the company has three existing effective “shelf” registration statements on file with the Securities and Exchange Commission that together would permit additional registered debt offerings up to an aggregate $3.8 billion of debt securities. Following the acquisition of Unocal, the company withdrew Unocal’s “shelf” registration statements.

     In October 2005, the company fully redeemed the Unocal subsidiary Pure Resources’ 7.125 percent Senior Notes due 2011 for $395 million. The company’s $150 million of Texaco Brasil zero coupon notes were paid at maturity in November 2005. In December 2005, the company exercised a par-call redemption of $200 million in Texaco Capital Inc. 5.7 percent Notes due 2008.

     In February 2006, the company retired Union Oil bonds at maturity for approximately $185 million.

     Texaco Capital LLC, a wholly owned finance subsidiary, issued Deferred Preferred Shares Series C (Series C) in December 1995. In February 2005, the company redeemed the Series C shares and paid accumulated dividends of approximately $140 million.

     In January 2005, the company contributed $98 million to its Employee Stock Ownership Plan (ESOP) to permit the ESOP to make a $144 million debt service payment, which included a principal payment of $113 million.

     In the second quarter 2004, Chevron entered into $1 billion of interest rate fixed-to-floating swap transactions, in which the company receives a fixed interest rate and pays a floating rate, based on the notional principal amounts. Under the terms of the swap agreements, of which $250 million and $750 million will terminate in September 2007 and February 2008, respectively, the net cash settlement will be based on the difference between fixed-rate and floating rate interest amounts.

     Chevron’s senior debt is rated AA by Standard and Poor’s Corporation and Aa2 by Moody’s Investors Service. The company’s senior debt of Texaco Capital Inc. is rated Aa3, and Union Oil Company of California bonds are rated A1 by Moody’s. These companies are wholly owned subsidiaries of Chevron. The company’s U.S. commercial paper is rated A-1+ by Standard and Poor’s and P-1 by Moody’s, and the company’s Canadian commercial paper is rated R-1 (middle) by Dominion Bond Rating Service. All of these ratings denote high-quality investment-grade securities.

     The company’s future debt level is dependent primarily on results of operations, the capital-spending program and cash that may be generated from asset dispositions. Further reductions from debt balances at December 31, 2005, are dependent upon many factors, including management’s continuous assessment of debt as an appropriate component of the company’s overall capital structure. The company believes it has substantial borrowing capacity to meet unanticipated cash requirements, and during periods of low prices for crude oil and natural gas and narrow margins for refined products and commodity chemicals, the company believes that it has the flexibility to increase borrowings and/or modify capital-spending plans to continue paying the common stock dividend and maintain the company’s high-quality debt ratings.

     Common Stock