1
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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 March 31, 1997
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 the 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, 1997, 92,806,305 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
Three Months Ended March 31
(in thousands, except per share data)
1997 1996
---------- ----------
REVENUES
Sales (excluding excise taxes) and
other operating revenues $2,396,830 $2,214,537
Non-operating revenues 19,268 18,011
---------- ----------
Total revenues 2,416,098 2,232,548
---------- ----------
COSTS AND EXPENSES
Cost of products sold and operating expenses 1,870,899 1,644,871
Exploration expenses, including dry holes 50,180 61,686
Selling, general and administrative expenses 149,074 150,132
Interest expense 33,652 52,805
Depreciation, depletion, amortization and lease impairment 197,495 201,549
Provision for income taxes 110,210 55,528
---------- ----------
Total costs and expenses 2,411,510 2,166,571
---------- ----------
NET INCOME $ 4,588 $ 65,977
========== ==========
NET INCOME PER SHARE $ .05 $ .71
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 93,010 93,001
COMMON STOCK DIVIDENDS PER SHARE $ .15 $ .15
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
March 31, December 31,
1997 1996
------------ ------------
CURRENT ASSETS
Cash and cash equivalents $ 299,727 $ 112,522
Accounts receivable 673,636 848,129
Inventories 966,254 1,272,312
Other current assets 141,638 193,881
------------ ------------
Total current assets 2,081,255 2,426,844
------------ ------------
INVESTMENTS AND ADVANCES 215,860 218,573
------------ ------------
PROPERTY, PLANT AND EQUIPMENT
Total - at cost 11,847,685 11,902,419
Less reserves for depreciation, depletion,
amortization and lease impairment 7,023,692 6,995,136
------------ ------------
Property, plant and equipment - net 4,823,993 4,907,283
------------ ------------
DEFERRED INCOME TAXES AND OTHER ASSETS 257,747 231,781
------------ ------------
TOTAL ASSETS $ 7,378,855 $ 7,784,481
============ ============
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 $ 531,658 $ 666,172
Accrued liabilities 459,295 501,369
Deferred revenue 50,403 103,031
Taxes payable 340,412 258,723
Notes payable -- 18,000
Current maturities of long-term debt 189,685 189,685
------------ ------------
Total current liabilities 1,571,453 1,736,980
------------ ------------
LONG-TERM DEBT 1,504,665 1,660,998
------------ ------------
CAPITALIZED LEASE OBLIGATIONS 48,737 50,818
------------ ------------
DEFERRED LIABILITIES AND CREDITS
Deferred income taxes 593,114 616,900
Other 341,917 335,154
------------ ------------
Total deferred liabilities and credits 935,031 952,054
------------ ------------
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 - 92,806,305 shares at March 31, 1997;
93,073,305 shares at December 31, 1996 92,806 93,073
Capital in excess of par value 752,498 754,559
Retained earnings 2,592,023 2,613,920
Equity adjustment from foreign currency translation (118,358) (77,921)
------------ ------------
Total stockholders' equity 3,318,969 3,383,631
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,378,855 $ 7,784,481
============ ============
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
Three Months Ended March 31
(in thousands)
1997 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,588 $ 65,977
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation, depletion, amortization and lease impairment 197,495 201,549
Exploratory dry hole costs 24,926 39,199
Changes in operating assets and liabilities 388,024 (47,487)
Deferred income taxes and other items (2,317) (35,374)
--------- ---------
Net cash provided by operating activities 612,716 223,864
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (219,537) (158,190)
Proceeds from asset sales and other 12,101 11,873
--------- ---------
Net cash used in investing activities (207,436) (146,317)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in notes payable (18,000) (68,556)
Long-term borrowings -- 196,866
Repayment of long-term debt (156,524) (163,828)
Cash dividends paid (27,893) (27,868)
Common stock acquired (13,936) --
--------- ---------
Net cash used in financing activities (216,353) (63,386)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,722) 1,460
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 187,205 15,621
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 112,522 56,071
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 299,727 $ 71,692
========= =========
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, 1997 and December 31, 1996, and the
consolidated results of operations and the consolidated cash flows for
the three-month periods ended March 31, 1997 and 1996. 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 1996 Annual Report to Stockholders, which
have been incorporated by reference in the Corporation's Form 10-K for
the year ended December 31, 1996.
Note 2 - Inventories consist of the following:
March 31, December 31,
1997 1996
--------- ------------
Crude oil and other charge stocks $340,291 $ 441,071
Refined and other finished products 530,998 734,141
Materials and supplies 94,965 97,100
-------- ----------
Total inventories $966,254 $1,272,312
======== ==========
Note 3 - The provision for income taxes consisted of the following:
Three months
ended March 31
--------------------------
1997 1996
-------- --------
Current $100,786 $ 75,784
Deferred 9,424 (20,256)
-------- --------
Total $110,210 $ 55,528
======== ========
Note 4 - Foreign currency exchange transactions are reflected in selling,
general and administrative expenses. The net effect, after applicable
income taxes, amounted to gains of $1,383 and $2,127, respectively, for
the three-month periods ended March 31, 1997 and 1996.
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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 deferred gains resulting from the Corporation's
petroleum hedging activities were approximately $11,000 at March 31,
1997, including $10,000 of unrealized gains.
Note 6 - Interest cost related to certain long-term construction projects
has been capitalized in accordance with FAS No. 34. During the quarter
ended March 31, 1997, $1,517 of interest cost was capitalized. There
was no interest capitalized for the corresponding period of 1996.
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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
Net income for the first quarter of 1997 amounted to $5 million
($.05 per share) compared with net income of $66 million ($.71 per
share) in the first quarter of 1996.
The after-tax results by major operating activity for the first
quarters of 1997 and 1996 were as follows (in millions):
Three months
ended March 31
---------------
1997 1996
---- ----
Exploration and production $ 97 $ 68
Refining, marketing and shipping (56) 44
Corporate (7) (5)
Interest expense (29) (41)
---- ----
$ 5 $ 66
==== ====
Earnings from exploration and production activities increased by $29
million in the first quarter of 1997, primarily due to higher average
worldwide crude oil selling prices. The Corporation's average selling
prices, including the effects of hedging, were as follows:
Three months
ended March 31
--------------------
1997 1996
-------- --------
Crude oil and natural gas liquids
(per barrel)
United States $ 20.68 $ 15.81
Foreign 21.43 18.21
Natural gas (per Mcf)
United States (*) 2.73 2.63
Foreign 2.36 1.73
(*) Includes sales of purchased gas.
A portion of the increase in the United States crude oil selling
price indicated above reflects improved hedging results in 1997. The
increase in the average foreign natural gas price in 1997 reflects the
absence of sales of lower priced Canadian gas as a result of the sale of
the Corporation's Canadian operations in April 1996.
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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
------------------
1997 1996
------- -------
Crude oil and natural gas liquids
(barrels per day)
United States 42,876 57,176
Foreign 191,878 197,424
------- -------
Total 234,754 254,600
======= =======
Natural gas (Mcf per day)
United States 325,955 401,011
Foreign 323,291 576,909
------- -------
Total 649,246 977,920
======= =======
United States crude oil and natural gas production was lower in
1997, principally reflecting asset sales in the second and third
quarters of 1996. The decrease in foreign crude oil production reflects
the sales of the Canadian and Abu Dhabi operations in 1996, partially
offset by increased production in the United Kingdom. Lower foreign
natural gas production in 1997 reflects the sale of operations in Canada
and reduced demand for natural gas in the United Kingdom.
Depreciation, depletion, amortization and lease impairment charges
were lower in the first quarter of 1997, reflecting the lower production
volumes noted above. Exploration expenses were lower in the United
States in the first quarter of 1997, partially offset by increases in
international exploration areas. The effective income tax rate on
exploration and production earnings exceeds the United States statutory
rate, due to special petroleum taxes in Norway and on certain fields in
the United Kingdom.
The Corporation's exploration and production earnings are subject to
changes in the selling prices of crude oil and natural gas, the level of
exploration spending, the extent of field maintenance, particularly in
the North Sea, and various other factors.
Refining, marketing and shipping operations had a loss of $56
million in the first quarter of 1997 compared with income of $44 million
in the first quarter of 1996. Refined product margins were lower in
1997, principally for distillates and residual fuel oils, as a result of
the relatively mild winter on the East Coast. In addition, in the first
quarter of 1997, the average refined product selling price declined by
more than $4.00 per barrel, resulting in the sale of products below
inventory costs. Income taxes (benefits in the first quarter of 1997)
were not recorded on the results of a refining subsidiary due to
available loss carryforwards.
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PART I - FINANCIAL INFORMATION (CONT'D.)
RESULTS OF OPERATIONS - (CONTINUED)
Refined product sales volumes in the first quarter of 1997 amounted
to 52 million barrels, the same as in the corresponding period of 1996.
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 $29 million in
the first quarter of 1997 compared with $41 million in the first quarter
of 1996. The decrease was due to lower average debt outstanding.
Sales and other operating revenues in the first quarter of 1997
amounted to $2,397 million, an increase of $182 million, or 8%, from the
corresponding period of 1996. The increase was primarily due to the
higher selling price and sales volume of gasoline. Also contributing to
the increase was higher foreign crude oil sales, reflecting increased
selling prices, partially offset by lower sales volumes.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities, including changes in
operating assets and liabilities, amounted to $613 million in the first
quarter of 1997 compared with $224 million in the first quarter of 1996.
The increase 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 $236 million and $286 million in the
first quarters of 1997 and 1996, respectively.
Total debt was $1,762 million at March 31, 1997 compared with $1,939
million at December 31, 1996, resulting in debt to total capitalization
ratios of 34.7% and 36.4%, respectively. At March 31, 1997, the
Corporation had additional borrowing capacity available under existing
revolving credit agreements of $1,785 million and additional unused
lines of credit under uncommitted arrangements with banks of $356
million.
The Corporation is in the process of refinancing its revolving
credit agreements in the United States and the United Kingdom with a $2
billion, five-year, unsecured global revolving credit facility. The new
facility will replace $2.2 billion in existing credit facilities, which
begin to expire in 1999. Interest rate differentials and fees will be
generally lower than under the existing credit agreements.
Since inception of the Corporation's stock repurchase program in
August 1996, through March 31, 1997, 424,700 shares have been purchased
at a cost of approximately $24 million.
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PART I - FINANCIAL INFORMATION (CONT'D.)
LIQUIDITY AND CAPITAL RESOURCES - (CONTINUED)
The Corporation and unrelated parties formed a joint venture trading
company in the first quarter of 1997. The venture will engage in
proprietary transactions in the energy markets including transactions in
commodities and related derivatives.
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, 1997, the Corporation had open
hedge positions equal to 6% of its estimated worldwide crude oil
production over the next twelve months. In certain circumstances, hedge
counterparties may elect to purchase up to an additional 1% of this
production. The Corporation also had open contracts equal to 15% of its
estimated United States natural gas production over the next twelve
months and approximately 1% of its production for the succeeding twelve
months. The Corporation had hedges covering 48% of its refining and
marketing inventories and had additional short positions, principally
crack spreads, approximating 6% of refined products to be manufactured
in the next twelve months. As market conditions change, the Corporation
will adjust its hedge positions.
The Corporation has acquired interests in several United Kingdom
producing properties and exploration areas for approximately $120
million. The acquisition includes additional interests in the blocks
containing the Beryl, Ness and Nevis fields and additional interests in
two exploration blocks.
The Corporation reached agreement to acquire the stock of Pick Kwik
Corporation based in Tampa, Florida for approximately $38 million and
the assumption of $18 million of debt. Pick Kwik currently operates 66
retail sites on the west coast of Florida. The closing is expected to
take place by the end of the second quarter.
Capital expenditures in the first quarter of 1997 amounted to $220
million compared with $158 million in the first quarter of 1996. Capital
expenditures for exploration and production activities were $199 million
in the first quarter of 1997 compared with $152 million in the first
three months of 1996.
Capital expenditures for the remainder of 1997, including the North
Sea and Pick Kwik acquisitions, are currently expected to be
approximately $1,030 million, which will be financed principally 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, 1997.
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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: May 12, 1997
11
5
1,000
3-MOS
DEC-31-1997
JAN-01-1997
MAR-31-1997
299,727
0
673,636
0
966,254
2,081,255
11,847,685
7,023,692
7,378,855
1,571,453
1,504,665
0
0
92,806
3,226,163
7,378,855
2,396,830
2,416,098
1,870,899
1,870,899
0
0
33,652
114,798
110,210
4,588
0
0
0
4,588
.05
.05
