at their acquisition date fair values. Provisional fair value measurements were made for acquired assets and liabilities, and adjustments to those measurements may be made in subsequent periods, up to one year from the acquisition date, as information necessary to complete the analysis is obtained. Oil and gas properties were valued using a discounted cash flow approach that incorporated internally generated price assumptions and production profiles together with appropriate operating cost and development cost assumptions. Debt assumed in the acquisition was valued based on observable market prices for Noble’s debt. As a result of measuring the assets acquired and the liabilities assumed at fair value, there was no goodwill or bargain purchase recognized. The following table summarizes the values assigned to assets acquired and liabilities assumed: Current assets Investments and long-term receivables Properties (includes $14,935 for oil and gas properties) Other assets Total assets acquired Current liabilities Long-term debt and finance leases Deferred income taxes Other liabilities Total liabilities assumed Net assets acquired January 1, 2019: Sales and other operating revenues Net income Noncontrolling interest and redeemable noncontrolling interest The following unaudited pro forma summary presents the results of operations as if the acquisition of Noble had occurred The pro forma summary uses estimates and assumptions based on information available at the time. Management believes the estimates and assumptions to be reasonable; however, actual results may differ significantly from this pro forma financial information. The pro forma information does not reflect any synergistic savings that might be achieved from combining the operations and is not intended to reflect the actual results that would have occurred had the companies actually been combined during the periods presented. At October 5, 2020 $ $ 1,105 1,282 16,703 607 19,697 1,829 9,231 2,355 1,394 14,809 779 4,109 Year ended December 31 2020 96,980 (9,890) 2019 $ $ 144,303 1,412 $ $ 96 Chevron Corporation 2020 Annual Report 96 97 173155_Annual_Report_10-K.indd 96 173155_Annual_Report_10-K.indd 96 3/5/21 6:04 PM 3/5/21 6:04 PM Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts Notes to the Consolidated Financial Statements Millions of dollars, except per-share amounts During 2020, the company made payments of $396 associated with these liabilities. The following table summarizes the accrued severance liability, which is classified as current on the Consolidated Balance Sheet. immediately after the acquisition. As part of the transaction, the company recognized long-term debt and finance leases with a fair value of $9,231. Amounts Before Tax $ $ 7 859 (396) 470 The acquisition was accounted for as a business combination under ASC 805, which requires assets acquired and liabilities assumed to be measured at their acquisition date fair values. Provisional fair value measurements were made for acquired assets and liabilities, and adjustments to those measurements may be made in subsequent periods, up to one year from the acquisition date, as information necessary to complete the analysis is obtained. Oil and gas properties were valued using a discounted cash flow approach that incorporated internally generated price assumptions and production profiles together with appropriate operating cost and development cost assumptions. Debt assumed in the acquisition was valued based on observable market prices for Noble’s debt. As a result of measuring the assets acquired and the liabilities assumed at fair value, there was no goodwill or bargain purchase recognized. The following table summarizes the values assigned to assets acquired and liabilities assumed: Current assets Investments and long-term receivables Properties (includes $14,935 for oil and gas properties) Other assets Total assets acquired Current liabilities Long-term debt and finance leases Deferred income taxes Other liabilities Total liabilities assumed Noncontrolling interest and redeemable noncontrolling interest Net assets acquired At October 5, 2020 $ $ 1,105 1,282 16,703 607 19,697 1,829 9,231 2,355 1,394 14,809 779 4,109 The following unaudited pro forma summary presents the results of operations as if the acquisition of Noble had occurred January 1, 2019: Sales and other operating revenues Net income Year ended December 31 2019 2020 $ $ 96,980 (9,890) $ $ 144,303 1,412 The pro forma summary uses estimates and assumptions based on information available at the time. Management believes the estimates and assumptions to be reasonable; however, actual results may differ significantly from this pro forma financial information. The pro forma information does not reflect any synergistic savings that might be achieved from combining the operations and is not intended to reflect the actual results that would have occurred had the companies actually been combined during the periods presented. Balance at January 1, 2020 Accruals/Adjustments Payments Balance at December 31, 2020 Note 28 Financial Instruments—Credit Losses Chevron adopted Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses, and its related amendments at the effective date of January 1, 2020. The standard replaces the “incurred loss model” and requires an estimate of expected credit losses, measured over the contractual life of a financial instrument, that considers forecast of future economic conditions in addition to information about past events and current conditions. The cumulative-effect adjustment to the opening retained earnings at January 1, 2020 was a reduction of $25, representing a decrease to the net accounts and notes receivable balances shown on the company’s consolidated balance sheet on page 61. Chevron’s expected credit loss allowance balance was $671 as of December 31, 2020 and $849 as of December 31, 2019, with a majority of the allowance relating to non-trade receivable balances. A reduction in the allowance for non-trade receivables of $550 was recorded in the second quarter as an agreement was reached with a government joint venture partner that resulted in the write-off of the associated receivable balances. Additionally, new allowances of $265 were recorded in the second and third quarters associated with other than trade receivables. The majority of the company’s receivable balance is concentrated in trade receivables, with a balance of $9.5 billion as of December 31, 2020, which reflects the company’s diversified sources of revenues and is dispersed across the company’s broad worldwide customer base. As a result, the company believes the concentration of credit risk is limited. The company routinely assesses the financial strength of its customers. When the financial strength of a customer is not considered sufficient, alternative risk mitigation measures may be deployed, including requiring pre-payments, letters of credit or other acceptable forms of collateral. Once credit is extended and a receivable balance exists, the company applies a quantitative calculation to current trade receivable balances that reflects credit risk predictive analysis, including probability of default and loss given default, which takes into consideration current and forward-looking market data as well as the company’s historical loss data. This statistical approach becomes the basis of the company’s expected credit loss allowance for current trade receivables with payment terms that are typically short-term in nature, with most due in less than 90 days. The company continues to monitor credit risk in response to the COVID-19 pandemic and the significant reduction in crude prices resulting from decreased demand associated with government-mandated travel restrictions. Chevron’s non-trade receivable balance was $3.3 billion as of December 31, 2020, which includes receivables from certain governments in their capacity as joint venture partners. Joint venture partner balances that are paid as per contract terms or not yet due are subject to the statistical analysis described above while past due balances are subject to additional qualitative management quarterly review. This management review includes review of reasonable and supportable repayment forecasts. Non-trade receivables also include employee and tax receivables that are deemed immaterial and low risk. Equity affiliate loans are also considered non-trade and during the second quarter 2020 review, a $560 allowance was recognized within “Investments and advances” on the Consolidated Balance Sheet. Note 29 Acquisition of Noble Energy, Inc. On October 5, 2020, the company acquired Noble Energy, Inc., an independent oil and gas exploration and production company. Noble’s principal upstream operations are in the United States, the Eastern Mediterranean and West Africa. Noble’s operations also include an integrated midstream business in the United States. The acquisition of Noble provides the company with low-cost proved reserves, attractive undeveloped resources and cash-generating assets. The aggregate purchase price of Noble was $4,109, with approximately 58 million shares of Chevron common stock issued as consideration in the transaction, representing approximately 3 percent of shares of Chevron common stock outstanding 96 97 Chevron Corporation 2020 Annual Report 97 173155_Annual_Report_10-K.indd 97 173155_Annual_Report_10-K.indd 97 3/5/21 6:04 PM 3/5/21 6:04 PM Five-Year Financial Summary Unaudited Supplemental Information on Oil and Gas Producing Activities - Unaudited Millions of dollars, except per-share amounts 2020 2019 2018 2017 2016 Statement of Income Data Revenues and Other Income Total sales and other operating revenues* Income from equity affiliates and other income $ 94,471 221 $ 139,865 $ 6,651 158,902 $ 7,437 134,674 $ 7,048 110,215 4,257 Total Revenues and Other Income Total Costs and Other Deductions Income (Loss) Before Income Tax Expense Income Tax Expense (Benefit) Net Income (Loss) Less: Net income (loss) attributable to noncontrolling 94,692 102,145 (7,453) (1,892) (5,561) 146,516 140,980 5,536 2,691 2,845 166,339 145,764 20,575 5,715 14,860 141,722 132,501 114,472 116,632 9,221 (48) 9,269 (2,160) (1,729) (431) interests (18) (79) 36 74 66 Net Income (Loss) Attributable to Chevron Corporation $ (5,543) $ 2,924 $ 14,824 $ 9,195 $ (497) Per Share of Common Stock Net Income (Loss) Attributable to Chevron – Basic – Diluted Cash Dividends Per Share Balance Sheet Data (at December 31) Current assets Noncurrent assets Total Assets Short-term debt Other current liabilities Long-term debt Other noncurrent liabilities Total Liabilities $ $ $ $ Total Chevron Corporation Stockholders’ Equity $ Noncontrolling interests Total Equity * Includes excise, value-added and similar taxes: (2.96) (2.96) 5.16 26,078 213,712 239,790 1,548 20,635 42,767 42,114 107,064 131,688 1,038 $ 132,726 $ — $ $ $ $ $ $ $ 1.55 $ 1.54 $ 4.76 $ 7.81 $ 7.74 $ 4.48 $ 4.88 $ 4.85 $ 4.32 $ (0.27) (0.27) 4.29 28,329 $ 209,099 34,021 $ 219,842 28,560 $ 225,246 29,619 230,459 237,428 253,863 253,806 260,078 3,282 23,248 23,691 41,999 92,220 5,726 21,445 28,733 42,317 98,221 5,192 22,545 33,571 43,179 10,840 20,945 35,286 46,285 104,487 113,356 144,213 $ 995 154,554 $ 1,088 148,124 $ 1,195 145,556 1,166 145,208 $ 155,642 $ 149,319 $ 146,722 — $ — $ 7,189 $ 6,905 Development3 7,072 1,216 199 10,304 5,112 Total Costs Incurred4 8,014 $ 1,614 $ $ 1,166 $ $ 210 $ 11,926 $ 5,112 $ 98 Chevron Corporation 2020 Annual Report 98 173155_Annual_Report_10-K.indd 98 173155_Annual_Report_10-K.indd 98 3/5/21 6:04 PM 3/5/21 6:04 PM In accordance with FASB and SEC disclosure requirements for oil and gas producing activities, this section provides supplemental information on oil and gas exploration and producing activities of the company in seven separate tables. Tables I through IV provide historical cost information pertaining to costs incurred in exploration, property acquisitions and development; capitalized costs; and results of operations. Tables V through VII present information on the company’s Table I - Costs Incurred in Exploration, Property Acquisitions and Development1 Millions of dollars U.S. Americas Africa Asia Europe Total TCO Other Other Australia/ Oceania Consolidated Companies Affiliated Companies $ $ 181 $ $ $ $ — $ $ — $ Total Costs Incurred4 $ 11,386 $ 1,029 $ 1,050 $ 9,197 $ $ 23,506 $ 2,998 $ $ $ $ $ $ $ $ — $ Year Ended December 31, 2020 Exploration Wells Other Geological and geophysical Total exploration Property acquisitions2 Proved - Noble Proved - Other Unproved - Noble Unproved - Other Total property acquisitions Development3 Year Ended December 31, 2019 Exploration Wells Other Geological and geophysical Total exploration Property acquisitions2 Proved Unproved Total property acquisitions Year Ended December 31, 2018 Exploration Wells Other Geological and geophysical Total exploration Property acquisitions2 Proved Unproved Total property acquisitions Development3 190 83 125 398 3,463 2,845 23 35 6,366 4,622 571 82 140 793 81 68 149 508 84 190 782 160 52 212 6,245 $ $ 29 77 287 — — 2 — 2 740 44 118 52 214 34 150 184 74 41 46 161 — 494 494 856 8 3 22 33 7,945 56 129 — 8,130 1,034 110 1,020 2 5 29 36 93 17 55 5 33 93 117 27 144 1,095 1 58 42 101 438 2 113 10 563 386 9 21 35 65 — — — 279 344 25 4 35 64 7 2 9 711 784 381 185 307 873 11,846 3,089 81 45 15,061 7,572 634 238 306 1,178 208 236 444 676 142 376 1,194 284 575 859 $ $ — 2 2 — — — — — 37 39 4 1 6 11 — — — 14 1 23 38 — — — 1 12 39 52 — — — — — 753 805 4 11 44 59 — 1 1 518 578 7 49 56 — — — 845 901 2,998 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 81 81 — — 8 8 — — — 158 166 — — — — — — — 200 200 Total Costs Incurred4 $ 7,239 $ 1,511 $ $ 1,332 $ $ 316 $ 12,083 $ 4,963 $ 1 Includes costs incurred whether capitalized or expensed. Excludes general support equipment expenditures. Includes capitalized amounts related to asset retirement obligations. See Note 23, “Asset Retirement Obligations,” on page 94. 2 Includes wells, equipment and facilities associated with proved reserves. Does not include properties acquired in nonmonetary transactions. 3 Includes $897, $246 and $114 of costs incurred on major capital projects prior to assignment of proved reserves for consolidated companies in 2020, 2019, and 2018, respectively. 4 Reconciliation of consolidated and affiliated companies total cost incurred to Upstream capital and exploratory (C&E) expenditures - $ billions: 278 10,030 4,963 2020 2019 2018 Total cost incurred Noble acquisition Non-oil and gas activities ARO reduction/(build) $ 26.6 $ 17.2 $ 17.2 (14.9) — (0.8) — 0.3 0.3 — 0.6 (0.1) See Note 29 for additional information (Primarily; LNG and transportation activities.) Upstream C&E $ 10.9 $ 17.8 $ 17.7 Reference page 44 Upstream total 99 $ $ $ $ — $ $ $ — $ Millions of dollars, except per-share amounts 2020 2019 2018 2017 2016 $ 94,471 $ 139,865 $ 158,902 $ 134,674 $ 110,215 6,651 146,516 140,980 5,536 2,691 2,845 7,437 166,339 145,764 20,575 5,715 14,860 7,048 141,722 132,501 9,221 (48) 9,269 Net Income (Loss) Attributable to Chevron Corporation $ (5,543) $ 2,924 $ 14,824 $ 9,195 $ (18) (79) 36 74 Five-Year Financial Summary Unaudited Statement of Income Data Revenues and Other Income Total sales and other operating revenues* Income from equity affiliates and other income Total Revenues and Other Income Total Costs and Other Deductions Income (Loss) Before Income Tax Expense Income Tax Expense (Benefit) Net Income (Loss) interests Less: Net income (loss) attributable to noncontrolling Per Share of Common Stock Net Income (Loss) Attributable to Chevron – Basic – Diluted Cash Dividends Per Share Balance Sheet Data (at December 31) Current assets Noncurrent assets Total Assets Short-term debt Other current liabilities Long-term debt Other noncurrent liabilities Total Liabilities Noncontrolling interests Total Equity Total Chevron Corporation Stockholders’ Equity 4,257 114,472 116,632 (2,160) (1,729) (431) 66 (497) (0.27) (0.27) 4.29 29,619 230,459 260,078 10,840 20,945 35,286 46,285 113,356 145,556 1,166 146,722 $ $ $ $ $ $ $ 1.55 1.54 4.76 $ $ $ $ 7.81 7.74 4.48 $ $ $ $ 28,329 209,099 237,428 3,282 23,248 23,691 41,999 92,220 34,021 219,842 253,863 5,726 21,445 28,733 42,317 98,221 144,213 995 145,208 $ $ 154,554 1,088 155,642 $ $ 4.88 4.85 4.32 28,560 225,246 253,806 5,192 22,545 33,571 43,179 104,487 148,124 1,195 149,319 $ $ $ $ $ $ $ 221 94,692 102,145 (7,453) (1,892) (5,561) (2.96) (2.96) 5.16 26,078 213,712 239,790 1,548 20,635 42,767 42,114 107,064 131,688 1,038 132,726 $ $ $ $ $ $ $ 98 Supplemental Information on Oil and Gas Producing Activities - Unaudited In accordance with FASB and SEC disclosure requirements for oil and gas producing activities, this section provides supplemental information on oil and gas exploration and producing activities of the company in seven separate tables. Tables I through IV provide historical cost information pertaining to costs incurred in exploration, property acquisitions and development; capitalized costs; and results of operations. Tables V through VII present information on the company’s Table I - Costs Incurred in Exploration, Property Acquisitions and Development1 U.S. Other Americas Africa Asia Australia/ Oceania Europe Total TCO Other Consolidated Companies Affiliated Companies Millions of dollars Year Ended December 31, 2020 Exploration Wells Geological and geophysical Other $ Total exploration Property acquisitions2 Proved - Noble Proved - Other Unproved - Noble Unproved - Other Total property acquisitions Development3 1$ —$ 12 39 — 2 $ 190 83 125 398 3,463 23 2,845 35 6,366 4,622 $ 181 29 77 287 — — 2 — 2 740 1$ 58 42 101 438 2 113 10 563 386 8$ 3 22 33 7,945 56 129 — 8,130 1,034 52 — — — — — 753 Total Costs Incurred4 $ 11,386 $ 1,029 $ 1,050 $ 9,197 $ 805 $ Year Ended December 31, 2019 Exploration Wells Geological and geophysical Other $ Total exploration Property acquisitions2 Proved Unproved Total property acquisitions $ 571 82 140 793 81 68 149 $ 44 118 52 214 34 150 184 $ 9 21 35 65 — — — $ 2 5 29 36 93 17 110 $ 4 11 44 59 — 1 1 381 185 307 873 11,846 81 3,089 45 15,061 7,572 $ —$ — — — — — — — — 2,998 $ 23,506 $ 2,998 $ $ 634 238 306 1,178 208 236 444 $ $ — — — — — — — 2 — — — — — 37 39 4 1 6 11 — — — — — — — — — — — — 81 81 — — 8 8 — — — 158 166 — — — — — — — 200 200 * Includes excise, value-added and similar taxes: — — $ — $ 7,189 6,905 Development3 7,072 1,216 279 1,020 518 199 10,304 5,112 Total Costs Incurred4 $ 8,014 $ 1,614 $ 344 $ 1,166 $ 578 $ 210 $ 11,926 $ 5,112 $ Year Ended December 31, 2018 Exploration Wells Geological and geophysical Other $ Total exploration Property acquisitions2 Proved Unproved Total property acquisitions Development3 $ $ 508 84 190 782 160 52 212 6,245 74 41 46 161 — 494 494 856 $ 25 4 35 64 7 2 9 55 5 33 93 117 27 144 $ $ — 7 49 56 — — — $ $ 14 1 23 38 — — — 676 142 376 1,194 284 575 859 $ — — — — — — — 711 1,095 845 278 10,030 4,963 Total Costs Incurred4 $ 7,239 $ 1,511 $ 784 $ 1,332 $ 901 $ 316 $ 12,083 $ 4,963 $ 1 2 3 Includes costs incurred whether capitalized or expensed. Excludes general support equipment expenditures. Includes capitalized amounts related to asset retirement obligations. See Note 23, “Asset Retirement Obligations,” on page 94. Includes wells, equipment and facilities associated with proved reserves. Does not include properties acquired in nonmonetary transactions. Includes $897, $246 and $114 of costs incurred on major capital projects prior to assignment of proved reserves for consolidated companies in 2020, 2019, and 2018, respectively. 4 Reconciliation of consolidated and affiliated companies total cost incurred to Upstream capital and exploratory (C&E) expenditures - $ billions: 2020 2019 2018 Total cost incurred Noble acquisition Non-oil and gas activities ARO reduction/(build) $ 26.6 (14.9) — (0.8) $ 17.2 — 0.3 0.3 $ 17.2 — 0.6 (0.1) See Note 29 for additional information (Primarily; LNG and transportation activities.) Upstream C&E $ 10.9 $ 17.8 $ 17.7 Reference page 44 Upstream total 99 Chevron Corporation 2020 Annual Report 99 173155_Annual_Report_10-K.indd 99 173155_Annual_Report_10-K.indd 99 3/5/21 6:04 PM 3/5/21 6:04 PM Supplemental Information on Oil and Gas Producing Activities - Unaudited Supplemental Information on Oil and Gas Producing Activities - Unaudited estimated net proved reserve quantities, standardized measure of estimated discounted future net cash flows related to proved reserves, and changes in estimated discounted future net cash flows. The amounts for consolidated companies are organized by geographic areas including the United States, Other Americas, Africa, Asia, Australia/Oceania and Europe. Amounts for affiliated companies include Chevron’s equity interests in Tengizchevroil (TCO) in the Republic of Kazakhstan and in other affiliates, principally in Venezuela and Angola. Refer to Note 13, beginning on page 77, for a discussion of the company’s major equity affiliates. Table II - Capitalized Costs Related to Oil and Gas Producing Activities Millions of dollars At December 31, 2020 Unproved properties Proved properties and related producing assets Support equipment Deferred exploratory wells Other uncompleted projects Gross Capitalized Costs Unproved properties valuation Proved producing properties – Depreciation and depletion Support equipment depreciation Accumulated provisions Net Capitalized Costs At December 31, 2019 Unproved properties Proved properties and related producing assets Support equipment Deferred exploratory wells Other uncompleted projects Gross Capitalized Costs Unproved properties valuation Proved producing properties – Depreciation and depletion Support equipment depreciation Accumulated provisions Net Capitalized Costs At December 31, 2018 Unproved properties Proved properties and related producing assets Support equipment Deferred exploratory wells Other uncompleted projects Gross Capitalized Costs Unproved properties valuation Proved producing properties – Depreciation and depletion Support equipment depreciation Accumulated provisions U.S. Other Americas Africa Asia Australia/ Oceania Europe Total TCO Other Consolidated Companies Affiliated Companies $ 3,519 $ 2,438 $ 188 $ 984 $ 1,987 $ — $ 9,116 $ 108 $ — $ $ $ $ 81,573 1,882 411 5,549 92,934 179 55,839 1,002 57,020 24,108 197 142 582 27,467 1,471 13,141 159 14,771 46,637 1,087 202 1,030 49,144 126 35,899 742 36,767 58,086 2,042 505 803 62,420 856 42,354 1,644 44,854 22,321 18,898 1,144 1,157 45,507 110 7,541 2,965 10,616 2,117 — 108 20 2,245 — 498 — 498 234,842 24,106 2,512 9,141 279,717 2,742 155,272 6,512 164,526 11,326 2,023 — 18,806 32,263 67 6,746 1,169 7,982 1,548 — — 23 1,571 — 493 — 493 35,914 $ 12,696 $ 12,377 $ 17,566 $ 34,891 $ 1,747 $ 115,191 $ 24,281 $ 1,078 4,620 $ 2,492 $ 151 $ 1,081 $ 1,986 $ — $ 10,330 $ 108 $ — 82,199 2,287 533 5,080 94,719 3,964 56,911 1,635 62,510 24,189 311 147 505 27,644 1,271 12,644 226 14,141 45,756 1,098 405 1,176 48,586 120 33,613 772 34,505 56,648 2,075 513 926 61,243 842 44,871 1,605 47,318 22,032 18,610 1,322 1,023 44,973 109 6,064 2,272 8,445 2,082 — 121 15 2,218 — 404 — 404 232,906 24,381 3,041 8,725 279,383 6,306 154,507 6,510 167,323 10,757 1,981 — 16,503 29,349 65 6,018 1,053 7,136 4,311 — — 743 5,054 — 1,912 — 1,912 32,209 $ 13,503 $ 14,081 $ 13,925 $ 36,528 $ 1,814 $ 112,060 $ 22,213 $ 3,142 4,687 $ 2,463 $ 201 $ 1,299 $ 1,986 $ — $ 10,636 $ 108 $ — 75,013 2,216 782 4,730 87,428 820 45,712 1,466 47,998 21,796 317 160 3,704 28,440 694 12,984 220 13,898 44,876 1,096 405 1,744 48,322 164 31,102 738 32,004 57,168 2,149 632 1,292 62,540 623 43,735 1,674 46,032 22,047 17,712 1,323 1,462 12,634 124 261 300 233,534 23,614 3,563 13,232 44,530 13,319 284,579 107 — 2,408 4,631 1,531 6,269 10,014 119 10,133 148,178 5,748 156,334 9,892 1,858 — 12,311 24,169 61 5,276 947 6,284 4,336 — — 605 4,941 — 1,730 — 1,730 Net Capitalized Costs $ 39,430 $ 14,542 $ 16,318 $ 16,508 $ 38,261 $ 3,186 $ 128,245 $ 17,885 $ 3,211 Table III - Results of Operations for Oil and Gas Producing Activities1 The company’s results of operations from oil and gas producing activities for the years 2020, 2019 and 2018 are shown in the following table. Net income (loss) from exploration and production activities as reported on page 75 reflects income taxes computed on an effective rate basis. Income taxes in Table III are based on statutory tax rates, reflecting allowable deductions and tax credits. Interest income and expense are excluded from the results reported in Table III and from the net income amounts on page 75. Other U.S. Americas Africa Australia/ Oceania Asia Europe Total TCO Other Consolidated Companies Affiliated Companies Millions of dollars Year Ended December 31, 2020 Revenues from net production Sales Transfers Total Production expenses excluding taxes Taxes other than on income Proved producing properties: Depreciation and depletion Accretion expense2 Exploration expenses Unproved properties valuation Other income (expense)3 Results before income taxes Income tax (expense) benefit Year Ended December 31, 2019 Revenues from net production Sales Transfers Total Production expenses excluding taxes Taxes other than on income Proved producing properties: Depreciation and depletion Accretion expense2 Exploration expenses Unproved properties valuation Other income (expense)3 Results before income taxes Income tax (expense) benefit $ 1,665 $ 505 $ 473 $ 5,629 $ 3,010 $ 149 $ $ 3,088 $ 3,378 1,092 (6,482) (1,221) (2,323) (15,776) (879) (146) 7,711 9,376 (3,933) (597) (165) (457) (58) 51 (2,265) 558 1,683 2,188 (981) (62) (22) (314) (215) (8) (635) (5) 13,302 (3,567) (595) 3,023 (1,020) (64) (191) (293) (3,268) (51) (6,322) 1,311 (21) (211) (591) (44) (308) (27) 1,830 4,840 (589) (121) (2,192) (62) (231) (1) (2) 1,642 (558) 2,596 6,928 (616) (221) (53) (60) (2) 53 6,721 (2,408) (11) (3,466) (120) (67) (8) 1,053 1,694 (353) 8,721 (2,703) (16) (133) (93) (388) 413 2,636 (1,212) 3,837 (1,161) 3,851 (1,485) (77) (136) (431) (6) (11) (618) 888 7,202 (1,460) (101) (2,548) (148) (73) (2) (121) 2,749 (1,731) — 149 (64) (2) (92) (10) (15) — (9) (43) 12 592 $ 655 1,247 (343) (2) (85) (37) (10) — 1,373 2,143 (311) 11,431 15,694 27,125 (9,460) (870) (515) (1,515) (288) 1,074 (225) 542 317 16,124 24,299 40,423 (9,709) (999) (583) (740) (4,251) 1,623 4,735 (3,131) — 3,088 (419) (190) (9) — — (29) 1,562 (471) — 5,603 (475) (57) (5) — (4) 1 4,193 (1,261) 288 — 288 (98) (30) (6) 1 — (2,103) (2,094) 161 780 — 780 (247) (10) (8) (8) — (157) 139 (73) 66 (11,659) (1,380) (3,165) (2,192) (21,029) (870) (211) $ 2,259 $ 863 $ 668 $ 7,410 $ 4,332 $ $ 5,603 $ 11,043 2,160 6,534 1,311 Results of Producing Operations $ (1,707) $ (640) $ 270 $ 1,341 $ 1,084 $ (31) $ $ 1,091 $ (1,933) Results of Producing Operations $ (5,011) $ (335) $ 1,018 $ 1,424 $ 2,676 $ 1,832 $ 1,604 $ 2,932 $ 1 The value of owned production consumed in operations as fuel has been eliminated from revenues and production expenses, and the related volumes have been deducted from net production in calculating the unit average sales price and production cost. This has no effect on the results of producing operations. 2 Represents accretion of ARO liability. Refer to Note 23, “Asset Retirement Obligations,” on page 94. 3 Includes foreign currency gains and losses, gains and losses on property dispositions and other miscellaneous income and expenses. 100 Chevron Corporation 2020 Annual Report 100 101 173155_Annual_Report_10-K.indd 100 173155_Annual_Report_10-K.indd 100 3/5/21 6:04 PM 3/5/21 6:04 PM 4,620 $ 2,492 $ 151 $ 1,081 $ 1,986 $ — $ 10,330 108 $ — estimated net proved reserve quantities, standardized measure of estimated discounted future net cash flows related to proved reserves, and changes in estimated discounted future net cash flows. The amounts for consolidated companies are organized by geographic areas including the United States, Other Americas, Africa, Asia, Australia/Oceania and Europe. Amounts for affiliated companies include Chevron’s equity interests in Tengizchevroil (TCO) in the Republic of Kazakhstan and in other affiliates, principally in Venezuela and Angola. Refer to Note 13, beginning on page 77, for a discussion of the company’s major equity affiliates. Table II - Capitalized Costs Related to Oil and Gas Producing Activities Millions of dollars U.S. Americas Africa Asia Europe Total TCO Other Australia/ Oceania Consolidated Companies Affiliated Companies $ 3,519 $ 2,438 $ 188 $ 984 $ 1,987 $ — $ 9,116 $ 108 $ At December 31, 2020 Unproved properties Proved properties and related producing assets Support equipment Deferred exploratory wells Other uncompleted projects Gross Capitalized Costs Unproved properties valuation Proved producing properties – Depreciation and depletion Support equipment depreciation Accumulated provisions At December 31, 2019 Unproved properties Proved properties and related producing assets Support equipment Deferred exploratory wells Other uncompleted projects Gross Capitalized Costs Unproved properties valuation Proved producing properties – Depreciation and depletion Support equipment depreciation Accumulated provisions At December 31, 2018 Unproved properties Proved properties and related producing assets Support equipment Deferred exploratory wells Other uncompleted projects Gross Capitalized Costs Unproved properties valuation Proved producing properties – Depreciation and depletion Support equipment depreciation Accumulated provisions $ $ $ $ 81,573 1,882 411 5,549 92,934 179 55,839 1,002 57,020 82,199 2,287 533 5,080 94,719 3,964 56,911 1,635 62,510 75,013 2,216 782 4,730 87,428 820 45,712 1,466 47,998 Other 24,108 197 142 582 27,467 1,471 13,141 159 14,771 24,189 311 147 505 27,644 1,271 12,644 226 14,141 21,796 317 160 3,704 28,440 694 12,984 220 13,898 2,245 279,717 1,571 22,321 18,898 1,144 1,157 45,507 110 7,541 2,965 10,616 22,032 18,610 1,322 1,023 44,973 109 6,064 2,272 8,445 22,047 17,712 1,323 1,462 44,530 107 4,631 1,531 6,269 2,117 — 108 20 — 498 — 498 2,082 — 121 15 — 404 — 404 12,634 124 261 300 13,319 — 10,014 119 10,133 234,842 24,106 2,512 9,141 2,742 155,272 6,512 164,526 232,906 24,381 3,041 8,725 6,306 154,507 6,510 167,323 233,534 23,614 3,563 13,232 284,579 2,408 148,178 5,748 156,334 $ $ $ $ 11,326 2,023 — 18,806 32,263 67 6,746 1,169 7,982 10,757 1,981 — 16,503 29,349 65 6,018 1,053 7,136 9,892 1,858 — 12,311 24,169 61 5,276 947 6,284 2,218 279,383 1,548 — — — 23 — 493 — 493 4,311 — — 743 5,054 — 1,912 — 1,912 3,142 4,336 — — 605 4,941 — 1,730 — 1,730 3,211 46,637 1,087 202 1,030 49,144 126 35,899 742 36,767 45,756 1,098 405 1,176 48,586 120 33,613 772 34,505 44,876 1,096 405 1,744 48,322 164 31,102 738 32,004 58,086 2,042 505 803 62,420 856 42,354 1,644 44,854 56,648 2,075 513 926 61,243 842 44,871 1,605 47,318 57,168 2,149 632 1,292 62,540 623 43,735 1,674 46,032 100 Net Capitalized Costs $ 39,430 $ 14,542 $ 16,318 $ 16,508 $ 38,261 $ 3,186 $ 128,245 $ 17,885 $ Net Capitalized Costs 32,209 $ 13,503 $ 14,081 $ 13,925 $ 36,528 $ 1,814 $ 112,060 22,213 $ Supplemental Information on Oil and Gas Producing Activities - Unaudited Supplemental Information on Oil and Gas Producing Activities - Unaudited Table III - Results of Operations for Oil and Gas Producing Activities1 The company’s results of operations from oil and gas producing activities for the years 2020, 2019 and 2018 are shown in the following table. Net income (loss) from exploration and production activities as reported on page 75 reflects income taxes computed on an effective rate basis. Income taxes in Table III are based on statutory tax rates, reflecting allowable deductions and tax credits. Interest income and expense are excluded from the results reported in Table III and from the net income amounts on page 75. Millions of dollars Year Ended December 31, 2020 Revenues from net production Sales Transfers Total Production expenses excluding taxes Taxes other than on income Proved producing properties: Depreciation and depletion Accretion expense2 Exploration expenses Unproved properties valuation Other income (expense)3 Results before income taxes Income tax (expense) benefit Other Americas U.S. Africa Australia/ Oceania Asia Europe Total TCO Other Consolidated Companies Affiliated Companies $ 1,665 $ 7,711 505 $ 473 $ 1,683 3,378 5,629 $ 3,010 $ 1,092 1,830 149 $ — 11,431 15,694 $ 3,088 $ — 9,376 (3,933) (597) (6,482) (165) (457) (58) 51 (2,265) 558 2,188 (981) (62) (1,221) (22) (314) (215) (8) (635) (5) 3,851 (1,485) (77) (2,323) (136) (431) (6) (11) (618) 888 6,721 (2,408) (11) (3,466) (120) (67) (8) 1,053 1,694 (353) 4,840 (589) (121) (2,192) (62) (231) (1) (2) 1,642 (558) 149 (64) (2) (92) (10) (15) — (9) (43) 12 27,125 (9,460) (870) (15,776) (515) (1,515) (288) 1,074 (225) 542 3,088 (419) (190) (879) (9) — — (29) 1,562 (471) 288 — 288 (98) (30) (146) (6) 1 — (2,103) (2,094) 161 Net Capitalized Costs 35,914 $ 12,696 $ 12,377 $ 17,566 $ 34,891 $ 1,747 $ 115,191 24,281 $ 1,078 Results of Producing Operations $ (1,707) $ (640) $ 270 $ 1,341 $ 1,084 $ (31) $ 317 $ 1,091 $ (1,933) Year Ended December 31, 2019 Revenues from net production Sales Transfers Total Production expenses excluding taxes Taxes other than on income Proved producing properties: Depreciation and depletion Accretion expense2 Exploration expenses Unproved properties valuation Other income (expense)3 Results before income taxes Income tax (expense) benefit $ 2,259 $ 11,043 863 $ 668 $ 2,160 6,534 7,410 $ 4,332 $ 1,311 2,596 592 $ 655 16,124 24,299 $ 5,603 $ — 13,302 (3,567) (595) (11,659) (191) (293) (3,268) (51) (6,322) 1,311 3,023 (1,020) (64) (1,380) (21) (211) (591) (44) (308) (27) 7,202 (1,460) (101) (2,548) (148) (73) (2) (121) 2,749 (1,731) 8,721 (2,703) (16) (3,165) (133) (93) (388) 413 2,636 (1,212) 6,928 (616) (221) (2,192) (53) (60) (2) 53 3,837 (1,161) 1,247 (343) (2) (85) (37) (10) — 1,373 2,143 (311) 40,423 (9,709) (999) (21,029) (583) (740) (4,251) 1,623 4,735 (3,131) 5,603 (475) (57) (870) (5) — (4) 1 4,193 (1,261) 4,687 $ 2,463 $ 201 $ 1,299 $ 1,986 $ — $ 10,636 108 $ — Results of Producing Operations $ (5,011) $ (335) $ 1,018 $ 1,424 $ 2,676 $ 1,832 $ 1,604 $ 2,932 $ 780 — 780 (247) (10) (211) (8) (8) — (157) 139 (73) 66 1 The value of owned production consumed in operations as fuel has been eliminated from revenues and production expenses, and the related volumes have been deducted from net production in calculating the unit average sales price and production cost. This has no effect on the results of producing operations. 2 Represents accretion of ARO liability. Refer to Note 23, “Asset Retirement Obligations,” on page 94. 3 Includes foreign currency gains and losses, gains and losses on property dispositions and other miscellaneous income and expenses. 101 Chevron Corporation 2020 Annual Report 101 173155_Annual_Report_10-K.indd 101 173155_Annual_Report_10-K.indd 101 3/5/21 6:04 PM 3/5/21 6:04 PM Supplemental Information on Oil and Gas Producing Activities - Unaudited Supplemental Information on Oil and Gas Producing Activities - Unaudited Table III - Results of Operations for Oil and Gas Producing Activities1, continued Millions of dollars Year Ended December 31, 2018 Revenues from net production Sales Transfers Total Production expenses excluding taxes Taxes other than on income Proved producing properties: Depreciation and depletion Accretion expense2 Exploration expenses Unproved properties valuation Other income (expense)3 Results before income taxes Income tax (expense) benefit Other Americas U.S. Africa Asia Australia/ Oceania Europe Total TCO Other Consolidated Companies Affiliated Companies $ 2,162 $ 11,645 1,008 $ 1,808 829 $ 7,829 5,880 $ 3,206 4,229 $ 3,413 13,807 (3,203) (540) 2,816 (1,009) (70) (4,583) (186) (777) (516) 336 4,338 (886) (998) (26) (191) (42) 4 484 (400) 8,658 (1,564) (112) (3,368) (149) (52) (3) 97 3,507 (2,131) 9,086 (2,653) (22) (3,714) (146) (58) (135) (33) 2,325 (1,088) 7,642 (557) (250) (2,103) (50) (56) — 31 4,657 (1,415) 619 $ 1,071 1,690 (424) (2) (411) (52) (41) — (161) 599 (233) 14,727 28,972 43,699 (9,410) (996) (15,177) (609) (1,175) (696) 274 15,910 (6,153) $ 5,987 $ — 5,987 (447) 160 (711) (4) (3) — 70 5,052 (1,519) 1,369 — 1,369 (295) (210) (306) (3) (6) — (280) 269 341 610 Results of Producing Operations $ 3,452 $ 84 $ 1,376 $ 1,237 $ 3,242 $ 366 $ 9,757 $ 3,533 $ 1 The value of owned production consumed in operations as fuel has been eliminated from revenues and production expenses, and the related volumes have been deducted from net production in calculating the unit average sales price and production cost. This has no effect on the results of producing operations. 2 Represents accretion of ARO liability. Refer to Note 23, “Asset Retirement Obligations,” on page 94. 3 Includes foreign currency gains and losses, gains and losses on property dispositions and other miscellaneous income and expenses. Table IV - Results of Operations for Oil and Gas Producing Activities - Unit Prices and Costs1 Other Americas U.S. Africa Asia Australia/ Oceania Europe Total TCO Other Consolidated Companies Affiliated Companies Year Ended December 31, 2020 Average sales prices Liquids, per barrel Natural gas, per thousand cubic feet Average production costs, per barrel2 Year Ended December 31, 2019 Average sales prices Liquids, per barrel Natural gas, per thousand cubic feet Average production costs, per barrel2 Year Ended December 31, 2018 Average sales prices Liquids, per barrel Natural gas, per thousand cubic feet Average production costs, per barrel2 $ $ $ 30.53 $ 0.96 10.01 35.41 $ 2.20 14.27 38.06 $ 1.61 13.19 39.77 $ 4.30 11.24 38.03 $ 5.42 4.02 34.20 $ 1.07 13.23 34.12 3.68 10.07 48.54 $ 1.07 10.48 54.85 $ 2.24 15.97 62.27 $ 1.84 11.90 59.53 $ 4.73 12.74 60.15 $ 7.54 4.08 61.80 $ 4.43 14.28 54.47 4.86 10.62 58.17 $ 1.86 11.18 58.27 $ 2.62 17.32 69.75 $ 2.55 11.29 63.55 $ 4.48 12.15 68.78 $ 8.78 3.95 66.31 $ 7.54 14.21 62.45 5.54 10.78 $ $ $ 24.25 $ 0.54 3.17 24.07 0.61 3.91 49.14 $ 0.79 3.53 45.25 0.99 7.93 56.20 $ 0.77 3.59 56.41 3.19 9.29 1 The value of owned production consumed in operations as fuel has been eliminated from revenues and production expenses, and the related volumes have been deducted from net production in calculating the unit average sales price and production cost. This has no effect on the results of producing operations. 2 Natural gas converted to oil-equivalent gas (OEG) barrels at a rate of 6 MCF = 1 OEG barrel. 102 Chevron Corporation 2020 Annual Report 102 173155_Annual_Report_10-K.indd 102 173155_Annual_Report_10-K.indd 102 3/5/21 6:04 PM 3/5/21 6:04 PM Table V Reserve Quantity Information Summary of Net Oil and Gas Reserves 2020 2019 2018 Crude Oil Synthetic Natural Crude Oil Synthetic Natural Crude Oil Synthetic Condensate Oil NGL Gas Condensate Oil NGL Gas Condensate Oil NGL Natural Gas Liquids in Millions of Barrels Natural Gas in Billions of Cubic Feet Proved Developed Consolidated Companies Other Americas U.S. Africa Asia Europe TCO Other U.S. Africa Asia Europe TCO Other Australia/Oceania Total Consolidated Affiliated Companies Total Consolidated and Affiliated Companies Proved Undeveloped Consolidated Companies Other Americas Australia/Oceania Total Consolidated Affiliated Companies Total Consolidated and Affiliated Companies Total Proved Reserves 346 2,503 1,121 258 2,998 1,061 1,157 168 497 358 115 23 — 597 — — — — 6 68 4 — 222 1,629 8,951 8 — 7,864 — 540 — — — — 5 67 397 1,472 — 3,382 4 10,697 — 8 — 545 — — — — 179 2,396 3 60 393 1,316 — 4,021 5 10,084 3 205 2,318 597 424 21,177 2,383 540 334 18,954 2,463 545 250 18,415 565 2 — — 53 12 1,057 322 — — 59 10 1,135 308 — 55 62 11 1,179 308 2,885 597 489 22,556 3,081 540 403 20,397 3,166 600 323 19,902 593 92 57 45 26 38 851 985 1 — — — — — — — — — 247 1,747 2 36 107 1,208 — 319 — 2,434 — 14 49 5 961 576 — — — — — — — — — 244 1,730 11 33 339 1,286 — 299 — 3,961 — 18 44 5 869 558 — — — — — — — — 72 349 4,313 19 38 470 1,499 — 289 — 3,647 — 100 406 10,318 39 5 755 601 285 5,829 1,226 288 7,633 1,311 1,837 4,722 — 597 339 7,366 828 29,922 2,160 5,241 — 540 337 9,060 740 29,457 2,179 5,345 72 672 450 11,674 773 31,576 174 525 406 136 21 584 114 807 146 88 107 30 48 889 45 156 568 470 127 81 638 65 813 185 110 109 29 65 866 2 Reserves Governance The company has adopted a comprehensive reserves and resource classification system modeled after a system developed and approved by a number of organizations including the Society of Petroleum Engineers, the World Petroleum Congress and the American Association of Petroleum Geologists. The company classifies recoverable hydrocarbons into six categories based on their status at the time of reporting – three deemed commercial and three potentially recoverable. Within the commercial classification are proved reserves and two categories of unproved reserves: probable and possible. The potentially recoverable categories are also referred to as contingent resources. For reserves estimates to be classified as proved, they must meet all SEC and company standards. Proved oil and gas reserves are the estimated quantities that geoscience and engineering data demonstrate with reasonable certainty to be economically producible in the future from known reservoirs under existing economic conditions, operating methods and government regulations. Net proved reserves exclude royalties and interests owned by others and reflect contractual arrangements and royalty obligations in effect at the time of the estimate. Proved reserves are classified as either developed or undeveloped. Proved developed reserves are the quantities expected to be recovered through existing wells with existing equipment and operating methods. Proved undeveloped reserves are the quantities expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. additional information becomes available. Due to the inherent uncertainties and the limited nature of reservoir data, estimates of reserves are subject to change as Proved reserves are estimated by company asset teams composed of earth scientists and engineers. As part of the internal control process related to reserves estimation, the company maintains a Reserves Advisory Committee (RAC) that is chaired by the Manager of Global Reserves, an organization that is separate from the Upstream operating organization. The 103 Supplemental Information on Oil and Gas Producing Activities - Unaudited Supplemental Information on Oil and Gas Producing Activities - Unaudited Table III - Results of Operations for Oil and Gas Producing Activities1, continued Millions of dollars U.S. Americas Africa Asia Europe Total TCO Other Other Australia/ Oceania Consolidated Companies Affiliated Companies $ 2,162 $ 1,008 $ 829 $ 5,880 $ 4,229 $ 619 $ $ 5,987 $ 1,369 Year Ended December 31, 2018 Revenues from net production Sales Transfers Total Production expenses excluding taxes Taxes other than on income Proved producing properties: Depreciation and depletion Accretion expense2 Exploration expenses Unproved properties valuation Other income (expense)3 Results before income taxes Income tax (expense) benefit 11,645 13,807 (3,203) (540) (4,583) (186) (777) (516) 336 4,338 (886) 1,808 7,829 3,206 2,816 (1,009) (70) 8,658 (1,564) (112) 9,086 (2,653) (22) (998) (26) (191) (42) 4 484 (400) (149) (52) (3) 97 (146) (58) (135) (33) 3,507 (2,131) 2,325 (1,088) 4,657 (1,415) 3,413 7,642 (557) (250) (50) (56) — 31 1,071 1,690 (424) (2) (411) (52) (41) — (161) 599 (233) 14,727 28,972 43,699 (9,410) (996) (15,177) (609) (1,175) (696) 274 15,910 (6,153) (3,368) (3,714) (2,103) (711) (306) — 5,987 (447) 160 (4) (3) — 70 5,052 (1,519) — 1,369 (295) (210) (3) (6) — (280) 269 341 610 Results of Producing Operations $ 3,452 $ 84 $ 1,376 $ 1,237 $ 3,242 $ 366 $ 9,757 $ 3,533 $ 1 The value of owned production consumed in operations as fuel has been eliminated from revenues and production expenses, and the related volumes have been deducted from net production in calculating the unit average sales price and production cost. This has no effect on the results of producing operations. 2 Represents accretion of ARO liability. Refer to Note 23, “Asset Retirement Obligations,” on page 94. 3 Includes foreign currency gains and losses, gains and losses on property dispositions and other miscellaneous income and expenses. Table IV - Results of Operations for Oil and Gas Producing Activities - Unit Prices and Costs1 U.S. Americas Africa Asia Europe Total TCO Other Other Australia/ Oceania Consolidated Companies Affiliated Companies Natural gas, per thousand cubic feet Average production costs, per barrel2 0.96 10.01 2.20 14.27 1.61 13.19 4.30 11.24 5.42 4.02 1.07 13.23 0.54 3.17 0.61 3.91 $ 30.53 $ 35.41 $ 38.06 $ 39.77 $ 38.03 $ 34.20 $ $ 24.25 $ 24.07 Natural gas, per thousand cubic feet Average production costs, per barrel2 1.07 10.48 2.24 15.97 1.84 11.90 4.73 12.74 7.54 4.08 4.43 14.28 0.79 3.53 0.99 7.93 $ 48.54 $ 54.85 $ 62.27 $ 59.53 $ 60.15 $ 61.80 $ $ 49.14 $ 45.25 Year Ended December 31, 2020 Average sales prices Liquids, per barrel Year Ended December 31, 2019 Average sales prices Liquids, per barrel Year Ended December 31, 2018 Average sales prices Liquids, per barrel Natural gas, per thousand cubic feet Average production costs, per barrel2 1.86 11.18 2.62 17.32 2.55 11.29 4.48 12.15 8.78 3.95 7.54 14.21 0.77 3.59 3.19 9.29 $ 58.17 $ 58.27 $ 69.75 $ 63.55 $ 68.78 $ 66.31 $ $ 56.20 $ 56.41 1 The value of owned production consumed in operations as fuel has been eliminated from revenues and production expenses, and the related volumes have been deducted from net production in calculating the unit average sales price and production cost. This has no effect on the results of producing operations. 2 Natural gas converted to oil-equivalent gas (OEG) barrels at a rate of 6 MCF = 1 OEG barrel. 34.12 3.68 10.07 54.47 4.86 10.62 62.45 5.54 10.78 102 Table V Reserve Quantity Information Summary of Net Oil and Gas Reserves Liquids in Millions of Barrels Natural Gas in Billions of Cubic Feet Proved Developed Consolidated Companies U.S. Other Americas Africa Asia Australia/Oceania Europe Total Consolidated Affiliated Companies TCO Other Total Consolidated and Affiliated Companies Proved Undeveloped Consolidated Companies U.S. Other Americas Africa Asia Australia/Oceania Europe Total Consolidated Affiliated Companies TCO Other Total Consolidated and Affiliated Companies Total Proved Reserves 2020 2019 2018 Crude Oil Condensate Synthetic Oil Natural Gas Crude Oil Condensate Synthetic Oil NGL Natural Gas Crude Oil Condensate Synthetic Oil NGL Natural Gas NGL 1,157 168 497 358 115 23 2,318 565 2 — 597 — — — — 597 — — 346 2,503 6 222 68 1,629 — 7,864 4 8,951 8 — 424 21,177 53 1,057 322 12 1,121 174 525 406 136 21 2,383 584 114 — 540 — — — — 540 — — 258 2,998 5 397 67 1,472 — 3,382 4 10,697 8 — 334 18,954 59 1,135 10 308 1,061 156 568 470 127 81 2,463 638 65 — 545 — — — — 545 — 55 179 2,396 3 393 60 1,316 — 4,021 5 10,084 205 3 250 18,415 62 1,179 308 11 2,885 597 489 22,556 3,081 540 403 20,397 3,166 600 323 19,902 593 92 57 45 26 38 851 985 1 — — — — — — — — — 247 1,747 2 107 36 1,208 — 319 — 2,434 14 — 807 146 88 107 30 48 285 5,829 1,226 49 5 961 576 889 45 — — — — — — — — — 244 1,730 11 339 33 1,286 — 299 — 3,961 18 — 813 185 110 109 29 65 288 7,633 1,311 44 5 869 558 866 2 — — — — — — — — 72 349 4,313 19 470 38 1,499 — 289 — 3,647 100 — 406 10,318 39 5 755 601 1,837 4,722 — 597 339 7,366 828 29,922 2,160 5,241 — 540 337 9,060 740 29,457 2,179 5,345 72 672 450 11,674 773 31,576 Reserves Governance The company has adopted a comprehensive reserves and resource classification system modeled after a system developed and approved by a number of organizations including the Society of Petroleum Engineers, the World Petroleum Congress and the American Association of Petroleum Geologists. The company classifies recoverable hydrocarbons into six categories based on their status at the time of reporting – three deemed commercial and three potentially recoverable. Within the commercial classification are proved reserves and two categories of unproved reserves: probable and possible. The potentially recoverable categories are also referred to as contingent resources. For reserves estimates to be classified as proved, they must meet all SEC and company standards. Proved oil and gas reserves are the estimated quantities that geoscience and engineering data demonstrate with reasonable certainty to be economically producible in the future from known reservoirs under existing economic conditions, operating methods and government regulations. Net proved reserves exclude royalties and interests owned by others and reflect contractual arrangements and royalty obligations in effect at the time of the estimate. Proved reserves are classified as either developed or undeveloped. Proved developed reserves are the quantities expected to be recovered through existing wells with existing equipment and operating methods. Proved undeveloped reserves are the quantities expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Due to the inherent uncertainties and the limited nature of reservoir data, estimates of reserves are subject to change as additional information becomes available. Proved reserves are estimated by company asset teams composed of earth scientists and engineers. As part of the internal control process related to reserves estimation, the company maintains a Reserves Advisory Committee (RAC) that is chaired by the Manager of Global Reserves, an organization that is separate from the Upstream operating organization. The 103 Chevron Corporation 2020 Annual Report 103 173155_Annual_Report_10-K.indd 103 173155_Annual_Report_10-K.indd 103 3/5/21 6:04 PM 3/5/21 6:04 PM Supplemental Information on Oil and Gas Producing Activities - Unaudited Supplemental Information on Oil and Gas Producing Activities - Unaudited Manager of Global Reserves has more than 30 years’ experience working in the oil and gas industry and holds both undergraduate and graduate degrees in geoscience. His experience includes various technical and management roles in providing reserve and resource estimates in support of major capital and exploration projects, and more than 10 years of overseeing oil and gas reserves processes. He has been named a Distinguished Lecturer by the American Association of Petroleum Geologists and is an active member of the American Association of Petroleum Geologists, the SEPM Society of Sedimentary Geologists and the Society of Petroleum Engineers. All RAC members are degreed professionals, each with more than 10 years of experience in various aspects of reserves estimation relating to reservoir engineering, petroleum engineering, earth science or finance. The members are knowledgeable in SEC guidelines for proved reserves classification and receive annual training on the preparation of reserves estimates. The RAC has the following primary responsibilities: establish the policies and processes used within the operating units to estimate reserves; provide independent reviews and oversight of the business units’ recommended reserves estimates and changes; confirm that proved reserves are recognized in accordance with SEC guidelines; determine that reserve volumes are calculated using consistent and appropriate standards, procedures and technology; and maintain the Chevron Corporation Reserves Manual, which provides standardized procedures used corporatewide for classifying and reporting hydrocarbon reserves. During the year, the RAC is represented in meetings with each of the company’s upstream business units to review and discuss reserve changes recommended by the various asset teams. Major changes are also reviewed with the company’s senior leadership team including the Chief Executive Officer and the Chief Financial Officer. The company’s annual reserve activity is also reviewed with the Board of Directors. If major changes to reserves were to occur between the annual reviews, those matters would also be discussed with the Board. RAC subteams also conduct in-depth reviews during the year of many of the fields that have large proved reserves quantities. These reviews include an examination of the proved-reserve records and documentation of their compliance with the Chevron Corporation Reserves Manual. The acquisition of Noble was completed on October 5, 2020. Given the timing of the acquisition, Chevron has continued to rely on legacy Noble reserves staff and processes for reviewing reserves with input and guidance from the Chevron Reserves Advisory Committee. The processes include internal reviews and an external audit. Accordingly, Chevron continued to retain Netherland, Sewell & Associates, Inc. (NSAI), a third-party petroleum consulting firm, that completed an audit of the legacy Noble acquisition proved reserves at December 31, 2020 (representing approximately 15% of Chevron’s total reserves). Based upon their evaluation NSAI issued an unqualified audit opinion, and this report is attached as Exhibit 99.3 to the company’s Annual Report on Form 10-K. Technologies Used in Establishing Proved Reserves Additions In 2020, additions to Chevron’s proved reserves were based on a wide range of geologic and engineering technologies. Information generated from wells, such as well logs, wire line sampling, production and pressure testing, fluid analysis, and core analysis, was integrated with seismic data, regional geologic studies, and information from analogous reservoirs to provide “reasonably certain” proved reserves estimates. Both proprietary and commercially available analytic tools, including reservoir simulation, geologic modeling and seismic processing, have been used in the interpretation of the subsurface data. These technologies have been utilized extensively by the company in the past, and the company believes that they provide a high degree of confidence in establishing reliable and consistent reserves estimates. Proved Undeveloped Reserves Noteworthy changes in proved undeveloped reserves are shown in the table below and discussed on the following page. Proved Undeveloped Reserves (Millions of BOE) Quantity at January 1 Revisions Improved Recovery Extension & Discoveries Purchases Sales Transfers to Proved Developed Quantity at December 31 104 Chevron Corporation 2020 Annual Report 104 2020 4,007 (699) 1 123 329 (95) (262) 3,404 In 2020, Revisions include a reduction of 392 million BOE in the United States, primarily from the Midland and Delaware basins where 300 million BOE was attributed to demotions due to capital reductions, commodity price effects and performance revisions, and 75 million BOE from the Gulf of Mexico, primarily from commodity price effects at Anchor. In Australia, there was a net reduction of 269 million BOE, primarily from demotion of compression volumes related to capital and approval delays at Jansz Io, partially offset by positive revisions at Gorgon (Gorgon and Jansz Io make up the Gorgon Project). A reduction of 85 million BOE was recorded in Canada, primarily from commodity price effects at Kaybob Duvernay. In Nigeria, there was a reduction of 67 million BOE, primarily from gas volume changes based on reduced demand and development plan changes at Meren. In Venezuela, there was a demotion of 48 million BOE, due to impairment and accounting methodology change. These negative revisions were partially offset by an increase of 143 million BOE in Kazakhstan, primarily from entitlement effects at TCO and Karachaganak. In 2020, Extensions and Discoveries of 108 million BOE in the United States were primarily due to portfolio optimizations where future drilling in various fields is being targeted toward liquids-rich reservoirs with higher execution efficiencies in the Midland and Delaware basins. The differences in 2020 Extensions and Discoveries of 124 million BOE, between the net quantities of Proved reserves of 247 million BOE as reflected on pages 106 to 109 and net quantities of Proved Undeveloped of 123 million BOE, are primarily due to proved extensions and discoveries that were not recognized as PUDs in the prior year but rather were recognized directly as proved developed. basin in the United States. Purchases of 329 million BOE in 2020 include 326 million BOE from the Noble acquisition, primarily in Israel and the DJ Sales of 95 million BOE in 2020 include 77 million BOE from the sale of the company’s interest in Azerbaijan. Transfers to proved developed reserves in 2020 include 178 million BOE in the United States, primarily from the Midland and Delaware basin developments and 84 million BOE in Canada, Kazakhstan, and other international locations. These transfers are the consequence of development expenditures on completing wells and facilities. During 2020, investments totaling approximately $6.3 billion in oil and gas producing activities and about $0.1 billion in non-oil and gas producing activities were expended to advance the development of proved undeveloped reserves. In Asia, expenditures during the year totaled approximately $3.4 billion, primarily related to development projects of the TCO affiliate in Kazakhstan. The United States accounted for about $2.1 billion related primarily to various development activities in the Midland and Delaware basins and the Gulf of Mexico. In Africa, about $0.3 billion was expended on various offshore development and natural gas projects in Nigeria, Angola and Republic of Congo. Development activities in Canada and other international locations were primarily responsible for about $0.5 billion of expenditures. Reserves that remain proved undeveloped for five or more years are a result of several factors that affect optimal project development and execution, such as the complex nature of the development project in adverse and remote locations, physical limitations of infrastructure or plant capacities that dictate project timing, compression projects that are pending reservoir pressure declines, and contractual limitations that dictate production levels. At year-end 2020, the company held approximately 1.6 billion BOE of proved undeveloped reserves that have remained undeveloped for five years or more. The majority of these reserves are in three locations where the company has a proven track record of developing major projects. In Australia, approximately 400 million BOE remain undeveloped for five years or more related to the Gorgon and Wheatstone Projects. Further field development to convert the remaining proved undeveloped reserves is scheduled to occur in line with operating constraints and infrastructure optimization. In Africa, approximately 200 million BOE have remained undeveloped for five years or more, primarily due to facility constraints at various fields and infrastructure associated with the Escravos gas projects in Nigeria. Affiliates account for about 1.3 billion BOE of proved undeveloped reserves with about 900 million BOE that have remained undeveloped for five years or more, with the majority related to the TCO affiliate in Kazakhstan. At TCO, further field development to convert the remaining proved undeveloped reserves is scheduled to occur in line with reservoir depletion and facility constraints. Annually, the company assesses whether any changes have occurred in facts or circumstances, such as changes to development plans, regulations or government policies, that would warrant a revision to reserve estimates. In 2020, decreases in commodity prices negatively impacted the economic limits of oil and gas properties, resulting in proved reserve decreases, and positively impacted proved reserves due to entitlement effects. The year-end reserves quantities have been updated for these circumstances and significant changes have been discussed in the appropriate reserves 105 173155_Annual_Report_10-K.indd 104 173155_Annual_Report_10-K.indd 104 3/5/21 6:04 PM 3/5/21 6:04 PM Supplemental Information on Oil and Gas Producing Activities - Unaudited Supplemental Information on Oil and Gas Producing Activities - Unaudited In 2020, Revisions include a reduction of 392 million BOE in the United States, primarily from the Midland and Delaware basins where 300 million BOE was attributed to demotions due to capital reductions, commodity price effects and performance revisions, and 75 million BOE from the Gulf of Mexico, primarily from commodity price effects at Anchor. In Australia, there was a net reduction of 269 million BOE, primarily from demotion of compression volumes related to capital and approval delays at Jansz Io, partially offset by positive revisions at Gorgon (Gorgon and Jansz Io make up the Gorgon Project). A reduction of 85 million BOE was recorded in Canada, primarily from commodity price effects at Kaybob Duvernay. In Nigeria, there was a reduction of 67 million BOE, primarily from gas volume changes based on reduced demand and development plan changes at Meren. In Venezuela, there was a demotion of 48 million BOE, due to impairment and accounting methodology change. These negative revisions were partially offset by an increase of 143 million BOE in Kazakhstan, primarily from entitlement effects at TCO and Karachaganak. In 2020, Extensions and Discoveries of 108 million BOE in the United States were primarily due to portfolio optimizations where future drilling in various fields is being targeted toward liquids-rich reservoirs with higher execution efficiencies in the Midland and Delaware basins. The differences in 2020 Extensions and Discoveries of 124 million BOE, between the net quantities of Proved reserves of 247 million BOE as reflected on pages 106 to 109 and net quantities of Proved Undeveloped of 123 million BOE, are primarily due to proved extensions and discoveries that were not recognized as PUDs in the prior year but rather were recognized directly as proved developed. Purchases of 329 million BOE in 2020 include 326 million BOE from the Noble acquisition, primarily in Israel and the DJ basin in the United States. Sales of 95 million BOE in 2020 include 77 million BOE from the sale of the company’s interest in Azerbaijan. Transfers to proved developed reserves in 2020 include 178 million BOE in the United States, primarily from the Midland and Delaware basin developments and 84 million BOE in Canada, Kazakhstan, and other international locations. These transfers are the consequence of development expenditures on completing wells and facilities. During 2020, investments totaling approximately $6.3 billion in oil and gas producing activities and about $0.1 billion in non-oil and gas producing activities were expended to advance the development of proved undeveloped reserves. In Asia, expenditures during the year totaled approximately $3.4 billion, primarily related to development projects of the TCO affiliate in Kazakhstan. The United States accounted for about $2.1 billion related primarily to various development activities in the Midland and Delaware basins and the Gulf of Mexico. In Africa, about $0.3 billion was expended on various offshore development and natural gas projects in Nigeria, Angola and Republic of Congo. Development activities in Canada and other international locations were primarily responsible for about $0.5 billion of expenditures. Reserves that remain proved undeveloped for five or more years are a result of several factors that affect optimal project development and execution, such as the complex nature of the development project in adverse and remote locations, physical limitations of infrastructure or plant capacities that dictate project timing, compression projects that are pending reservoir pressure declines, and contractual limitations that dictate production levels. At year-end 2020, the company held approximately 1.6 billion BOE of proved undeveloped reserves that have remained undeveloped for five years or more. The majority of these reserves are in three locations where the company has a proven track record of developing major projects. In Australia, approximately 400 million BOE remain undeveloped for five years or more related to the Gorgon and Wheatstone Projects. Further field development to convert the remaining proved undeveloped reserves is scheduled to occur in line with operating constraints and infrastructure optimization. In Africa, approximately 200 million BOE have remained undeveloped for five years or more, primarily due to facility constraints at various fields and infrastructure associated with the Escravos gas projects in Nigeria. Affiliates account for about 1.3 billion BOE of proved undeveloped reserves with about 900 million BOE that have remained undeveloped for five years or more, with the majority related to the TCO affiliate in Kazakhstan. At TCO, further field development to convert the remaining proved undeveloped reserves is scheduled to occur in line with reservoir depletion and facility constraints. Manager of Global Reserves has more than 30 years’ experience working in the oil and gas industry and holds both undergraduate and graduate degrees in geoscience. His experience includes various technical and management roles in providing reserve and resource estimates in support of major capital and exploration projects, and more than 10 years of overseeing oil and gas reserves processes. He has been named a Distinguished Lecturer by the American Association of Petroleum Geologists and is an active member of the American Association of Petroleum Geologists, the SEPM Society of Sedimentary Geologists and the Society of Petroleum Engineers. All RAC members are degreed professionals, each with more than 10 years of experience in various aspects of reserves estimation relating to reservoir engineering, petroleum engineering, earth science or finance. The members are knowledgeable in SEC guidelines for proved reserves classification and receive annual training on the preparation of reserves estimates. reserves. The RAC has the following primary responsibilities: establish the policies and processes used within the operating units to estimate reserves; provide independent reviews and oversight of the business units’ recommended reserves estimates and changes; confirm that proved reserves are recognized in accordance with SEC guidelines; determine that reserve volumes are calculated using consistent and appropriate standards, procedures and technology; and maintain the Chevron Corporation Reserves Manual, which provides standardized procedures used corporatewide for classifying and reporting hydrocarbon During the year, the RAC is represented in meetings with each of the company’s upstream business units to review and discuss reserve changes recommended by the various asset teams. Major changes are also reviewed with the company’s senior leadership team including the Chief Executive Officer and the Chief Financial Officer. The company’s annual reserve activity is also reviewed with the Board of Directors. If major changes to reserves were to occur between the annual reviews, those matters would also be discussed with the Board. RAC subteams also conduct in-depth reviews during the year of many of the fields that have large proved reserves quantities. These reviews include an examination of the proved-reserve records and documentation of their compliance with the Chevron Corporation Reserves Manual. The acquisition of Noble was completed on October 5, 2020. Given the timing of the acquisition, Chevron has continued to rely on legacy Noble reserves staff and processes for reviewing reserves with input and guidance from the Chevron Reserves Advisory Committee. The processes include internal reviews and an external audit. Accordingly, Chevron continued to retain Netherland, Sewell & Associates, Inc. (NSAI), a third-party petroleum consulting firm, that completed an audit of the legacy Noble acquisition proved reserves at December 31, 2020 (representing approximately 15% of Chevron’s total reserves). Based upon their evaluation NSAI issued an unqualified audit opinion, and this report is attached as Exhibit 99.3 to the company’s Annual Report on Form 10-K. Technologies Used in Establishing Proved Reserves Additions In 2020, additions to Chevron’s proved reserves were based on a wide range of geologic and engineering technologies. Information generated from wells, such as well logs, wire line sampling, production and pressure testing, fluid analysis, and core analysis, was integrated with seismic data, regional geologic studies, and information from analogous reservoirs to provide “reasonably certain” proved reserves estimates. Both proprietary and commercially available analytic tools, including reservoir simulation, geologic modeling and seismic processing, have been used in the interpretation of the subsurface data. These technologies have been utilized extensively by the company in the past, and the company believes that they provide a high degree of confidence in establishing reliable and Noteworthy changes in proved undeveloped reserves are shown in the table below and discussed on the following page. consistent reserves estimates. Proved Undeveloped Reserves Proved Undeveloped Reserves (Millions of BOE) Quantity at January 1 Revisions Improved Recovery Extension & Discoveries Purchases Sales Transfers to Proved Developed Quantity at December 31 2020 4,007 (699) 1 123 329 (95) (262) 3,404 Annually, the company assesses whether any changes have occurred in facts or circumstances, such as changes to development plans, regulations or government policies, that would warrant a revision to reserve estimates. In 2020, decreases in commodity prices negatively impacted the economic limits of oil and gas properties, resulting in proved reserve decreases, and positively impacted proved reserves due to entitlement effects. The year-end reserves quantities have been updated for reserves have these circumstances appropriate significant discussed changes been and the in 104 105 Chevron Corporation 2020 Annual Report 105 173155_Annual_Report_10-K.indd 105 173155_Annual_Report_10-K.indd 105 3/5/21 6:04 PM 3/5/21 6:04 PM Supplemental Information on Oil and Gas Producing Activities - Unaudited Supplemental Information on Oil and Gas Producing Activities - Unaudited sections. Over the past three years, the ratio of proved undeveloped reserves to total proved reserves has ranged between 31 percent and 38 percent. Proved Reserve Quantities For the three years ending December 31, 2020, the pattern of net reserve changes shown in the following tables are not necessarily indicative of future trends. Apart from acquisitions, the company’s ability to add proved reserves can be affected by events and circumstances that are outside the company’s control, such as delays in government permitting, partner approvals of development plans, changes in oil and gas prices, OPEC constraints, geopolitical uncertainties, and civil unrest. At December 31, 2020, proved reserves for the company were 11.1 billion BOE. The company’s estimated net proved reserves of liquids including crude oil, condensate and synthetic oil for the years 2018, 2019 and 2020 are shown in the table on page 107. The company’s estimated net proved reserves of natural gas liquids are shown on page 108 and the company’s estimated net proved reserves of natural gas are shown on page 109. Noteworthy changes in crude oil, condensate and synthetic oil proved reserves for 2018 through 2020 are discussed below and shown in the table on the following page: Revisions In 2018, improved field performance at various Gulf of Mexico fields and in the Midland and Delaware basins were primarily responsible for the 121 million barrel increase in the United States. Improved field performance at various fields, including Agbami in Nigeria and Moho-Bilondo in the Republic of Congo, were responsible for the 61 million barrel increase in Africa. Reserves in Other Americas increased by 59 million barrels, primarily due to improved field performance at the Hebron field in Canada. In Asia, improved performance across numerous assets resulted in the 37 million barrel increase. In 2019, portfolio optimizations, where future drilling in various fields in the Midland and Delaware basins is being targeted away from reservoirs with higher gas-to-oil ratios and lower execution efficiencies, and planned divestments in the Appalachian basin, were primarily responsible for the 153 million barrel decrease in the United States. Operational issues with the Petropiar upgrader in Venezuela resulted in a decrease in reserves of synthetic oil of 126 million barrels and an increase of crude oil and condensate reserves of 105 million barrels. Reservoir management and entitlement effects were mainly responsible for 75 million barrels increase in the TCO affiliate in Kazakhstan. Improved field performance at various fields, including Moho-Bilondo in the Republic of Congo, Mafumeria in Angola, and Sonam in Nigeria, were responsible for the 42 million barrel increase in Africa. In 2020, capital reductions and commodity price effects in the Midland and Delaware basins and Anchor in the Gulf of Mexico, were primarily responsible for the 279 million barrels decrease in the United States. Reserves in Venezuela affiliates decreased by 149 million barrels, primarily due to impairments and accounting methodology change. Entitlement effects and performance revisions in the TCO affiliate were primarily responsible for the 180 million barrels increase. Entitlement effects primarily contributed to an increase of 77 million barrels synthetic oil at the Athabasca Oil sands in Canada and 74 million barrels at multiple locations in Asia. Extensions and Discoveries In 2018, extensions and discoveries in the Midland and Delaware basins were primarily responsible for the 359 million barrel increase in the United States. Extensions and discoveries in the Duvernay Shale in Canada and Loma Campana in Argentina were primarily responsible for the 31 million barrel increase in Other Americas. In 2019, portfolio optimizations, where future drilling in various fields in the Midland and Delaware basins is being targeted towards liquids-rich reservoirs with higher execution efficiencies, and extensions and discoveries in the deepwater fields in the Gulf of Mexico, were primarily responsible for the 394 million barrel increase in the United States. Extensions and discoveries in Loma Campana in Argentina were primarily responsible for the 39 million barrel increase in Other Americas. In 2020, extensions and discoveries in the Midland and Delaware basins were primarily responsible for the 105 million barrels increase in the United States. Purchases In 2018, purchases of 31 million barrels in the United States were primarily in the Midland and Delaware basins. In 2020, the acquisition of Noble assets contributed 227 million barrels in the DJ basin, Midland and Delaware basins in the United States. Sales In 2019, sales of 69 million barrels in Europe were in the United Kingdom and Denmark. In 2020, sale of 99 million barrels in Asia were in Azerbaijan. Net Proved Reserves of Crude Oil, Condensate and Synthetic Oil Total 5,937 277 10 391 31 (31) (598) 6,017 (18) 7 438 21 (73) (611) (126) 2 110 258 (110) (596) 5,319 Millions of barrels Other Australia/ Synthetic Synthetic U.S. Americas1 Africa Asia Oceania Europe Oil2 Total TCO Oil Other3 and Affiliated Companies Consolidated Companies Affiliated Companies Consolidated Reserves at January 1, 2018 1,573 280 743 631 153 142 543 4,065 1,630 159 Reserves at December 31, 20184 1,874 341 678 579 545 4,319 1,504 Changes attributable to: Revisions Improved recovery Extensions and discoveries Purchases Sales Production Changes attributable to: Revisions Improved recovery Extensions and discoveries Purchases Sales Production Changes attributable to: Revisions Improved recovery Extensions and discoveries Purchases Sales Production 121 5 359 31 (26) (189) (153) 7 394 19 — (213) (279) 1 105 227 (11) (221) 59 — 31 — — 61 — 37 1 1 — — — (5) — (29) (122) (90) (25) — 39 2 42 19 — — 1 1 — — (4) — — (33) (108) (86) (25) 1 3 — — (39) 11 74 — — 1 — 21 10 — (99) (92) (95) (14) 156 17 — — — — 25 — 1 — — (16) 166 (11) — 1 — — (15) 141 19 4 — — — (19) 146 6 — 2 — (69) (16) 69 (4) — — — — (4) 61 21 — — 14 — — 335 10 31 — 391 — (31) (19) (482) (28) — — — — (98) (72) 7 21 — 438 — (73) (19) (491) 77 — 2 — 110 — 258 — (110) (20) (486) 75 — — — — — — — — (103) (126) 105 83 (7) — — — — (9) 67 — — — — — — — — (7) 3 (23) — — — — (9) 127 — — — — — — — — — — (106) (1) (13) (157) 180 — (149) Reserves at December 31, 20194 1,928 320 613 513 540 4,149 1,473 — 159 5,781 Reserves at December 31, 20204 1,750 260 554 403 597 3,766 1,550 1 Ending reserve balances in North America were 166, 230 and 269 and in South America were 94, 90 and 72 in 2020, 2019 and 2018, respectively. 2 Reserves associated with Canada. 3 Ending reserve balances in Africa were 3, 3 and 3 and in South America were 0, 156 and 64 in 2020, 2019 and 2018, respectively. 4 Included are year-end reserve quantities related to production-sharing contracts (PSC) (refer to glossary of energy and financial terms for the definition of a PSC). PSC-related reserve quantities are 9 percent, 11 percent and 14 percent for consolidated companies for 2020, 2019 and 2018, respectively. Noteworthy changes in natural gas liquids proved reserves for 2018 through 2020 are discussed below and shown in the table on the following page: Revisions In 2018, improved field performance in the Midland and Delaware basins were primarily responsible for the 34 million barrel increase in the United States. In 2019, portfolio optimizations and low price realizations in various fields in the Midland and Delaware basins and planned divestments in the Appalachian basin were mainly responsible for the 120 million barrel decrease in the United States. In 2020, capital reductions and commodity price effects in various fields in Midland and Delaware basins were primarily responsible for the 71 million barrels decrease in the United States. Extensions and Discoveries In 2018, extensions and discoveries in the Midland and Delaware basins were primarily responsible for the 173 million barrel increase in the United States. In 2019, extensions and discoveries in the Midland and Delaware basins and deepwater fields in the Gulf of Mexico were primarily responsible for the 140 million barrel increase in the United States. In 2020, extensions and discoveries in various fields in Midland and Delaware basins were primarily responsible for the 60 million barrels increase in the United States. Purchases In 2020, the acquisition of Noble assets contributed 198 million barrels primarily in the Denver Julesburg basin, Midland and Delaware basins and Eagle Ford Shale in the United States. 106 Chevron Corporation 2020 Annual Report 106 107 173155_Annual_Report_10-K.indd 106 173155_Annual_Report_10-K.indd 106 3/5/21 6:04 PM 3/5/21 6:04 PM Supplemental Information on Oil and Gas Producing Activities - Unaudited Supplemental Information on Oil and Gas Producing Activities - Unaudited sections. Over the past three years, the ratio of proved undeveloped reserves to total proved reserves has ranged between Net Proved Reserves of Crude Oil, Condensate and Synthetic Oil 31 percent and 38 percent. Proved Reserve Quantities For the three years ending December 31, 2020, the pattern of net reserve changes shown in the following tables are not necessarily indicative of future trends. Apart from acquisitions, the company’s ability to add proved reserves can be affected by events and circumstances that are outside the company’s control, such as delays in government permitting, partner approvals of development plans, changes in oil and gas prices, OPEC constraints, geopolitical uncertainties, and civil unrest. At December 31, 2020, proved reserves for the company were 11.1 billion BOE. The company’s estimated net proved reserves of liquids including crude oil, condensate and synthetic oil for the years 2018, 2019 and 2020 are shown in the table on page 107. The company’s estimated net proved reserves of natural gas liquids are shown on page 108 and the company’s estimated net proved reserves of natural gas are shown on page 109. Noteworthy changes in crude oil, condensate and synthetic oil proved reserves for 2018 through 2020 are discussed below and shown in the table on the following page: Revisions In 2018, improved field performance at various Gulf of Mexico fields and in the Midland and Delaware basins were primarily responsible for the 121 million barrel increase in the United States. Improved field performance at various fields, including Agbami in Nigeria and Moho-Bilondo in the Republic of Congo, were responsible for the 61 million barrel increase in Africa. Reserves in Other Americas increased by 59 million barrels, primarily due to improved field performance at the Hebron field in Canada. In Asia, improved performance across numerous assets resulted in the 37 million barrel increase. In 2019, portfolio optimizations, where future drilling in various fields in the Midland and Delaware basins is being targeted away from reservoirs with higher gas-to-oil ratios and lower execution efficiencies, and planned divestments in the Appalachian basin, were primarily responsible for the 153 million barrel decrease in the United States. Operational issues with the Petropiar upgrader in Venezuela resulted in a decrease in reserves of synthetic oil of 126 million barrels and an increase of crude oil and condensate reserves of 105 million barrels. Reservoir management and entitlement effects were mainly responsible for 75 million barrels increase in the TCO affiliate in Kazakhstan. Improved field performance at various fields, including Moho-Bilondo in the Republic of Congo, Mafumeria in Angola, and Sonam in Nigeria, were responsible for the 42 million barrel increase in Africa. In 2020, capital reductions and commodity price effects in the Midland and Delaware basins and Anchor in the Gulf of Mexico, were primarily responsible for the 279 million barrels decrease in the United States. Reserves in Venezuela affiliates decreased by 149 million barrels, primarily due to impairments and accounting methodology change. Entitlement effects and performance revisions in the TCO affiliate were primarily responsible for the 180 million barrels increase. Entitlement effects primarily contributed to an increase of 77 million barrels synthetic oil at the Athabasca Oil sands in Canada and 74 million barrels at multiple locations in Asia. Extensions and Discoveries In 2018, extensions and discoveries in the Midland and Delaware basins were primarily responsible for the 359 million barrel increase in the United States. Extensions and discoveries in the Duvernay Shale in Canada and Loma Campana in Argentina were primarily responsible for the 31 million barrel increase in Other Americas. In 2019, portfolio optimizations, where future drilling in various fields in the Midland and Delaware basins is being targeted towards liquids-rich reservoirs with higher execution efficiencies, and extensions and discoveries in the deepwater fields in the Gulf of Mexico, were primarily responsible for the 394 million barrel increase in the United States. Extensions and discoveries in Loma Campana in Argentina were primarily responsible for the 39 million barrel increase in Other Americas. In 2020, extensions and discoveries in the Midland and Delaware basins were primarily responsible for the 105 million barrels increase in the United States. Purchases In 2018, purchases of 31 million barrels in the United States were primarily in the Midland and Delaware basins. In 2020, the acquisition of Noble assets contributed 227 million barrels in the DJ basin, Midland and Delaware basins in the United States. Sales In 2019, sales of 69 million barrels in Europe were in the United Kingdom and Denmark. In 2020, sale of 99 million barrels in Asia were in Azerbaijan. 106 U.S. 1,573 121 5 359 31 (26) (189) Millions of barrels Reserves at January 1, 2018 Changes attributable to: Revisions Improved recovery Extensions and discoveries Purchases Sales Production Reserves at December 31, 20184 Changes attributable to: Revisions Improved recovery Extensions and discoveries Purchases Sales Production Reserves at December 31, 20194 Changes attributable to: Revisions Improved recovery Extensions and discoveries Purchases Sales Production Other Americas1 Africa Asia Australia/ Oceania Europe Oil2 Total Consolidated Companies Synthetic Affiliated Companies Synthetic Oil Other3 TCO Total Consolidated and Affiliated Companies 280 743 631 153 142 543 4,065 1,630 159 83 5,937 59 — 31 — — (29) 37 61 — 1 1 — — — (5) — (122) (90) 17 — — — — (14) 19 4 — — — (19) 21 — — — — (19) 335 10 391 31 (31) (482) (28) — — — — (98) (23) — — — — (9) 1,874 341 678 579 156 146 545 4,319 1,504 127 (153) 7 394 19 — (213) 42 19 (25) — — — 1 1 39 — — 2 (4) — — (108) (86) (33) 25 — 1 — — (16) 1,928 320 613 513 166 (279) 1 105 227 (11) (221) (25) 1 3 — — (39) 74 11 — — 1 — 10 21 — (99) (92) (95) (11) — 1 — — (15) 6 — 2 — (69) (16) 69 (4) — — — — (4) 61 14 — — — — (19) (72) 7 438 21 (73) (491) 75 — — — — (106) (126) — — — — (1) 540 4,149 1,473 — 159 5,781 77 — — — — (20) (157) 2 110 258 (110) (486) 180 — — — — (103) 597 3,766 1,550 — — — — — — — (149) — — — — (7) 3 (126) 2 110 258 (110) (596) 5,319 (7) — — — — (9) 67 105 — — — — (13) 277 10 391 31 (31) (598) 6,017 (18) 7 438 21 (73) (611) Reserves at December 31, 20204 1,750 260 554 403 141 1 Ending reserve balances in North America were 166, 230 and 269 and in South America were 94, 90 and 72 in 2020, 2019 and 2018, respectively. 2 Reserves associated with Canada. 3 Ending reserve balances in Africa were 3, 3 and 3 and in South America were 0, 156 and 64 in 2020, 2019 and 2018, respectively. 4 Included are year-end reserve quantities related to production-sharing contracts (PSC) (refer to glossary of energy and financial terms for the definition of a PSC). PSC-related reserve quantities are 9 percent, 11 percent and 14 percent for consolidated companies for 2020, 2019 and 2018, respectively. Noteworthy changes in natural gas liquids proved reserves for 2018 through 2020 are discussed below and shown in the table on the following page: Revisions In 2018, improved field performance in the Midland and Delaware basins were primarily responsible for the 34 million barrel increase in the United States. In 2019, portfolio optimizations and low price realizations in various fields in the Midland and Delaware basins and planned divestments in the Appalachian basin were mainly responsible for the 120 million barrel decrease in the United States. In 2020, capital reductions and commodity price effects in various fields in Midland and Delaware basins were primarily responsible for the 71 million barrels decrease in the United States. Extensions and Discoveries In 2018, extensions and discoveries in the Midland and Delaware basins were primarily responsible for the 173 million barrel increase in the United States. In 2019, extensions and discoveries in the Midland and Delaware basins and deepwater fields in the Gulf of Mexico were primarily responsible for the 140 million barrel increase in the United States. In 2020, extensions and discoveries in various fields in Midland and Delaware basins were primarily responsible for the 60 million barrels increase in the United States. Purchases In 2020, the acquisition of Noble assets contributed 198 million barrels primarily in the Denver Julesburg basin, Midland and Delaware basins and Eagle Ford Shale in the United States. 107 Chevron Corporation 2020 Annual Report 107 173155_Annual_Report_10-K.indd 107 173155_Annual_Report_10-K.indd 107 3/5/21 6:04 PM 3/5/21 6:04 PM Supplemental Information on Oil and Gas Producing Activities - Unaudited Supplemental Information on Oil and Gas Producing Activities - Unaudited Net Proved Reserves of Natural Gas Liquids Millions of barrels Reserves at January 1, 2018 Changes attributable to: Revisions Improved recovery Extensions and discoveries Purchases Sales Production Reserves at December 31, 20183 Changes attributable to: Revisions Improved recovery Extensions and discoveries Purchases Sales Production Reserves at December 31, 20193 Changes attributable to: Revisions Improved recovery Extensions and discoveries Purchases Sales Production Reserves at December 31, 20203 U.S. 343 34 — 173 19 (6) (35) 528 (120) — 140 5 — (51) 502 (71) — 60 198 (27) (69) 593 Other Americas1 Africa Asia 17 96 — 1 — 5 — — (1) 22 (4) — — — — (2) 16 (7) — 1 — — (2) 8 7 — — — — — — — — — (5) — 98 — 6 — — — — — — — — — (4) — 100 — (3) — — — — — — 12 — (5) — 104 — Consolidated Companies Australia/ Oceania Europe Total Affiliated Companies TCO Other2 Total Consolidated and Affiliated Companies 6 — — — — — (1) 5 — — — — — (1) 4 — — — — — — 4 3 465 119 21 1 — — — — (1) 43 — 178 19 (6) (43) 3 656 — — — — (2) (1) (118) — 140 5 (2) (59) (11) — — — — (7) 101 10 — — — — (8) — 622 103 (81) — — — 61 — — 210 (27) — (76) — 8 — — — — (9) — 709 102 (3) — — — — (2) 16 2 — — — — (3) 15 5 — — — — (3) 17 605 29 — 178 19 (6) (52) 773 (106) — 140 5 (2) (70) 740 (68) — 61 210 (27) (88) 828 1 Reserves associated with North America. 2 Reserves associated with Africa. 3 Year-end reserve quantities related to production-sharing contracts (PSC) (refer to glossary of energy and financial terms for the definition of a PSC) are not material for 2020, 2019 and 2018, respectively. Noteworthy changes in natural gas proved reserves for 2018 through 2020 are discussed below and shown in the table above: Revisions In 2018, reservoir performance, well test and surveillance data at Wheatstone and the greater Gorgon area were responsible for the 1.0 TCF increase in Australia. The Bibiyana Field in Bangladesh and the Pattani Field in Thailand were primarily responsible for the 347 BCF increase in Asia. Improved performance in the Midland and Delaware basins were primarily responsible for the 258 BCF increase in the United States. In 2019, strong performances at Wheatstone and the greater Gorgon areas were mainly responsible for 1.7 TCF increase in Australia. In the TCO affiliate in Kazakhstan, reservoir management and entitlement effects were mainly responsible for 223 BCF increase. Portfolio optimizations and low price realizations in various fields of the Midland and Delaware basins and planned divestments in the Appalachian basin were mainly responsible for the 2.6 TCF decrease in the United States. In 2020, the demotion of Jansz Io compression project reserves and lower field performance, partially offset by positive revisions at Gorgon, were mainly responsible for the net 2.5 TCF decrease in Australia. Capital reductions and commodity price effects in various fields of the Midland and Delaware basins were mainly responsible for the 509 BCF decrease in the United States. In Africa, a 229 BCF decrease was primarily due to reduced demand and development plan changes at Meren in Nigeria. Extensions and Discoveries In 2018, extensions and discoveries of 1.6 TCF in the United States were primarily in the Appalachian region and the Midland and Delaware basins. In 2019, extensions and discoveries of 1.0 TCF in the United States were primarily in the Midland and Delaware basins. In 2020, extensions and discoveries of 385 BCF in the United States were primarily in the Midland and Delaware basins. 108 Chevron Corporation 2020 Annual Report 108 173155_Annual_Report_10-K.indd 108 173155_Annual_Report_10-K.indd 108 3/5/21 6:04 PM 3/5/21 6:04 PM Purchases In 2020, the acquisition of Noble assets contributed 5.4 TCF in Israel in Asia, 1.5 TCF in the Denver Julesburg basin, Midland and Delaware basins and Eagle Ford Shale in the United States and 441 BCF in Equatorial Guinea in Africa. Sales In 2019, sales of 240 BCF in Europe were in the United Kingdom and Denmark. In 2020, sales of 1.3 TCF were primarily in the Appalachian basin, in the United States and 264 BCF primarily in Azerbaijan in Asia. Net Proved Reserves of Natural Gas Billions of cubic feet (BCF) U.S. Americas1 Africa Asia Europe Total TCO Other2 Other Australia/ Oceania Reserves at January 1, 2018 5,180 795 2,906 4,773 13,559 301 27,514 2,183 1,039 Consolidated Companies Affiliated Companies Total Consolidated and Affiliated Companies Reserves at December 31, 20184 6,709 863 2,815 4,310 13,731 305 28,733 Changes attributable to: Revisions Improved recovery Extensions and discoveries Purchases Sales Production3 Changes attributable to: Revisions Improved recovery Extensions and discoveries Purchases Sales Production3 Changes attributable to: Revisions Improved recovery Extensions and discoveries Purchases Sales Production3 258 2 1,627 144 (125) (377) (2,565) — 1,008 24 (1) (447) (509) — 385 1,548 (1,314) (588) 347 1,012 (108) (38) (3) 2 138 — — (69) (107) — 49 — (2) (67) (5) (112) 25 — — 1 46 — — — — — 5 — — — 5 — — (815) (841) (65) (2,279) 165 1,732 68 — 1 — — 3 — 1 — (240) (43) 1,707 5 1,771 145 (130) (726) 1,156 — 24 (243) (2,357) (178) (229) (2,455) (2) (3,204) — 8 — — 2 441 169 — — 5,350 (177) (60) — (264) (135) (753) (876) — — — — 453 7,339 — (1,755) (2) (2,414) 1 — — — — 93 — — — 58 — — — — — — (141) 1,934 223 — — — — 162 — — — — — 3 — — (95) 909 39 — 20 — — 866 138 — — — — (148) (106) Reserves at December 31, 20194 4,728 736 2,758 3,681 14,658 26 26,587 2,004 (103) (799) (898) (153) (102) 30,736 1,561 5 1,774 145 (130) (2,515) 31,576 (464) 1,176 — 24 (243) (2,612) 29,457 (2,904) — 453 7,339 (1,755) (2,668) 29,922 Reserves at December 31, 20204 4,250 329 2,837 8,183 11,385 22 27,006 2,018 898 1 Ending reserve balances in North America and South America were 234, 462, 582 and 95, 274, 281 in 2020, 2019 and 2018, respectively. 2 Ending reserve balances in Africa and South America were 898, 802, 799 and 0, 64, 110 in 2020, 2019 and 2018, respectively. 3 Total “as sold” volumes are 2,447, 2,379 and 2,289 for 2020, 2019 and 2018, respectively. 4 Includes reserve quantities related to production-sharing contracts (PSC) (refer to glossary of energy and financial terms for the definition of a PSC). PSC-related reserve quantities are 10 percent, 10 percent and 10 percent for consolidated companies for 2020, 2019 and 2018, respectively. 109 Supplemental Information on Oil and Gas Producing Activities - Unaudited Supplemental Information on Oil and Gas Producing Activities - Unaudited Net Proved Reserves of Natural Gas Liquids Millions of barrels U.S. Americas1 Africa Asia Europe Total TCO Other2 Other Australia/ Oceania Consolidated Companies Affiliated Companies Total Consolidated and Affiliated Companies Purchases In 2020, the acquisition of Noble assets contributed 5.4 TCF in Israel in Asia, 1.5 TCF in the Denver Julesburg basin, Midland and Delaware basins and Eagle Ford Shale in the United States and 441 BCF in Equatorial Guinea in Africa. Sales In 2019, sales of 240 BCF in Europe were in the United Kingdom and Denmark. In 2020, sales of 1.3 TCF were primarily in the Appalachian basin, in the United States and 264 BCF primarily in Azerbaijan in Asia. Reserves at January 1, 2018 Changes attributable to: Revisions Improved recovery Extensions and discoveries Purchases Sales Production Reserves at December 31, 20183 Changes attributable to: Revisions Improved recovery Extensions and discoveries Purchases Sales Production Purchases Sales Production Reserves at December 31, 20193 Changes attributable to: Revisions Improved recovery Extensions and discoveries Reserves at December 31, 20203 1 Reserves associated with North America. 2 Reserves associated with Africa. 2019 and 2018, respectively. (120) 343 34 — 173 19 (6) (35) 528 — 140 5 — (51) 502 (71) — 60 198 (27) (69) 593 17 1 — 5 — — (1) 22 (4) — — — — (2) 16 (7) — 1 — — (2) 8 96 7 — — — — 98 6 — — — — — — 12 — — — — — — — — — — — — — — — — — — (5) — (4) — 100 (3) — (5) — 104 6 — — — — — (1) 5 — — — — — (1) 4 — — — — — — 4 3 465 — 178 1 — — — (1) 3 — — (2) (1) — — — — — 43 — 19 (6) (43) 656 — 5 (2) (59) (81) — 61 (27) (76) — (118) — 140 — 622 — 210 — 709 119 (11) — — — — (7) 101 (8) 103 10 — — — — 8 — — — — (9) 102 21 (3) (2) — — — — 16 2 — — — — (3) 15 5 — — — — (3) 17 (106) 605 29 — 178 19 (6) (52) 773 — 140 5 (2) (70) 740 (68) — 61 210 (27) (88) 828 3 Year-end reserve quantities related to production-sharing contracts (PSC) (refer to glossary of energy and financial terms for the definition of a PSC) are not material for 2020, Noteworthy changes in natural gas proved reserves for 2018 through 2020 are discussed below and shown in the table above: Revisions In 2018, reservoir performance, well test and surveillance data at Wheatstone and the greater Gorgon area were responsible for the 1.0 TCF increase in Australia. The Bibiyana Field in Bangladesh and the Pattani Field in Thailand were primarily responsible for the 347 BCF increase in Asia. Improved performance in the Midland and Delaware basins were primarily responsible for the 258 BCF increase in the United States. In 2019, strong performances at Wheatstone and the greater Gorgon areas were mainly responsible for 1.7 TCF increase in Australia. In the TCO affiliate in Kazakhstan, reservoir management and entitlement effects were mainly responsible for 223 BCF increase. Portfolio optimizations and low price realizations in various fields of the Midland and Delaware basins and planned divestments in the Appalachian basin were mainly responsible for the 2.6 TCF decrease in the United States. In 2020, the demotion of Jansz Io compression project reserves and lower field performance, partially offset by positive revisions at Gorgon, were mainly responsible for the net 2.5 TCF decrease in Australia. Capital reductions and commodity price effects in various fields of the Midland and Delaware basins were mainly responsible for the 509 BCF decrease in the United States. In Africa, a 229 BCF decrease was primarily due to reduced demand and development plan changes at Meren in Nigeria. Extensions and Discoveries In 2018, extensions and discoveries of 1.6 TCF in the United States were primarily in the Appalachian region and the Midland and Delaware basins. In 2019, extensions and discoveries of 1.0 TCF in the United States were primarily in the Midland and Delaware basins. In 2020, extensions and discoveries of 385 BCF in the United States were primarily in the Midland and Delaware basins. 108 Net Proved Reserves of Natural Gas Billions of cubic feet (BCF) Reserves at January 1, 2018 Changes attributable to: Revisions Improved recovery Extensions and discoveries Purchases Sales Production3 Reserves at December 31, 20184 Changes attributable to: Revisions Improved recovery Extensions and discoveries Purchases Sales Production3 Reserves at December 31, 20194 Changes attributable to: Revisions Improved recovery Extensions and discoveries Purchases Sales Production3 U.S. 5,180 258 2 1,627 144 (125) (377) 6,709 (2,565) — 1,008 24 (1) (447) 4,728 (509) — 385 1,548 (1,314) (588) Consolidated Companies Affiliated Companies Other Americas1 Africa Australia/ Oceania Europe Asia Total TCO Other2 Total Consolidated and Affiliated Companies 795 2,906 4,773 13,559 301 27,514 2,183 1,039 30,736 (3) 2 138 — — (69) 25 — — 1 (5) (112) 347 — 5 — — (815) 1,012 1 — — — (841) 68 — 1 — — (65) 1,707 5 1,771 145 (130) (2,279) (108) — — — — (141) (38) — 3 — — (95) 863 2,815 4,310 13,731 305 28,733 1,934 909 (107) — 49 — (2) (67) 46 — — — — (103) 165 — 5 — — (799) 1,732 — 93 — — (898) 3 — 1 — (240) (43) (726) — 1,156 24 (243) (2,357) 223 — — — — (153) 39 — 20 — — (102) 736 2,758 3,681 14,658 26 26,587 2,004 866 (178) — 8 — (177) (60) (229) — 2 441 — (135) 169 — — 5,350 (264) (753) (2,455) — 58 — — (876) (2) — — — — (2) (3,204) — 453 7,339 (1,755) (2,414) 162 — — — — (148) 138 — — — — (106) 1,561 5 1,774 145 (130) (2,515) 31,576 (464) — 1,176 24 (243) (2,612) 29,457 (2,904) — 453 7,339 (1,755) (2,668) 29,922 Reserves at December 31, 20204 4,250 329 2,837 8,183 11,385 22 27,006 2,018 898 1 Ending reserve balances in North America and South America were 234, 462, 582 and 95, 274, 281 in 2020, 2019 and 2018, respectively. 2 Ending reserve balances in Africa and South America were 898, 802, 799 and 0, 64, 110 in 2020, 2019 and 2018, respectively. 3 Total “as sold” volumes are 2,447, 2,379 and 2,289 for 2020, 2019 and 2018, respectively. 4 Includes reserve quantities related to production-sharing contracts (PSC) (refer to glossary of energy and financial terms for the definition of a PSC). PSC-related reserve quantities are 10 percent, 10 percent and 10 percent for consolidated companies for 2020, 2019 and 2018, respectively. 109 Chevron Corporation 2020 Annual Report 109 173155_Annual_Report_10-K.indd 109 173155_Annual_Report_10-K.indd 109 3/5/21 6:04 PM 3/5/21 6:04 PM The changes in present values between years, which can be significant, reflect changes in estimated proved-reserve quantities and prices and assumptions used in forecasting production volumes and costs. Changes in the timing of production are included with “Revisions of previous quantity estimates.” Consolidated Companies Affiliated Companies Total Consolidated and Affiliated Companies Sales and transfers of oil and gas produced net of production costs Millions of dollars Present Value at January 1, 2018 Development costs incurred Purchases of reserves Sales of reserves Extensions, discoveries and improved recovery less related costs Revisions of previous quantity estimates Net changes in prices, development and production costs Present Value at December 31, 2018 Sales and transfers of oil and gas produced net of production costs Extensions, discoveries and improved recovery less related costs Revisions of previous quantity estimates Net changes in prices, development and production costs Accretion of discount Net change in income tax Net Change for 2018 Development costs incurred Purchases of reserves Sales of reserves Accretion of discount Net change in income tax Net Change for 2019 Development costs incurred Purchases of reserves Sales of reserves Present Value at December 31, 2019 Sales and transfers of oil and gas produced net of production costs Extensions, discoveries and improved recovery less related costs Revisions of previous quantity estimates Net changes in prices, development and production costs Accretion of discount Net change in income tax Net Change for 2020 Present Value at December 31, 2020 $ 65,847 (33,535) 9,723 99 (622) 5,503 15,480 39,241 9,413 (16,518) 28,784 $ 94,631 (29,436) 10,497 406 (579) 5,697 621 (25,056) 13,538 10,077 (14,235) $ 80,396 (16,621) 6,301 10,295 (803) 2,066 (1,293) (62,788) 11,274 19,616 (31,953) $ 48,443 $ 14,166 (6,813) 5,044 — — 14 (2,255) 17,251 2,084 (4,795) 10,530 $ 24,696 (5,823) 5,120 — — 43 2,122 (11,637) 3,584 2,046 (4,545) $ 20,151 (2,322) 2,892 — — — 4,033 (22,925) 2,948 5,317 (10,057) $ 10,094 $ 80,013 (40,348) 14,767 99 (622) 5,517 13,225 56,492 11,497 (21,313) 39,314 $119,327 (35,259) 15,617 406 (579) 5,740 2,743 (36,693) 17,122 12,123 (18,780) $100,547 (18,943) 9,193 10,295 (803) 2,066 2,740 (85,713) 14,222 24,933 (42,010) $ 58,537 Supplemental Information on Oil and Gas Producing Activities - Unaudited Supplemental Information on Oil and Gas Producing Activities - Unaudited Table VI - Standardized Measure of Discounted Future Net Cash Flows Related to Proved Oil and Gas Reserves Table VII - Changes in the Standardized Measure of Discounted Future Net Cash Flows From Proved Reserves The standardized measure of discounted future net cash flows is calculated in accordance with SEC and FASB requirements. This includes using the average of first-day-of-the-month oil and gas prices for the 12-month period prior to the end of the reporting period, estimated future development and production costs assuming the continuation of existing economic conditions, estimated costs for asset retirement obligations (includes costs to retire existing wells and facilities in addition to those future wells and facilities necessary to produce proved undeveloped reserves), and estimated future income taxes based on appropriate statutory tax rates. Discounted future net cash flows are calculated using 10 percent mid-period discount factors. Estimates of proved-reserve quantities are imprecise and change over time as new information becomes available. Probable and possible reserves, which may become proved in the future, are excluded from the calculations. The valuation requires assumptions as to the timing and amount of future development and production costs. The calculations are made as of December 31 each year and do not represent management’s estimate of the company’s future cash flows or value of its oil and gas reserves. In the following table, the caption “Standardized Measure Net Cash Flows” refers to the standardized measure of discounted future net cash flows. Millions of dollars Other Americas U.S. Africa Asia Australia/ Oceania Europe Total TCO Other Consolidated Companies Affiliated Companies Total Consolidated and Affiliated Companies At December 31, 2020 Future cash inflows from production $ 74,671 $ 29,605 $ 27,521 $ 49,265 $ 53,241 $ 2,304 $ 236,607 $ 53,309 $ 1,070 $ Future production costs Future development costs Future income taxes (30,359) (15,410) (2,366) (10,492) (3,131) (5,874) (11,036) (3,205) (11,700) (12,784) (2,274) (17,543) (86,289) (21,876) (44,623) (19,525) (7,138) (7,994) (15,364) (3,017) (6,197) (1,336) (522) (178) (426) (38) (212) 290,986 (106,240) (29,052) (52,829) Undiscounted future net cash flows 10 percent midyear annual discount for timing of estimated cash flows Standardized Measure Net Cash Flows 27,946 8,698 2,943 16,664 27,300 268 83,819 18,652 394 102,865 (10,456) (4,652) (582) (7,856) (11,774) (56) (35,376) (8,803) (149) (44,328) $ 17,490 $ 4,046 $ 2,361 $ 8,808 $ 15,526 $ 212 $ 48,443 $ 9,849 $ 245 $ 58,537 At December 31, 2019 Future cash inflows from production $ 122,012 $ 45,701 $ 45,706 $ 43,386 $ 95,845 $ 4,466 $ 357,116 $ 85,179 $ 12,309 $ Future production costs Future development costs Future income taxes (32,349) (18,324) (4,219) (15,987) (6,491) (15,780) (98,870) (34,718) (74,932) (22,302) (14,340) (14,561) (14,141) (5,458) (22,874) (14,646) (5,070) (11,147) (17,982) (3,643) (17,562) (2,487) (705) (3,855) (1,428) (341) (1,078) 454,604 (123,659) (49,763) (93,348) Undiscounted future net cash flows 10 percent midyear annual discount for timing of estimated cash flows Standardized Measure Net Cash Flows 57,896 16,667 6,519 12,523 53,372 1,619 148,596 33,976 5,262 187,834 (26,422) (9,312) (1,629) (3,652) (26,536) (650) (68,201) (16,990) (2,096) (87,287) $ 31,474 $ 7,355 $ 4,890 $ 8,871 $ 26,836 $ 969 $ 80,395 $ 16,986 $ 3,166 $ 100,547 At December 31, 2018 Future cash inflows from production $ 132,512 $ 52,470 $ 56,856 $ 54,012 $ 109,116 $ 11,959 $ 416,925 $ 100,518 $ 16,928 $ Future production costs Future development costs Future income taxes (34,679) (20,691) (5,106) (17,322) (7,553) (17,369) (6,609) (114,484) (41,184) (1,393) (90,224) (1,676) (24,580) (14,069) (18,561) (18,850) (4,112) (23,593) (16,296) (7,757) (25,519) (17,359) (5,494) (14,514) (4,665) (1,692) (4,496) 534,371 (143,729) (56,945) (113,281) Undiscounted future net cash flows 10 percent midyear annual discount for timing of estimated cash flows Standardized Measure Net Cash Flows 63,142 19,120 10,301 16,645 59,544 2,281 171,033 43,308 6,075 220,416 (29,103) (11,136) (2,646) (4,822) (28,276) (419) (76,402) (22,025) (2,662) (101,089) $ 34,039 $ 7,984 $ 7,655 $ 11,823 $ 31,268 $ 1,862 $ 94,631 $ 21,283 $ 3,413 $ 119,327 110 Chevron Corporation 2020 Annual Report 110 111 173155_Annual_Report_10-K.indd 110 173155_Annual_Report_10-K.indd 110 3/5/21 6:04 PM 3/5/21 6:04 PM Supplemental Information on Oil and Gas Producing Activities - Unaudited Supplemental Information on Oil and Gas Producing Activities - Unaudited Table VI - Standardized Measure of Discounted Future Net Cash Flows Related to Proved Oil and Gas Reserves Table VII - Changes in the Standardized Measure of Discounted Future Net Cash Flows From Proved Reserves The changes in present values between years, which can be significant, reflect changes in estimated proved-reserve quantities and prices and assumptions used in forecasting production volumes and costs. Changes in the timing of production are included with “Revisions of previous quantity estimates.” Millions of dollars Consolidated Companies Affiliated Companies Total Consolidated and Affiliated Companies Present Value at January 1, 2018 Sales and transfers of oil and gas produced net of production costs Development costs incurred Purchases of reserves Sales of reserves Extensions, discoveries and improved recovery less related costs Revisions of previous quantity estimates Net changes in prices, development and production costs Accretion of discount Net change in income tax Net Change for 2018 Present Value at December 31, 2018 Sales and transfers of oil and gas produced net of production costs Development costs incurred Purchases of reserves Sales of reserves Extensions, discoveries and improved recovery less related costs Revisions of previous quantity estimates Net changes in prices, development and production costs Accretion of discount Net change in income tax $ 17,490 $ 4,046 $ 2,361 $ 8,808 $ 15,526 $ 212 $ 48,443 $ 9,849 $ 245 $ 58,537 Net Change for 2019 Present Value at December 31, 2019 Sales and transfers of oil and gas produced net of production costs Development costs incurred Purchases of reserves Sales of reserves Extensions, discoveries and improved recovery less related costs Revisions of previous quantity estimates Net changes in prices, development and production costs Accretion of discount Net change in income tax Net Change for 2020 Present Value at December 31, 2020 $ 65,847 (33,535) 9,723 99 (622) 5,503 15,480 39,241 9,413 (16,518) 28,784 $ 94,631 (29,436) 10,497 406 (579) 5,697 621 (25,056) 13,538 10,077 (14,235) $ 80,396 (16,621) 6,301 10,295 (803) 2,066 (1,293) (62,788) 11,274 19,616 (31,953) $ 48,443 $ 14,166 (6,813) 5,044 — — 14 (2,255) 17,251 2,084 (4,795) 10,530 $ 24,696 (5,823) 5,120 — — 43 2,122 (11,637) 3,584 2,046 (4,545) $ 20,151 (2,322) 2,892 — — — 4,033 (22,925) 2,948 5,317 (10,057) $ 10,094 $ 80,013 (40,348) 14,767 99 (622) 5,517 13,225 56,492 11,497 (21,313) 39,314 $119,327 (35,259) 15,617 406 (579) 5,740 2,743 (36,693) 17,122 12,123 (18,780) $100,547 (18,943) 9,193 10,295 (803) 2,066 2,740 (85,713) 14,222 24,933 (42,010) $ 58,537 The standardized measure of discounted future net cash flows is calculated in accordance with SEC and FASB requirements. This includes using the average of first-day-of-the-month oil and gas prices for the 12-month period prior to the end of the reporting period, estimated future development and production costs assuming the continuation of existing economic conditions, estimated costs for asset retirement obligations (includes costs to retire existing wells and facilities in addition to those future wells and facilities necessary to produce proved undeveloped reserves), and estimated future income taxes based on appropriate statutory tax rates. Discounted future net cash flows are calculated using 10 percent mid-period discount factors. Estimates of proved-reserve quantities are imprecise and change over time as new information becomes available. Probable and possible reserves, which may become proved in the future, are excluded from the calculations. The valuation requires assumptions as to the timing and amount of future development and production costs. The calculations are made as of December 31 each year and do not represent management’s estimate of the company’s future cash flows or value of its oil and gas reserves. In the following table, the caption “Standardized Measure Net Cash Flows” refers to the standardized measure of discounted future net cash flows. Other Australia/ U.S. Americas Africa Asia Oceania Europe Total TCO Other Consolidated Companies Future cash inflows from production $ 74,671 $ 29,605 $ 27,521 $ 49,265 $ 53,241 $ 2,304 $ 236,607 $ 53,309 $ 1,070 $ (30,359) (10,492) (5,874) (15,410) (15,364) (12,784) (11,036) (1,336) (2,366) (3,131) (3,017) (6,197) (2,274) (3,205) (17,543) (11,700) (522) (178) (86,289) (21,876) (44,623) (19,525) (7,138) (7,994) Undiscounted future net cash flows 27,946 8,698 2,943 16,664 27,300 268 83,819 18,652 10 percent midyear annual discount for timing of estimated cash flows (10,456) (4,652) (582) (7,856) (11,774) (56) (35,376) (8,803) (149) (44,328) Affiliated Companies Total Consolidated and Affiliated Companies (426) (38) (212) 394 290,986 (106,240) (29,052) (52,829) 102,865 Future cash inflows from production $ 122,012 $ 45,701 $ 45,706 $ 43,386 $ 95,845 $ 4,466 $ 357,116 $ 85,179 $ 12,309 $ (32,349) (15,987) (15,780) (18,324) (17,982) (14,646) (14,141) (1,428) (4,219) (6,491) (3,643) (5,070) (5,458) (341) (17,562) (11,147) (22,874) (1,078) (98,870) (34,718) (74,932) (22,302) (14,340) (14,561) (2,487) (705) (3,855) Undiscounted future net cash flows 57,896 16,667 6,519 12,523 53,372 1,619 148,596 33,976 5,262 187,834 10 percent midyear annual discount for timing of estimated cash flows (26,422) (9,312) (1,629) (3,652) (26,536) (650) (68,201) (16,990) (2,096) (87,287) $ 31,474 $ 7,355 $ 4,890 $ 8,871 $ 26,836 $ 969 $ 80,395 $ 16,986 $ 3,166 $ 100,547 Future cash inflows from production $ 132,512 $ 52,470 $ 56,856 $ 54,012 $ 109,116 $ 11,959 $ 416,925 $ 100,518 $ 16,928 $ (34,679) (17,322) (17,369) (20,691) (18,850) (17,359) (16,296) (6,609) (114,484) (5,106) (7,553) (4,112) (5,494) (7,757) (23,593) (14,514) (25,519) (1,393) (1,676) (41,184) (90,224) (24,580) (14,069) (18,561) (4,665) (1,692) (4,496) Undiscounted future net cash flows 63,142 19,120 10,301 16,645 59,544 2,281 171,033 43,308 6,075 220,416 for timing of estimated cash flows (29,103) (11,136) (2,646) (4,822) (28,276) (419) (76,402) (22,025) (2,662) (101,089) 10 percent midyear annual discount Standardized Measure Net Cash Flows $ 34,039 $ 7,984 $ 7,655 $ 11,823 $ 31,268 $ 1,862 $ 94,631 $ 21,283 $ 3,413 $ 119,327 454,604 (123,659) (49,763) (93,348) 534,371 (143,729) (56,945) (113,281) Millions of dollars At December 31, 2020 Future production costs Future development costs Future income taxes Standardized Measure Net Cash Flows At December 31, 2019 Future production costs Future development costs Future income taxes Standardized Measure Net Cash Flows At December 31, 2018 Future production costs Future development costs Future income taxes 110 111 Chevron Corporation 2020 Annual Report 111 173155_Annual_Report_10-K.indd 111 173155_Annual_Report_10-K.indd 111 3/5/21 6:04 PM 3/5/21 6:04 PM glossary of energy and financial terms energy terms Additives Specialty chemicals incorporated into fuels and lubricants that enhance the performance of the fnished products. Barrels of oil-equivalent (BOE) A unit of measure to quantify crude oil, natural gas liquids and natural gas amounts using the same basis. Natural gas volumes are converted to barrels on the basis of energy content. See oil-equivalent gas and production. Condensate Hydrocarbons that are in a gaseous state at reservoir conditions, but condense into liquid as they travel up the wellbore and reach surface conditions. Development Drilling, construction and related activities following discovery that are necessary to begin production and transportation of crude oil and natural gas. Enhanced recovery Techniques used to increase or prolong production from crude oil and natural gas reservoirs. Entitlement efects The impact on Chevron’s share of net production and net proved reserves due to changes in crude oil and natural gas prices and spending levels between periods. Under production-sharing contracts (PSCs) and variable- royalty provisions of certain agreements, price and spending variability can increase or decrease royalty burdens and/or volumes attributable to the company. For example, at higher prices, fewer volumes are required for Chevron to recover its costs under certain PSCs. Also under certain PSCs, Chevron’s share of future proft oil and/or gas is reduced once specifed contractual thresholds are met, such as a cumulative return on investment. Exploration Searching for crude oil and/or natural gas by utilizing geologic and topographical studies, geophysical and seismic surveys, and drilling of wells. Gas-to-liquids (GTL) A process that converts natural gas into high-quality liquid transportation fuels and other products. Greenhouse gases Gases that trap heat in Earth’s atmosphere (e.g., water vapor, ozone, carbon dioxide, methane, nitrous oxide, hydrofuorocarbons, perfuorocarbons and sulfur hexafuoride). Integrated energy company A company engaged in all aspects of the energy industry, including exploring for and producing crude oil and natural gas; refning, marketing and transporting crude oil, natural gas and refned products; manufacturing and distributing petrochemicals; and generating power. Liquefed natural gas (LNG) Natural gas that is liquefed under extremely cold temperatures to facilitate storage or transportation in specially designed vessels. Natural gas liquids (NGLs) Separated from natural gas, these include ethane, propane, butane and natural gasoline. Oil-equivalent gas (OEG) The volume of natural gas needed to generate the equivalent amount of heat as a barrel of crude oil. Approximately 6,000 cubic feet of natural gas is equivalent to one barrel of crude oil. Oil sands Naturally occurring mixture of bitumen (a heavy, viscous form of crude oil), water, sand and clay. Using hydroprocessing technology, bitumen can be refned to yield synthetic oil. Petrochemicals Compounds derived from petroleum. These include aromatics, which are used to make plastics, adhesives, synthetic fbers and household detergents; and olefns, which are used to make packaging, plastic pipes, tires, batteries, household detergents and synthetic motor oils. Production Total production refers to all the crude oil (including synthetic oil), NGLs and natural gas produced from a property. Net production is the company’s share of total production after deducting both royalties paid to landowners and a government’s agreed-upon share of production under a PSC. Liquids production refers to crude oil, condensate, NGLs and synthetic oil volumes. Oil-equivalent production is the sum of the barrels of liquids and the oil-equivalent barrels of natural gas produced. See barrels of oil-equivalent and oil-equivalent gas. Production-sharing contract (PSC) An agreement between a government and a contractor (generally an oil and gas company) whereby production is shared between the parties in a prearranged manner. The contractor typically incurs all exploration, development and production costs, which are subsequently recoverable out of an agreed-upon share of any future PSC production, referred to as cost recovery oil and/or gas. Any remaining production, referred to as proft oil and/or gas, is shared between the parties on an agreed-upon basis as stipulated in the PSC. The government may also retain a share of PSC production as a royalty payment, and the contractor typically owes income tax on its portion of the proft oil and/or gas. The contractor’s share of PSC oil and/or gas production and reserves varies over time, as it is dependent on prices, costs and specifc PSC terms. Reserves Crude oil and natural gas contained in underground rock formations called reservoirs and saleable hydrocarbons extracted from oil sands, shale, coalbeds and other nonrenewable natural resources that are intended to be upgraded into synthetic oil or gas. Net proved reserves are the estimated quantities that geoscience and engineering data demonstrate with reasonable certainty to be economically producible in the future from known reservoirs under existing economic conditions, operating methods and government regulations and exclude royalties and interests owned by others. Estimates change as additional information becomes available. Oil-equivalent reserves are the sum of the liquids reserves and the oil-equivalent gas reserves. See barrels of oil-equivalent and oil-equivalent gas. The company discloses only net proved reserves in its flings with the U.S. Securities and Exchange Commission. Investors should refer to proved reserves disclosures in Chevron’s Annual Report on Form 10-K for the year ended December 31, 2020. Resources Estimated quantities of oil and gas resources are recorded under Chevron’s 6P system, which is modeled after the Society of Petroleum Engineers’ Petroleum Resource Management System, and include quantities classifed as proved, probable and possible reserves, plus those that remain contingent on commerciality. Unrisked resources, unrisked resource base and similar terms represent the arithmetic sum of the amounts recorded under each of these classifcations. Recoverable resources, potentially recoverable volumes and similar terms represent estimated remaining quantities that are expected to be ultimately recoverable and produced in the future, adjusted to refect the relative uncertainty represented by the various classifcations. These estimates may change signifcantly as development work provides additional information. At times, Chevron Corporation 2020 Annual Report 112 original oil in place and similar terms are used to describe total hydrocarbons contained in a reservoir without regard to the likelihood of their being produced. All of these measures are considered by management in making capital investment and operating decisions and may provide some indication to stockholders of the resource potential of oil and gas properties in which the company has an interest. Shale gas Natural gas produced from shale rock formations where the gas was sourced from within the shale itself. Shale is very fne-grained rock, characterized by low porosity and extremely low permeability. Production of shale gas normally requires formation stimulation such as the use of hydraulic fracturing (pumping a fuid-sand mixture into the formation under high pressure) to help produce the gas. Synthetic oil A marketable and transportable hydrocarbon liquid, resembling crude oil, that is produced by upgrading highly viscous or solid hydrocarbons, such as extra-heavy crude oil and oil sands. Tight oil Liquid hydrocarbons produced from shale (also referred to as shale oil) and other rock formations with extremely low permeability. As with shale gas, production from tight oil reservoirs normally requires formation stimulation such as hydraulic fracturing. fnancial terms Cash flow from operating activities Cash generated from the company’s businesses; an indicator of a company’s ability to fund capital programs and stockholder distributions. Excludes cash flows related to the company’s financing and investing activities. Debt ratio Total debt, including finance lease obligations, divided by total debt plus Chevron Corporation stockholders’ equity. Earnings Net income attributable to Chevron Corporation as presented on the Consolidated Statement of Income. Free cash flow The cash provided by operating activities less cash capital expenditures. Margin The difference between the cost of purchasing, producing and/or marketing a product and its sales price. Net debt ratio Total debt less the sum of cash and cash equivalents, time deposits and marketable securities as a percentage of total debt less the sum of cash and cash equivalents, time deposits and marketable securities plus Chevron Corporation’s total stockholder’s equity. Return on capital employed (ROCE) Ratio calculated by dividing earnings (adjusted for after- tax interest expense and noncontrolling interests) by the average of total debt, noncontrolling interests and Chevron Corporation stockholders’ equity for the year. Return on stockholders’ equity (ROSE) Ratio calculated by dividing earnings by average Chevron Corporation stockholders’ equity. Average Chevron Corporation stockholders’ equity is computed by averaging the sum of the beginning-of-year and end-of-year balances. Total stockholder return (TSR) The return to stockholders as measured by stock price appreciation and reinvested dividends for a period of time. 1149230_Annual_Report_v8.3_r2.indd 112 1149230_Annual_Report_v8.3_r2.indd 112 3/18/21 7:07 PM 3/18/21 7:07 PM stockholder and investor information Stock exchange listing Chevron common stock is listed on the New York Stock Exchange. The symbol is “CVX.” Stockholder information As of February 10, 2021, stockholders of record numbered approximately 114,000. For questions about stock ownership, changes of address and dividend reinvestment programs, please contact Chevron’s Stock Transfer Agent: Computershare P.O. Box 505000 Louisville, KY 40233-5000 800 368 8357 (U.S. and Canada) 201 680 6578 (outside the U.S. and Canada) www.computershare.com/investor Overnight correspondence should be sent to: Computershare 462 South 4th Street Suite 1600 Louisville, KY 40202 The Computershare Investment Plan is a direct stock purchase and dividend reinvestment plan. Dividend payment dates Quarterly dividends on common stock are paid, generally, following declaration by the Board of Directors, on or about the 10th day of March, June, September and December. Direct deposit of dividends is available to stockholders. For information, contact Computershare. (See Stockholder information.) Investor information Securities analysts, portfolio managers and representatives of fnancial institutions may contact: Investor Relations Chevron Corporation 6001 Bollinger Canyon Road San Ramon, CA 94583-2324 925 842 5690 Email: invest@chevron.com Notice As used in this report, the term “Chevron” and such terms as “the company,” “the corporation,” “our,” “we,” “us” and “its” may refer to one or more of Chevron’s consolidated subsidiaries or to all of them taken as a whole. All of these terms are used for convenience only and are not intended as a precise description of any of the separate companies, each of which manages its own afairs. Corporate headquarters 6001 Bollinger Canyon Road San Ramon, CA 94583-2324 925 842 1000 Annual meeting The Annual Meeting of Stockholders will be held online via live audio webcast at 8 a.m. PDT, Wednesday, May 26, 2021. www.virtualshareholdermeeting.com/CVX2021 Electronic access In an effort to conserve natural resources and reduce the cost of printing and mailing proxy materials, we encourage stockholders to register to receive these documents by email and vote their shares on the Internet. Stockholders of record may sign up for electronic access (and beneficial stockholders may be able to request electronic access by contacting their broker or bank or Broadridge Financial Solutions) on this website: www.icsdelivery.com/cvx/. Enrollment is revocable until each year’s Annual Meeting record date. assisting local communities during the - COVID 19 crisis Chevron has a history of supporting communities during crises. This pandemic is no different. To date, we have contributed more than $30 million to COVID 19 humanitarian relief efforts in 17 countries to support medical needs, essential workers, food banks, education, small businesses and more. In the Riau province of Indonesia, we delivered over 50 patient beds. - Chevron Corporation 2020 Annual Report 113 1149230_Annual_Report_v8.3_r1.indd 113 1149230_Annual_Report_v8.3_r1.indd 113 3/12/21 2:54 PM 3/12/21 2:54 PM     COVID‑19 response Chevron has a robust infrastructure to deal with emergencies – from earthquakes and wildfires to hurricanes, typhoons and other extreme weather. We also have become adept at managing epidemics, like SARS-1, Ebola and AIDS. These experiences remain in our corporate DNA as a foundation for emergency planning. After China first reported COVID-19 cases in January 2020, we quickly mustered an enterprisewide response. Data-focused analysis of the virus’s potential global reach prompted Chevron’s leadership to activate our Corporate Pandemic Response Team – weeks before the World Health Organization declared a pandemic, to protect our workers, communities and operations. Learn more at www.chevron.com/covid‑19 Details of the company’s political contributions for 2020 are available on the company’s website, www.chevron.com, or by writing to: Corporate Affairs Chevron Corporation 6001 Bollinger Canyon Road Building G San Ramon, CA 94583-2324 For additional information about the company and the energy industry, visit Chevron’s website, www.chevron.com. It includes articles, news releases, speeches, quarterly earnings information, the Proxy Statement and the complete text of this Annual Report. Publications and other news sources The Annual Report, distributed in April, summarizes the company’s financial performance in the preced ing year and provides an overview of the company’s major activities. Chevron’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission and the Supplement to the Annual Report, containing additional financial and operating data, are available on the company’s website, www.chevron.com, 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: invest@chevron.com The 2020 Sustainability Report will be available in May on the company’s website, www.chevron.com/sustainability, where a guide to Chevron’s sustainability efforts and approach to our environment, social and governance (ESG) priorities can be found. Highlights include: the innovative and responsible actions Chevron is taking to advance environmental performance; our investment in people and partnership; and our commitment to delivering results the right and responsible way, with safety and health as operating priorities. Printed copies may be requested by writing to: Corporate Affairs: Corporate Sustainability Communications Chevron Corporation 6001 Bollinger Canyon Road Building G San Ramon, CA 94583-2324 connect with us This Annual Report contains forward-looking statements – identified by words such as “believe,” “expect,” “may,” “will,” “commit,” “position,” “focus,” “goal,” “target,” “schedule,” “plan,” “opportunity,” “strategy,” “project,” “forecast,” “on track” and similar phrases – that reflect management’s current estimates and beliefs, but are not guarantees of future results. Please see “Cautionary Statements Relevant to Forward-Looking Information for the Purpose of ‘Safe Harbor’ Provisions of the Private Securities Litigation Reform Act of 1995” on page 30 for a discussion of some of the factors that could cause actual results to differ materially. PRODUCED BY Corporate Affairs and Controller’s Departments, Chevron Corporation DESIGN Bluehouse, Chevron Corporation PRINTING Advantage ColorGraphics – Anaheim, California www.chevron.com/annualreport2020 Chevron Corporation 6001 Bollinger Canyon Road, San Ramon, CA 94583-2324 USA www.chevron.com © 2021 Chevron Corporation. All rights reserved. 100% Recyclable 912-0985 1149230_Annual_Report_v8.3_r2.indd 55-159 3/18/21 6:41 PM 

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