Good morning. My name is Sean, and I’ll be your conference facilitator today. Welcome to Chevron's First Quarter 2013 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers’ remarks, there will be a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call is being recorded. I’ll now turn the conference call over to the Vice President and Chief Financial Officer of Chevron Corporation, Ms. Pat Yarrington. Please go ahead.

Okay. Good morning, everyone, and thank you, Sean. Welcome to Chevron’s first quarter earnings conference call and webcast. On the call with me today is Jeff Gustavson, General Manager, Investor Relations. We will refer to the slides that are available on Chevron’s website. Before we get started, please be reminded that this presentation contains estimates, projections and other forward-looking statements. We ask that you review the cautionary statement shown on Slide 2. Slide 3 provides an overview of our financial performance. The Company's first-quarter earnings were $6.2 billion, or $3.18 per diluted share. Return on capital employed for the trailing 12 months was 18%. Our debt ratio at the end of March was approximately 9%. In the first quarter we repurchased $1.25 billion of our shares. In the second quarter we expect to repurchase the same amount. Turning to slide 4, this week Chevron’s Board of Directors declared a $1 per share quarterly common stock dividend payable in mid-June. This is an 11% increase and reflects the performance and strength of our current portfolio and are confident in our compelling growth prospects. Since 2004, our dividend has grown at a compound annual rate of 11%, a growth rate that is well in excess of the S&P 500 and better than our peers. You can see this on the left chart. This pattern demonstrates the priority be placed on rewarding our investors through increasing distribution. The chart on the right provides updated information on five-year rolling total return to shareholders, through the end of the first quarter. Our strong financial and operational performance and superior growth prospects for both production and value are being recognized by the market. We have led on this rolling total shareholder return for an extended period of time now and we are off to a strong…

Thanks, Pat. Turning to slide 6, I'll compare results of the first quarter 2013 with the fourth quarter 2012. As a reminder, our earnings release compares first quarter 2013 with the same quarter a year ago. First quarter earnings were $6.2 billion, about 1 billion lower than fourth quarter results. Upstream earnings were down $942 million, reflecting the absence of fourth quarter asset transaction gains, partly offset by higher realizations and a favorable swing in foreign currency effects. Downstream results decreased $224 million between quarters, driven by lower volumes largely associated with seasonal maintenance activity in the absence of fourth quarter asset transactions, partly offset by a positive swing in foreign currency effects. The variance in the other bar largely reflects lower corporate charges. On slide 7, our U.S. Upstream earnings for the first quarter were $231 million lower than fourth quarter's results. Higher realizations improved earnings by 95 million, driven largely by an increase in crude oil prices. Lower production volumes decreased earnings by $80 million, mainly due to increased maintenance activity in the Gulf of Mexico and fewer producing days in the quarter. The net of higher DD&A and lower operating expenses reduced earnings by $85 million. The other bar reflects a number of unrelated items, including the absence of favorable tax effects and gains on small asset transactions in the fourth quarter. Turning to slide 8, international Upstream earnings were $711 million lower than the fourth quarter. Earnings increased approximately $130 million, due to higher realizations, partly offset by lower liftings. A favorable swing in foreign currency effects improved earnings by about $200 million. The first quarter had a gain of $170 million compared to a loss of $30 million in the fourth quarter. Lower operating expenses increased earnings by about $200 million between periods, primarily due…

Okay. Now turning to slide 13, last month we held our annual security analyst meeting where we provided updates on our projects and future growth plan as well as our financial performance relative to our key competitors. We now have fully updated relative performance data in a couple of areas. Segment returns on capital employed and Upstream cash margins. First, our Upstream adjusted return on capital employed was 21.5% for 2012 and we can confirm this placed us in the number one position relative to our major piers for the second year in a row. We completed the restructuring of our Downstream business and our adjusted return on capital employed in 2012 improved again to over 18%. Here we rank a strong number two against our piers and we have been closing the gap versus the leader for each of the last five years. Slide 14 shows our updated Upstream cash margin comparison. We have led the pier group in Upstream realizations for several years a trend which continued in 2012, combined with our competitive cost structure and the quality of our portfolio we also continue to lead the pier group on unit cash margins. In fact our cash margin of just under $37 per barrel exceeded the average cash margin for our pier group by $11 per barrel or over 40%. This superior performance is a function of the quality of our assets as well as our strong execution capabilities. Turning to, slide 15. I would like to share some highlights of the strategic progress we made during the quarter. We announced successful well test results at St. Malo in the U.S. deepwater Gulf of Mexico where oil flow rates while limited by testing equipment constraints exceeded 13,000 barrels per day. With new technology we saw drilling efficiencies and…

Thank you. (Operator Instructions). Our first question comes from Ed Westlake with Crédit Suisse. Please go ahead with your question.

Hi. Good morning, Pat. I've got a quick question on the tax rate, if I may. Obviously it dropped down to 39.3% and you flagged favorable tax rates in some of the commentary. Are there any sort of structural changes here in terms of shifts or is this just tax optimization in the quarter?

There's nothing structural here, Ed. As you probably know that as certain projects mature and particularly as they get to the FID stage, it's not unusual to have certain tax impacts triggered by reaching that project milestone and that's really what we saw occurring here in the first quarter. That's what gave us a low effective tax rate in first quarter '13. We expect this to balance out over the end of the year. And so I think from a longer term perspective, thinking back to the 2012 effective tax rate, which is about 43%, that's a pretty reasonable place for you to peg the overall expectation for the year.

Thanks, that's very helpful. And then just switching topics, on natural gas in the U.S., obviously a bit of benefit from Marcellus and Atlas over the last couple of quarters but the gas price, I guess it's rebounded a little bit. Should we expect that gas production probably turns down a little bit as it started to in the first quarter as you go through the balance of the year?

Well, I think what we have said in the past, we have really restricted all of our dry gas production to minimal amounts, principally in the Marcellus area. And of course, we're being helped there economically by the carry that it's still in place. All the rest of our gas production efforts really are geared towards heavy liquids concentration efforts. And so we should continue to see those ramp up.

Okay, thanks, very helpful. Thanks very much.

Okay. Thanks, Ed.

Our next question comes from Evan Calio with Morgan Stanley. Please go ahead with your questions.

Good morning, Pat and Jeff.

Good morning, Evan.

Good morning.

Let me ask maybe a longer term question of how you think about the longer term CapEx and cash return strategy. And I ask in the context of my view Chevron's relative free cash flow inflection in 2014, '15 time period, as you begin to see the cash benefit of these relatively heavier and current period of capital investment. And the question hence becomes, do you believe that when you likely have incremental cash during this period, the cash returns to shareholders via buybacks or dividends increase or that you see additional reinvestment opportunities in the portfolio to maybe replicate this '14 to '17 growth period. How do you think about that?

Okay. Well, I would say broadly. I mean first of all, we believe the best way over time that we create value for our shareholders is by making the right investment choices. And if we have a strong queue, if we have projects that are very nicely attractive, nicely economic then obviously that's an important element for us. We have been in a stage where we have had very nicely attractive projects. And so that is really what has given rise to the heavy investment period of time. We do take our dividend commitment to our shareholders very, very seriously. That is the first priority of return of distributions to the shareholders. So you should expect that to continue to grow as long as earnings and cash flows continue to grow, and we of course are able to grow earnings and cash flows if we invest appropriately. So we work very harder trying to get that balance right between attractive projects for investment in the business and then also dividend distributions to the shareholders. If we get into periods of times where we have surplus cash, free cash flow beyond the C&E requirement, beyond the dividend requirement that’s really what we pay to your share repurchase program to distribute. And we look at that every quarter, we evaluate what we think the kind of the medium term requirements for the firm are in terms of reinvestment, we obviously have a hypothesis about what our Board might do on dividends. We look at, what we think is happening from a commodity price standpoint and therefore what net generation into the firm might be and that's how we take our share repurchases. It is the most flexible element of our cash distribution formula.

I mean, then I understood, I mean, let me try may be what – kind of one different way and if I could, I mean, the percentage of CAPM that’s invested in the project queue, that is not anything I need to know about today, is relatively higher than where its been historically. I think you gave a 35% number at the Analyst Day and I know there is lot of variabilities, but under current conditions would you expect that to normalize back into this -- 25% to 30% range, once you are exiting this kind of peak spending period through call them the 2015 timeframe? I will leave it at that. Thanks.

Okay and I think the best guidance I can give you on that would be to have you take a look at the duration of the investment cycles for some of the projects that we have underway. When you're talking about LNG projects, of course we have got Gorgon and Wheatstone underway, we have Kitimat, which is just in a very, very embryonic stage here, but those have very long investment cycle, 60 months plus. That's much different than what you would get in sort of the factory investment types of cycles that you might achieve and say a Permian ramp up for example. So, I think you need to look at the kinds of projects that we have in our queue and the overall investment cycle times for those projects in the queue. And that is going to give you an indication of how much pre-productive capital we might have built up on our balance sheet at any point of time. I did say back in March that our pre-productive capital was in the high 30s and that is an abnormally high level for us. And so all things being equal, once you get through the heavy spend period, we would expect that to come down as long as we don't have another set of projects moving forward. We do try to balance this all out and in the end I think we have certainly demonstrated a history of doing that being able to that successfully, because our project queue has been very economic and its producing the returns that we're benefiting from a cash flow standpoint and our investors are benefiting from a distribution standpoint.

Great, thanks. I appreciate it.

Okay. Thank you.

Our next question comes from Arjun Murti with Goldman Sachs. Please go ahead with your question.

Thank you. Question on the Cooper Basin, when we were over in Perth last fall sometime, Chevron did not sound particularly excited about some of the East Coast LNG opportunities or stuff over in Queensland. Just curious whether this Cooper Basin entry signals any change to that view? Maybe I misread it.

You know Arjun, I wouldn't read too much into them, and I think we were talking very broadly back in the fall and as a general rule as a Company we are always on the look out for what I will consider low-cost early entry opportunities, and that's really what the Cooper Basin represent. It's a very new play, I can’t really indicate how that may in fact turn out for us, we just think it was an opportunity to expand our unconventional portfolio and there is an off a lot of work that will need to be done to evaluate the Basin. But we're hopeful that something could turn out there. I think you need to think of it as low-cost entry and very early in the evaluation phase.

Got it. That's helpful, Pat. Thank you. And just a quick follow-up. Any update on the timing of Angola LNG start-up and Frade start-up? Thank you very much.

Sure. So on Angola LNG, our expectation is that we will have first LNG here in the second quarter. Assuming that happens, we would expect then to get to full capacity by year-end. And again, assuming that things move as we think they will, it's probably going to add to us about 20,000 barrels a day for the full year. Obviously that would just be a partial year contribution for us. It's worth about 60,000 barrels a day net to us once fully operational. From a Frade standpoint, we have received approval for a production restart for four wells basically, no injection activity. And that should be here in the second quarter as well. But it will be ramping up relatively slowly and so the contribution for the year will be relatively modest, only about 5,000 barrels a day.

That's great. Thank you so much.

Okay.

Our next question comes from Paul Sankey with Deutsche Bank. Please go ahead with your questions.

Hi. Good morning, everyone.

Good morning, Paul.

Pat, just a quick one. Was there some tax changes in Kazakhstan as related to exports is the first one? And the bigger one which you may be able to answer or not is can you talk a little bit about the sensitivity of your CapEx levels to the dollar – to appreciation in the dollar? I assume an appreciating dollar would bring down your global CapEx. I wondered if you had a sense for sensitivities. Thanks.

Right. So the first answer no, the tax change didn’t relate to Kazakhstan. And in terms of our capital program, we're really most sensitive to movement from a capital program standpoint to the Australian dollar versus the U.S. dollar. And I think we've explained in the past that yes, it's been a component. We have had higher foreign exchange impacts that was part of the Gorgon cost increase up to $52 billion. About a third of that increase from the original FID number was related to foreign exchange effects, so that has impacted us there. This year it has really been much more modest than that. And as we said in the past, we haven't hedged against the Australian dollar or hedged the Gorgon or Wheatstone activities because usually the Australian dollar is moving with commodity prices and usually that means that we've got a natural hedge.

Yeah, I was just kind of wondering because I guess it's the dollar strength and just globally it would tend to imply that the oil price will come down, but clearly what you're saying is the main sensitivity by far is the Aussie dollar.

That's exactly right.

Not some – for example, the euro wouldn't make a whole lot of difference either way.

Not from a C&E standpoint, no.

By the way, going back to the first question that Kazakhstan had changed its exports tariffs. Was I wrong?

No, Paul. This is Jeff. That's correct. They did increase the export tax but our assets are not affected by the increase – our netbacks are not impacted.

Thank you. That's perfect. Thank you.

Our next question comes from Doug Leggate with Bank of America Merrill Lynch. Please go ahead with your questions. Doug, your line is open. Could you try pressing your mute button?

I'm sorry, I had mute on. Good morning, everybody.

Hello, Doug.

Hi, Pat. We were looking forward a couple of years just some very substantial step-ups in production, but we don't really hear you talk much about portfolio high grading. Is that something that – you're very happy with the asset base you have now or is it an ongoing effort to pair, if you like, the bottom 10% in portfolio on a regular basis? And I've got a follow-up please.

I would say that we have a standard practice of pairing components of our portfolio and I'm speaking here about the Upstream, pairing components of our portfolio where we find that it's not going to continue to attract the capital that it needs to perform well where we feel others might find more value in that asset. So we will continue to do that pairing, I think about a year-and-a-half ago because I'm a little shy on the timing, but it's fourth quarter – last year I think it was ‘11, the Cook Inlet sale occurred. So, that’s just a good example of continued pairing of the portfolio. I will say on balance we’re very happy with our portfolio because you see it in our earnings margins and you see it in our cash margins. So, on balance we like the assets that we have, but having said that we obviously looked for opportunities to pair if we think the asset has more value to somebody else and it's not going to compete in our portfolio.

[Indiscernible) particularly material, how does that result a fair assessment?

I think that’s true, that’s fair. I mean, normally you can expect for the enterprise somewhere between $1 billion and $3 billion of asset sales in a given year. Over the last few years more recently we have had a little bit heavier restructuring occurring in our Downstream segment, and so that effort is largely behind us and so you wouldn’t expect that continuing size to go forward in 2013.

Great. My follow-up is really – I guess it's kind of a related issue. We monitor your, if you like, cap rate on your Upstream business and for most of the last year, it was – I won't give numbers, but let's assume it was relatively low and in Q1, we have seen a big jump in your international margins relative to your weighted revenues, if you like. Has something changed there? Was it an absence of maintenance that’s more sustainable going forward or to Paul’s point has there been any kind of incremental tax changes that have led to that rebound. I am just trying to understand how sustainable this might be on a go-forward basis, because it was quite a significant number relative to what you were expecting?

You’re talking about our Upstream …

International – international margins.

Upstream international margins, right. I think that it really, when you look at 2012, if you look at the whole quarterly pattern for 2012 had a significant deterioration in the third quarter really associated with the downtime at TCO. And now we have really just moved backup into what would be a more normal pattern. And that impact of the downturn in the third quarter and the re-ramping backup here in the fourth quarter you can see in last years results.

Okay. That’s great. Thank you.

We’re back to a more normal position for us.

That’s what I need. Thank you

Thanks, Doug.

Our next question comes from Doug Terreson with ISI Group. Please go ahead with your question.

Congratulations on your results everybody.

Thanks, Doug.

Thank you.

Pat, I want to say -- if you’d provide an update on the situation in Argentina and also the plan or next steps for Kurdistan for 2013, if there are any?

Okay, well Argentina we continue to work with YPF on the Vaca Muerta discussion. We're hopeful that, that will be able to be concluded. So far we have drilled about three shale wells on our existing acreage and we’re encouraged by the results that we have there. There are some above ground complications, I guess I would say that exists in Ecuador as they relate to Ecuador, and we need to have satisfactory resolution of those above ground complications before we proceed in a material way on Vaca Muerta.

Yeah. In fact could you just provide a little color on that point?

Okay, well basically Ecuador has …

You don’t have to go that far back. Just kind of the next steps, I guess legally that you guys envision? Yeah.

On the Ecuador – on the overall Ecuador case?

No, no. Just the Argentina component. I’m sorry, yes.

On Argentina. Argentina, okay. So right now there’s a, I guess I would call it a partial freeze of assets in Ecuador.

Sure.

It really hasn’t impacted our liquidity in a substantial way. We’ve been able to modify our liquidity provisions and so operationally we’re in good shape. There is a freeze underway.

Right.

We are basically petitioning to the Supreme Court in Argentina to have them review that case. I don’t know when the Supreme Court may take it up or if they will take it up. We’re certainly hopeful that they will take it up.

Okay.

We don’t believe that there is any merit to having the freeze in place. And we believe in a country that abides by the rule of law that kind of justice will prevail on this element as well.

Great. Thanks a lot.

Okay. Thank you.

Our next question comes from Jason Gammel with Macquarie. Please go ahead with your question.

Thank you. I just wanted to ask a couple of follow-up questions on the exploration success in the quarter. First of all in Coronado, obviously in a pretty good neighborhood there. Can you talk about any follow-on drilling plans that you have? I believe that you're about to spud a sidetrack or maybe already have spud a sidetrack on the discovery well?

Well, not really sure what I want to be saying here on Coronado. I mean we do like the area. Let's see here…

So we're still evaluating that – Jason, we have spud – a sidetrack on it.

But there's not much more that we really want to say…

Not right now, it's still under evaluation.

Okay, that's fine. And then maybe if I could just shift to the Australian exploration success. Obviously between drilling results and then the swap that you had with Shell for Carnarvon Basin versus Browse Basin, a quite a bit of incremental gas. Now you've talked about being able to move into a Gorgon feed for a training 4 relatively soon. But given the gas you've accumulated, when do you think you could actually start evaluating a training 3 at Wheatstone?

Well, I think that is more distant certainly. I think we need to get trains 1 and 2 up and moving forward. We're only the second year into that, the whole development construction phase here for Wheatstone. So I think it will come. It is a hugely prolific area, as you know, and with both the Kentish Knock and Elfin-1 prospects may just continue to add. And so the more that full region continues to add to our gas holding then it gives us more flexibility about which particular or gas molecule we send to which particular plant. So I think you should think of it as after discussions around training 4 for Gorgon.

Okay. That's helpful.

And any further expansion of Wheatstone.

Okay. That's helpful. Thanks very much.

Our next question comes from Paul Cheng with Barclays Capital. Please go ahead with you questions.

Hi, guys. Nigeria GTL, are we still on track for the year-end start-up? And based on your experience with the GTL, I presume that you're probably not interested in a GTL plan in the U.S. natural gas market?

So with regard to EGTL, we're in the process here of commissioning the plant. It's a complex plant and the commissioning activity really go on for the bulk of this year, for the rest of this year. I would say we don't see – GTL will not rank high in terms of our project alternatives for U.S. natural gas.

In Nigeria, Pat you're saying should be continued to be ramping up, is that any PSC you said related to Nigerian production or your just natural under 90 rate?

No, there's no PSC of fracs there.

I'd say there are some cost recovery there, Paul. So investment levels were slightly lower because quarters since we had lower cost to our barrels.

And that's really a timing issue not anything more sustaining than that, timing of investments and therefore the timing of cost recovery barrels.

Okay. Can I just maybe a real quick one for clarification. On the favorable tax impact for the international E&P, do you have an absolute dollar amount in the first quarter? You showed in the chart saying that sequentially it's a benefit of $214 million. What is the absolute dollar amount in the first quarter?

We're not going to disclose that. Again, I think the important point about this is to understand that that was a timing event associated with moving some projects through various project milestones and the taxes that are triggered commensurate with that. For the overall year, you should think about the overall effective rate for the company of being in the low 40%.

All right, thank you.

Our next question comes from Faisel Khan with Citigroup. Please go ahead with your questions.

Thank you. Good morning. I just wanted to actually get some clarification on the Downstream business. You guys mentioned a lot of sort of downtime between Pascagoula, El Segundo, Burnaby, South Africa, Richmond, the OC Refinery that's just all of that. Could you guys just let us know what was down and what’s back up in its full production right now and maybe give us a little bit more detail on the upgrader here, which is so you’re going to consume more heavy oil at Yeosu? And I just have a follow-up. Thanks.

Okay. So I think, what we can say we really have said already. So El Segundo and Pascagoula are back at normal operating level. Richmond crude unit is just now taking FEED and we will continue to line that out over the next several days, so certainly as we progress through the quarter, you should expect that to be back to full operation. The downtime at the smaller refineries is same sort of circumstance has occurred. So, it was just a very heavy first quarter of maintenance period. You should expect the second quarter will be substantially back fully operational. We don't go into specific details about which units we have down at which plant, for which duration for commercial reasons and I'm sure you can appreciate that. And then in terms of South Korea here, we did have the new VGO FCC up and online with on-spec product during the first quarter. It's a 53,000 barrel a day plant; it does allow us to process heavier oil.

Okay, got it. Perfect. And then my follow-up is on the Marcellus. Is there any chance you give us sort of how production has going for you in the Marcellus, last year and for this year. So you talked about it, I guess, in your prepared remarks, so just trying to understand how much growth you’re seeing at that particular asset of yours?

So that – I will take that –there has been production growth between year-on-year quarters and a lot of that’s driven in the U.S. by both Marcellus and the Midcontinent for us which is respectably the Permian and some of the assets we picked up from Chesapeake later last year. So Marcellus continued these carry and continue to bring on production.

And we would expect the Permian component to continue to grow during the year.

Okay. Fair enough. Thanks a lot.

Our next question comes from Asit Sen with Cowen Securities. Please go ahead with your question.

Thank you. Good morning. Two quick questions, one with Brazil and one on Australia. Just a follow-on on Brazil, given Friday’s start in second quarter and small contribution in 2013, how should we think about Papa Terra, still at 2013 start-up or slips into 2014?

Right. So – we really need to refer you to the operator on this, but the operators continues to have a 2013 start-up.

Okay. And then, secondly on Australia, a more strategic question, in a scenario were floating LNG becomes viable. How does it impact your thought process and future LNG trains that either Gorgon or Wheatstone, any early thoughts on that would be appreciated. Thank you.

Right. So, I think the floating LNG obviously is a technology that is still yet to be proven and my expectation will be over time that will prove out to be a development design that will be appropriate for certain types of reservoirs. In terms of Wheatstone and Gorgon, we’re really in a position where we have invested already in the Greenfield and our best opportunity for further expansion obviously will be Brownfield. Brownfield as you know can be much more economic, particularly on the Downstream component of the plant, certainly we think may be 15% or so – 15% to 20% more capital efficient on the Downstream side. So, we think the Brownfield expansion that we have at Gorgon and Wheatstone and given the resource size that we have at Gorgon and Wheatstone will allow those developments when the time is right to be attractive and competitive.

Thanks.

Our next question comes from Allen Good with Morningstar. Please go ahead with your question.

Good morning. I just wonder, if I get a follow-up on the Marcellus, I guess in March you announced you had the $850 million left on the drilling carries there and were running about eight rigs. At your current level, when would you expect to exhaust that drilling carry and when you do, would you imagine that you continue almost on with that eight rig drilling program or would you reduce the activity at that time?

Right. So the 850 is the number that we have at this particular point in time. We are not going to continue to provide interim updates on that. That really is a function of kind of the drilling program and the rate at which the investments occur. Our expectation really is and I think we've said this for some time here that our expectation is that the drilling carry works through a period of what I'll call relatively low US gas prices it allows us to understand the reservoir allow for kind of the build up the development plans for that basin and by the time the carry is over, it's our expectation that we would be sitting in a stronger US natural gas price environment. At the same time we've had good success and improving the economics of our drilling program in terms of cost per well the footprint per well and also the environmental impacts per well. So we're really pleased with the progress that we've been able to make and we're happy to have that carry and we'll continue to prosecute the plan over the next 12, 18, 24 months just as we have in the last couple of years.

Okay. And I wondered if I could just get your update also on the acquisition front, obviously you did a deal with last year, a couple of years ago the Atlas deal. What's your view right now as far as evaluations are concerned in the US unconventional space whether it be natural gas and oil and how much opportunities do you see today relative to last year given I guess some of the oil prices and maybe some of the other evaluations of some of these small EMPs that are out there that may fit into your portfolio.

And I think that I don't want to have a generic statement on this because I think it really does depend on the quality of the asset in the unconventional space. As we have no – as we've seen there's a big difference between sweet spot areas and non sweet spot areas and we continue to always be focused on the value proposition first and that really stems from the quality of the asset and in certain times here we have seen that the high quality assets have been very, very expensive and that our entry point was really too late. In other circumstances, we have found that for whatever reason in Chesapeake I think was a good example of this. There were certain circumstantial above ground issues that were face that we could get in and get a good value for that. Kitimat in the unconventional space we feel very pleased with having the opportunity to buy into that particular project. It's a tremendous resource space and we like the overall dynamics between the partners now. There's only two partners and we've got a good partner in Apache with a strong capability on the Upstream side. We obviously bring the Downstream side. So we tend to look at the overall project. And if we can find value in the overall project, we're going forward but it's not – there's not a blanket, gee, everything's overpriced or gee, everything's under priced right now. It's very resource specific and circumstantial specific.

Okay, great. Thanks.

Our final question comes from Pavel Molchanov with Raymond James. Please go ahead with your question.

Thanks for squeezing me in. Just a big picture question on your overseas unconventional, one of your European competitors recently made some very downbeat comments on shale development outside North America. You guys have been about as active as everyone in the cumulating acreage. I would just like to get your latest thoughts on that?

Right. Pavel, I think we have said that I know George has said that this is a long-term development opportunity and we have always had the expectation that it would take several years to understand what this play could develop into. You just don't have the same infrastructure in these European countries as you have in the US. You don't have the same knowledge of the reservoir. In the US of course the US have been drilled for decades and decades and there was an awful lot of reservoir knowledge that is not the case in Europe. In the US we have a lot of service providers and a lot of infrastructure. In Europe that is not the case. We have well established fiscal and political regimes here. As it relates to hydrocarbons, that's not always the case in Europe. And so there are a number of differences between the US environment and the European environment and so we have always thought that this would be a longer term development opportunity.

Okay. Just a quick one on Kitimat. Is it still your sense that you will only move forward with the project if you can get crude linked off take?

Our belief is that selling Kitimat gas into an Asian market will require, I guess I would say economic provisioning that will underpin the asset investment. And in our belief the best mechanism for doing that is the oil linked contract. So we believe that, that will continue to be the basis that will be needed to spur on the investment for new LNG developments like Kitimat.

All right. I appreciate it guys.

Okay. Thank you.

I am showing one follow-up from Paul Cheng with Barclays Capital. Please go ahead.

Hey Pat, two quick one actually. One in page 10 of your presentation you show in the U.S. Downstream a negative bar of $190 million, and you’re saying that primarily relate to the downtime. Is that just the, we take also that’s including your estimate of the opportunity cost. And if you are not into the opportunity cost, do you have a rough estimate that how big that may be?

No, I mean this is -- I mean, there’s an analytical derivation to get to the volume bar and what we’re really trying to say there is that, that compared to last quarter and the volumes that we had running through the equipment and the margins that were achieved back then relative to this quarter and the margins achieved this year we break that up between the volume and margin analysis here, various analysis. And that’s really just trying to say that the primary driver for poor U.S. Downstream earnings really had to do with having so much of our equipment down, Pascagoula, Richmond, El Segundo.

So that’s the best estimated opportunity cost to you?

No.

That’s fine. I'll just follow-up with, Jeff later on. A final one, at the end of the first quarter from an inventory level, do you roughly balance at a normal level or that you’re under-levered or over-levered and do you have any under-lift or over-lift in the first quarter also?

We’re slightly over lifted, but it's immaterial. It's less than half a percent in the first quarter.

How about at the end of the quarter. Are you roughly balanced?

Well that is the end of the quarter.

That is the end.

Oh, that is the end. How about in the first quarter, did you have any over-lift or under-lift at all?

Well, like I said we were slightly over lifted, but less than a half a percent. So it's not material to our results.

Okay. Thank you.

I’m not showing any other questions. Thank you.

Okay. Then I’d like to thank everybody for your participation here today, especially for the folks who asked the questions. With that again I’ll reiterate my appreciation for your interest in the company, and I wish you well for the day. Thank you.

Thank you. Ladies and gentlemen, this concludes Chevron's first quarter 2013 Earnings Conference Call. You may now disconnect.