1
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
------------- -------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
REVENUES
Sales (excluding excise taxes) and
other operating revenues $2,094,840 $1,773,326 $4,309,377 $3,665,537
Non-operating revenues 448,916 4,723 466,927 90,846
---------- ---------- ---------- ----------
Total revenues 2,543,756 1,778,049 4,776,304 3,756,383
---------- ---------- ---------- ----------
COSTS AND EXPENSES
Cost of products sold and operating expenses 1,597,520 1,268,006 3,242,391 2,631,881
Exploration expenses, including dry holes 61,489 77,139 123,175 141,887
Selling, general and administrative expenses 151,570 149,395 301,702 303,860
Interest expense 41,902 63,026 94,707 127,977
Depreciation, depletion, amortization and
lease impairment 183,559 211,603 385,108 429,726
Provision for income taxes 131,269 49,099 186,797 136,109
---------- ---------- ---------- ----------
Total costs and expenses 2,167,309 1,818,268 4,333,880 3,771,440
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 376,447 $ (40,219) $ 442,424 $ (15,057)
========== ========== ========== ==========
NET INCOME (LOSS) PER SHARE $ 4.04 $ (0.43) $ 4.75 $ (0.16)
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING (FULLY DILUTED BASIS) 93,132 92,995 93,077 92,995
COMMON STOCK DIVIDENDS PER SHARE $ .15 $ .15 $ .30 $ .30
See accompanying notes to consolidated financial statements.
1
2
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,
1996 1995
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 34,150 $ 56,071
Accounts receivable 690,481 798,331
Inventories 910,401 838,770
Other current assets 184,677 269,372
----------- -----------
Total current assets 1,819,709 1,962,544
----------- -----------
INVESTMENTS AND ADVANCES 189,815 185,522
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Total - at cost 11,819,850 13,064,212
Less reserves for depreciation, depletion,
amortization and lease impairment 7,055,371 7,694,496
----------- -----------
Property, plant and equipment - net 4,764,479 5,369,716
----------- -----------
DEFERRED INCOME TAXES AND OTHER ASSETS 262,770 238,588
----------- -----------
TOTAL ASSETS $ 7,036,773 $ 7,756,370
=========== ===========
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 $ 470,625 $ 443,513
Accrued liabilities 561,529 575,886
Deferred revenue 60,780 151,416
Taxes payable 292,061 239,080
Notes payable 12,800 90,000
Current maturities of long-term debt 84,685 104,685
----------- -----------
Total current liabilities 1,482,480 1,604,580
----------- -----------
LONG-TERM DEBT 1,523,569 2,523,181
----------- -----------
CAPITALIZED LEASE OBLIGATIONS 55,528 64,202
----------- -----------
DEFERRED LIABILITIES AND CREDITS
Deferred income taxes 533,261 602,792
Other 330,519 301,219
----------- -----------
Total deferred liabilities and credits 863,780 904,011
----------- -----------
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 - 93,136,005 shares at June 30, 1996;
93,011,255 shares at December 31, 1995 93,136 93,011
Capital in excess of par value 750,567 744,252
Retained earnings 2,431,644 2,017,064
Equity adjustment from foreign currency translation (163,931) (193,931)
----------- -----------
Total stockholders' equity 3,111,416 2,660,396
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,036,773 $ 7,756,370
=========== ===========
See accompanying notes to consolidated financial statements.
2
3
PART I - FINANCIAL INFORMATION (CONT'D.)
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
Six Months Ended June 30
(in thousands)
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 442,424 $ (15,057)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation, depletion, amortization and lease impairment 385,108 429,726
Exploratory dry hole costs 67,039 83,720
Pre-tax gain on asset sales (438,663) (3,438)
Changes in operating assets and liabilities 121,270 185,472
Deferred income taxes and other items (902) 35,608
----------- ---------
Net cash provided by operating activities 576,276 716,031
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (330,666) (332,761)
Proceeds from asset sales and other 877,164 (18,459)
----------- ---------
Net cash provided by (used in) investing activities 546,498 (351,220)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in notes payable (77,200) (51,941)
Long-term borrowings -- 25,000
Repayment of long-term debt and capitalized lease obligations (1,027,558) (304,113)
Cash dividends paid (41,794) (41,847)
----------- ---------
Net cash used in financing activities (1,146,552) (372,901)
----------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,857 3,277
----------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (21,921) (4,813)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 56,071 53,135
----------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 34,150 $ 48,322
=========== =========
See accompanying notes to consolidated financial statements.
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4
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, 1996 and December 31, 1995, and the
consolidated results of operations for the three and six- month periods
ended June 30, 1996 and 1995 and the consolidated cash flows for the
six-month periods ended June 30, 1996 and 1995. The unaudited results
of operations for the interim periods reported are not necessarily
indicative of results to be expected for the full 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 1995 Annual Report to Stockholders, which
have been incorporated by reference in the Corporation's Form 10-K for
the year ended December 31, 1995.
Note 2 - Inventories consist of the following:
June 30, December 31,
1996 1995
---- ----
Crude oil and other charge stocks $320,867 $240,425
Refined and other finished products 486,326 492,613
Materials and supplies 103,208 105,732
-------- --------
Total inventories $910,401 $838,770
======== ========
Note 3 - The provision for income taxes consisted of the following:
Three months Six months
ended June 30 ended June 30
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
Current $101,992 $36,934 $177,776 $ 95,838
Deferred 29,277 12,165 9,021 40,271
-------- ------- -------- --------
Total $131,269 $49,099 $186,797 $136,109
======== ======= ======== ========
Note 4 - Foreign currency exchange transactions are reflected in selling,
general and administrative expenses. The net effect of foreign currency
exchange transactions, after applicable income taxes, amounted to gains
of $516 and $2,643, respectively, for the three and six-month periods
ended June 30, 1996, compared to gains of $2,533 and $1,494 for the
corresponding periods of 1995.
4
5
PART I - FINANCIAL INFORMATION (CONT'D.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
Note 5 - The Corporation uses futures, forwards, options and swaps 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 losses on the Corporation's
petroleum hedging activities were approximately $45,000 at June 30,
1996.
Note 6 - In the second quarter of 1996, the Corporation sold its Canadian
operations, certain United States producing properties, and Abu Dhabi
assets resulting in a net gain of $350,100. In the first quarter,
Canadian production amounted to 10,883 barrels of crude oil and natural
gas liquids per day and 189,553 Mcf of natural gas per day. The sale of
certain additional United States properties will be completed in the
third quarter. After completion of these sales, approximately 20% of
United States production, on a barrel of oil equivalent basis, will
have been sold.
5
6
PART I - FINANCIAL INFORMATION (CONT'D.)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
RESULTS OF OPERATIONS
Net income for the second quarter of 1996 amounted to $376 million
($4.04 per share) compared with a net loss of $40 million ($.43 per
share) in the second quarter of 1995. The results for the second
quarter of 1996 include net gains of $350 million ($3.76 per share)
from the sale of the Corporation's Canadian operations, certain United
States producing properties, and Abu Dhabi assets. The proceeds from
asset sales amounted to approximately $860 million and enabled the
Corporation to significantly reduce debt.
In the first half of 1996, the Corporation had net income,
including asset sales, of $442 million ($4.75 per share) compared with
a net loss of $15 million ($.16 per share) in the first half of 1995.
The results for the first half of 1995 included income of $44 million
($.47 per share) from the refund of windfall profits taxes and related
interest.
The after-tax results by major operating activity for the three
and six month periods ended June 30, 1996 and 1995 were as follows
(in millions):
Three months Six months
ended June 30 ended June 30
------------- -------------
1996 1995 (*) 1996 1995 (*)
---- ---- ---- ----
Exploration and production $ 31 $ 13 $ 99 $ 62
Refining, marketing and shipping 35 10 79 --
Corporate (6) (14) (11) (19)
Interest expense (34) (49) (75) (102)
---- ---- ---- -----
Income (loss), excluding special items 26 (40) 92 (59)
Special items -
Gain on sale of exploration
and production assets 350 -- 350 --
Windfall profits tax refund -- -- -- 44
---- ---- ---- -----
Net income (loss) $376 $(40) $442 $ (15)
==== ==== ==== =====
(*) Restated to conform with current period presentation.
Excluding special items, earnings from exploration and production
activities increased by $18 million in the second quarter of 1996 and
$37 million in the first half of 1996 compared with the corresponding
periods of 1995. The increase in both periods was primarily due to
higher average foreign crude oil selling prices and sales volumes.
6
7
PART I - FINANCIAL INFORMATION (CONT'D.)
RESULTS OF OPERATIONS (CONTINUED)
The Corporation's average selling prices, including the effects of
hedging, were as follows:
Three months Six months
ended June 30 ended June 30
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
Crude oil and natural gas liquids
(per barrel)
United States $15.41 $15.83 $15.61 $15.94
Foreign 19.12 17.66 18.66 17.26
Natural gas (per Mcf)
United States 2.20 1.59 2.42 1.65
Foreign 1.79 1.51 1.75 1.64
The United States crude oil selling prices indicated above did not
increase in 1996, due to the positive impact of hedging in 1995 and the
unfavorable effect of price changes on similar hedge positions in 1996.
The Corporation's net daily worldwide production was as follows:
Three months Six months
ended June 30 ended June 30
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
Crude oil and natural gas liquids
(barrels per day)
United States 55,197 64,301 56,186 64,071
Foreign 182,980 174,169 190,201 181,415
------- ------- ------- -------
Total 238,177 238,470 246,387 245,486
======= ======= ======= =======
Natural gas (Mcf per day)
United States 361,114 411,121 381,062 408,252
Foreign 316,373 438,314 446,641 478,504
------- ------- ------- -------
Total 677,487 849,435 827,703 886,756
======= ======= ======= =======
United States crude oil and natural gas production was lower in
1996, principally reflecting natural decline and the effect of asset
sales. The increase in foreign crude oil production largely reflects
output from the Fife Field in the United Kingdom since August 1995,
partially offset by the effect of the sale of the Corporation's
Canadian and Abu Dhabi operations in April and June of 1996,
respectively. The decline in foreign natural gas production reflects
the sale of the Corporation's Canadian operations, partially offset by
increased production in the United Kingdom.
7
8
PART I - FINANCIAL INFORMATION (CONT'D.)
RESULTS OF OPERATIONS (CONTINUED)
After completion of the sales of several additional United States
properties in the third quarter, approximately 20% of 1995 United
States production, on a barrel of oil equivalent basis, will have been
sold. Three non-core United Kingdom producing fields are also expected
to be sold in the second half of the year.
The reduction in exploration expenses in the first six months of
1996 was primarily attributable to foreign operations, principally the
United Kingdom. Depreciation, depletion and amortization charges were
lower in the second quarter and six months, reflecting asset sales, as
well as lower asset carrying values and production volumes in the
United States and positive oil and gas reserve revisions. Partially
offsetting these factors was the effect of increased production in the
United Kingdom. The effective income tax rate on exploration and
production earnings continues to be higher than the United States
statutory rate due to special petroleum taxes on certain fields in the
United Kingdom and in Norway.
The Corporation's oil and gas production in the short term future
will be lower due to the impact of asset sales, however, net income is
not expected to be materially affected. New U.S. and foreign crude oil
and natural gas developments are scheduled or in progress and will add
to production in the future. Exploration and production earnings will
continue to be subject to changes in crude oil and natural gas selling
prices (including the effects of hedging), the level of exploration
spending, income taxes and other factors.
Refining, marketing and shipping operations had income of $35
million in the second quarter of 1996 compared with $10 million in the
second quarter of 1995. Refined product margins improved in the second
quarter of 1996 as average refined product selling prices increased by
approximately $2.00 per barrel, largely due to the selling prices of
No. 2 oil and other distillates. Gasoline margins also improved in 1996
compared with 1995. The cost of crude oil increased during the quarter,
but was partially offset by lower refinery expenses, including
depreciation.
In the first half of 1996, refining and marketing earnings
increased by $79 million compared with the first half of 1995. Refined
product margins for distillates and residual fuel oils improved
significantly in the first half of 1996, largely reflecting increased
weather related demand during the early part of the year. A substantial
amount of income in the first half of 1996 was generated by a refining
subsidiary, for which income taxes are not provided on earnings due to
available loss carryforwards. Refined product sales volumes increased
to 101 million barrels in the first half of 1996 from 92 million
barrels in the first half of 1995.
8
9
PART I - FINANCIAL INFORMATION (CONT'D.)
RESULTS OF OPERATIONS (CONTINUED)
Corporate interest expense (after-tax) decreased by 30% in the
second quarter of 1996 and 26% in the first half of 1996, compared with
the corresponding periods of 1995. The decrease was primarily due to
lower outstanding debt, reflecting cash flow from operations and the
proceeds of asset sales. In the second half of 1996, interest expense
is expected to continue to be lower than in the comparable period of
1995.
Other corporate expenses decreased to $6 million and $11 million
in the second quarter and first six months of 1996 compared with $14
million and $19 million in the corresponding periods of 1995. The
decreases were primarily due to the effect of foreign source income on
the provision for United States taxes.
Sales and other operating revenues in the second quarter and first
half of 1996 increased by approximately 18% in each period compared
with 1995. The increases were primarily due to higher refined product
selling prices and sales volumes and increased sales of natural gas,
including purchased gas. Non-operating revenues include the pre-tax
gain on asset sales in the first half of 1996 of $439 million and the
refund of windfall profits taxes and related interest of $67 million in
the first half of 1995.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities, including changes in
operating assets and liabilities, amounted to $576 million in the first
half of 1996 compared with $716 million in the first half of 1995. The
decrease was primarily due to balance sheet changes.
The Corporation generated proceeds of approximately $860 million
from the sale of its Canadian operations, certain United States
producing properties, and Abu Dhabi assets in 1996. In addition, cash
flow from operations for the first six months of 1996 exceeded capital
expenditures. As a result, debt has been reduced by $1,097 million
since December 31, 1995.
Total debt was $1,621 million at June 30, 1996 compared with
$2,718 at December 31, 1995. The debt to total capitalization ratio
decreased to 34% from 50% at year-end. At June 30, 1996 the Corporation
had additional borrowing capacity available under existing revolving
credit agreements of $1,880 million and additional unused lines of
credit under uncommitted arrangements with banks of $738 million.
9
10
PART I - FINANCIAL INFORMATION (CONT'D.)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Corporation uses futures, forwards, options and swaps 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, 1996, the Corporation had open
hedge positions equal to approximately 8% of its estimated worldwide
crude oil production over the next twelve months and approximately 1%
of its production for the succeeding twelve months. In certain
circumstances, hedge counterparties may elect to purchase up to an
additional 1% of this production. In addition, the Corporation had open
option contracts, providing varying degrees of protection against
declines in market prices, covering 2% of crude oil production through
June 1997. The Corporation also had open contracts equal to
approximately 50% of its estimated United States natural gas production
over the next twelve months and approximately 27% of its production for
the succeeding twelve months. In addition, the Corporation had hedges
covering approximately 18% of its refining, marketing and shipping
inventories and had additional short positions, principally crack
spreads, approximating 3% of refined products to be manufactured in the
next twelve months. As market conditions change, the Corporation will
adjust its hedge positions.
Capital expenditures in the first half of 1996 amounted to $331
million, approximately the same as in 1995. Capital expenditures for
exploration and production activities were $314 million in the first
half of 1996 compared with $299 million in the corresponding period of
1995.
Capital expenditures for the remainder of 1996 are currently
expected to be approximately $500 million and will be financed
primarily by internally generated funds.
10
11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As reported in Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, on June 21, 1994 Region II of the
Environmental Protection Agency ("EPA") commenced an administrative
proceeding under Section 325 of the Emergency Planning and Community
Right-to-Know Act ("EPCRA") against Registrant's wholly-owned
subsidiary, Hess Oil Virgin Islands Corp. ("HOVIC"), alleging
violations of Section 313 of EPCRA arising out of HOVIC's alleged
failure to comply with certain reporting requirements relating to toxic
chemicals manufactured or otherwise used at HOVIC's refinery. The
proceedings sought civil penalties totaling $252,000 for the alleged
violations. Effective May 10, 1996, HOVIC and Region II of the EPA
entered into a consent agreement in full settlement of all civil
liabilities that might have attached as a result of the allegations in
EPA's complaint. Pursuant to the consent agreement, HOVIC paid a civil
penalty of $95,000 and agreed to expend not more than $81,000 for the
purchase of certain environmental remediation equipment, without
admitting EPA's allegations in its complaint or EPA's findings of fact
or conclusions of law in the consent agreement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Annual Meeting of Stockholders of the Registrant was held on
May 1, 1996. The Inspectors of Election reported that 81,186,031 shares
of Common Stock of the Registrant were represented in person or by
proxy at the meeting, constituting 87.3% 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
1999, 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, 1996, and the approval of the adoption
by the Board of Directors of the 1995 Long-Term Incentive Plan.
With respect to the election of directors, the inspectors of
election reported as follows:
For Withhold Authority to Vote
Name Nominee Listed For Nominee Listed
---- -------------- ------------------
Bernard T. Deverin 80,533,473 652,558
Edith E. Holiday 80,540,501 645,530
W.S.H. Laidlaw 80,461,442 724,589
Roger B. Oresman 79,759,054 1,426,977
Richard B. Sellars 80,598,987 587,044
Robert F. Wright 80,534,256 651,775
The inspectors further reported that 81,050,066 votes were cast
for the ratification of the selection of Ernst & Young LLP as
independent auditors for the fiscal year ending December 31, 1996,
79,641 votes were cast against said ratification and holders of 56,324
votes abstained.
11
12
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS (CONTINUED)
The inspectors further reported that 66,508,293 votes were cast
for the proposal to approve the adoption of the 1995 Long-Term
Incentive Plan, 13,802,282 votes were cast against said proposal and
holders of 875,456 votes abstained.
There were no broker non-votes with respect to the election of
directors, the ratification of the selection of independent auditors or
the approval of the adoption of the 1995 Long-Term Incentive Plan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
During the second quarter of 1996, the Registrant filed a report
on Form 8-K, dated April 29, 1996. Such report covered Item 2 -
Acquisition or Disposition of Assets, and dealt with the sale of
the Registrant's Canadian subsidiary, Amerada Hess Canada Limited,
including pro-forma financial information of the Registrant.
12
13
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 9, 1996
13
14
EXHIBIT INDEX
-------------
Exhibit 27 Financial Data Schedule
5
1,000
6-MOS
DEC-31-1996
JAN-01-1996
JUN-30-1996
34,150
0
690,481
0
910,401
1,819,709
11,819,850
7,055,371
7,036,773
1,482,480
1,523,569
0
0
93,136
3,018,280
7,036,773
4,309,377
4,776,304
3,242,391
3,242,391
0
0
94,707
629,221
186,797
442,424
0
0
0
442,424
4.75
4.75
