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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, 1994
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, 1994, 93,011,355 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)
1994 1993
-------- --------
REVENUES
Sales (excluding excise taxes) and
other operating revenues $ 1,857,628 $ 1,565,169
Interest, dividends and other revenues 11,598 12,847
----------- ------------
Total revenues 1,869,226 1,578,016
----------- ------------
COSTS AND EXPENSES
Cost of products sold and operating expenses 1,205,628 1,120,444
Exploration expenses, including dry holes 59,858 57,787
Selling, general and administrative expenses 157,354 134,745
Interest expense 60,566 30,113
Depreciation, depletion and amortization 229,869 171,871
Lease impairment 12,801 13,220
Provision for income taxes 59,494 46,362
----------- ------------
Total costs and expenses 1,785,570 1,574,542
----------- ------------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 83,656 3,474
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR INCOME TAXES -- 29,459
----------- ------------
NET INCOME $ 83,656 $ 32,933
=========== ============
INCOME PER SHARE BEFORE ACCOUNTING CHANGE $ .90 $ .04
=========== ============
NET INCOME PER SHARE $ .90 $ .36
=========== ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
(FULLY DILUTED BASIS) 92,905 92,596
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,
1994 1993
----------- ------------
CURRENT ASSETS
Cash and cash equivalents $ 84,306 $ 79,635
Accounts receivable 492,679 554,987
Inventories 807,512 853,393
Prepaid expenses 183,130 200,151
----------- ------------
Total current assets 1,567,627 1,688,166
----------- ------------
INVESTMENTS AND ADVANCES 127,840 137,161
----------- ------------
PROPERTY, PLANT AND EQUIPMENT
Total - at cost 13,856,486 13,787,240
Less reserves for depreciation, depletion,
amortization and lease impairment 7,239,971 7,052,328
----------- ------------
Property, plant and equipment - net 6,616,515 6,734,912
----------- ------------
OTHER ASSETS 90,250 81,307
----------- ------------
TOTAL ASSETS $ 8,402,232 $ 8,641,546
=========== ===========
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 $ 321,390 $ 329,648
Accrued liabilities 549,516 613,791
Deferred revenue 76,542 128,566
Notes payable 28,000 117,900
Taxes payable 142,166 106,893
Current maturities of long-term debt 96,033 146,342
----------- ------------
Total current liabilities 1,213,647 1,443,140
----------- ------------
LONG-TERM DEBT 3,277,217 3,423,680
----------- ------------
CAPITALIZED LEASE OBLIGATIONS 91,242 91,094
----------- ------------
DEFERRED LIABILITIES AND CREDITS
Deferred income taxes 481,450 462,273
Other 229,794 192,448
----------- ------------
Total deferred liabilities and credits 711,244 654,721
----------- ------------
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 - 93,011,355 shares at March 31, 1994;
92,586,855 shares at December 31, 1993 93,011 92,587
Capital in excess of par value 744,202 725,443
Retained earnings 2,519,030 2,449,325
Equity adjustment from foreign currency translation (247,361) (238,444)
----------- ------------
Total stockholders' equity 3,108,882 3,028,911
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,402,232 $ 8,641,546
=========== ============
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)
1994 1993
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 83,656 $ 32,933
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation, depletion, amortization and lease impairment 242,670 185,091
Exploratory dry hole costs 39,559 29,188
Changes in operating assets and liabilities 81,549 170,509
Deferred income taxes and other items 31,681 (17,711)
---------- ----------
Net cash provided by operating activities 479,115 400,010
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (131,082) (380,005)
Proceeds from sales of property, plant and equipment and other 1,906 768
---------- ----------
Net cash used in investing activities (129,176) (379,237)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in notes payable (89,900) --
Long-term borrowings 65,929 111,307
Repayment of long-term debt and capitalized lease obligations (293,768) (97,142)
Cash dividends paid (27,838) (13,872)
---------- ----------
Net cash provided by (used in) financing activities (345,577) 293
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 309 (2,358)
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NET INCREASE IN CASH AND CASH EQUIVALENTS 4,671 18,708
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 79,635 141,014
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 84,306 $ 159,722
========== ==========
See accompanying notes to consolidated financial statements.
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PART I - FINANCIAL INFORMATION (CONT'D.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars)
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, 1994 and December 31,
1993, and the consolidated results of operations and the
consolidated cash flows for the three-month periods ended March
31, 1994 and 1993. 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 1993 Annual
Report to Stockholders, which have been incorporated by reference
in the Corporation's Form 10-K for the year ended December 31,
1993.
Note 2 - Inventories consist of the following:
March 31, December 31,
1994 1993
----------- -----------
Crude oil and other charge stocks $ 282,636 $ 299,015
Refined and other finished products 403,915 436,633
Materials and supplies 120,961 117,745
----------- -----------
Total inventories $ 807,512 $ 853,393
=========== ===========
Note 3 - The provision for income taxes consisted of the following:
Three months
ended March 31
----------------------
1994 1993
-------- --------
Current $ 32,280 $ 35,655
Deferred 27,214 10,707
-------- --------
Total $ 59,494 $ 46,362
======== ========
On January 1, 1993, the Corporation changed its method of
accounting for income taxes in accordance with FAS No. 109,
Accounting for Income Taxes. The cumulative effect of this
accounting change at January 1, 1993 was to increase net income by
$29,459 ($.32 per share).
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PART I - FINANCIAL INFORMATION (CONT'D.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Foreign currency exchange transactions, reflected in selling,
general and administrative expenses, amounted to a loss of $2,053
and a gain of $1,199, respectively, for the three-month periods
ended March 31, 1994 and 1993. The net effect, after applicable
income taxes, amounted to a loss of $1,792 and a gain of $1,469,
respectively, for the three-month periods ended March 31, 1994
and 1993.
Note 5 - Interest cost related to certain long-term construction projects
has been capitalized in accordance with FAS No. 34. During the
first quarter of 1993, interest cost of $31,335 was capitalized.
There was no interest capitalized in the first quarter of 1994.
Note 6 - The Corporation uses futures, forward, option and swap contracts
to reduce the price volatility of crude oil, natural gas and
refined products. Since these contracts qualify as hedges and
correlate to price movements of inventory and crude oil and natural
gas production, any gains or losses resulting from market changes
will be offset by losses or gains on the Corporation's hedged
inventory or production. Total unrealized gains on the
Corporation's petroleum hedging activities were approximately
$57,000 at March 31, 1994.
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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
First Quarter 1994 compared with First Quarter 1993.
Net income for the first quarter of 1994 amounted to $84
million ($.90 per share) compared with net income of $33 million
($.36 per share) for the first quarter of 1993. Net income for
the first quarter of 1993 included income of $29 million ($.32 per
share) from the cumulative effect of the change in accounting for
income taxes required by Statement of Financial Accounting
Standards No. 109.
Following is a summary of net income by major operating
activity (in millions):
Three months
ended March 31
----------------------
1994 1993
-------- --------
Exploration and production $ 44 $ 60
Refining and marketing 76 (36)
Corporate administration, including
interest expense, and other
operating activities (36) 9
------ ------
Total $ 84 $ 33
====== ======
Earnings from exploration and production activities decreased
by $16 million in the first quarter of 1994 compared with the
corresponding period of 1993, primarily due to lower worldwide
crude oil selling prices. The Corporation's average selling
prices, including the effects of forward sales, were as follows:
Three months
ended March 31
----------------------
Crude oil and natural gas liquids 1994 1993
-------- --------
(per barrel)
United States $ 16.53 $ 19.49
Foreign 15.11 18.94
Natural gas (per Mcf)
United States 2.31 1.87
Foreign 1.77 1.58
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PART I - FINANCIAL INFORMATION (CONT'D.)
RESULTS OF OPERATIONS (CONTINUED)
The Corporation's net daily worldwide crude oil and natural
gas production increased in the first quarter of 1994, as follows:
Three months
ended March 31
------------------------
Crude oil and natural gas liquids 1994 1993
--------- ---------
(barrels per day)
United States 70,412 71,840
Foreign 185,487 136,794
-------- --------
Total 255,899 208,634
========= ========
Natural gas (Mcf per day)
United States 492,033 530,900
Foreign 515,067 453,432
--------- --------
Total 1,007,100 984,332
========= ========
The increase in foreign crude oil production in the first
quarter of 1994 resulted primarily from the Scott Field, which
commenced production in September of 1993. The decrease in U.S.
natural gas production was principally due to natural field
decline, but was offset by increases in Canada and the United
Kingdom.
The benefit of increased crude oil and natural gas production
was offset by the negative impact of lower worldwide crude oil
selling prices and higher production costs and depreciation,
depletion and amortization charges related to the increased
production. In the United States, selling, general and
administrative expenses were also higher, reflecting expenses
related to the consolidation of exploration and production
activities and offices. Foreign effective income tax rates
increased, largely because of the elimination of the deductibility
of exploration and appraisal expenditures in the determination of
the Petroleum Revenue Tax in the United Kingdom.
Although the Corporation's overall crude oil production in
the remaining quarters of 1994 will likely exceed production in
the corresponding periods of 1993, exploration and production
earnings may continue to be negatively affected by low crude oil
selling prices.
Earnings from refining and marketing operations were $76
million in the first quarter of 1994 compared with a loss of $36
million in the first quarter of 1993. The increase was primarily
due to improved refined product margins, principally for
distillates and residual fuel oils, and increased sales volumes.
Selling prices for these products were firm, reflecting the cold
winter weather, while crude oil costs were substantially lower.
Total refined product sales volumes amounted to 50 million barrels
in the first quarter of 1994 compared with 39 million barrels in
the first quarter of 1993. The increase reflected higher refinery
runs resulting from weather related demand for distillates and
higher gasoline production from the fluid catalytic cracking unit
at the Virgin Islands refinery, which commenced operations in late
1993. Income taxes were not provided on approximately 50% of the
1994 refining and marketing income, reflecting the utilization of
the net operating loss carryforward of a refining subsidiary.
Refining and marketing earnings are impacted by supply and demand
conditions, including the effects of weather, and will continue to
be volatile in the future.
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PART I - FINANCIAL INFORMATION (CONT'D.)
RESULTS OF OPERATIONS (CONTINUED)
Corporate administration, including interest expense, and
other operating activities (principally transportation), had net
expenses of $36 million in the first quarter of 1994 compared with
income of $9 million in the first quarter of 1993. The results
for 1993 included a benefit of $29 million from the adoption of
FAS No. 109. Interest expense was higher in the first quarter of
1994, primarily because a substantial amount of interest was
capitalized in 1993 as part of the Corporation's major
construction projects. Each of these projects is now in
operation. Because all interest is currently being expensed and
due to increasing interest rates, interest expense for the
remainder of 1994 will be higher than in the comparative periods
of 1993, even though debt will be reduced.
Consolidated revenues were $1,869 million in the first
quarter of 1994, an increase of $291 million from the first
quarter of 1993. The increase was primarily due to higher refined
product sales volumes and increased United States and United
Kingdom natural gas sales, including sales of purchased gas.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities, including changes
in operating assets and liabilities, amounted to $479 million in
the first quarter of 1994 compared with $400 million in the first
quarter of 1993. The increase was due to improved operating
results. Cash provided by operating activities exceeded capital
expenditures of $131 million and $380 million in the first quarter
of 1994 and 1993, respectively. The excess cash flow in the first
quarter of 1994 was used to repay debt.
Total debt was $3,401 million at March 31, 1994 compared with
$3,688 million at December 31, 1993. The debt to total
capitalization ratio decreased to 52% at March 31, 1994 from
nearly 55% at year-end 1993. The Corporation anticipates that
total borrowings will decline further in 1994 because of lower
capital expenditures and increased cash flow from its major North
Sea projects and the upgrading of the Virgin Islands refinery. At
March 31, 1994, the Corporation had additional borrowing capacity
available under existing revolving credit agreements of $689
million and additional unused lines of credit under uncommitted
arrangements with banks of $686 million.
During the first quarter of 1994, the Corporation exchanged
its equity interests in certain shipping partnerships for
increased interests in other shipping partnerships, including a
controlling interest in one of the partnerships. As a result of
these non-cash transactions, assets of approximately $30 million
and long-term debt of approximately $30 million have been added to
the consolidated balance sheet.
In April 1994, the Corporation entered into a $100 million,
10-year borrowing with an insurance company at a fixed rate of
7.3%. Proceeds of the loan were used to repay revolving credit
debt.
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PART I - FINANCIAL INFORMATION (CONT'D.)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
In April 1994, Amerada Hess Limited, the Corporation's United
Kingdom subsidiary, entered into arrangements to transfer its 6.8%
interest in the Armada gas field to a third party for
approximately $40 million. Under these arrangements, the gain on
the transfer is not certain unless a field development plan is
approved by the United Kingdom government prior to November 1,
1994. Accordingly, the gain will not be recorded until such time.
The Corporation uses futures, forward, option and swap
contracts to mitigate the effect on its business of volatility in
the prices of crude oil, natural gas and refined products. At
March 31, 1994, the Corporation has open forward sale positions on
approximately 30% of its anticipated worldwide crude oil
production over the next twelve months at an average price of
approximately $17 per barrel. The Corporation also has option
contracts covering an additional 12% of this production, which
will generate revenue of approximately $.60 per barrel. The
Corporation has hedges (primarily short futures and options)
covering approximately 40% of its refining and marketing
inventories and has short positions covering an additional 9
million barrels of refined products to be manufactured in the
latter part of 1994. As market conditions change, the Corporation
will adjust its hedging strategies. Existing hedge positions are
not necessarily indicative of future results of operations.
Capital expenditures in the first quarter of 1994 amounted to
$131 million compared with $380 million in the first quarter of
1993. Capital expenditures in the first quarter of 1993 included
$245 million related to the Corporation's three major projects.
The three major projects were the development of the Scott oil
field and the Everest and Lomond natural gas fields and related
facilities in the United Kingdom North Sea and the construction of
the fluid catalytic cracking complex in the Virgin Islands, all of
which have been completed and are in operation.
Capital expenditures for the remainder of 1994 are estimated
to be approximately $400 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, 1994.
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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.
[S]
AMERADA HESS CORPORATION
(REGISTRANT)
By s/s Leon Hess
---------------------------------------
LEON 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 6, 1994
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