UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

For the quarterly period ended June 30, ~~2015~~2016

Non-accelerated filer o

Smaller reporting company o

This quarterly report on Form 10-Q 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,” “may,” “could,” “should,” “budgets,” “outlook,” “on schedule,” “on ~~track”~~track,” “goals,” “objectives” 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; changing refining, marketing and chemicals margins; the company's ability to realize anticipated cost savings and expenditure reductions; 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;~~affiliates, particularly during extended periods of low prices for crude oil and natural gas; 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 ~~production or manufacturing facilities or delivery/transportation networks~~operations due to war, accidents, political events, civil unrest, severe weather, ~~other natural or human factors, or~~cyber threats and terrorist acts, crude oil production quotas or other actions that might be imposed by the Organization of Petroleum Exporting ~~Countries;~~Countries, or other natural or human causes beyond its control; changing economic, regulatory and political environments in the various countries in which the company operates; general domestic and international economic and political conditions; 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 ~~litigation;~~national or regional legislation and regulatory measures to limit or reduce greenhouse gas emissions; the potential liability resulting from other pending or future litigation; the company’s future acquisition or disposition of assets and gains and losses from asset dispositions or impairments; government-mandated sales, divestitures, recapitalizations, industry-specific taxes, 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 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 2221 through 2423 of the company’s ~~2014~~2015 Annual Report on Form 10-K. ~~In addition, such results could be affected by general domestic and international economic and political conditions.~~ Other unpredictable or unknown factors not discussed in this report could also have material adverse effects on forward-looking statements.

See accompanying notes to consolidated financial statements.

~~See accompanying notes to consolidated financial statements.~~

¹2015 adjusted to conform to ASU 2015-17. Refer to Note 9, "Income Taxes" beginning on page 13.

²2015 adjusted to conform to ASU 2015-03. Refer to Note 5, "New Accounting Standards" on page 10.

See accompanying notes to consolidated financial statements.

Note 1. Interim Financial Statements

Note 2. Changes in Accumulated Other Comprehensive Losses

Changes in Accumulated Other Comprehensive Income (Loss) by Component ⁽¹⁾

Reclassifications⁽²⁾

~~______________________~~

⁽¹⁾ All amounts are net of tax.

⁽²⁾ Refer to Note 10, Employee Benefits for reclassified components totaling ~~$358~~$392 million that are included in employee benefit costs for the six months ending June 30, ~~2015~~2016. Related income taxes for the same period, totaling ~~$134~~$148 million, are reflected in Income Tax Expense on the Consolidated Statement of Income. All other reclassified amounts were insignificant.

Note 3. 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.

Activity for the equity attributable to noncontrolling interests for the first six months of ~~2015~~2016 and ~~2014~~2015 is as follows:

Stockholders’ Equity

~~_________________________________~~_____________________

* Includes components of comprehensive income, which are disclosed separately in the Consolidated Statement of Comprehensive Income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 4. Information Relating to the Consolidated Statement of Cash Flows

The “Net increase in operating working capital” includes reductions of ~~$13~~$11 million and ~~$54~~$13 million for excess income tax benefits associated with stock options exercised during the six months ended June 30, ~~2015,~~2016, and ~~2014,~~2015, respectively. These amounts are offset by an equal amount in “Net sales ~~(purchases)~~ of treasury shares.”

“Net Cash Provided by Operating Activities” included the following cash payments for interest on debt and for income taxes:

Six Months Ended
June 30
2015 2014
(Millions of dollars)
Income taxes $ 3,404
$ 6,026



	Six Months Ended June 30
	2016		2015
	(Millions of dollars)
Interest on debt (net of capitalized interest)	$	50	$	—
Income taxes	1,297		3,404

Six Months Ended
June 30
2015 2014
(Millions of dollars)
Time deposits purchased $ —
$ (308 )
Time deposits matured 8
308
Net sales of time deposits $ 8
$ —

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Six Months Ended June 30
	2016			2015
	(Millions of dollars)
Borrowing of loans by equity affiliates	$	(171	)	$	(96	)
Repayment of loans by equity affiliates	13			—
Net borrowing of loans by equity affiliates	$	(158	)	$	(96	)



	Six Months Ended June 30
	2016			2015
	(Millions of dollars)
Purchases of other short-term investments	$	(3	)	$	(46	)
Sales of other short-term investments	158			117
Net sales of other short-term investments	$	155		$	71



	Six Months Ended June 30
	2016			2015
	(Millions of dollars)
Repayments of short-term obligations	$	(5,175	)	$	(8,116	)
Proceeds from issuances of short-term obligations	8,494			5,468
Net borrowings of short-term obligations with three months or less maturity	(2,960		)	728
Net borrowings (repayments) of short-term obligations	$	359		$	(1,920	)

The “Net sales of treasury shares” represents the cost of common shares acquired less the cost of shares issued for share-based compensation plans. Purchases totaled ~~$1.0~~$1 million for the first six months in ~~2015~~2016 and ~~$2.5 billion~~$1 million for the first six months in ~~2014.~~2015. No purchases were made under the company's share repurchase program in the first six months of 2016 or 2015. ~~During the first six months of 2014, the company purchased 20.8 million common shares under the program for $2.5 billion.~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

The major components of “Capital expenditures” and the reconciliation of this amount to the capital and exploratory expenditures, including equity affiliates, are as follows:

Six Months Ended
June 30
2015 2014
(Millions of dollars)
Additions to properties, plant and equipment $ 14,599
$ 17,019
Additions to investments 275
221
Current year dry hole expenditures 371
251
Payments for other liabilities and assets, net —
(16 )
Capital expenditures 15,245
17,475
Expensed exploration expenditures 507
614
Assets acquired through capital lease obligations 29
10
Capital and exploratory expenditures, excluding equity affiliates 15,781
18,099
Company’s share of expenditures by equity affiliates 1,526
1,517
Capital and exploratory expenditures, including equity affiliates $ 17,307
$ 19,616

~~Note 5. Operating Segments and Geographic Data~~



	Six Months Ended June 30
	2016		2015
	(Millions of dollars)
Additions to properties, plant and equipment	$	9,796	$	14,599
Additions to investments	27		275
Current year dry hole expenditures	211		371
Payments for other liabilities and assets, net	1		—
Capital expenditures	10,035		15,245
Expensed exploration expenditures	250		507
Assets acquired through capital lease obligations	4		29
Capital and exploratory expenditures, excluding equity affiliates	10,289		15,781
Company’s share of expenditures by equity affiliates	1,703		1,526
Capital and exploratory expenditures, including equity affiliates	$	11,992	$	17,307

The segments are separately managed for investment purposes under a structure that includes “segment managers” who report to the company’s “chief operating decision maker” (CODM). The CODM is the company’s Executive Committee (EXCOM), a committee of senior officers that includes the Chief Executive Officer. EXCOM reports to the Board of Directors of Chevron Corporation.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 5. New Accounting Standards

Three Months Ended
June 30 Six Months Ended
June 30
Segment Earnings 2015 2014 2015 2014
(Millions of dollars)
Upstream
United States $ (1,038 ) $ 1,054
$ (1,498 ) $ 1,966
International (1,181 ) 4,210
839
7,605
Total Upstream (2,219 ) 5,264
(659 ) 9,571
Downstream
United States 731
517
1,437
939
International 2,225
204
2,942
492
Total Downstream 2,956
721
4,379
1,431
Total Segment Earnings 737
5,985
3,720
11,002
All Other
Interest Income 16
21
32
38
Other (182 ) (341 ) (614 ) (863 )
Net Income Attributable to Chevron Corporation $ 571
$ 5,665
$ 3,138
$ 10,177

~~Segment Assets~~ Segment assets do not include intercompany investments or intercompany receivables. “All Other” assets consist primarily of worldwide cash, cash equivalents, time deposits and marketable securities; real estate; information systems; technology companies; and assets of the corporate administrative functions. Segment assets at ~~June 30, 2015, and~~ ~~December 31, 2014, are as follows:~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~Segment Sales~~expands disclosure requirements. "Sales and Other Operating ~~Revenues~~ ~~Segment~~Revenues” on the Consolidated Statement of Income includes excise, value-added and similar taxes on sales ~~and other operating revenues, including internal transfers,~~transactions. Upon adoption of the standard, revenue will exclude sales-based taxes collected on behalf of third parties, which will have no impact to earnings. The company continues to evaluate the effect of the standard on its consolidated financial statements.

~~Note 6. Summarized Financial Data — Chevron U.S.A. Inc.~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~Note 7. Summarized Financial Data — Tengizchevroil LLP~~

~~Chevron has a 50 percent equity ownership interest in Tengizchevroil LLP (TCO). Summarized financial information for 100 percent of TCO is presented in the following table:~~

Six Months Ended
June 30
2015 2014
(Millions of dollars)
   Sales and other operating revenues $ 7,304
$ 12,537
   Costs and other deductions 4,122
5,467
   Net income attributable to TCO 2,232
4,948

~~Note 8. Income Taxes~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Note 6. Operating Segments and Geographic Data

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 and assets are not allocated to the operating segments. However, operating segments are billed for the direct use of corporate services. Nonbillable costs remain at the corporate level in “All Other.” Earnings by major operating area for the three- and six-month period ended June 30, 2016, and 2015, are presented in the following table:



	Three Months Ended June 30						Six Months Ended June 30
Segment Earnings	2016			2015			2016			2015
	(Millions of dollars)
Upstream
United States	$	(1,113	)	$	(1,038	)	$	(1,963	)	$	(1,498	)
International	(1,349		)	(1,181		)	(1,958		)	839
Total Upstream	(2,462		)	(2,219		)	(3,921		)	(659		)
Downstream
United States	537			731			784			1,437
International	741			2,225			1,229			2,942
Total Downstream	1,278			2,956			2,013			4,379
Total Segment Earnings	(1,184		)	737			(1,908		)	3,720
All Other
Interest Income	17			16			32			32
Other	(303		)	(182		)	(319		)	(614		)
Net Income (Loss) Attributable to Chevron Corporation	$	(1,470	)	$	571		$	(2,195	)	$	3,138

Segment Assets Segment assets do not include intercompany investments or intercompany receivables. “All Other” assets consist primarily of worldwide cash, cash equivalents, time deposits and marketable securities; real estate; information systems; technology companies; and assets of the corporate administrative functions. Segment assets at June 30, 2016, and December 31, 2015, are as follows:



Segment Assets	At June 30 2016		At December 31 2015
	(Millions of dollars)
Upstream
United States ¹	$	43,992	$	46,383
International ¹	162,142		162,030
Goodwill	4,581		4,588
Total Upstream	210,715		213,001
Downstream
United States¹	21,949		21,404
International	15,868		14,982
Total Downstream	37,817		36,386
Total Segment Assets	248,532		249,387
All Other
United States ^1,2	5,043		4,728
International	7,903		10,425
Total All Other	12,946		15,153
Total Assets — United States	70,984		72,515
Total Assets — International	185,913		187,437
Goodwill	4,581		4,588
Total Assets	$	261,478	$	264,540
____________________
¹2015 adjusted to conform to ASU 2015-17. Refer to Note 9, "Income Taxes" beginning on page 13.
²2015 adjusted to conform to ASU 2015-03. Refer to Note 5, "New Accounting Standards" on page 10.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Segment Sales and Other Operating Revenues Segment sales and other operating revenues, including internal transfers, for the three- and six-month period ended June 30, 2016, and 2015, are presented in the following table. Products are transferred between operating segments at internal product values that approximate market prices. 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.



	Three Months Ended June 30						Six Months Ended June 30
Sales and Other Operating Revenues	2016			2015			2016			2015
	(Millions of dollars)
Upstream
United States	$	2,467		$	3,533		$	4,539		$	6,882
International	5,377			7,408			10,398			14,623
Subtotal	7,844			10,941			14,937			21,505
Intersegment Elimination — United States	(1,810		)	(2,553		)	(3,141		)	(4,664		)
Intersegment Elimination — International	(2,278		)	(3,281		)	(4,207		)	(6,273		)
Total Upstream	3,756			5,107			7,589			10,568
Downstream
United States	11,716			15,107			20,883			27,541
International	12,539			16,978			22,847			31,842
Subtotal	24,255			32,085			43,730			59,383
Intersegment Elimination — United States	(4		)	(8		)	(8		)	(14		)
Intersegment Elimination — International	(196		)	(388		)	(459		)	(862		)
Total Downstream	24,055			31,689			43,263			58,507
All Other
United States	296			438			545			763
International	11			10			19			17
Subtotal	307			448			564			780
Intersegment Elimination — United States	(264		)	(407		)	(484		)	(697		)
Intersegment Elimination — International	(10		)	(8		)	(18		)	(14		)
Total All Other	33			33			62			69
Sales and Other Operating Revenues
United States	14,479			19,078			25,967			35,186
International	17,927			24,396			33,264			46,482
Subtotal	32,406			43,474			59,231			81,668
Intersegment Elimination — United States	(2,078		)	(2,968		)	(3,633		)	(5,375		)
Intersegment Elimination — International	(2,484		)	(3,677		)	(4,684		)	(7,149		)
Total Sales and Other Operating Revenues	$	27,844		$	36,829		$	50,914		$	69,144

Note 7. Summarized Financial Data — Chevron U.S.A. Inc.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The summarized financial information for CUSA and its consolidated subsidiaries is as follows:



	Six Months Ended June 30
	2016			2015
	(Millions of dollars)
Sales and other operating revenues	$	38,275		$	52,777
Costs and other deductions	40,905			54,019
Net income (loss) attributable to CUSA	(1,218		)	(290		)



	At June 30 2016		At December 31 2015
	(Millions of dollars)
Current assets	$	11,100	$	9,732
Other assets	56,910		59,170
Current liabilities	14,305		13,664
Other liabilities	27,392		29,100
Total CUSA net equity	$	26,313	$	26,138
Memo: Total debt	$	14,457	$	14,462

Note 8. Summarized Financial Data — Tengizchevroil LLP

Chevron has a 50 percent equity ownership interest in Tengizchevroil LLP (TCO). Summarized financial information for 100 percent of TCO is presented in the following table:



	Six Months Ended June 30
	2016		2015
	(Millions of dollars)
Sales and other operating revenues	$	5,044	$	7,304
Costs and other deductions	2,900		4,122
Net income attributable to TCO	1,501		2,232

Note 9. ~~Assets Held~~Income Taxes

Taxes on income for the second quarter and first six months of 2016 benefited earnings by $0.6 billion and $1.6 billion, respectively, compared with charges of $0.8 billion and $1.1 billion, respectively for the corresponding periods in 2015. The associated effective tax rates (calculated as the amount of Income Tax Expense (Benefit) divided by Income (Loss) Before Income Tax Expense) for the second quarters of 2016 and 2015 were 29 percent and 55 percent, respectively. For ~~Sale~~the comparative six-month periods the effective tax rates were 43 percent and 25 percent, respectively.

AtExcluding the effects of equity earnings, the effective tax rates for the 2016 and 2015 quarterly periods were 24 percent and 334 percent, respectively, a decrease of 310 percent between periods, and the tax rates for the respective six-month periods were 34 percent and 50 percent, a decrease of 16 percent between periods. The decrease in the effective tax rate between the quarterly periods primarily resulted from the effects of valuation allowances recognized on deferred tax assets, the absence of the 2015 sale of the company's interest in Caltex Australia Limited and foreign currency remeasurement effects, partially offset by jurisdictional mix impacts. The decrease in the effective tax rate for the six-month comparative period primarily resulted from the effects of valuation allowances recognized on deferred tax assets and the absence of the 2015 sale of the company's interest in Caltex Australia Limited, partially offset by jurisdictional mix impacts.

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 June 30, ~~2015,~~2016. For these jurisdictions, the latest years for which income tax examinations had been finalized were as follows: United States — 2011, Nigeria — 2000, Angola — 2009 and Kazakhstan — 2007.

The company engages in ongoing discussions with tax authorities regarding the resolution of tax matters in the various jurisdictions. Both the outcomes for 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 regarding 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Effective January 1, 2016, Chevron early-adopted Income Taxes (Topic 740), Balance Sheet Classification of Deferred Taxes (ASU 2015-17), on a retrospective basis. The standard provides that all deferred income taxes be classified ~~$387 million of net properties, plant and equipment~~ as ~~“Assets held for sale”~~noncurrent on the Consolidated Balance Sheet. ~~These~~The prior requirement was to classify most deferred tax assets ~~are associated with upstream~~ and ~~downstream operations that are anticipated to be sold~~liabilities based on the classification of the underlying asset or liability. The effects of retrospective adoption on the December 31, 2015, Consolidated Balance Sheet were reductions of $917 million in ~~the next 12 months. The revenues~~"Prepaid expenses and ~~earnings contributions of these~~other current assets," $603 million in ~~2014 were not material.~~"Deferred charges and other assets," $996 million in "Federal and other taxes on income," and $524 million in "Noncurrent deferred income taxes."

Note 10. Employee Benefits

The company also sponsors other postretirement employee 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 the retirees share the costs. Medical coverage for Medicare-eligible retirees in the company’s

main U.S. medical plan is secondary to Medicare (including Part D) and the increase to the 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 components of net periodic benefit costs for ~~2015~~2016 and ~~2014~~2015 are as follows:

~~__________________________~~

* Includes costs for U.S. and international OPEB plans. Obligations for plans outside the United States are not significant relative to the company’s total OPEB obligation.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 11. Assets Held For Sale

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 ~~seven~~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. Additional lawsuits and claims related to the use of MTBE, including personal-injury claims, may be filed in the future. 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.

Background. Chevron is a defendant in a civil lawsuit initiated in the Superior Court of Nueva Loja in Lago Agrio, Ecuador, in May 2003 by plaintiffs who claim to be representatives of certain residents of an area where an oil production consortium formerly had operations. The lawsuit alleges damage to the environment from the oil exploration and production operations and seeks unspecified damages to fund environmental remediation and restoration of the alleged environmental harm, plus a health monitoring program. Until 1992, Texaco Petroleum Company (Texpet), a subsidiary of Texaco Inc., was a minority member of this consortium with Petroecuador, the Ecuadorian state-owned oil company, as the majority partner; since 1990, the operations have been conducted solely by Petroecuador. At the conclusion of the consortium and following an independent third-party environmental audit of the concession area, Texpet entered into a formal agreement with the Republic of Ecuador and Petroecuador for Texpet to remediate specific sites assigned by the government in proportion to Texpet’s ownership share of the consortium. Pursuant to that agreement, Texpet conducted a three-year remediation program at a cost of $40 million. After certifying that the sites were properly remediated, the government granted Texpet and all related corporate entities a full release from any and all environmental liability arising from the consortium operations.

Based on the history described above, Chevron believes that this lawsuit lacks legal or factual merit. As to matters of law, the company believes first, that the court lacks jurisdiction over Chevron; second, that the law under which plaintiffs bring the action, enacted in 1999, cannot be applied retroactively; third, that the claims are barred by the statute of limitations in Ecuador; and, fourth, that the lawsuit is also barred by the releases from liability previously given to Texpet by the Republic of Ecuador and Petroecuador and by the pertinent provincial and municipal governments. With regard to the facts, the company believes that the evidence confirms that Texpet’s remediation was properly conducted and that the remaining environmental damage reflects Petroecuador’s failure to timely fulfill its legal obligations and Petroecuador’s further conduct since assuming full control over the operations.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

case was recused. In 2010, Chevron moved to strike the mining engineer’s report and to dismiss the case based on evidence obtained through discovery in the United States indicating that the report was prepared by consultants for the plaintiffs before being presented as the mining engineer’s independent and impartial work and showing further evidence of misconduct. In August 2010, the judge issued an order stating that he was not bound by the mining engineer’s report and requiring the parties to provide their positions on damages within 45 ~~days~~.days. Chevron subsequently petitioned for recusal of the judge, claiming that he had disregarded evidence of fraud and misconduct and that he had failed to rule on a number of motions within the statutory time requirement.

In September 2010, Chevron submitted its position on damages, asserting that no amount should be assessed against it. The plaintiffs’ submission, which relied in part on the mining engineer’s report, took the position that damages are between approximately ~~$16~~$16 billion and ~~$76~~$76 billion and that unjust enrichment should be assessed in an amount between approximately $5$5 billion and ~~$38 billion~~.$38 billion. The next day, the judge issued an order closing the evidentiary phase of the case and notifying the parties that he had requested the case file so that he could prepare a judgment. Chevron petitioned to have that order declared a nullity in light of Chevron’s prior recusal petition, and because procedural and evidentiary matters remained unresolved. In October 2010, Chevron’s motion to recuse the judge was granted. A new judge took charge of the case and revoked the prior judge’s order closing the evidentiary phase of the case. On December 17, 2010, the judge issued an order closing the evidentiary phase of the case and notifying the parties that he had requested the case file so that he could prepare a judgment.

On February 14, 2011, the provincial court in Lago Agrio rendered an adverse judgment in the case. The court rejected Chevron’s defenses to the extent the court addressed them in its opinion. The judgment assessed approximately ~~$8.6~~$8.6 billion in damages and approximately ~~$900~~$900 million as an award for the plaintiffs’ representatives. It also assessed an additional amount of approximately ~~$8.6~~$8.6 billion in punitive damages unless the company issued a public apology within 15 days of the judgment, which Chevron did not do. On February 17, 2011, the plaintiffs appealed the judgment, seeking increased damages, and on March 11, 2011, Chevron appealed the judgment seeking to have the judgment nullified. On January 3, 2012, an appellate panel in the provincial court affirmed the February 14, 2011 decision and ordered that Chevron pay additional attorneys’ fees in the amount of “~~0.10%~~“0.10% of the values that are derived from the decisional act of this judgment.” The plaintiffs filed a petition to clarify and amplify the appellate decision on January 6, 2012, and the court issued a ruling in response on January 13, 2012, purporting to clarify and amplify its January 3, 2012 ruling, which included clarification that the deadline for the company to issue a public apology to avoid the additional amount of approximately ~~$8.6~~$8.6 billion in punitive damages was within 15 days of the clarification ruling, or February 3, 2012. Chevron did not issue an apology because doing so might be mischaracterized as an admission of liability and would be contrary to facts and evidence submitted at trial. On January 20, 2012, Chevron appealed (called a petition for cassation) the appellate panel’s decision to Ecuador’s National Court of Justice. As part of the appeal, Chevron requested the suspension of any requirement that Chevron post a bond to prevent enforcement under Ecuadorian law of the judgment during the cassation appeal. On February 17, 2012, the appellate panel of the provincial court admitted Chevron’s cassation appeal in a procedural step necessary for the National Court of Justice to hear the appeal. The provincial court appellate panel denied Chevron’s request for suspension of the requirement that Chevron post a bond and stated that it would not comply with the First and Second Interim Awards of the international arbitration tribunal discussed below. On March 29, 2012, the matter was transferred from the provincial court to the National Court of Justice, and on November 22, 2012, the National Court agreed to hear Chevron's cassation appeal. On August 3, 2012, the provincial court in Lago Agrio approved a court-appointed liquidator’s report on damages that calculated the total judgment in the case to be ~~$19.1 billion~~.$19.1 billion. On November 13, 2013, the National Court ratified the judgment but nullified the ~~$8.6~~$8.6 billion punitive damage assessment, resulting in a judgment of ~~$9.5 billion~~.$9.5 billion. On December 23, 2013, Chevron appealed the decision to the Ecuador Constitutional Court, Ecuador's highest court. The reporting justice of the Constitutional Court heard oral arguments on the appeal on July 16, 2015.

On July 2, 2013, the provincial court in Lago Agrio issued an embargo order in Ecuador ordering that any funds to be paid by the Government of Ecuador to Chevron to satisfy a ~~$96~~$96 million award issued in an unrelated action

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Ecuador's petition for Writ of Certiorari. On July 22, 2016, the Government of Ecuador paid the $96 million award, plus interest, resulting in a payment to Chevron of approximately $113 million.

Lago Agrio Plaintiffs' Enforcement Actions. Chevron has no assets in Ecuador and the Lago Agrio plaintiffs’ lawyers have stated in press releases and through other media that they will seek to enforce the Ecuadorian judgment in various countries and otherwise disrupt Chevron’s operations. On May 30, 2012, the Lago Agrio plaintiffs filed an action against Chevron Corporation, Chevron Canada Limited, and Chevron Canada Finance Limited in the Ontario Superior Court of Justice in Ontario, Canada, seeking to recognize and enforce the Ecuadorian judgment. On May 1, 2013, the Ontario Superior Court of Justice held that the Court has jurisdiction over Chevron and Chevron Canada Limited for purposes of the action, but stayed the action due to the absence of evidence that Chevron Corporation has assets in Ontario. The Lago Agrio plaintiffs appealed that ~~decision. On~~decision and, on December 17, 2013, the Court of Appeals for Ontario affirmed the lower court’s decision on jurisdiction and set aside the stay, allowing the recognition and enforcement action to be heard in the Ontario Superior Court of Justice. Chevron appealed the decision ~~concerning jurisdiction~~ to the Supreme Court of Canada and, on ~~January 16, 2014,~~September 4, 2015, the Supreme Court dismissed the appeal and affirmed that the Ontario Superior Court of ~~Appeals~~Justice has jurisdiction over Chevron and Chevron Canada Limited for ~~Ontario granted Chevron’s motion to stay~~purposes of the action. The recognition and enforcement proceeding ~~pending a decision on~~and related preliminary motions are proceeding in the ~~admissibility of the Supreme Court appeal. On April 3, 2014, the Supreme~~Ontario Superior Court of Canada granted Chevron’s and Chevron Canada Limited’s petitions to appeal the Ontario Court of Appeal’s decision. The Supreme Court of Canada heard oral arguments on the appeal on December 11, 2014.Justice.

On June 27, 2012, the Lago Agrio plaintiffs filed a complaint against Chevron Corporation in the Superior Court of Justice in Brasilia, Brazil, seeking to recognize and enforce the Ecuadorian judgment. Chevron has answered the complaint. In accordance with Brazilian procedure, the matter was referred to the public prosecutor for a nonbinding opinion of the issues raised in the complaint. On May 13, 2015, the public prosecutor issued its nonbinding opinion and recommended that the Superior Court of Justice reject the plaintiffs’ recognition and enforcement request, finding, among other things, that the Lago Agrio judgment was procured through fraud and corruption and cannot be recognized in Brazil because it violates Brazilian and international public order.

On October 15, 2012, the provincial court in Lago Agrio issued an ex parte embargo order that purports to order the seizure of assets belonging to separate Chevron subsidiaries in Ecuador, Argentina and Colombia. On November 6, 2012, at the request of the Lago Agrio plaintiffs, a court in Argentina issued a Freeze Order against Chevron Argentina S.R.L. and another Chevron subsidiary, Ingeniero Norberto Priu, requiring shares of both companies to be "embargoed," requiring third parties to withhold 40 percent of any payments due to Chevron Argentina S.R.L. and ordering banks to withhold 40 percent of the funds in Chevron Argentina S.R.L. bank accounts. On December 14, 2012, the Argentinean court rejected a motion to revoke the Freeze Order but modified it by ordering that third parties are not required to withhold funds but must report their payments. The court also clarified that the Freeze Order relating to bank accounts excludes taxes.On January 30, 2013, an appellate court upheld the Freeze Order, but on June 4, 2013, the Supreme Court of Argentina revoked the Freeze Order in its entirety. On December 12, 2013, the Lago Agrio plaintiffs served Chevron with notice of their filing of an enforcement proceeding in the National Court, First Instance, of Argentina. Chevron filed its answer on February 27, ~~2014. Chevron intends~~2014 to ~~vigorously defend against~~which the ~~proceeding.~~Lago Agrio plaintiffs responded on December 29, 2015. On April 19, 2016, the public prosecutor in Argentina issued a non-binding opinion recommending to the National Court, First Instance, of Argentina that it reject the Lago Agrio plaintiffs' request to recognize the Ecuadorian judgment in Argentina.

Chevron continues to believe the provincial court’s judgment is illegitimate and unenforceable in Ecuador, the United States and other countries. The company also believes the judgment is the product of fraud, and contrary to the legitimate scientific evidence. Chevron cannot predict the timing or ultimate outcome of the appeals process in Ecuador or any enforcement action. Chevron expects to continue a vigorous defense of any imposition of liability in the Ecuadorian courts and to contest and defend any and all enforcement actions.

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of Ecuador take all measures necessary (whether by its judicial, legislative or executive branches) to suspend or cause to be suspended the enforcement and recognition within and without Ecuador of the judgment against Chevron and, in particular, to preclude any certification by the Republic of Ecuador that would cause the judgment to be enforceable against Chevron. On February 27, 2012, the Tribunal issued a Third Interim Award confirming its jurisdiction to hear Chevron's arbitration claims. On February 7, 2013, the Tribunal issued its Fourth Interim Award in which it declared that the Republic of Ecuador “has violated the First and Second Interim Awards under the [BIT], the UNCITRAL Rules and international law in regard to the finalization and enforcement subject to execution of the Lago Agrio Judgment within and outside Ecuador, including (but not limited to) Canada, Brazil and Argentina.” The Republic of Ecuador subsequently filed in the District Court of the Hague a request to set aside the Tribunal’s Interim Awards and the First Partial Award (described below)~~. Chevron filed its answer to~~, and on January 20, 2016, the ~~set aside request on December 31, 2014.~~District Court denied the Republic's request. On April 13, 2016, the Republic of Ecuador appealed the decision.

The Tribunal has divided the merits phase of the proceeding into three phases. On September 17, 2013, the Tribunal issued its First Partial Award from Phase One, finding that the settlement agreements between the Republic of Ecuador and Texpet applied to Texpet and Chevron, released Texpet and Chevron from claims based on "collective" or "diffuse" rights arising from Texpet's operations in the former concession area and precluded third parties from asserting collective/diffuse rights environmental claims relating to Texpet's operations in the former concession area but did not preclude individual claims for personal harm. The Tribunal held a hearing on April 29-30, 2014, to address remaining issues relating to Phase One, and on March 12, 2015, it issued a nonbinding decision that the Lago Agrio ~~plaintiffs’~~plaintiffs' complaint, on its face, includes claims not barred by the settlement agreement between the Republic of Ecuador and Texpet. In the same decision, the Tribunal deferred to Phase Two remaining issues from Phase One, including whether the Republic of Ecuador breached the 1995 settlement agreement and the remedies that are available to Chevron and Texpet as a result of that breach. Phase Two issues were addressed at a hearing held in April and May 2015. The Tribunal has not set a date for Phase Three, the damages phase of the arbitration.

Company's RICO Action. Through a series of U.S. court proceedings initiated by Chevron to obtain discovery relating to the Lago Agrio litigation and the BIT arbitration, Chevron obtained evidence that it believes shows a pattern of fraud, collusion, corruption, and other misconduct on the part of several lawyers, consultants and others acting for the Lago Agrio plaintiffs. In February 2011, Chevron filed a civil lawsuit in the Federal District Court for the Southern District of New York against the Lago Agrio plaintiffs and several of their lawyers, consultants and supporters, alleging violations of the Racketeer Influenced and Corrupt Organizations Act and other state laws. Through the civil lawsuit, Chevron is seeking relief that includes a declaration that any judgment against Chevron in the Lago Agrio litigation is the result of fraud and other unlawful conduct and is therefore unenforceable. On March 7, 2011, the Federal District Court issued a preliminary injunction prohibiting the Lago Agrio plaintiffs and persons acting in concert with them from taking any action in furtherance of recognition or enforcement of any judgment against Chevron in the Lago Agrio case pending resolution of

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

The trial commenced on October 15, 2013 and concluded on November 22, 2013. On March 4, 2014, the Federal District Court entered a judgment in favor of Chevron, prohibiting the defendants from seeking to enforce the Lago Agrio judgment in the United States and further prohibiting them from profiting from their illegal acts. The defendants ~~filed their notices of appeal~~appealed the Federal District Court's decision, and, on ~~March 18, 2014. A~~April 20, 2015, a panel of the U.S. Court of Appeals for the Second Circuit heard oral ~~arguments on the appeal on April 20, 2015.~~arguments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~Note 12. Other Contingencies and Commitments~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Note 13. Other Contingencies and Commitments

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 14. Fair Value Measurements

Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities. For the company, Level 1 inputs include exchange-traded futures contracts for which the parties are willing to transact at the exchange-quoted price and marketable securities that are actively traded.

Level 2: Inputs other than Level 1 that are observable, either directly or indirectly. For the company, Level 2 inputs include quoted prices for similar assets or liabilities, prices obtained through third-party broker quotes and prices that can be corroborated with other observable inputs for substantially the complete term of a contract.

Level 3: Unobservable inputs. The company does not use Level 3 inputs for any of its recurring fair value measurements. Level 3 inputs may be required for the determination of fair value associated with certain nonrecurring measurements of nonfinancial assets and liabilities.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

~~Note 14. Financial and Derivative Instruments~~

The company’s derivative instruments principally include crude oil, natural gas and refined product futures, swaps, options, and forward contracts. None of the company’s derivative instruments are designated as hedging instruments, although certain of the company’s affiliates make such a designation. The company’s derivatives are not material to the company’s consolidated 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 commodities and other derivatives activities.

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.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~Derivative instruments measured at fair value at~~ ~~June 30, 2015, and~~ ~~December 31, 2014, and their classification on the Consolidated Balance Sheet and Consolidated Statement of Income are as follows:~~

~~Consolidated Balance Sheet: Fair Value of Derivatives Not Designated as Hedging Instruments~~

~~(Millions of Dollars)~~

Type of
Contract
Balance Sheet Classification At June 30
2015 At December 31
2014
Commodity Accounts and notes receivable, net $ 45
$ 401
Commodity Long-term receivables, net —
12
Total Assets at Fair Value $ 45
$ 413
Commodity Accounts payable $ 71
$ 57
Commodity Deferred credits and other noncurrent obligations 9
27
Total Liabilities at Fair Value $ 80
$ 84

~~Consolidated Statement of Income: The Effect of Derivatives Not Designated as Hedging Instruments~~

~~(Millions of dollars)~~

Gain / (Loss)
Three Months Ended
June 30 Gain / (Loss)
Six Months ended June 30
Type of
Contract
Statement of Income Classification 2015 2014 2015 2014
Commodity Sales and other operating revenues $ (31 ) $ (71 ) $ (152 ) $ 26
Commodity Purchased crude oil and products (13 ) (8 ) 1
(16 )
Commodity Other income (4 ) —
(11 ) (23 )
$ (48 ) $ (79 ) $ (162 ) $ (13 )

~~The table below represents gross and net derivative assets and liabilities subject to netting agreements on the Consolidated Balance Sheet at~~ ~~June 30, 2015, and~~ ~~December 31, 2014~~.

~~Consolidated Balance Sheet: The Effect of Netting Derivative Assets and Liabilities~~

~~(Millions of dollars)~~

Gross Amount Recognized Gross Amounts Offset Net Amounts Presented Gross Amounts Not Offset Net Amount
At June 30, 2015
Derivative Assets $ 1,119
$ 1,074
$ 45
$ —
$ 45
Derivative Liabilities $ 1,154
$ 1,074
$ 80
$ —
$ 80

At December 31, 2014
Derivative Assets $ 4,004
$ 3,591
$ 413
$ 7
$ 406
Derivative Liabilities $ 3,675
$ 3,591
$ 84
$ —
$ 84

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."

~~Note 15. Accounting for Suspended Exploratory Wells~~

The capitalized cost of suspended wells at June 30, 2015, was $3.7 billion, a net decrease of $527 million from year-end 2014. The decrease was primarily due to well write-offs and asset sales, partially offset by drilling activities. During the six months ended June 30, 2015, $466 million of exploratory well costs previously capitalized for greater than one year at December 31, 2014, were charged to expense.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Note ~~16. New Accounting Standards~~15. Financial and Derivative Instruments

~~Revenue Recognition (Topic 606), Revenue from Contracts with Customers (ASU 2014-09)In July 2015, the FASB approved a one-year deferral~~The company’s derivative instruments principally include crude oil, natural gas and refined product futures, swaps, options, and forward contracts. None of the effective date of ASU 2014-09, which becomes effective for the company January 1, 2018. Early adoption is permitted at the original effective date of January 1, 2017. The standard provides that an entity should recognize revenue to align with the transfer of promised goods or services to customers in an amount that reflects the consideration that the entity expects to be entitled to receive in exchange for those goods or services. The ASU, which replaces most existing revenue recognition guidance in U.S. GAAP, provides a five-step model for recognition of revenue, guidance on the accounting forcompany’s derivative instruments are designated as hedging instruments, although certain ~~costs of obtaining or fulfilling contracts with customers and specific disclosure requirements. Transition guidance permits either retrospective application or presentation~~ of the ~~cumulative effect at the adoption date.~~company’s affiliates make such a designation. The ~~company is reviewing the requirements of the ASU~~company’s derivatives are not material to ~~determine the transition method it will apply and to update its assessments developed throughout the FASB’s deliberation period. The company is evaluating the effect of the standard on~~ the company’s consolidated financial ~~statements.~~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 commodities and other derivatives activities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Derivative instruments measured at fair value at June 30, 2016, and December 31, 2015, and their classification on the Consolidated Balance Sheet and Consolidated Statement of Income are as follows:

Consolidated Balance Sheet: Fair Value of Derivatives Not Designated as Hedging Instruments

(Millions of dollars)



Type of Contract	Balance Sheet Classification	At June 30 2016		At December 31 2015
Commodity	Accounts and notes receivable, net	$	20	$	200
Commodity	Long-term receivables, net	3		5
Total Assets at Fair Value		$	23	$	205
Commodity	Accounts payable	$	72	$	51
Commodity	Deferred credits and other noncurrent obligations	2		2
Total Liabilities at Fair Value		$	74	$	53

Consolidated Statement of Income: The Effect of Derivatives Not Designated as Hedging Instruments

(Millions of dollars)



		Gain / (Loss) Three Months Ended June 30						Gain / (Loss) Six Months ended June 30
Type of Contract	Statement of Income Classification	2016			2015			2016			2015
Commodity	Sales and other operating revenues	$	(145	)	$	(31	)	$	(171	)	$	(152	)
Commodity	Purchased crude oil and products	(17		)	(13		)	(21		)	1
Commodity	Other income	3			(4		)	2			(11		)
		$	(159	)	$	(48	)	$	(190	)	$	(162	)

The table below represents gross and net derivative assets and liabilities subject to netting agreements on the Consolidated Balance Sheet at June 30, 2016, and December 31, 2015.

Consolidated Balance Sheet: The Effect of Netting Derivative Assets and Liabilities

(Millions of dollars)



	Gross Amount Recognized		Gross Amounts Offset		Net Amounts Presented		Gross Amounts Not Offset		Net Amount
At June 30, 2016	Gross Amount Recognized		Gross Amounts Offset		Net Amounts Presented		Gross Amounts Not Offset		Net Amount
Derivative Assets	$	1,290	$	1,267	$	23	$	—	$	23
Derivative Liabilities	$	1,341	$	1,267	$	74	$	—	$	74

At December 31, 2015
Derivative Assets	$	2,459	$	2,254	$	205	$	—	$	205
Derivative Liabilities	$	2,307	$	2,254	$	53	$	—	$	53

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note ~~17.~~16. Restructuring and Reorganization Costs

~~In second quarter 2015,~~The following table summarizes the company recorded charges for employee reduction programs related to the restructuring and reorganization of its corporate staffs and certain upstream operations. The terminations are expected to be substantially completed by the end of 2016.

A before-tax charge of $264 million ($160 million after-tax) was recorded in second quarter 2015, with $140 million reported as “Operating Expenses” and $124 million reported as “Selling, general and administrative expenses” on the Consolidated Statement of Income. The accrued severance liability, ~~covering severance benefits,~~which is classified as current on the Consolidated Balance Sheet. Approximately $25 million ($16 million after-tax) is associated with terminations in U.S. Upstream, $115 million ($64 million after-tax) in International Upstream, and $124 million ($80 million after-tax) in All Other.


	Amounts Before Tax		Amounts Before Tax
	(Millions of dollars)		(Millions of dollars)
Balance at January 1, 2015	$	—
Balance at January 1, 2016			$	293
Accruals/Adjustments	264		93
Payments	—		(218		)
Balance at June 30, 2015	$	264
Balance at June 30, 2016			$	168

Note 17. Long-Term Debt

Second Quarter ~~2015~~2016 Compared with Second Quarter ~~2014~~

~~And Six Months~~ 2015 ~~Compared with Six Months~~ ~~2014~~

Key Financial Results

Earnings by Business Segment

⁽¹⁾ Includes foreign currency effects

⁽²⁾ Income net of tax; also referred to as “earnings” in the discussions that follow.

Net income (loss) attributable to Chevron Corporation for second quarter ~~2015~~2016 was ~~$571 million~~a loss of $1.47 billion ($~~0.30~~0.78 per share — diluted), ~~versus $5.7 billion~~compared with earnings of $571 million ($~~2.98~~0.30 per share — diluted) in the corresponding ~~2014~~2015 period. ~~Net income~~The net loss attributable to Chevron Corporation for the first six months of ~~2015~~2016 was $~~3.1~~2.20 billion ($~~1.67~~1.17 per share — diluted), ~~versus~~compared with earnings of $~~10.2~~3.14 billion ($~~5.34~~1.67 per share — diluted) in the first six months of ~~2014~~2015.

Refer to pages 2827 through 3130 for additional discussion of results by business segment and “All Other” activities for second quarter and first six months of ~~2015~~2016 versus the same period in ~~2014~~2015.

Business Environment and Outlook

Chevron is a global energy company with substantial business activities in the following countries: Angola, Argentina, Australia, Azerbaijan, Bangladesh, Brazil, Canada, China, Colombia, Democratic Republic of the Congo, Denmark, Indonesia, Kazakhstan, Myanmar, Nigeria, the Partitioned Zone between Saudi Arabia and Kuwait, ~~the~~ Philippines, Republic of ~~the~~ Congo, Singapore, South Africa, South Korea, Thailand, Trinidad and Tobago, the United Kingdom, the United States, and Venezuela.

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Earnings of the company depend mostly on the profitability of its upstream business segment. The biggest factor affecting the results of operations for the upstream segment is the price of crude oil. The price of crude oil has fallen significantly since mid-year 2014, reflecting ~~robust non-OPEC supply growth led by expanding unconventional production in the United States, weakening growth in emerging markets,~~persistently high global crude oil inventories and ~~the decision by OPEC in fourth quarter 2014 to maintain its current production ceiling.~~ production.

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The downturn in the price of crude oil has impacted and, depending upon its duration, will continue to significantly impact the company's results of operations, cash flows, leverage, capital and exploratory investment program and production outlook. IfA sustained lower ~~prices persist for an extended period~~price environment was a factor in certain impairments in second quarter 2016, and could result in the impairment or write-off of ~~time, the company's response could include further~~specific assets in future periods. The company is responding with reductions in operating expenses, ~~and~~including employee reductions, reductions in capital and exploratory expenditures in 2016 and ~~additional~~future periods, and increased asset sales. The company anticipates that crude oil prices will increase in the future, as continued growth in demand and a slowing in supply growth should bring global markets into balance; however, the timing of any such ~~increases~~increase is unknown. In the company's downstream business, crude oil is the largest cost component of refined products.

Refer to the "Cautionary Statement Relevant to Forward-Looking Information" on page 2 and to "Risk Factors" on pages 2221 through 2423 of the company’s ~~2014~~2015 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. Refer to the "Results of Operations" section, beginning on page 28 27for discussions of net gains on asset sales during ~~2015.~~2016. Asset dispositions and restructurings may also occur in future periods and could result in significant gains or losses.

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 inventory levels, technology advancements, production quotas or other actions imposed by the Organization of Petroleum Exporting Countries (OPEC), actions of regulators, weather-related damage and disruptions, competing fuel prices, 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 laws and regulations.

The company continues to actively manage its schedule of work, contracting, procurement and supply-chain activities to effectively manage costs. However, price levels for capital and exploratory costs and operating expenses associated with the production of crude oil and natural gas can be subject to external factors beyond the company’s control including, among other things, the general level of inflation, commodity prices and prices charged by the industry’s material and service providers, which can be affected by the volatility of the industry’s own supply-and-demand conditions for such materials and services. In recent years, Chevron and the oil and gas industry generally experienced an increase in certain costs that exceeded the general trend of inflation in many areas of the world. As a result of the decline in prices of crude oil and other commodities since mid-2014, these ~~cost pressures~~costs have ~~softened.~~declined. Capital and exploratory expenditures and operating expenses can also be affected by damage to production facilities caused by severe weather or civil unrest, delays in construction, or other factors.

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The chart ~~above~~on the previous page 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 ~~$99~~$52 per barrel for the full-year ~~2014~~.2015. During ~~2015~~2016, Brent averaged ~~$62~~$46 per barrel in the second quarter,~~, $58~~ $40 per barrel for the six-month period, and ended July at about ~~$53.~~$42. The majority of the company’s equity crude production is priced based on the Brent benchmark. Prices continued to firm through ~~much of the~~ ~~second quarter~~May 2016 amid ongoing reduction of oil and gas capital budgets, increased supply disruptions, and slowly declining ~~drilling rig counts globally.~~non-OPEC supply. However, upside price movement ~~was capped~~remained constrained by ~~continued robust non-OPEC supply growth,~~ ongoing increases in OPEC supplies as Iran ramped up production, and ~~growing~~ concerns grew over continued high crude and product inventories globally ~~and~~(and in the U.S. in ~~particular.~~particular). Prices ~~began to soften~~softened in June ~~reflecting high refinery maintenance~~and July 2016 as wildfire-related disruptions in Canada waned, OPEC reaffirmed its market-share-oriented production policy, and confidence in the economic outlook for Europe ~~and Asia, continued growth~~was shaken following the unexpected vote in ~~Iraqi production, and easing of geopolitical tensions in key regions.~~the United Kingdom to leave the European Union.

The WTI price averaged ~~$93~~$49 per barrel for the full-year ~~2014.~~2015. During ~~2015~~2016, WTI averaged ~~$58~~$46 per barrel in the second quarter, ~~$53~~$40 per barrel for the six-month period, and ended July at about ~~$47.~~$42. WTI ~~continued to trade~~values traded at ~~a discount~~around parity to Brent throughout the second quarter ~~due to high inventories and excess~~ of 2016 as market sentiment was alternately influenced by reported weekly U.S. production declines, fluctuating crude ~~supply in the U.S. market. However, with U.S.~~inventory levels at Cushing, seasonal refinery maintenance ~~near seasonal lows~~cycles, and ~~maintenance~~the onset of recovery in ~~Europe and Asia near seasonal highs, the discount did contract relative to the first quarter.~~U.S. oil rig counts.

A differential in crude oil prices exists between high quality (high-gravity, low-sulfur) crudes and those of lower quality (low-gravity, high-sulfur). The amount of the differential in any period is associated with the relative supply/demand balances for each crude type, which are functions of the capacity of refineries that are able to process each as feedstock into high-value light products (motor gasoline, jet fuel, aviation gasoline and diesel fuel). In the second quarter ~~2015,~~of 2016, the differential ~~contracted~~increased slightly in North America as gains in heavy crude values from planned and unplanned supply outages in Canada were offset by increasing support for light sweet crude oil pricing from declining U.S. production ~~in the~~and strong demand amid high U.S. ~~midcontinent region remained robust, while high~~ refinery ~~crude runs boosted demand for heavy sour crudes.~~runs. Outside of North America, differentials contracted as high refinery maintenance in Europe ~~and Asia led to oversupply of~~dampened demand for light sweet crude in the Atlantic Basin, ~~pressuring markets relative to~~while rising output from Iran and other Middle East producers maintained pressure on heavier, more sour crudes.

Chevron produces or shares in the production of heavy crude oil in California, Indonesia, the Partitioned Zone between Saudi Arabia and Kuwait, Venezuela and in certain fields in Angola, China and the United Kingdom sector of the North Sea. (See page 3433 for the company’s average U.S. and international crude oil realizations.)

In contrast to price movements in the global market for crude oil, price changes for natural gas in many regional markets are more closely aligned with supply-and-demand conditions in those markets. ~~In the U.S., prices at Henry Hub averaged $2.82 per thousand cubic feet (MCF) for the first six months of 2015, compared with $4.86 during the first six months of 2014. At the end of~~ ~~July 2015, the Henry Hub spot price was $2.77 per MCF.~~ Fluctuations in the price for natural gas in the United States are closely associated with customer demand relative to the volumes produced in North America. In the United States, prices at Henry Hub averaged $2.02 per thousand cubic feet (MCF) for the first six months of 2016, compared with $2.82 during the first six months of 2015. At the end of July 2016, the Henry Hub spot price was $2.95 per MCF.

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Outside the United States, price changes for natural gas depend on a wide range of supply, demand and regulatory circumstances. Chevron sells natural gas into the domestic pipeline market in most locations. In some locations, Chevron is investing in long-term projects to install infrastructure to produce and liquefy natural gas for transport by tanker to other markets. The company's long-term contract prices for liquefied natural gas (LNG) are typically linked to crude oil prices. Approximately 85 percent of the equity LNG offtake from the operated Australian LNG projects is targeted to be sold into binding long-term contracts, with the remainder to be sold in the Asian spot LNG market. The Asian spot market reflects the supply and demand for LNG in the Pacific Basin and is not directly linked to crude oil prices. International natural gas realizations averaged $~~4.75~~3.92 per MCF during the first six months of ~~2015~~2016, compared with ~~$6.00~~$4.75 per MCF in the same period last year. (See page 3433 for the company’s average natural gas realizations for the U.S. and international regions.)

The company’s worldwide net oil-equivalent production in the first six months of ~~2015~~2016 averaged ~~2.638~~2.597 million barrels per day. About ~~one-fifth~~one-fourth of the company’s net oil-equivalent production in the first six months of ~~2015~~2016 occurred in the OPEC-member countries of Angola, Indonesia, Nigeria ~~Venezuela~~ and ~~the Partitioned Zone between Saudi Arabia and Kuwait.~~Venezuela. OPEC quotas had no effect on the company’s net crude oil production for the second quarter or ~~six-month~~ ~~periods~~ of ~~2015~~2016 or ~~2014~~2015. ~~At their June 2015 meeting, members of OPEC supported maintaining the current production quota of 30 million barrels per day, which has been in effect since December 2008.~~

The company estimates that net oil-equivalent production for the full-year ~~2015~~2016 will be near the bottom of the previously-reported guidance range of flat to 34 percent growth compared to ~~2014~~2015. Estimated full-year production has been unfavorably impacted by the continued shut-in of production in the Partitioned Zone, start-up issues at the Gorgon Project and the effect of other external events. This estimate is subject to many factors and uncertainties, including the duration of the low price environment that began in second-half 2014; quotas or other actions that may be imposed by OPEC; price ~~and other production~~effects on entitlement ~~effects;~~volumes; changes in fiscal terms or restrictions on the scope of company operations; delays in construction, start-up or ramp-up of projects;

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fluctuations in demand for natural gas in various markets; weather conditions that may shut in production; civil unrest; changing geopolitics; delays in completion of maintenance turnarounds; greater-than-expected declines in production from mature fields; or other disruptions to operations. The outlook for future production levels is also affected by the size and number of economic investment opportunities and, for new, large-scale projects, the time lag between initial exploration and the beginning of production. Investments in upstream projects generally begin well in advance of the start of the associated crude oil and natural gas production. A significant majority of Chevron’s upstream investment is made outside the United States.

In the Partitioned Zone between Saudi Arabia and Kuwait, production was shut-in ~~at the end of~~beginning in May 2015 as a result of ~~continued~~ difficulties in securing work and equipment permits. Net oil-equivalent production in the Partitioned Zone in 2014 was 81,000 barrels per day. ~~The potential for~~During 2015, net oil-equivalent production averaged 28,000 barrels per day. As of mid-2016, production remained shut-in, and the exact timing of a ~~complete loss of~~ production ~~in the Partitioned Zone was not anticipated in the company’s 2015 full-year production guidance. The potential for a continued loss of production~~restart is uncertain and ~~the company cannot estimate its duration.~~dependent on dispute resolution between Saudi Arabia and Kuwait. The financial effects from the loss of production in 2015 were not significant and are not expected to be significant in 2016.

Refer to the “Results of Operations” section on pages 28 and 29 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.

The company’s most significant marketing areas are the West Coast of North America, the U.S. Gulf Coast, Asia and southern Africa. Chevron operates or has significant ownership interests in refineries in each of these areas.

Refer to the “Results of Operations” section on page 29 and 30 for additional discussion of the company’s downstream operations.

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All Other consists of worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities and technology companies.

Operating Developments

Noteworthy operating developments in recent months included the following:

~~Australia~~Angola — ~~Completed~~Restarted LNG production and cargo shipments at the ~~sale of the company’s 50 percent interest in Caltex Australia Limited.~~Angola LNG plant.

Australia — ~~Progressed commissioning activities~~Restarted LNG production and cargo shipments from Train 1 at the Gorgon Project. ~~Commissioning of the Jansz-Io Field subsea infrastructure is ongoing. All Train 2 modules are installed on foundations, with Train 3 modules being delivered to site.~~

~~Australia~~ — Continued construction of the Wheatstone Project, which is now over 65 percent complete. Eleven of 24 Train 1 process modules required for first LNG have been delivered to site. All gas turbine generators are installed on foundations. Subsea infrastructure is being installed, with all three production manifolds now in place.

~~New Zealand~~ ~~— Completed the sale of the company’s interest in The New Zealand Refining Company Limited and reached agreement to sell the company’s marketing interests in New Zealand.~~

~~United States~~China — Achieved start-up of ~~sixth production well~~the third train at ~~Jack/St. Malo in~~ the ~~deepwater Gulf of Mexico. Ramp-up of total oil-equivalent production to approximately 80,000 barrels per day continues to exceed expectations.~~Chuandongbei Project.

~~United States~~Kazakhstan — ~~On track~~Announced final investment decision on the Future Growth and Wellhead Pressure Management Project at the company’s 50 percent-owned affiliate, Tengizchevroil, which is expected to ~~drill 325 gross wells in 2015, including multiple horizontal well development programs, in~~increase crude oil production at the ~~Midland and Delaware Basins in Texas and New Mexico.~~Tengiz Field by about 260,000 barrels per day.

Results of Operations

Business Segments 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.” (Refer to Note 5,6, beginning on page 9,10, for a discussion of the company’s “reportable segments,” as defined under the accounting standards for segment reporting.)

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Upstream

Three Months Ended
June 30 Six Months Ended
June 30
2015 2014 2015 2014
(Millions of dollars)
U.S. Upstream Earnings $ (1,038 ) $ 1,054
$ (1,498 ) $ 1,966



	Three Months Ended June 30						Six Months Ended June 30
	2016			2015			2016			2015
	(Millions of dollars)
U.S. Upstream Earnings	$	(1,113	)	$	(1,038	)	$	(1,963	)	$	(1,498	)

U.S. upstream incurred a loss of ~~$1.04~~$1.11 billion in second quarter ~~2015~~2016 compared ~~to earnings~~with a loss of ~~$1.05~~$1.04 billion from a year earlier. Earnings decreased due to sharply lower crude oil realizations of $1.26 billion and higher depreciation expenses of $920 million, primarily reflecting impairments. Partially offsetting these effects were higher crude oil production of $280 million and lower operating expenses of $90 million.

~~U.S. upstream incurred a loss of $1.50 billion for the first six months of 2015, compared to~~ago. The decrease in earnings ~~of $1.97 billion from a year earlier. Earnings decreased~~was due to lower crude oil and natural gas realizations of ~~$2.62 billion~~$440 million and ~~$330 million, respectively, and higher depreciation expenses of $1.17 billion, primarily reflecting impairments. Partially offsetting these effects were higher~~lower crude oil production of ~~$550~~$50 million. Partially offsetting this decrease were lower depreciation expenses of $260 million, ~~and lower~~ operating expenses of ~~$210~~$80 million and exploration expenses of $80 million. In both quarters, depreciation expense was impacted by a similar amount of impairments and other charges.

U.S. upstream incurred a loss of $1.96 billion for the first six months of 2016, compared with a loss of $1.50 billion from a year earlier. The decrease in earnings was primarily due to lower crude oil and natural gas realizations of $870 million and $100 million, respectively. Partially offsetting this decrease were lower depreciation expenses of $320 million, operating expenses of $190 million and exploration expenses of $70 million.

The average realization per barrel for U.S. crude oil and natural gas liquids in second quarter ~~2015~~2016 was ~~$50,~~$36, down from ~~$92~~$50 a year ago. The average six-month realization per barrel for U.S. crude oil and natural gas liquids was ~~$47~~$31 in ~~2015,~~2016, compared to ~~$92~~$47 a year earlier. The average natural gas realization in second quarter ~~2015~~2016 was ~~$1.92~~$1.21 per thousand cubic feet, compared with ~~$4.09~~$1.92 in ~~2014.~~2015. The average six-month natural gas realization was ~~$2.09~~$1.27 per thousand cubic feet in 2016 and $2.09 in 2015.

Net oil-equivalent production of 682,000 barrels per day in second quarter 2016 was down 48,000 barrels per day, or 7 percent, from a year earlier. Net oil-equivalent production of 692,000 barrels per day in the first six months of 2016 was down 22,000 barrels per day, or 3 percent from a year earlier. Production increases due to project ramp-ups in the Marcellus Shale in western Pennsylvania, the Gulf of Mexico, and the Permian Basin in Texas and New Mexico were more than offset by the effect of asset sales, maintenance-related downtime, and normal field declines in both comparative periods.

The net liquids component of oil-equivalent production of 501,000 barrels per day in second quarter 2016 was down 2 percent from the corresponding 2015 period. The net liquids component of oil-equivalent production of 495,000 barrels per day in the 2016 six-month period was down 1 percent from the 2015 period. Net natural gas production was 1.09 billion cubic feet per day in second quarter 2016, a decrease of 17 percent from the 2015 comparative period. Net natural gas production was 1.18 billion cubic feet per day in the six-month period, a decrease of 8 percent from the 2015 period.



	Three Months Ended June 30						Six Months Ended June 30
	2016			2015			2016			2015
	(Millions of dollars)
International Upstream Earnings*	$	(1,349	)	$	(1,181	)	$	(1,958	)	$	839
___________________
* Includes foreign currency effects	$	329		$	(146	)	$	31		$	376

International upstream incurred a loss of $1.35 billion in second quarter 2016 compared with a loss of $1.18 billion from a year earlier. The decrease was due to lower crude oil and ~~$4.42~~natural gas realizations of $840 million and $150 million, respectively, higher impairments and other charges of $260 million, and lower gains on asset sales of $70 million. Partially offsetting these effects were lower exploration and operating expenses of $480 million and $210 million, respectively. Foreign currency effects increased earnings by $329 million in ~~2014.~~the 2016 quarter, compared with a decrease of $146 million a year earlier.

The loss for the first six months of 2016 was $1.96 billion, compared with earnings of $839 million from a year earlier. The decrease in earnings was due to lower crude oil realizations of $2.04 billion along with lower natural gas realizations of $370 million, higher tax items of $470 million and lower gains on asset sales of $380 million. Partially offsetting the decrease were lower exploration expenses of $560 million. Foreign currency effects increased earnings by $31 million in the first six months of 2016, compared with an increase of $376 million a year earlier.

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Net oil-equivalent production of 730,000 barrels per day in second quarter 2015 was up 63,000 barrels per day, or 9 percent, from the second quarter a year earlier. Net oil-equivalent production of 714,000 barrels per day in the first six months of 2015 was also up 9 percent from a year earlier. Production increases in the Gulf of Mexico, the Permian Basin in Texas and New Mexico, and the Marcellus Shale in western Pennsylvania were only partially offset by normal field declines in both comparative periods.

The net liquids component of oil-equivalent production of 511,000 barrels per day in second quarter 2015 was up 11 percent from the corresponding 2014 period. The net liquids component of oil-equivalent production of 500,000 barrels per day in the 2015 six-month period was also up 11 percent from the 2014 period. Net natural gas production was 1.31 billion cubic feet per day in second quarter 2015, an increase of 5 percent from the 2014 comparative period. Net natural gas production was 1.29 billion cubic feet per day in the six-month period, an increase of 5 percent from the 2014 period.

Three Months Ended
June 30 Six Months Ended
June 30
2015 2014 2015 2014
(Millions of dollars)
     International Upstream Earnings* $ (1,181 ) $ 4,210
$ 839
$ 7,605
     ____________________
      *  Includes foreign currency effects $ (146 ) $ (147 ) $ 376
$ (200 )

International upstream incurred a loss of $1.18 billion in second quarter 2015 compared to earnings of $4.21 billion from a year earlier. The decrease was due to sharply lower crude oil realizations of $2.65 billion and higher depreciation expenses of $1.34 billion, primarily reflecting impairments. Also contributing to the decrease were higher income tax items of $940 million and higher exploration expenses of $240 million. Foreign currency effects decreased earnings by $146 million in the 2015 quarter, compared with a decrease of $147 million a year earlier.

Earnings for the first six months of 2015 were $839 million, compared to earnings of $7.61 billion from a year earlier. The decrease was due to sharply lower crude oil realizations of $5.84 billion along with lower natural gas realizations of $360 million and higher depreciation expenses of $1.40 billion, primarily reflecting impairments. Also contributing to the decrease were higher income tax items of $430 million and higher exploration expenses of $260 million. Partially offsetting the decrease were higher crude oil production of $350 million, higher gains on asset sales of $220 million and lower operating expenses of $150 million. Foreign currency effects increased earnings by $376 million in the first six months of 2015, compared with a decrease of $200 million a year earlier.

The average realization per barrel of crude oil and natural gas liquids in second quarter ~~2015~~2016 was ~~$56,~~$40, compared with ~~$101~~$56 a year earlier. The average realization per barrel of crude oil and natural gas liquids in the first six months of ~~2015~~2016 was ~~$51,~~$34, compared with ~~$100~~$51 a year earlier. The average natural gas realization in second quarter ~~2015~~2016 was ~~$4.48~~$3.93 per thousand cubic feet, compared with ~~$5.98~~$4.48 in the ~~2014~~2015 period. The average natural gas realization in the first six months of ~~2015~~2016 was ~~$4.75~~$3.92 per thousand cubic feet, compared with ~~$6.00~~$4.75 in the ~~2014~~2015 period.

International net oil-equivalent production of ~~1.87~~1.85 million barrels per day in second quarter ~~2015~~2016 was down ~~12,000~~20,000 barrels per day, or 1 percent, from ~~second quarter~~ a year ago. Production increases from ~~entitlement effects in several locations, lower maintenance-related downtime, primarily reflecting the absence of a major turnaround at Tengizchevroil in Kazakhstan, and~~ project ramp-ups in ~~Bangladesh~~Angola, Canada, and ~~Argentina~~other areas were more than offset by normal field declines, the Partitioned Zone shut-in ~~normal field declines,~~ and the ~~effect~~effects of ~~asset sales.~~civil unrest in Nigeria.

International net oil-equivalent production of ~~1.92~~1.91 million barrels per day in the first six months of ~~2015~~2016 was ~~up 11,000~~down 19,000 barrels per day, or 1 percent, from the corresponding ~~2014~~2015 period. Production increases from project ramp-ups in Angola, Canada and other areas, and production entitlement effects in several locations, ~~and project ramp-ups in Bangladesh and Argentina,~~ were ~~partially~~more than offset by ~~normal field declines, the effect of asset sales, and~~ the Partitioned Zone ~~shut-in.~~shut-in and normal field declines.

The net liquids component of oil-equivalent production of ~~1.21~~1.19 million barrels per day in second quarter ~~2015 decreased 2 percent from the 2014 period. The net liquids component of oil-equivalent production of 1.26~~2016 and 1.24 million barrels per day in the first six months of ~~2015 was essentially unchanged~~2016 each decreased 2 percent from the ~~2014 period.~~corresponding 2015 periods. Net natural gas production of ~~3.93~~3.94 billion cubic feet per day in second quarter ~~2015 increased 2 percent from the year ago period. Net natural gas production of 3.98~~2016 and 3.99 billion cubic feet per day in the first six months of ~~2015 increased 1 percent~~2016 were essentially unchanged from the corresponding ~~2014 period.~~2015 periods.

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Downstream

Three Months Ended
June 30 Six Months Ended
June 30
2015 2014 2015 2014
(Millions of dollars)
U.S. Downstream Earnings $ 731
$ 517
$ 1,437
$ 939



	Three Months Ended June 30				Six Months Ended June 30
	2016		2015		2016		2015
	(Millions of dollars)
U.S. Downstream Earnings	$	537	$	731	$	784	$	1,437

U.S. downstream operations earned ~~$731~~$537 million in second quarter ~~2015~~2016 compared with earnings of ~~$517~~$731 million a year earlier. The ~~increase~~decrease in earnings was primarily due to ~~higher~~lower margins on refined product sales of ~~$410 million, partially offset by the absence of a 2014 asset sale gain of $140~~$270 million and lower earnings from the 50 percent-owned Chevron Phillips ~~Chemical~~Chemicals Company LLC of ~~$30~~$100 million. Partially offsetting this decrease were lower operating expenses of $120 million and higher gains on asset sales of $60 million.

Earnings for the first six months of ~~2015~~2016 were ~~$1.4 billion~~$784 million compared to ~~$939 million~~$1.44 billion a year earlier. The ~~increase~~decrease was due to ~~higher~~lower margins on refined product sales of ~~$850~~$470 million, ~~partially offset by the absence of 2014 asset sales gains of $240 million and~~ lower earnings from the 50 percent-owned Chevron Phillips ~~Chemical~~Chemicals Company LLC of ~~$130~~$170 million and an asset impairment of $110 million. Partially offsetting this decrease are higher gains on asset sales of $50 million and $50 million in lower tax items.

Refinery crude oil input ~~of 916,000 barrels per day~~ in second quarter ~~2015~~2016 increased ~~155,000~~4 percent to 955,000 barrels per day from the year-ago period. For the ~~first six months~~six-months of ~~2015,~~2016, crude oil input was ~~918,000~~956,000 barrels per day, up ~~102,000 barrels per day~~4 percent from the corresponding ~~2014~~2015 period. ~~The increase in both periods was primarily due to the absence of the second quarter 2014 major crude unit turnaround at the El Segundo, California refinery.~~

Refined product sales of ~~1.23~~1.26 million barrels per day were up 3 percent from second quarter ~~2014,~~2015, primarily ~~reflecting~~due to higher ~~gasoline~~jet fuel sales. Branded gasoline sales of ~~535,000~~544,000 barrels per day were up 2 percent from the ~~2014~~2015 period. Sales of ~~1.22~~1.24 million barrels per day in the six-month period were up 2 percent, primarily ~~reflecting~~due to higher ~~gasoline~~jet fuel sales. Branded gasoline sales of ~~519,000~~527,000 barrels per day for the first ~~six months~~six-months were up 12 percent from the corresponding ~~2014~~2015 period.


	Three Months Ended June 30						Six Months Ended June 30						Three Months Ended June 30						Six Months Ended June 30
	2015			2014			2015			2014			2016			2015			2016			2015
	(Millions of dollars)						(Millions of dollars)						(Millions of dollars)						(Millions of dollars)
International Downstream Earnings*	$	2,225		$	204		$	2,942		$	492		$	741		$	2,225		$	1,229		$	2,942
___________________
* Includes foreign currency effects	$	(103	)	$	(84	)	$	(49	)	$	(112	)	$	(26	)	$	(103	)	$	(74	)	$	(49	)

International downstream operations earned ~~$2.23 billion~~$741 million in second quarter ~~2015~~2016 compared with ~~$204 million~~$2.23 billion a year earlier. Earnings for the first six months of 2016 were $1.23 billion compared with $2.94 billion a year earlier. The ~~increase~~decrease in earnings in both periods was primarily due to the absence of a $1.6 billion gain from the sale of the company’s interest in Caltex Australia ~~Limited. Higher~~Limited in second quarter 2015, partially offset by second quarter 2016 asset sales gains of $420 million. Lower margins on refined product sales of ~~$210~~$220 million for the

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second quarter and $460 million for the first six months also contributed to the ~~increase.~~decline. Foreign currency effects decreased earnings by ~~$103~~$26 million in ~~the 2015~~second quarter ~~compared with a decrease of $84 million a year earlier.~~

Earnings for the first six months of 2015 were $2.9 billion compared with $492 million a year earlier. The increase was primarily due to a $1.6 billion gain from the sale of the company’s interest in Caltex Australia Limited. Higher margins on refined product sales of $670 million also contributed to the increase. Foreign currency effects decreased earnings $492016 and $74 million in the first six months of ~~2015,~~2016, compared towith decreases of $103 and $49 million, respectively, a ~~decrease of $112 million in the year-ago period.~~year earlier.

Refinery crude oil input of ~~774,000~~764,000 barrels per day in second quarter ~~2015~~2016 decreased ~~70,000 barrels per day~~1 percent from the year-ago ~~period as a result of the Caltex Australia Limited divestment.~~

period. For the first six months of ~~2015,~~2016, crude input was ~~777,000~~780,000 barrels per day, ~~down 32,000 barrels per day~~essentially unchanged from the ~~corresponding 2014~~year-ago period. ~~Decreases from the Caltex Australia Limited divestment were somewhat offset by the absence of a major planned turnaround at the Star Petroleum Refining Company in Thailand in 2014.~~

Total refined product sales of ~~1.48~~1.45 million barrels per day in ~~the 2015~~ second quarter 2016 were down ~~69,000 barrels per day~~2 percent from the year-ago period due to lower gasoline and gas oil ~~sales resulting from the Caltex Australia Limited divestment.~~sales. Sales of ~~1.53~~1.44 million barrels per day in the first six months were ~~up 54,000 barrels per day~~down 6 percent from the corresponding ~~2014 period,~~2015 period. Excluding the effects of the Caltex Australia Limited divestment, refined product sales were down 2 percent, primarily ~~due to higher gasoline and jet~~reflecting lower fuel oil sales.

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All Other


	Three Months Ended June 30						Six Months Ended June 30						Three Months Ended June 30						Six Months Ended June 30
	2015			2014			2015			2014			2016			2015			2016			2015
	(Millions of dollars)												(Millions of dollars)
Net Charges*	$	(166	)	$	(320	)	$	(582	)	$	(825	)	$	(286	)	$	(166	)	$	(287	)	$	(582	)
____________
___________________
* Includes foreign currency effects	$	(2	)	$	(1	)	$	2		$	1		$	(24	)	$	(2	)	$	3		$	2

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 second quarter ~~2015~~2016 were ~~$166~~$286 million, compared with ~~$320~~$166 million a year earlier. The change between periods was mainly due to ~~lower corporate~~higher tax items and ~~lower corporate charges,~~interest expense, partially offset by the ~~effects~~absence of second quarter 2015 charges related to reductions in corporate staffs and ~~higher~~lower environmental expenses. Foreign currency effects increased net charges by $2$24 million in second quarter ~~2015~~2016, compared to a $1$2 million increase in net charges in the ~~2014~~2015 period. Net charges for the first six months of ~~2015~~2016 were $~~582~~287 million, compared with $~~825~~582 million a year earlier. The change between periods was mainly due to lower tax items, the absence of ~~a 2014 impairment of a mining asset and lower corporate tax items, partially offset by higher corporate expenses,~~second quarter 2015 charges related to reductions in corporate staffs and ~~higher~~lower environmental expenses. Higher interest expenses partially offset the decrease. Foreign currency effects decreased net charges by $23 million for the first six months of ~~2015~~2016, compared to a $12 million decrease in net charges in the ~~2014~~2015 period.

Consolidated Statement of Income

Explanations of variations between periods for selected income statement categories are provided below:

Three Months Ended
June 30 Six Months Ended
June 30
2015 2014 2015 2014
(Millions of dollars)
Sales and other operating revenues $ 36,829
$ 55,583
$ 69,144
$ 106,561



	Three Months Ended June 30				Six Months Ended June 30
	2016		2015		2016		2015
	(Millions of dollars)
Sales and other operating revenues	$	27,844	$	36,829	$	50,914	$	69,144

Sales and other operating revenues decreased ~~$18.8~~$9.0 billion infor the ~~three-month~~quarterly period, and ~~$37.4~~$18.2 billion infor the six-month period, ~~primarily~~ due to lower refined product and crude oil ~~prices, partially offset by an increase in refined product and crude oil volumes.~~

prices.

Three Months Ended
June 30 Six Months Ended
June 30
2015 2014 2015 2014
(Millions of dollars)
Income from equity affiliates $ 1,169
$ 1,709
$ 2,570
$ 3,631



	Three Months Ended June 30				Six Months Ended June 30
	2016		2015		2016		2015
	(Millions of dollars)
Income from equity affiliates	$	752	$	1,169	$	1,328	$	2,570

Income from equity affiliates in the quarterly period decreased mainly due to lower upstream-related earnings from Tengizchevroil in Kazakhstan, and ~~Chevron Phillips Chemical Company LLC, partially offset by higher~~lower downstream-related earnings from CPChem and GS Caltex in South Korea. Income from equity affiliates in the six-month period decreased mainly due to lower upstream-related earnings from Tengizchevroil in Kazakhstan, and ~~Chevron Phillips Chemical Company LLC. Partially offsetting these effects were higher~~Petroboscan in Venezuela, and lower downstream-related earnings from CPChem and GS Caltex in South Korea, and ~~Petropiar in Venezuela.~~the effect of the sale of Caltex Australia Limited.

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Three Months Ended
June 30 Six Months Ended
June 30
2015 2014 2015 2014
(Millions of dollars)
Other income $ 2,359
$ 646
$ 3,201
$ 1,011



	Three Months Ended June 30				Six Months Ended June 30
	2016		2015		2016		2015
	(Millions of dollars)
Other income	$	686	$	2,359	$	593	$	3,201

Other income for the quarterly and six-month periods ~~increased primarily~~decreased due to ~~higher~~lower gains on asset sales.

Three Months Ended
June 30 Six Months Ended
June 30
2015 2014 2015 2014
(Millions of dollars)
Purchased crude oil and products $ 20,541
$ 33,844
$ 37,734
$ 64,667



	Three Months Ended June 30				Six Months Ended June 30
	2016		2015		2016		2015
	(Millions of dollars)
Purchased crude oil and products	$	15,278	$	20,541	$	26,503	$	37,734

Purchases decreased ~~$13.3~~$5.3 billion infor the ~~three-month~~quarterly period, and ~~$26.9~~$11.2 billion infor the six-month period, primarily due to lower crude oil and refined product prices, partially offset by ~~an increase in~~higher crude oil volumes.

Three Months Ended
June 30 Six Months Ended
June 30
2015 2014 2015 2014
(Millions of dollars)
Operating, selling, general and
administrative expenses
$ 7,247
$ 7,364
$ 13,586
$ 14,314



	Three Months Ended June 30				Six Months Ended June 30
	2016		2015		2016		2015
	(Millions of dollars)
Operating, selling, general and administrative expenses	$	6,087	$	7,247	$	12,489	$	13,586

Operating, selling, general and administrative expenses decreased ~~$117 million~~$1.2 billion between quarterly periods due to lower employee, environmental reserve, construction, repair and ~~$728 million~~maintenance, contract labor and professional services expenses.

Expenses decreased $1.1 billion between ~~the~~ six-month periods primarily due to lower employee, marine transportation, contract labor, construction, repair and maintenance, environmental reserve, and professional services ~~and fuel expenses, partially offset by higher charges related to employee reductions and transportation~~ expenses.

Three Months Ended
June 30 Six Months Ended
June 30
2015 2014 2015 2014
(Millions of dollars)
Exploration expenses $ 1,075
$ 694
$ 1,667
$ 1,109



	Three Months Ended June 30				Six Months Ended June 30
	2016		2015		2016		2015
	(Millions of dollars)
Exploration expenses	$	214	$	1,075	$	584	$	1,667

The ~~increase~~decrease in exploration expenses for the quarterly and six-month ~~periods~~periods was ~~mostly~~primarily due to ~~higher~~significantly lower charges for well write-offs, ~~partially offset by~~and lower geological and geophysical expenses.

Three Months Ended
June 30 Six Months Ended
June 30
2015 2014 2015 2014
(Millions of dollars)
Depreciation, depletion and
amortization
$ 6,958
$ 3,842
$ 11,369
$ 7,972



	Three Months Ended June 30				Six Months Ended June 30
	2016		2015		2016		2015
	(Millions of dollars)
Depreciation, depletion and amortization	$	6,721	$	6,958	$	11,124	$	11,369

Depreciation, depletion and amortization expenses ~~for the~~in second quarter ~~and six-month periods increased~~2016 decreased mainly due to ~~higher impairment expense related to upstream properties, along with higher~~ lower

production levels and depreciation rates, partially offset by higher impairment expenses for certain oil and gas

producing fields. The six-month period decreased mainly due to lower production volumes, partially offset by

higher impairment expenses for certain oil and gas producing ~~fields.~~fields, and the impairment of a downstream asset.

Three Months Ended
June 30 Six Months Ended
June 30
2015 2014 2015 2014
(Millions of dollars)
Taxes other than on income $ 3,173
$ 3,167
$ 6,291
$ 6,186



	Three Months Ended June 30				Six Months Ended June 30
	2016		2015		2016		2015
	(Millions of dollars)
Taxes other than on income	$	2,973	$	3,173	$	5,837	$	6,291

Taxes other than on income ~~were relatively flat between~~decreased in the quarterly ~~periods. The~~and six-month ~~period increased~~periods primarily due to ~~higher excise taxes in Thailand.~~lower product and crude oil prices, and the divestment of the Pakistan fuels business at the end of June 2015.

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Three Months Ended
June 30 Six Months Ended
June 30
2015 2014 2015 2014
(Millions of dollars)
Income tax expense $ 755
$ 3,337
$ 1,060
$ 6,744



	Three Months Ended June 30					Six Months Ended June 30
	2016			2015		2016			2015
	(Millions of dollars)
Income tax expense (benefit)	$	(607	)	$	755	$	(1,611	)	$	1,060

Effective income tax rates for the ~~2015~~2016 and ~~2014~~2015 quarters were 5529 percent and 3755 percent, respectively. For the comparative six-month periods, the effective tax rates were 43 percent and 25 percent, for 2016 and 402015 respectively. Excluding the effects of equity earnings, the effective tax rates for the 2016 and 2015 quarterly periods were 24 percent and 334 percent, respectively, a decrease of 310 percent between periods, and the tax rates for ~~2015~~the respective six-month periods were 34 percent and ~~2014 respectively.~~50 percent, a decrease of 16 percent between periods. The ~~increase~~decrease in the effective tax rate between the quarterly periods primarily resulted from the effects of ~~jurisdictional mix, the sale of the company’s interest in Caltex Australia Limited,~~ valuation allowances recognized on deferred tax assets, the absence of the 2015 sale of the company's interest in Caltex Australia Limited and foreign currency remeasurement effects, partially offset by ~~the effects of equity earnings.~~jurisdictional mix impacts. The decrease in the effective tax rate for the six-month comparative period ~~was~~ primarily ~~due to to the effects of equity income, a reduction in statutory tax rates in the United Kingdom, foreign currency remeasurement and jurisdictional mix, partially offset by~~resulted from the effects of valuation allowances recognized on deferred tax ~~assets.~~assets and the absence of the 2015 sale of the company's interest in Caltex Australia Limited, partially offset by jurisdictional mix impacts.

3332

Table of Contents

Selected Operating Data

The following table presents a comparison of selected operating data:

Selected Operating Data ⁽¹⁾⁽²⁾


	Three Months Ended June 30				Six Months Ended June 30				Three Months Ended June 30				Six Months Ended June 30
	2015		2014		2015		2014		2016		2015		2016		2015
U.S. Upstream
Net crude oil and natural gas liquids production (MBPD)	511		460		500		449		501		511		495		500
Net natural gas production (MMCFPD)⁽³⁾	1,312		1,244		1,285		1,228		1,088		1,312		1,177		1,285
Net oil-equivalent production (MBOEPD)	730		667		714		654		682		730		692		714
Sales of natural gas (MMCFPD)	3,777		3,676		3,957		4,303		3,154		3,777		3,481		3,957
Sales of natural gas liquids (MBPD)	27		19		25		17		26		27		25		25
Revenue from net production
Liquids ($/Bbl)	$	50.29	$	92.44	$	46.80	$	91.98	$	35.79	$	50.29	$	31.19	$	46.80
Natural gas ($/MCF)	$	1.92	$	4.09	$	2.09	$	4.42	$	1.21	$	1.92	$	1.27	$	2.09
International Upstream
Net crude oil and natural gas liquids production (MBPD)⁽⁴⁾	1,211		1,234		1,261		1,255		1,188		1,211		1,240		1,261
Net natural gas production (MMCFPD)⁽³⁾	3,931		3,861		3,978		3,950		3,943		3,931		3,994		3,978
Net oil-equivalent production (MBOEPD)⁽⁴⁾	1,866		1,878		1,924		1,913		1,846		1,866		1,905		1,924
Sales of natural gas (MMCFPD)	4,130		4,132		4,286		4,347		4,503		4,130		4,531		4,286
Sales of natural gas liquids (MBPD)	24		25		25		30		24		24		24		25
Revenue from liftings
Liquids ($/Bbl)	$	55.94	$	101.15	$	51.12	$	99.93	$	40.25	$	55.94	$	34.39	$	51.12
Natural gas ($/MCF)	$	4.48	$	5.98	$	4.75	$	6.00	$	3.93	$	4.48	$	3.92	$	4.75
U.S. and International Upstream
Total net oil-equivalent production (MBOEPD)⁽⁴⁾	2,596		2,545		2,638		2,567		2,528		2,596		2,597		2,638
U.S. Downstream
Gasoline sales (MBPD)⁽⁵⁾	631		612		617		603		646		631		631		617
Other refined product sales (MBPD)	598		576		601		590		617		598		606		601
Total refined product sales (MBPD)	1,229		1,188		1,218		1,193		1,263		1,229		1,237		1,218
Sales of natural gas liquids (MBPD)	136		116		121		115		115		136		110		121
Refinery input (MBPD)	916		761		918		816		955		916		956		918
International Downstream
Gasoline sales (MBPD)⁽⁵⁾	350		335		355		316		345		350		352		355
Other refined product sales (MBPD)	761		742		748		695		742		761		724		748
Share of affiliate sales (MBPD)	367		470		426		464		362		367		366		426
Total refined product sales (MBPD)	1,478		1,547		1,529		1,475		1,449		1,478		1,442		1,529
Sales of natural gas liquids (MBPD)	60		56		70		55		68		60		66		70
Refinery input (MBPD)	774		844		777		809		764		774		780		777
_________________________
_____________________
⁽¹⁾ Includes company share of equity affiliates.
⁽²⁾ MBPD — thousands of barrels per day; MMCFPD — millions of cubic feet per day; Bbl — Barrel; MCF — thousands of cubic feet; oil-equivalent gas conversion ratio is 6,000 cubic feet of natural gas = 1 barrel of crude oil; MBOEPD — thousands of barrels of oil-equivalent per day.	⁽²⁾ MBPD — thousands of barrels per day; MMCFPD — millions of cubic feet per day; Bbl — Barrel; MCF — thousands of cubic feet; oil-equivalent gas conversion ratio is 6,000 cubic feet of natural gas = 1 barrel of crude oil; MBOEPD — thousands of barrels of oil-equivalent per day.								⁽²⁾ MBPD — thousands of barrels per day; MMCFPD — millions of cubic feet per day; Bbl — Barrel; MCF — thousands of cubic feet; oil-equivalent gas conversion ratio is 6,000 cubic feet of natural gas = 1 barrel of crude oil; MBOEPD — thousands of barrels of oil-equivalent per day.
⁽³⁾ Includes natural gas consumed in operations (MMCFPD):	⁽³⁾ Includes natural gas consumed in operations (MMCFPD):								⁽³⁾ Includes natural gas consumed in operations (MMCFPD):
United States	66		69		68		71		71		66		69		68
International	423		452		438		466		430		423		430		438
⁽⁴⁾ Includes: Canada — synthetic oil	28		42		39		41
Venezuela affiliate — synthetic oil	29		32		30		32
⁽⁴⁾ Includes net production of synthetic oil:
Canada									43		28		46		39
Venezuela affiliate									28		29		28		30
⁽⁵⁾ Includes branded and unbranded gasoline.

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Table of Contents

Liquidity and Capital Resources

Cash, cash equivalents ~~time deposits~~ and marketable securities totaled $~~12.5~~9.1 billion at June 30, ~~2015~~2016, down $~~0.7~~2.2 billion from year-end ~~2014~~2015. Cash provided by operating activities in the first six months of ~~2015~~2016 was ~~$9.5~~$3.7 billion,, compared with $~~16.3~~9.5 billion in the year-ago ~~period.~~period, reflecting lower crude prices. Cash capital and exploratory expenditures decreased ~~$2.3~~$5.5 billion between periods, reflecting ~~the pacing of certain of the company's larger capital projects.~~lower activity.

Dividends The company paid dividends of ~~$4.0~~$4.0 billion to common shareholders during the first six months of ~~2015~~2016. In July ~~2015~~,2016, the company declared a quarterly dividend of $1.07 per common share, payable in September ~~2015~~2016.

Debt and Capital Lease Obligations Chevron’s total debt and capital lease obligations were $~~31.9~~45.1 billion at June 30, ~~2015~~2016, up from $~~27.8~~38.5 billion at December 31, ~~2014~~2015.

The company’s primary financing source for working capital needs is its commercial paper program. The ~~authorized borrowing limit under this program is $20.0 billion and the~~ outstanding balance for the company's commercial paper program at June 30, ~~2015~~2016, was ~~$6.6~~$8.6 billion. The company’s debt and capital lease obligations due within one year, consisting primarily of commercial paper, redeemable long-term obligations and the current portion of long-term debt, totaled ~~$10.6~~$13.5 billion at June 30, ~~2015~~2016, and ~~$11.8~~$12.9 billion at December 31, ~~2014~~2015. Of these amounts, $8.0 billion was reclassified to long-term at both June 30, ~~2015~~2016, and December 31, ~~2014~~2015. At June 30, ~~2015~~2016, settlement of these obligations was not expected to require the use of working capital within one year, as the company had the intent and the ability, as evidenced by committed credit facilities, to refinance them on a long-term basis.

At June 30, ~~2015~~2016, the company had $8.0 billion in committed credit facilities with various major banks ~~expiring in December 2016, which~~that enable the refinancing of short-term obligations on a long-term basis. The credit facilities consist of a 364-day facility which enables borrowing of up to $6.0 billion and can be renewed for an additional 364-day period or the company can convert any amounts outstanding into a term loan for a period of up to one year, and a $2.0 billion five-year facility expiring in December 2020. These facilities support 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 facilities 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 these facilities at June 30, ~~2015~~2016. In addition, the company has an automatic shelf registration statement that expires in ~~November 2015~~August 2018 for an unspecified amount of nonconvertible debt securities issued or guaranteed by the company.

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 and Texaco Capital Inc. All of these securities are the obligations of, or guaranteed by, Chevron Corporation and are rated AAAA- by Standard and Poor’s Corporation and ~~Aa1~~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, the capital program and cash that may be generated from asset dispositions. Based on its high-quality debt ratings, the company believes that it has substantial borrowing capacity to meet unanticipated cash requirements. ~~The company also can modify capital spending plans during~~During extended periods of low prices for crude oil and natural gas and narrow margins for refined products and commodity chemicals, the company can also modify capital spending plans to provide flexibility to continue paying the common stock dividend and ~~maintain~~also remain committed to retaining the company’s high-quality debt ratings.

Common Share Repurchase Program In July 2010, the Board of Directors approved an ongoing share repurchase program with no set term or monetary limits. No shares were acquired under the program in 2015 or through the first six months of 2016, and the company does not plan to acquire any shares under the program for the remainder of the year. From the inception of the program through 2014, the company purchased 180.9 million shares for $20.0 billion. ~~The company does not plan to acquire any shares under the program in 2015.~~

Noncontrolling Interests The company had noncontrolling interests of $1.2 billion ~~and~~ ~~$1.2 billion~~at both June 30, ~~2015~~2016, and December 31, ~~2014~~2015~~, respectively.~~. Distributions to noncontrolling interests totaled ~~$26~~$24 million during the first six months of ~~2015~~2016 compared to $2$26 million for the same period in ~~2014~~2015.

Current Ratio ~~— current~~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 was ~~1.4~~1.3 at June 30, ~~2015~~2016, and ~~1.3~~1.4 at December 31, ~~2014~~2015, respectively. The current ratio is adversely affected by the fact that Chevron’s inventories are valued on a last-in, first-out basis. At June 30, ~~2015~~2016, the book value of inventory was lower than replacement cost.

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Debt Ratio ~~— total~~Total debt as a percentage of total debt plus Chevron Corporation Stockholders’ Equity, which indicates the company’s leverage. This ratio was ~~17.1~~23.5 percent at June 30, ~~2015~~2016, and ~~15.2~~20.2 percent at year-end ~~2014~~2015.

Pension Obligations Information related to pension plan contributions is included on pages 1314 and 1415 in Note 10 to the Consolidated Financial Statements.

Capital and Exploratory Expenditures Total expenditures, including the company’s share of spending by affiliates, were $~~17.3~~12.0 billion in the first six months of ~~2015~~2016, compared with $~~19.6~~17.3 billion in the corresponding ~~2014~~2015 period. The amounts included the company’s share of affiliates’ expenditures of $~~1.5~~1.7 billion and $1.5 billion in the ~~2015~~2016 and ~~2014~~2015 periods, respectively, which did not require cash outlays by the company. Expenditures for upstream projects in the first six months of ~~2015~~2016 were $~~16.2~~11.0 billion, representing 9392 percent of the companywide total.

Capital and Exploratory Expenditures by Major Operating Area


	Three Months Ended June 30				Six Months Ended June 30				Three Months Ended June 30				Six Months Ended June 30
	2015		2014		2015		2014		2016		2015		2016		2015
	(Millions of dollars)								(Millions of dollars)
United States
Upstream	$	1,876	$	2,130	$	4,194	$	4,088	$	1,204	$	1,876	$	2,480	$	4,194
Downstream	531		411		816		768		332		531		753		816
All Other	88		122		151		221		53		88		75		151
Total United States	2,495		2,663		5,161		5,077		1,589		2,495		3,308		5,161
International
Upstream	6,114		7,281		11,956		14,109		3,818		6,114		8,508		11,956
Downstream	114		230		189		415		116		114		175		189
All Other	1		11		1		15		—		1		1		1
Total International	6,229		7,522		12,146		14,539		3,934		6,229		8,684		12,146
Worldwide	$	8,724	$	10,185	$	17,307	$	19,616	$	5,523	$	8,724	$	11,992	$	17,307

Contingencies and Significant Litigation

(a) Evaluation of disclosure controls and procedures

(b) Changes in internal control over financial reporting

Government ProceedingsAs initially disclosed in the ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K for the ~~period~~year ended ~~March~~December 31, ~~2014, filed May 2, 2014,~~2013, on August 6, 2012, a piping failure and fire ~~was reported on February 11, 2014,~~occurred at the Chevron ~~Appalachia, LLC’s Lanco 7H well located~~refinery in ~~Dunkard Township, Greene County, Pennsylvania. The Pennsylvania Department of Environmental Protection (PA DEP)~~Richmond, California. Various federal, state, and ~~the Occupational Safety and Health Administration of the United States (OSHA)~~local agencies initiated investigations as a result of the incident. The PA DEP issued Chevron a Notice of Violation alleging nine separate incidents of noncompliance. Chevron entered into a settlement agreement with the PA DEP resolving the alleged violations and a penalty has been paid in the amount of $939,553.

~~On June 12, 2015,~~Based on its civil investigation, the United States Environmental Protection Agency ~~(EPA)~~("EPA") issued a Finding of Violations ("FOVs") to Chevron on December 17, 2013, which includes 62 findings of alleged ~~that Chevron is obligated~~noncompliance at the Richmond refinery. The California Division of Occupational Safety and Health ("Cal/OSHA") issued 17 citations related to pay stipulated civil penalties in conjunction with commitments Chevron undertook to operate certain air emission control equipment, meet applicable emission limits, meet fuel gas specifications, and conduct specified environmental sampling at its Salt Lake City, Utah refinery pursuant to athe incident. Following the Richmond fire, EPA conducted inspections under the Clean Air Act ~~settlement with~~Risk Management Program at Chevron’s El Segundo, Pascagoula and Salt Lake refineries. With the ~~EPA. The company has disputed many~~participation of the ~~allegations.~~United States Department of Justice, Chevron, EPA, and Cal/OSHA are negotiating a potential combined resolution of the FOVs and citations at all four refineries. Resolution of the ~~alleged violations~~FOVs and citations may result in the payment of a civil penalty of $100,000 or more.

As initially disclosed in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, in April 2016, Chevron received a proposal from the South Coast Air Quality Management District ("SCAQMD") seeking to collectively resolve certain notices of violation ("NOVs") issued in 2012 and 2013 to the Chevron refinery in El Segundo, California. Chevron and the SCAQMD are negotiating a potential combined resolution of the NOVs. The SCAQMD has now proposed a combined resolution of NOVs from 2014, in addition to the NOVs from 2012 and 2013. Collective resolution of these NOVs may result in the payment of a civil penalty of $100,000 or more.

Information about risk factors for the three months ended June 30, ~~2015~~2016, does not differ materially from that set forth under the heading “Risk Factors” on pages 2221 through 2423 of the company’s ~~2014~~2015 Annual Report on Form 10-K.

ISSUER PURCHASES OF EQUITY SECURITIES

Purchased ⁽¹⁾⁽²⁾

the Program ⁽²⁾

Purchased ⁽¹⁾⁽²⁾

the Program ⁽²⁾

_______________________

In July 2010, the Board of Directors approved an ongoing share repurchase program with no set term or monetary limits, under which common shares would be acquired by the company through open market purchases or in negotiated transactions at prevailing prices, as permitted by securities laws and other legal requirements and subject to market conditions and other factors. As of December 31, 2014, 180,886,291 shares had been acquired under this program (some pursuant to Rule 10b5-1 plans and some pursuant to accelerated share repurchase plans) for $20.0 billion at an average price of approximately $111 per share. ~~The~~No shares were acquired under the program in 2015, or through the first six months of 2016, and the company does not plan to acquire any shares under the program ~~in 2015.~~for the remainder of the year.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	CHEVRON CORPORATION (REGISTRANT)


	/S/ JEANETTE L. OURADA
	Jeanette L. Ourada, Vice President and Comptroller (Principal Accounting Officer and Duly Authorized Officer)

Date: August ~~5, 2015~~4, 2016

_________________________



Delaware		94-0890210
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
6001 Bollinger Canyon Road, San Ramon, California		94583-2324 (Zip Code)
(Address of principal executive offices)		94583-2324 (Zip Code)



Class		Outstanding as of June 30, ~~2015~~2016
Common stock, $.75 par value		~~1,881,734,623~~1,886,520,448



		Page No.
	Cautionary Statements Relevant to Forward-Looking Information for the Purpose of “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995	2
PART I FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements —
	Consolidated Statement of Income for the Three and Six Months Ended June 30, ~~2015,~~2016, and ~~2014~~2015	3
	Consolidated Statement of Comprehensive Income for the Three and Six Months Ended June 30, ~~2015,~~2016, and ~~2014~~2015	4
	Consolidated Balance Sheet at June 30, ~~2015,~~2016, and December 31, ~~2014~~2015	5
	Consolidated Statement of Cash Flows for the Six Months Ended June 30, ~~2015,~~2016, and ~~2014~~2015	6
	Notes to Consolidated Financial Statements	7-23
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~24-36~~24-35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37 36
Item 4.	Controls and Procedures	37 36
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	38 36
Item 1A.	Risk Factors	3836
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3937
Item 4.	Mine Safety Disclosures	3937
Item 6.	Exhibits	3937
Signature		4038
Exhibits:	Computation of Ratio of Earnings to Fixed Charges	4240
Rule 13a-14(a)/15d-14(a) Certifications		~~43-44~~41-42
Rule 13a-14(b)/15d-14(b) Certifications		~~45-46~~43-44



* Includes excise, value-added and similar taxes:	$	1,965	$	2,120	$	3,842	$	4,066


	At June 30 2015			At December 31 2014			At June 30 2016			At December 31 2015
	(Millions of dollars, except per-share amounts)						(Millions of dollars, except per-share amounts)
ASSETS	ASSETS						ASSETS
Cash and cash equivalents	$	12,156		$	12,785		$	8,764		$	11,022
Time deposits	—			8
Marketable securities	365			422			320			310
Accounts and notes receivable, net	16,153			16,736			13,490			12,860
Inventories
Crude oil and petroleum products	4,317			3,854			3,680			3,535
Chemicals	454			467			431			490
Materials, supplies and other	2,345			2,184			2,316			2,309
Total inventories	7,116			6,505			6,427			6,334
Prepaid expenses and other current assets	4,948			5,776
Prepaid expenses and other current assets¹							3,470			3,904
Total Current Assets	40,738			42,232			32,471			34,430
Long-term receivables, net	2,880			2,817			2,469			2,412
Investments and advances	26,206			26,912			27,740			27,110
Properties, plant and equipment, at cost	336,619			327,289			339,081			340,277
Less: Accumulated depreciation, depletion and amortization	151,352			144,116			154,396			151,881
Properties, plant and equipment, net	185,267			183,173			184,685			188,396
Deferred charges and other assets	6,389			6,299
Deferred charges and other assets^{1, 2}							6,316			6,155
Goodwill	4,588			4,593			4,581			4,588
Assets held for sale	387			—			3,216			1,449
Total Assets	$	266,455		$	266,026		$	261,478		$	264,540
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY						LIABILITIES AND EQUITY
Short-term debt	$	2,621		$	3,790
Short-term debt²							$	5,530		$	4,927
Accounts payable	17,380			19,000			13,416			13,516
Accrued liabilities	5,024			5,328			4,458			4,833
Federal and other taxes on income	2,047			2,575
Federal and other taxes on income¹							490			1,073
Other taxes payable	1,196			1,233			1,033			1,118
Total Current Liabilities	28,268			31,926			24,927			25,467
Long-term debt	29,210			23,960
Long-term debt²							39,487			33,542
Capital lease obligations	79			68			68			80
Deferred credits and other noncurrent obligations	23,110			23,549			22,712			23,465
Noncurrent deferred income taxes	21,597			21,920
Noncurrent deferred income taxes¹							18,342			20,165
Noncurrent employee benefit plans	8,300			8,412			7,617			7,935
Total Liabilities	110,564			109,835			113,153			110,654
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 June 30, 2015, and December 31, 2014)	1,832			1,832
Common stock (authorized 6,000,000,000 shares; $0.75 par value; 2,442,676,580 shares issued at June 30, 2016, and December 31, 2015)							1,832			1,832
Capital in excess of par value	16,174			16,041			16,436			16,330
Retained earnings	184,129			184,987			175,379			181,578
Accumulated other comprehensive loss	(4,651		)	(4,859		)	(4,032		)	(4,291		)
Deferred compensation and benefit plan trust	(240		)	(240		)	(240		)	(240		)
Treasury stock, at cost (560,941,957 and 563,027,772 shares at June 30, 2015, and December 31, 2014, respectively)	(42,575		)	(42,733		)
Treasury stock, at cost (556,156,132 and 559,862,580 shares at June 30, 2016, and December 31, 2015, respectively)							(42,212		)	(42,493		)
Total Chevron Corporation Stockholders’ Equity	154,669			155,028			147,163			152,716
Noncontrolling interests	1,222			1,163			1,162			1,170
Total Equity	155,891			156,191			148,325			153,886
Total Liabilities and Equity	$	266,455		$	266,026		$	261,478		$	264,540
____________________
¹2015 adjusted to conform to ASU 2015-17. Refer to Note 9, "Income Taxes" beginning on page 13.							¹2015 adjusted to conform to ASU 2015-17. Refer to Note 9, "Income Taxes" beginning on page 13.
²2015 adjusted to conform to ASU 2015-03. Refer to Note 5, "New Accounting Standards" on page 10.							²2015 adjusted to conform to ASU 2015-03. Refer to Note 5, "New Accounting Standards" on page 10.


		Six Months Ended June 30, 2015																Six Months Ended June 30, 2016
		Currency Translation Adjustment			Unrealized Holding Gains (Losses) on Securities			Derivatives			Defined Benefit Plans			Total				Currency Translation Adjustment			Unrealized Holding Gains (Losses) on Securities			Derivatives			Defined Benefit Plans			Total

Balance at January 1		$	(96	)	$	(8	)	$	(2	)	$	(4,753	)	$	(4,859	)		$	(140	)	$	(29	)	$	(2	)	$	(4,120	)	$	(4,291	)
Components of Other Comprehensive Income (Loss):	Components of Other Comprehensive Income (Loss):																Components of Other Comprehensive Income (Loss):
Before Reclassifications		(19		)	(6		)	—			9			(16		)		2			10			—			3			15
Reclassifications⁽²⁾		—			—			—			224			224				—			—			—			244			244
Net Other Comprehensive Income (Loss)		(19		)	(6		)	—			233			208				2			10			—			247			259
Balance at June 30		$	(115	)	$	(14	)	$	(2	)	$	(4,520	)	$	(4,651	)		$	(138	)	$	(19	)	$	(2	)	$	(3,873	)	$	(4,032	)


	At June 30, 2015								At December 31, 2014								At June 30, 2016								At December 31, 2015
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Marketable Securities	$	365	$	365	$	—	$	—	$	422	$	422	$	—	$	—	$	320	$	320	$	—	$	—	$	310	$	310	$	—	$	—
Derivatives	45		22		23		—		413		394		19		—		23		4		19		—		205		189		16		—
Total Assets at Fair Value	$	410	$	387	$	23	$	—	$	835	$	816	$	19	$	—	$	343	$	324	$	19	$	—	$	515	$	499	$	16	$	—
Derivatives	80		60		20		—		84		83		1		—		74		69		5		—		53		47		6		—
Total Liabilities at Fair Value	$	80	$	60	$	20	$	—	$	84	$	83	$	1	$	—	$	74	$	69	$	5	$	—	$	53	$	47	$	6	$	—


																			At June 30, 2016
	At June 30, 2015																															Before-Tax Loss
	Total		Level 1			Level 2			Level 3				Before-Tax Loss						Total				Level 1			Level 2			Level 3			Three Months Ended			Six Months Ended
	Total				Three Months Ended				Level 3			Six Months Ended							Total				Level 1			Level 2			Level 3			Three Months Ended			Six Months Ended
Properties, plant and equipment, net (held and used)	$	2,069	Level 1		$	Level 2		—		$	44			$	2,025		$	2,307			$	2,566		$	358		$	—		$	13		$	345		$	2,261	$	2,335
Properties, plant and equipment, net (held for sale)	289		—			289			—				273			273			288				—			285			3			314			541
Investments and advances	75		—			75			—				20			21			23				—			20			3			214			218
Total Assets at Fair Value	$	2,433	$	—		$	408		$	2,025			$	2,600		$	2,860		$	669			$	—		$	318		$	351		$	2,789		$	3,094



		Gain / (Loss) Three Months Ended June 30						Gain / (Loss) Six Months ended June 30
Type of Contract	Statement of Income Classification	2015			2014			2015			2014
Commodity	Sales and other operating revenues	$	(31	)	$	(71	)	$	(152	)	$	26
Commodity	Purchased crude oil and products	(13		)	(8		)	1			(16		)
Commodity	Other income	(4		)	—			(11		)	(23		)
		$	(48	)	$	(79	)	$	(162	)	$	(13	)



Period	Total Number Of Shares Purchased ⁽¹⁾⁽²⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares that May Yet Be Purchased Under the Program ⁽²⁾
April 1 – April 30, 2015	—	$	—	—
May 1 – May 31, 2015	—	—		—
June 1 – June 30, 2015	8	102.52		—
Total	8	$	102.52	—


⁽¹⁾	Includes common shares repurchased from company employees and directors for required personal income tax withholdings on the exercise of the stock options and shares delivered or attested to in satisfaction of the exercise price by holders of employee and director stock options. The options were issued to and exercised by management under Chevron long-term incentive plans.



Exhibit Number	Description
(4)	Pursuant to the Instructions to Exhibits, certain instruments defining the rights of holders of long-term debt securities of the company and its consolidated subsidiaries are not filed because the total amount of securities authorized under any such instrument does not exceed 10 percent of the total assets of the company and its subsidiaries on a consolidated basis. A copy of such instrument will be furnished to the Commission upon request.
(10.1)	Amendment Number One to the Chevron Corporation Non-Employee Directors’ Equity Compensation and Deferral Plan
(12)	Computation of Ratio of Earnings to Fixed Charges
(31.1)	Rule 13a-14(a)/15d-14(a) Certification by the company’s Chief Executive Officer
(31.2)	Rule 13a-14(a)/15d-14(a) Certification by the company’s Chief Financial Officer
(32.1)	Rule 13a-14(b)/15d-14(b) Certification by the company’s Chief Executive Officer
(32.2)	Rule 13a-14(b)/15d-14(b) Certification by the company’s Chief Financial Officer
~~(95)~~	~~Mine Safety Disclosure~~
(101.INS)	XBRL Instance Document
(101.SCH)	XBRL Schema Document
(101.CAL)	XBRL Calculation Linkbase Document
(101.DEF)	XBRL Definition Linkbase Document
(101.LAB)	XBRL Label Linkbase Document
(101.PRE)	XBRL Presentation Linkbase Document

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