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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM 10-Q
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 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 September 30, 1995, 93,008,755 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 NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
-------------------------- --------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
REVENUES
Sales (excluding excise taxes) and
other operating revenues $ 1,641,904 $ 1,494,042 $ 5,307,441 $ 4,839,896
Interest and other non-operating revenues 21,349 51,042 112,195 70,328
----------- ----------- ----------- -----------
Total revenues 1,663,253 1,545,084 5,419,636 4,910,224
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Cost of products sold and operating expenses 1,200,956 1,024,745 3,832,837 3,226,332
Exploration expenses, including dry holes 82,379 62,168 224,266 184,542
Selling, general and administrative expenses 170,579 144,357 474,439 441,064
Interest expense 58,879 62,127 186,856 182,421
Depreciation, depletion and amortization 207,865 207,753 617,878 659,793
Lease impairment 10,738 11,305 30,451 36,839
Provision for income taxes 36,440 34,541 172,549 114,220
----------- ----------- ----------- -----------
Total costs and expenses 1,767,836 1,546,996 5,539,276 4,845,211
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (104,583) $ (1,912) $ (119,640) $ 65,013
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE $ (1.13) $ (0.02) $ (1.29) $ 0.70
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 93,007 92,994 92,999 92,961
COMMON STOCK DIVIDENDS PER SHARE $ .15 $ .15 $ .45 $ .45
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)
ASSETS
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
CURRENT ASSETS
Cash and cash equivalents $ 88,720 $ 53,135
Accounts receivable 675,905 570,525
Inventories 930,066 945,635
Prepaid expenses 172,107 152,366
------------ ------------
Total current assets 1,866,798 1,721,661
------------ ------------
INVESTMENTS AND ADVANCES 180,113 140,300
------------ ------------
PROPERTY, PLANT AND EQUIPMENT
Total - at cost 14,619,517 14,304,826
Less reserves for depreciation, depletion,
amortization and lease impairment 8,510,440 7,938,824
------------ ------------
Property, plant and equipment - net 6,109,077 6,366,002
------------ ------------
OTHER ASSETS 96,906 109,977
------------ ------------
TOTAL ASSETS $ 8,252,894 $ 8,337,940
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 484,381 $ 291,571
Accrued liabilities 607,320 555,363
Notes payable 130,000 63,747
Taxes payable 202,977 168,927
Current maturities of long-term debt 103,950 121,806
------------ ------------
Total current liabilities 1,528,628 1,201,414
------------ ------------
LONG-TERM DEBT 2,793,353 3,154,235
------------ ------------
CAPITALIZED LEASE OBLIGATIONS 74,009 80,928
------------ ------------
DEFERRED LIABILITIES AND CREDITS
Deferred income taxes 627,904 547,537
Other 260,676 254,197
------------ ------------
Total deferred liabilities and credits 888,580 801,734
------------ ------------
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 - 93,008,755 shares at September 30, 1995;
92,995,755 shares at December 31, 1994 93,009 92,996
Capital in excess of par value 744,138 743,537
Retained earnings 2,305,785 2,467,267
Equity adjustment from foreign currency translation (174,608) (204,171)
------------ ------------
Total stockholders' equity 2,968,324 3,099,629
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,252,894 $ 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
Nine Months Ended September 30
(in thousands)
1995 1994
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(119,640) $ 65,013
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation, depletion, amortization and lease impairment 648,329 696,632
Exploratory dry hole costs 133,308 113,023
Changes in operating assets and liabilities 198,024 (173,961)
Deferred income taxes and other items 60,003 (27,245)
--------- ---------
Net cash provided by operating activities 920,024 673,462
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (509,607) (398,295)
Other 3,120 53,443
--------- ---------
Net cash used in investing activities (506,487) (344,852)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in notes payable 66,247 (101,900)
Long-term borrowings 92,808 266,795
Repayment of long-term debt and capitalized lease obligations (484,990) (483,760)
Cash dividends paid (55,790) (55,712)
--------- ---------
Net cash used in financing activities (381,725) (374,577)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 3,773 2,698
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 35,585 (43,269)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 53,135 79,635
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 88,720 $ 36,366
========= =========
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 September 30, 1995 and December 31, 1994, and
the consolidated results of operations for the three and nine-month
periods ended September 30, 1995 and 1994 and the consolidated cash
flows for the nine-month periods ended September 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 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 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:
September 30, December 31,
1995 1994
------------- ------------
Crude oil and other charge stocks $ 335,859 $ 250,291
Refined and other finished products 472,565 582,696
Materials and supplies 121,642 112,648
--------- ---------
Total inventories $ 930,066 $ 945,635
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Note 3 - The provision for income taxes consisted of the following:
Three months Nine months
ended September 30 ended September 30
----------------------------- ----------------------------
1995 1994 1995 1994
---------- ---------- --------- ---------
Current $ 11,362 $ 49,770 $ 107,200 $ 98,475
Deferred 25,078 (15,229) 65,349 15,745
---------- ---------- --------- ---------
Total $ 36,440 $ 34,541 $ 172,549 $ 114,220
========== ========== ========= =========
Note 4 - The net effect of foreign currency exchange transactions, after
applicable income taxes, amounted to a loss of $1,135 and a gain of
$359, respectively, for the three and nine-month periods ended
September 30, 1995, compared to losses of $1,242 and $3,362 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
$70,000 at September 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 third quarter of 1995
amounted to a net loss of $105 million ($1.13 per share) compared
with a net loss of $2 million ($.02 per share) in the third quarter
of 1994. In the first nine months of 1995, the Corporation had a
net loss of $120 million ($1.29 per share) compared with net income
of $65 million ($.70 per share) in the first nine months of 1994.
The results for the third quarter of 1995 include charges in
connection with damage and unrecovered costs associated with
Hurricane Marilyn of $19 million ($.21 per share) and staff
reduction costs amounting to $14 million ($.15 per share). Third
quarter 1995 results also include income of $8 million ($.08 per
share) resulting from a business interruption insurance recovery by
a foreign exploration and production subsidiary. In the third
quarter of 1994, the Corporation recorded a gain of $41 million
($.44 per share) from the sale of an interest in an undeveloped
United Kingdom North Sea natural gas field. The results for the
first nine months of 1995 include income of $44 million ($.47 per
share) from the refund of windfall profits taxes and related
interest.
Following is a summary of net income by major operating
activity (in millions):
Three months Nine months
ended September 30 ended September 30
------------------ ------------------
1995 1994 1995 1994
----- ----- ----- -----
Exploration and production $ 17 $ 65 $ 119 $ 132
Refining and marketing (56) (14) (68) 70
Corporate administration,
including interest expense,
and other operating activities (66) (53) (171) (137)
----- ----- ----- -----
Total $(105) $ (2) $(120) $ 65
===== ===== ===== =====
Excluding special items, earnings from exploration and
production activities decreased by $15 million in the third quarter
and $24 million in the first nine months of 1995. These decreases
were primarily due to lower natural gas selling prices in the
United States and Canada and higher exploration expenses,
principally in the United Kingdom and Denmark.
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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 Nine months
ended September 30 ended September 30
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1995 1994 1995 1994
-------- -------- -------- --------
Crude oil and natural gas liquids
(per barrel)
United States $ 15.85 $ 15.45 $ 15.91 $ 15.25
Foreign 16.30 16.20 16.93 15.76
Natural gas (per Mcf)
United States 1.55 1.82 1.62 2.02
Foreign 1.46 1.72 1.58 1.75
The Corporation's net daily worldwide production was as follows:
Three months Nine months
ended September 30 ended September 30
1995 1994 1995 1994
------- ------- ------- -------
Crude oil and natural gas liquids
(barrels per day)
United States 61,452 66,013 63,188 68,807
Foreign 202,309 167,630 188,456 180,928
------- ------- ------- -------
Total 263,761 233,643 251,644 249,735
======= ======= ======= =======
Natural gas (Mcf per day)
United States 389,261 384,858 401,852 441,686
Foreign 399,025 321,793 451,720 402,545
------- ------- ------- -------
Total 788,286 706,651 853,572 844,231
======= ======= ======= =======
United States crude oil production was lower in 1995,
principally reflecting natural field decline. The increase in
foreign crude oil production in the third quarter of 1995 reflects
the commencement of production from the Fife Field in the United
Kingdom and higher production from the Scott Field, from which
production was reduced in the third quarter of 1994 due to
scheduled maintenance. United States natural gas production was
lower in the nine months ended September 30, 1995 but was more than
offset by increased production in the United Kingdom and Canada.
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PART I - FINANCIAL INFORMATION (CONT'D.)
RESULTS OF OPERATIONS (CONTINUED)
In the first nine months of 1995, depreciation, depletion and
amortization charges were lower than in 1994, reflecting reduced
United States production volumes and positive oil and gas reserve
revisions. In the third quarter of 1995, depreciation and related
charges were comparable to the 1994 level as lower charges in the
United States were offset by increased United Kingdom expenses,
resulting from higher production volumes. Exploration expenses in
the third quarter and nine months of 1995 were higher than in the
1994 periods due to increased activity in the United Kingdom and
new exploration 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 on
certain fields in the United Kingdom. Future exploration and
production earnings will be affected by changes in crude oil and
natural gas selling prices, the level of exploration spending,
income tax rates in the various countries in which the Company
operates and other factors.
Excluding the charge of $19 million for costs associated with
the hurricane, refining and marketing operations had a loss of $37
million in the third quarter of 1995 compared with a loss of $14
million in the third quarter of 1994. In the third quarter of 1995,
refined product margins were negatively impacted by average selling
prices, which declined throughout the quarter, while the cost of
crude oil processed during the period increased.
In the first nine months of 1995, refining and marketing
operations had a loss of $49 million, excluding the
hurricane-related charge, compared with income of $70 million in
the corresponding period of 1994. Gasoline margins improved
somewhat in 1995, but were more than offset by the effect of lower
distillate margins compared with those experienced during the
winter of 1994. Income tax benefits were not provided in either
period on the results of a refining subsidiary that has a net
operating loss carryforward. Refined product sales volumes amounted
to 131 million barrels in the first nine months of 1995 compared
with 126 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.
Excluding the charge of $14 million for staff reduction
costs, corporate administration (including interest expense) and
other operating activities had net expenses of $52 million and $157
million in the third quarter and first nine months of 1995 compared
with $53 million and $137 million in the corresponding periods of
1994. The increase in the nine months of 1995 is due largely to a
higher effective income tax rate related to the impact of foreign
source earnings on United States taxes.
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PART I - FINANCIAL INFORMATION (CONT'D.)
RESULTS OF OPERATIONS (CONTINUED)
Sales and other operating revenues in the third quarter and
first nine months of 1995 increased by approximately 10% compared
with the corresponding periods of 1994. The increases are primarily
due to higher sales volumes of gasoline. Non-operating revenue in
the first nine months of 1995 includes the refund of windfall
profits taxes and related interest totaling $67 million (before
income tax effect) and in the third quarter of 1994 includes the
gain on the sale of the United Kingdom natural gas field of $41
million. Selling, general and administrative expenses in the third
quarter of 1995 includes approximately $24 million reflecting the
pre-tax effect of staff reduction costs.
The Corporation is currently quantifying the effect of
complying with Statement of Financial Accounting Standards No. 121,
"Accounting For The Impairment Of Long-Lived Assets And For
Long-Lived Assets To Be Disposed Of," which it plans to adopt in
the fourth quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities, including changes
in operating assets and liabilities, amounted to $920 million in
the first nine months of 1995 compared with $673 million in the
first nine months of 1994. The increase was primarily due to
changes in working capital components, partially offset by lower
operating results. Cash provided by operating activities exceeded
capital expenditures of $510 million and $398 million in the first
nine months of 1995 and 1994, respectively. The remaining cash flow
in each period was used principally to repay debt.
Total debt was $3,027 million at September 30, 1995 compared
with $3,340 million at December 31, 1994. The debt to total
capitalization ratio was 50.5% at September 30, 1995 compared to
nearly 52% at year-end 1994. At September 30, 1995, the Corporation
had additional borrowing capacity available under existing
revolving credit agreements of $853 million and additional unused
lines of credit under uncommitted arrangements with banks of $627
million.
Amerada Hess Limited, the Corporation's United Kingdom
subsidiary, has agreed to sell its 1.76% interest in the Britannia
field for approximately $28 million. The transaction is expected to
be completed in the fourth quarter. The Corporation announced in
early November that it will offer for sale its wholly-owned
Canadian subsidiary, Amerada Hess Canada Ltd. For the first nine
months of 1995, crude oil and natural gas liquids production for
Amerada Hess Canada averaged 11,400 barrels per day and natural gas
production averaged 217,000 mcf per day. Proved reserves were 130
million barrels on a crude oil equivalent basis at December 31,
1994. The proposed sale is expected to close during the first half
of 1996. The Corporation anticipates the sale of certain additional
assets. Generally, the proceeds from asset rationalization are
expected to be used to repay debt.
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PART I - FINANCIAL INFORMATION (CONT'D.)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
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
September 30, 1995, the Corporation had open hedge positions equal
to approximately 40% 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 20%
of this production. In addition, the Corporation had open option
contracts, providing varying degrees of protection against declines
in market prices, covering 8% of crude oil production. The
Corporation also had open contracts equal to approximately 2% 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 3% of its
natural gas production. The Corporation had hedges covering
approximately 60% 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 nine months of 1995
amounted to $510 million compared with $398 million in the
corresponding period of 1994. Capital expenditures for exploration
and production activities were $460 million in the first nine
months of 1995 compared with $352 million in the first nine months
of 1994.
Capital expenditures for the remainder of 1995 are currently
expected to be approximately $200 million. It is anticipated that
these expenditures 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 September 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: November 10, 1995
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EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
5
1,000
9-MOS
DEC-31-1995
JAN-01-1995
SEP-30-1995
$88,720
0
675,905
0
930,066
1,866,798
14,619,517
8,510,440
8,252,894
1,528,628
2,793,353
93,009
0
0
2,875,315
8,252,894
5,307,441
5,419,636
3,832,837
3,832,837
0
0
186,856
52,909
172,549
(119,640)
0
0
0
(119,640)
(1.29)
(1.29)
