1
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 AND EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996
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
--------------------
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 March 31, 1996, 92,988,755 shares of Common Stock were outstanding.
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
Three Months Ended March 31
(in thousands, except per share data)
1996 1995
---------- ----------
REVENUES
Sales (excluding excise taxes) and
other operating revenues $2,214,537 $1,892,211
Non-operating revenues 18,011 86,123
---------- ----------
Total revenues 2,232,548 1,978,334
---------- ----------
COSTS AND EXPENSES
Cost of products sold and operating expenses 1,644,871 1,363,875
Exploration expenses, including dry holes 61,686 64,748
Selling, general and administrative expenses 150,132 154,465
Interest expense 52,805 64,951
Depreciation, depletion, amortization and lease impairment 201,549 218,123
Provision for income taxes 55,528 87,010
---------- ----------
Total costs and expenses 2,166,571 1,953,172
---------- ----------
NET INCOME $ 65,977 $ 25,162
========== ==========
NET INCOME PER SHARE $ .71 $ .27
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 93,001 92,994
COMMON STOCK DIVIDENDS PER SHARE $ .15 $ .15
See accompanying notes to consolidated financial statements.
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3
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
March 31, December 31,
1996 1995
---------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 71,692 $ 56,071
Accounts receivable 769,077 798,331
Inventories 898,632 838,770
Other current assets 268,597 269,372
----------- -----------
Total current assets 2,007,998 1,962,544
----------- -----------
INVESTMENTS AND ADVANCES 186,054 185,522
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Total - at cost 13,080,365 13,064,212
Less reserves for depreciation, depletion,
amortization and lease impairment 7,817,892 7,694,496
----------- -----------
Property, plant and equipment - net 5,262,473 5,369,716
----------- -----------
DEFERRED INCOME TAXES AND OTHER ASSETS 274,759 238,588
----------- -----------
TOTAL ASSETS $ 7,731,284 $ 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 $ 469,026 $ 443,513
Accrued liabilities 569,372 575,886
Deferred revenue 105,438 151,416
Taxes payable 228,160 239,080
Notes payable 21,423 90,000
Current maturities of long-term debt 84,685 104,685
----------- -----------
Total current liabilities 1,478,104 1,604,580
----------- -----------
LONG-TERM DEBT 2,576,230 2,523,181
----------- -----------
CAPITALIZED LEASE OBLIGATIONS 63,354 64,202
----------- -----------
DEFERRED LIABILITIES AND CREDITS
Deferred income taxes 596,881 602,792
Other 316,629 301,219
----------- -----------
Total deferred liabilities and credits 913,510 904,011
----------- -----------
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 - 92,988,755 shares at March 31, 1996;
93,011,255 shares at December 31, 1995 92,989 93,011
Capital in excess of par value 743,222 744,252
Retained earnings 2,069,123 2,017,064
Equity adjustment from foreign currency translation (205,248) (193,931)
----------- -----------
Total stockholders' equity 2,700,086 2,660,396
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,731,284 $ 7,756,370
=========== ===========
See accompanying notes to consolidated financial statements.
2
4
PART I - FINANCIAL INFORMATION (CONT'D.)
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
Three Months Ended March 31
(in thousands)
1996 1995
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 65,977 $ 25,162
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation, depletion, amortization and lease impairment 201,549 218,123
Exploratory dry hole costs 39,199 39,994
Changes in operating assets and liabilities (47,487) 84,293
Deferred income taxes and other items (35,374) 25,538
--------- ---------
Net cash provided by operating activities 223,864 393,110
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (158,190) (156,531)
Other 11,873 (21,458)
--------- ---------
Net cash used in investing activities (146,317) (177,989)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in notes payable (68,556) (57,974)
Long-term borrowings 196,866 --
Repayment of long-term debt and capitalized lease obligations (163,828) (147,022)
Cash dividends paid (27,868) (27,895)
--------- ---------
Net cash used in financing activities (63,386) (232,891)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,460 2,441
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 15,621 (15,329)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 56,071 53,135
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 71,692 $ 37,806
========= =========
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 March 31, 1996 and December 31, 1995, and the
consolidated results of operations and the consolidated cash flows
for the three-month periods ended March 31, 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:
March 31, December 31,
1996 1995
--------- ------------
Crude oil and other charge stocks $ 321,216 $ 240,425
Refined and other finished products 474,254 492,613
Materials and supplies 103,162 105,732
--------- ---------
Total inventories $ 898,632 $ 838,770
========= =========
Note 3 - The provision for income taxes consisted of the following:
Three months
ended March 31
--------------------------------
1996 1995
-------- --------
Current $ 75,784 $ 58,904
Deferred (20,256) 28,106
-------- --------
Total $ 55,528 $ 87,010
======== ========
Note 4 - Foreign currency exchange transactions are reflected in selling,
general and administrative expenses. The net effect, after
applicable income taxes, amounted to a gain of $2,127 and a loss of
$1,039, respectively, for the three-month periods ended March 31,
1996 and 1995.
4
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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 $60,000 at March 31,
1996.
Note 6 - On April 29, 1996, the Corporation completed the sale of its
Canadian subsidiary, Amerada Hess Canada Ltd., with the Corporation
receiving cash of $611,000. The proceeds reflect the adjusted
selling price of $558,000 and a dividend to Amerada Hess Corporation
of $53,000. Amerada Hess Canada Ltd.'s production in the first
quarter of 1996 amounted to 10,883 barrels of crude oil and natural
gas liquids per day and 189,553 Mcf of natural gas per day. The
Corporation anticipates recording an after-tax gain of approximately
$230,000 in the second quarter of 1996.
5
7
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 first quarter of 1996 amounted to $66 million
($.71 per share) compared with net income of $25 million ($.27 per
share) for the first quarter of 1995. Net income for the first quarter
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 first
quarters of 1996 and 1995 were as follows (in millions):
Three months
ended March 31
---------------------
1996 1995(*)
---- -------
Exploration and production $ 68 $ 94
Refining, marketing and shipping 44 (11)
Corporate (5) (5)
Interest expense (41) (53)
---- ----
$ 66 $ 25
==== ====
(*) Restated to conform with current period presentation.
Excluding the 1995 tax refund referred to above, earnings from
exploration and production activities increased by $18 million in the
first quarter of 1996 compared with the corresponding period of 1995.
The increase was primarily due to higher average foreign crude oil
selling prices and increased foreign crude oil and natural gas
production.
The Corporation's average selling prices, including the effects of
hedging, were as follows:
Three months
ended March 31
---------------------
1996 1995
---- ----
Crude oil and natural gas liquids
(per barrel)
United States $15.81 $16.04
Foreign 18.21 16.85
Natural gas (per Mcf)
United States 2.63 1.71
Foreign 1.73 1.74
United States crude oil selling prices did not increase in 1996
due to a material positive impact from hedging in 1995 and a minor
negative impact in 1996.
6
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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
ended March 31
---------------------
1996 1995
---- ----
Crude oil and natural gas liquids
(barrels per day)
United States 57,176 63,838
Foreign 197,424 188,739
------- -------
Total 254,600 252,577
======= =======
Natural gas (Mcf per day)
United States 401,011 405,351
Foreign 576,909 519,141
------- -------
Total 977,920 924,492
======= =======
United States crude oil production was lower in 1996, principally
reflecting natural decline. The increase in foreign crude oil
production in 1996 was largely due to the start of production from the
Fife Field in the United Kingdom in August 1995. United Kingdom natural
gas production also increased because of new fields. In April 1996, the
Corporation completed the sale of its Canadian subsidiary, which had
net daily production of 10,883 barrels of crude oil and natural gas
liquids and 189,553 Mcf of natural gas in the first quarter of 1996.
The Corporation also expects to complete the sale of a number of United
States producing properties which had first quarter production
representing approximately 20% of domestic production on a barrel of
oil equivalent basis. The Corporation's remaining Abu Dhabi interest
and several non-core United Kingdom fields are also being offered for
sale.
Depreciation, depletion, amortization and lease impairment charges
were lower in the first quarter of 1996, reflecting lower asset
carrying values and production volumes in the United States and
positive oil and gas reserve revisions, partially offset by increased
production volumes in the United Kingdom. Foreign exploration expenses
were lower in 1996, partially offset by an increase in the United
States. The effective income tax rates in each period are higher than
the United States statutory rate because of special petroleum taxes in
Norway and on certain fields in the United Kingdom.
The Corporation will have significant gains from asset sales in
the second quarter of 1996. Worldwide crude oil and United States
natural gas selling prices have improved over last year; however, there
is no assurance that the higher selling prices will continue.
7
9
PART I - FINANCIAL INFORMATION (CONT'D.)
RESULTS OF OPERATIONS (CONTINUED)
Refining, marketing and shipping operations had income of $44
million in the first quarter of 1996, compared with a loss of $11
million in the first quarter of 1995. Refined product margins for
distillates and residual fuel oils improved significantly in the first
quarter of 1996, largely reflecting increased demand because of the
colder weather during the winter of 1996. Gasoline margins also
improved compared with the first quarter of 1995. A substantial amount
of income in the first quarter of 1996 was generated by a refining
subsidiary, for which income taxes are not provided on earnings due to
available loss carryforwards. Total refined product sales volumes
increased to 52 million barrels in the first quarter of 1996 from 49
million barrels in the first quarter of 1995. Refining and marketing
earnings may continue to be volatile because of competitive industry
conditions and supply and demand factors, including the effects of
weather.
Corporate interest expense (after tax) amounted to $41 million in
the first quarter of 1996 compared with $53 million in the first
quarter of 1995. The decrease was primarily due to lower average debt
balances.
Sales and other operating revenues in the first quarter of 1996
amounted to $2,215 million, an increase of $322 million, or 17%, from
the corresponding period of 1995. The increase was primarily due to
higher distillate and residual fuel oil selling prices and sales
volumes and increased natural gas sales, including sales of purchased
gas. Non-operating revenues in 1995 included $67 million from the
refund of windfall profits taxes and related interest (before income
tax effect).
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities, including changes in
operating assets and liabilities, amounted to $224 million in the first
quarter of 1996 compared with $393 million in the first quarter of
1995. The decrease was primarily due to changes in working capital
components, particularly inventory. Net income adjusted for non-cash
charges (depreciation and related charges, exploratory dry hole costs
and deferred income taxes) amounted to $286 million and $311 million in
the first quarter of 1996 and 1995, respectively. The excess of cash
provided by operating activities over capital expenditures was used for
debt reduction and cash dividends.
Total debt was $2,682 million at March 31, 1996 compared with
$2,718 million at December 31, 1995, resulting in a debt to total
capitalization ratio of approximately 50% in each period. At March 31,
1996, the Corporation had additional borrowing capacity available under
existing revolving credit agreements of $902 million and additional
unused lines of credit under uncommitted arrangements with banks of
$744 million.
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PART I - FINANCIAL INFORMATION (CONT'D.)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Corporation anticipates significant debt reduction in the
second quarter of 1996 as a result of the sale of its Canadian
subsidiary. In addition, other asset sales are expected to be
completed in the second quarter, including a number of producing
properties in the United States.
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 March 31, 1996, the Corporation had open
hedge positions equal to approximately 23% of its estimated worldwide
crude oil production over the next twelve months and approximately 3%
of its production for the succeeding twelve months. In certain
circumstances, hedge counterparties may elect to purchase up to an
additional 3% of this production. In addition, the Corporation had open
option contracts, providing varying degrees of protection against
declines in market prices, covering 4% of crude oil production through
March 1997. The Corporation also had open contracts equal to
approximately 45% of its estimated United States natural gas production
over the next twelve months and approximately 20% of its production for
the succeeding twelve months. In certain circumstances, hedge
counterparties may elect to purchase up to an additional 4% of the
production through March 1997. In addition, the Corporation had hedges
covering approximately 50% of its refining, marketing and shipping
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 hedge positions.
Capital expenditures in the first quarter of 1996 amounted to $158
million, approximately the same as in 1995. Capital expenditures for
exploration and production activities were $152 million in the first
quarter of 1996 compared with $143 million in the first three months of
1995.
Capital expenditures for the remainder of 1996 are currently
expected to be approximately $700 million and will be financed by
internally generated funds.
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PART II - OTHER INFORMATION
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 March 31, 1996.
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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/s John B. Hess
---------------------------------
JOHN B. HESS
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
By s/s John Y. Schreyer
---------------------------------
JOHN Y. SCHREYER
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Date: May 10, 1996
11
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EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
27 Financial Data Schedule
5
1,000
3-MOS
DEC-31-1996
JAN-01-1996
MAR-31-1996
71,692
0
769,077
0
898,632
2,007,998
13,080,365
7,817,892
7,731,284
1,478,104
2,576,230
0
0
92,989
2,607,097
7,731,284
2,214,537
2,232,548
1,644,871
1,644,871
0
0
52,805
121,505
55,528
65,977
0
0
0
65,977
.71
.71
