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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1995
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
COMMISSION FILE NUMBER 1-1204
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AMERADA HESS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
13-4921002
(I.R.S. employer identification number)
1185 AVENUE OF THE AMERICAS, NEW YORK, N.Y.
(Address of principal executive offices)
10036
(Zip Code)
(Registrant's telephone number, including area code is (212) 997-8500)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
At June 30, 1995, 93,002,755 shares of Common Stock were outstanding.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
(in thousands, except per share data)
Three Months Six Months
Ended June 30 Ended June 30
----------------------- -------------------------
1995 1994 1995 1994
-------- -------- -------- ---------
REVENUES
Sales (excluding excise taxes) and
other operating revenues $ 1,773,326 $ 1,488,226 $ 3,665,537 $ 3,345,854
Interest and other non-operating revenues 4,723 7,688 90,846 19,286
----------- ----------- ------------- --------------
Total revenues 1,778,049 1,495,914 3,756,383 3,365,140
----------- ----------- ------------- --------------
COSTS AND EXPENSES
Cost of products sold and operating expenses 1,268,006 995,959 2,631,881 2,201,587
Exploration expenses, including dry holes 77,139 62,516 141,887 122,374
Selling, general and administrative expenses 149,395 139,353 303,860 296,707
Interest expense 63,026 59,728 127,977 120,294
Depreciation, depletion and amortization 202,210 222,171 410,013 452,040
Lease impairment 9,393 12,733 19,713 25,534
Provision for income taxes 49,099 20,185 136,109 79,679
----------- ----------- ------------- --------------
Total costs and expenses 1,818,268 1,512,645 3,771,440 3,298,215
----------- ----------- ------------- --------------
NET INCOME (LOSS) $ (40,219) $ (16,731) $ (15,057) $ 66,925
=========== =========== ============= ==============
NET INCOME (LOSS) PER SHARE $ (0.43) $ (0.18) $ (0.16) $ 0.72
=========== =========== ============= ==============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 92,995 93,005 92,995 92,947
COMMON STOCK DIVIDENDS PER SHARE $ .15 $ .15 $ .30 $ .30
See accompanying notes to consolidated financial statements.
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PART I - FINANCIAL INFORMATION (CONT'D.)
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands of dollars)
A S S E T S
June 30, December 31,
1995 1994
------------ ----------------
CURRENT ASSETS
Cash and cash equivalents $ 48,322 $ 53,135
Accounts receivable 564,867 570,525
Inventories 926,679 945,635
Prepaid expenses 112,627 152,366
------------- ----------------
Total current assets 1,652,495 1,721,661
------------- ----------------
INVESTMENTS AND ADVANCES 176,857 140,300
------------- ----------------
PROPERTY, PLANT AND EQUIPMENT
Total - at cost 14,603,293 14,304,826
Less reserves for depreciation, depletion,
amortization and lease impairment 8,375,159 7,938,824
------------- ----------------
Property, plant and equipment - net 6,228,134 6,366,002
------------- ----------------
OTHER ASSETS 89,281 109,977
------------- ----------------
TOTAL ASSETS $ 8,146,767 $ 8,337,940
============= ================
L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
CURRENT LIABILITIES
Accounts payable - trade $ 338,902 $ 291,571
Accrued liabilities 586,481 555,363
Notes payable 11,800 63,747
Taxes payable 193,510 168,927
Current maturities of long-term debt 136,689 121,806
------------- ----------------
Total current liabilities 1,267,382 1,201,414
------------- ----------------
LONG-TERM DEBT 2,873,692 3,154,235
------------- ----------------
CAPITALIZED LEASE OBLIGATIONS 74,453 80,928
------------- ----------------
DEFERRED LIABILITIES AND CREDITS
Deferred income taxes 594,612 547,537
Other 249,839 254,197
------------- ----------------
Total deferred liabilities and credits 844,451 801,734
------------- ----------------
STOCKHOLDERS' EQUITY
Preferred stock, par value $1.00
Authorized - 20,000,000 shares for issuance in series - - - -
Common stock, par value $1.00
Authorized - 200,000,000 shares
Issued - 93,002,755 shares at June 30, 1995;
92,995,755 shares at December 31, 1994 93,003 92,996
Capital in excess of par value 743,841 743,537
Retained earnings 2,424,311 2,467,267
Equity adjustment from foreign currency translation (174,366) (204,171)
------------- ----------------
Total stockholders' equity 3,086,789 3,099,629
------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,146,767 $ 8,337,940
============= ================
See accompanying notes to consolidated financial statements.
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PART I - FINANCIAL INFORMATION (CONT'D.)
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
Six Months Ended June 30
(in thousands)
1995 1994
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (15,057) $ 66,925
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation, depletion, amortization and lease impairment 429,726 477,574
Exploratory dry hole costs 83,720 75,778
Changes in operating assets and liabilities 185,472 (6,729)
Deferred income taxes and other items 32,170 37,281
-------------- -------------
Net cash provided by operating activities 716,031 650,829
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (332,761) (259,391)
Other (18,459) 10,082
-------------- -------------
Net cash used in investing activities (351,220) (249,309)
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in notes payable (51,941) (114,900)
Long-term borrowings 25,000 218,046
Repayment of long-term debt and capitalized lease obligations (304,113) (509,921)
Cash dividends paid (41,847) (41,770)
-------------- -------------
Net cash used in financing activities (372,901) (448,545)
-------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 3,277 2,202
-------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,813) (44,823)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 53,135 79,635
-------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 48,322 $ 34,812
============== =============
See accompanying notes to consolidated financial statements.
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PART I - FINANCIAL INFORMATION (CONT'D.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
Note 1 - The financial statements included in this report reflect all
normal and recurring adjustments which, in the opinion of
management, are necessary for a fair presentation of the Company's
consolidated financial position at June 30, 1995 and December 31,
1994, and the consolidated results of operations for the three and
six-month periods ended June 30, 1995 and 1994 and the
consolidated cash flows for the six month periods ended June 30,
1995 and 1994. The unaudited results of operations for the
interim periods reported are not necessarily indicative of results
to be expected for the year.
Certain notes and other information have been condensed or omitted
from these interim financial statements. Such statements,
therefore, should be read in conjunction with the consolidated
financial statements and related notes included in the 1994 Annual
Report to Stockholders, which have been incorporated by reference
in the Corporation's Form 10-K for the year ended December 31,
1994.
Note 2 - Inventories consist of the following:
June 30, December 31,
1995 1994
----------- -----------
Crude oil and other charge stocks $ 311,780 $ 250,291
Refined and other finished products 501,354 582,696
Materials and supplies 113,545 112,648
--------- ---------
Total inventories $ 926,679 $ 945,635
========= =========
Note 3 - The provision for income taxes consisted of the following:
Three months Six months
ended June 30 ended June 30
------------------------------ ------------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
Current $ 36,934 $ 16,425 $ 95,838 $ 48,705
Deferred 12,165 3,760 40,271 30,974
---------- ---------- --------- ----------
Total $ 49,099 $ 20,185 $ 136,109 $ 79,679
========== ========== ========= ==========
Note 4 - The net effect of foreign currency exchange transactions, after
applicable income taxes, amounted to gains of $2,533 and $1,494,
respectively, for the three and six-month periods ended June 30,
1995, compared to losses of $328 and $2,120 for the corresponding
periods of 1994.
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PART I - FINANCIAL INFORMATION (CONT'D.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
Note 5 - The Corporation uses futures, forward, option and swap contracts
to reduce the impact of fluctuations in the prices of crude oil,
natural gas and refined products. These contracts correlate to
movements in the value of inventory and the prices of crude oil
and natural gas, and as hedges, any resulting gains or losses are
recorded as part of the hedged transaction. Net unrealized gains
on the Corporation's petroleum hedging activities were
approximately $48,000 at June 30, 1995.
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PART I - FINANCIAL INFORMATION (CONT'D.)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
RESULTS OF OPERATIONS
The results of operations for the second quarter of 1995
amounted to a net loss of $40 million ($.43 per share) compared
with a net loss of $17 million ($.18 per share) in the second
quarter of 1994. In the first half of 1995, the Corporation had a
net loss of $15 million ($.16 per share) compared with net income
of $67 million ($.72 per share) in the first half of 1994.
The results for the first half of 1995 include income of $44
million ($.47 per share) from the refund of windfall profits taxes
applicable to the years 1981 through 1986 and related interest.
Following is a summary of net income by major operating
activity (in millions):
Three months Six months
ended June 30 ended June 30
-------------------- ---------------------
1995 1994 1995 1994
------ ------ ------ ------
Exploration and production $ 10 $ 23 $ 101 $ 67
Refining and marketing 3 8 (12) 84
Corporate administration,
including interest expense,
and other operating activities (53) (48) (104) (84)
------- ------- ------- -------
Total $ (40) $ (17) $ (15) $ 67
======= ======= ======= =======
Earnings from exploration and production activities
decreased by $13 million in the second quarter of 1995 and $10
million in the first half of 1995 (excluding the tax refund
referred to above) compared with the corresponding periods of
1994. Crude oil selling prices were higher in 1995 than in 1994,
but natural gas selling prices decreased. The Corporation's
average selling prices, including the effects of hedging, were as
follows:
Three months Six months
ended June 30 ended June 30
----------------- ------------------
1995 1994 1995 1994
------ ------ ------ ------
Crude oil and natural gas liquids
(per barrel)
United States $15.83 $15.16 $15.94 $15.16
Foreign 17.66 16.30 17.26 15.53
Natural gas (per Mcf)
United States 1.59 1.87 1.65 2.10
Foreign 1.51 1.74 1.64 1.76
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PART I - FINANCIAL INFORMATION (CONT'D.)
RESULTS OF OPERATIONS (CONTINUED)
The Corporation's net daily worldwide production was as
follows:
Three months Six months
ended June 30 ended June 30
------------------------ ------------------------
1995 1994 1995 1994
-------- -------- --------- --------
Crude oil and natural gas liquids
(barrels per day)
United States 64,301 70,044 64,071 70,227
Foreign 174,169 187,209 181,415 186,351
------- --------- --------- ---------
Total 238,470 257,253 245,486 256,578
======= ========= ========= =========
Natural gas (Mcf per day)
United States 411,121 449,345 408,252 470,571
Foreign 438,314 372,899 478,504 443,589
------- ---------- --------- ---------
Total 849,435 822,244 886,756 914,160
======= ========== ========= =========
United States crude oil and natural gas production was lower
in 1995, principally reflecting natural decline. Foreign crude
oil production was lower in the second quarter of 1995, because of
scheduled maintenance in the United Kingdom North Sea. The
increase in foreign natural gas production in the second quarter
of 1995 largely reflects increased deliverability in Canada.
Depreciation, depletion and amortization expense was lower
in the second quarter and first half of 1995 compared to the
comparable periods of the prior year, reflecting lower United
States production volumes and positive oil and gas reserve
revisions. Exploration expenses, including dry holes, were higher
in the second quarter of 1995 due primarily to increased activity
in the United Kingdom. Exploration expenses for the first half of
1995 increased over 1994 because of the increased activity in the
United Kingdom and new exploration activity in Denmark, partially
offset by reduced United States expenses. The overall effective
income tax rate on exploration and production earnings continued
to be high, principally reflecting the effect of the Petroleum
Revenue Tax in the United Kingdom and the Special Tax in Norway.
Future exploration and production earnings will be affected by
changes in crude oil and natural gas selling prices, differing
income tax rates in the various countries in which the Company
operates and other factors.
Refining and marketing operations had income of $3 million
in the second quarter of 1995 compared with $8 million in the
second quarter of 1994. While average refined product selling
prices increased in the second quarter of 1995 compared with the
second quarter of 1994, the cost of crude oil and purchased
refined products also increased. In periods of price volatility,
movements in the selling prices of refined products may not
correspond with movements in the Company's cost of crude oil and
other charge stocks. These conditions, which existed in the
second quarters of 1995 and 1994, contributed to the earnings
decrease.
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PART I - FINANCIAL INFORMATION (CONT'D.)
RESULTS OF OPERATIONS (CONTINUED)
In the first half of 1995, refining and marketing operations
had a loss of $12 million compared with income of $84 million in
the corresponding period of 1994. Cold winter weather in the
first half of 1994 resulted in more favorable margins on
distillates and residual fuel oil than in 1995. Income taxes were
not provided in either period on the earnings of a refining
subsidiary that has a net operating loss carryforward. Refined
product sales volumes amounted to 92 million barrels in the first
half of 1995 compared with 87 million barrels in the corresponding
period of 1994. The increase was due to higher sales volumes of
gasoline, reflecting increased production from the fluid catalytic
cracking unit in the Virgin Islands. Refining and marketing
earnings will continue to be affected by competitive industry
conditions which impact refined product margins.
Corporate administration, including interest expense, and
other operating activities (principally transportation), had net
expenses of $53 million and $104 million in the second quarter and
first half of 1995, respectively, compared with $48 million and
$84 million in the corresponding periods of 1994. The increase in
1995 is due in part to higher interest expense, reflecting higher
interest rates, although debt has been reduced. Corporate
expenses in 1995 also reflect an increased effective income tax
rate related to the impact of foreign source earnings on United
States taxes.
Sales and other operating revenues in the second quarter and
first half of 1995 increased by 19% and 10%, respectively,
compared with the corresponding periods of 1994. The increases
are primarily due to higher sales volumes and selling prices of
gasoline. Non-operating revenue in the first half of 1995 includes
the refund of windfall profits taxes and related interest totaling
$67 million (before income tax effect). Selling, general and
administrative expenses increased by approximately $10 million in
the second quarter of 1995 compared with the second quarter of
1994. The increase was primarily in exploration and production
units.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities, including changes
in operating assets and liabilities, amounted to $716 million in
the first half of 1995 compared with $651 million in the first
half of 1994. The increase was due to changes in working capital
components, partially offset by lower operating results. Cash
provided by operating activities exceeded capital expenditures of
$333 million and $259 million in the first half of 1995 and 1994,
respectively. The excess cash flow in each period was used
principally to repay debt.
Total debt was $3,022 million at June 30, 1995 compared with
$3,340 million at December 31, 1994. The debt to total
capitalization ratio decreased to 49.5% at June 30, 1995 from
nearly 52% at year-end 1994.
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PART I - FINANCIAL INFORMATION (CONT'D.)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
At June 30, 1995, the Corporation had additional borrowing
capacity available under existing revolving credit agreements of
$764 million and additional unused lines of credit under
uncommitted arrangements with banks of $710 million.
The Corporation uses futures, forward, option and swap
contracts to reduce the effects of fluctuations in the prices of
crude oil, natural gas and refined products. These instruments
are used to set the selling and purchase prices of crude oil,
natural gas and refined products and the related gains or losses
are an integral part of the Corporation's selling prices and
costs. At June 30, 1995, the Corporation had open hedge positions
on approximately 25% of its estimated worldwide crude oil
production over the next eighteen months. In certain
circumstances, hedge counterparties may elect to purchase up to an
additional 15% of this production. In addition, the Corporation
had open option contracts, providing varying degrees of protection
against declines in market prices, covering 5% of crude oil
production. The Corporation also had open contracts equal to
approximately 5% of its estimated United States and Canadian
natural gas production over the next twelve months and option
contracts providing varying degrees of price protection, covering
approximately 10% of its natural gas production. The Corporation
had hedges covering approximately 35% of its refining and
marketing inventories and had additional short positions,
principally crack spreads, approximating 10% of refined products
to be manufactured in the next twelve months. As market
conditions change, the Corporation will adjust its hedging
positions.
Capital expenditures in the first half of 1995 amounted to
$333 million compared with $259 million in the corresponding
period of 1994. Capital expenditures for exploration and
production activities were $299 million in the first half of 1995
compared with $229 million in the first six months of 1994.
Capital expenditures for the remainder of 1995 are currently
expected to be approximately $370 million. It is anticipated that
these expenditures will be financed by internally generated funds.
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Annual Meeting of Stockholders of the Registrant was
held on May 3, 1995. The Inspectors of Election reported that
78,449,101 shares of Common Stock of the Registrant were
represented in person or by proxy at the meeting, constituting 84%
of the votes entitled to be cast. At the meeting, stockholders
voted upon the election of six nominees for the Board of Directors
for the three year term expiring in 1998 and upon the ratification
of the selection by the Board of Directors of Ernst & Young LLP as
the independent auditors of the Registrant for the fiscal year
ended December 31, 1995.
With respect to the election of directors, the inspectors of
election reported as follows:
Authority to Vote
Name of Nominee Vote for Nominee Withheld for Nominee
--------------- ---------------- --------------------
Marco B. Bianchi 77,204,531 1,244,570
Nicholas F. Brady 77,277,437 1,171,664
J. Barclay Collins 77,207,412 1,241,689
Leon Hess 77,186,208 1,262,893
Thomas H. Kean 77,277,908 1,171,193
H. W. McCollum 77,266,403 1,182,698
The inspectors further reported that 78,314,517 votes were
cast for the ratification of the selection of Ernst & Young LLP as
independent auditors for the fiscal year ending December 31, 1995,
65,064 votes were cast against said ratification and holders of
69,520 votes abstained.
There were no broker non-votes with respect to either the
election of directors or the ratification of the selection of
independent auditors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
The Registrant filed no report on Form 8-K during the three
months ended June 30, 1995.
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SIGNATURES
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.
AMERADA HESS CORPORATION
(REGISTRANT)
By /s/ John B. Hess
JOHN B. HESS
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
By /s/ John Y. Schreyer
JOHN Y. SCHREYER
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Date: August 10, 1995
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EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
5
1,000
6-MOS
DEC-31-1995
JAN-01-1995
JUN-30-1995
48,322
0
564,867
0
926,679
1,652,495
14,603,293
8,375,159
8,146,767
1,267,382
2,873,692
93,003
0
0
2,993,786
8,146,767
3,665,537
3,756,383
2,631,881
2,631,881
0
0
127,977
121,052
136,109
(15,057)
0
0
0
(15,057)
(0.16)
(0.16)
