¥ RESTRUCTURING OUR EXPLORATION  AND PRODUCTION ORGANIZATION ¥ STRENGTHENING OUR FINANCIAL POSITION ¥ CREATING VALUE THROUGH FOCUSED,  HIGH-IMPACT EXPLORATION ¥ REFINING AND MARKETING JOHN B. HESS Chairman of the Board and Chief Executive Officer  March 3, 2004 Our refining and marketing business posted its best annual results in a decade. Earnings at HOVENSA, our refining joint venture in the U.S. Virgin Islands, and our retail and energy marketing businesses were strong.  Last year we announced several discoveries, includ- ing two significant deepwater Gulf of Mexico wells: the successful appraisal of our Shenzi discovery,  in which we have a 28% interest and which encoun- tered about 500 feet of net oil pay, and Tubular Bells, in which we have a 20% interest. Both Shenzi and Tubular Bells will be further appraised in 2004. Our exploration strategy is to drill fewer, but higher impact wells than in the past. In 2004, we expect to drill about 15 high impact exploration and appraisal wells. In 2004, over one half of our exploration activity will be in the deepwater Gulf of Mexico. We deeply appreciate the many contributions and dedication of our employees. We are grateful to our directors for their advice and guidance. We thank our shareholders for their continued support. We significantly strengthened the CorporationGLYPH<213>s financial position in 2003. Proceeds from asset sales totaled $545 million; we generated free  cash flow, after capital spending and dividends,  in excess of $150 million, and during the fourth quarter we issued $675 million of Mandatory Convertible Preferred Stock. These steps allowed us to reduce debt by over $1 billion in 2003 and resulted in our year-end debt to capitalization ratio declining to 42.5% from 54% at the end of 2002. With $518 million of cash at the end of the year, an undrawn credit facility of $1.5 billion and negligible debt maturities over the next several years, we believe that we will have ample liquidity and finan- cial flexibility for the foreseeable future. Last year we took steps to restructure our explo- ration and production business. As part of this  reorganization, we reduced headcount by about 30%, or roughly 700 positions. As a result, we expect to achieve annual after-tax cost savings  of $30 million. Sixty percent of these savings are expected to be realized in 2004, and the full amount in 2005. Gulf of Mexico, bringing our interest in the field to 50%. We also exchanged our 25% stake in Premier Oil plc for a 23% interest in the Natuna Sea Block A in Indonesia. Net income per barrel of refined products sold ranked in the top quartile versus competitors for 2003. The first quarter of 2004 has started well, and we antici- pate another year of strong financial performance for our refining and marketing business. F 3