SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 11-K
ANNUAL REPORT
____________________
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
____________________
For the Fiscal Year Ended December 31, 1998
_____________________
PENNZOIL-QUAKER STATE COMPANY SAVINGS AND
INVESTMENT PLAN FOR HOURLY EMPLOYEES
Commission File No. 1-14501
______________________
PENNZOIL-QUAKER STATE COMPANY
Pennzoil Place, P. O. Box 2967
Houston, Texas 77252-2967
(Name of issuer of securities held pursuant to the plan and address of
its principal executive office)
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee,
Pennzoil-Quaker State Company Savings
and Investment Plan for Hourly Employees:
We have audited the accompanying statements of net assets available
for benefits of the Pennzoil-Quaker State Company Savings and
Investment Plan for Hourly Employees (the Plan) as of December 31,
1998 and 1997, and the related statement of changes in net assets
available for benefits for the year ended December 31, 1998. These
financial statements and the supplemental schedules referred to below
are the responsibility of the Plan's administrative committee. Our
responsibility is to express an opinion on these financial statements
and supplemental schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by the Plan's
administrative committee, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for
benefits of the Plan as of December 31, 1998 and 1997, and the changes
in its net assets available for benefits for the year ended
December 31, 1998, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental
schedules of assets held for investment purposes as of December 31,
1998, included as Schedule I, and reportable transactions (series of
investment transactions) for the year ended December 31, 1998,
included as Schedule II, are presented for purposes of additional
analysis and are not a required part of the basic financial statements
but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974. The Fund Information
in the statements of net assets available for benefits and statement
of changes in net assets available for benefits is presented for
purposes of additional analysis rather than to present the net assets
available for benefits and changes in net assets available for
benefits of each fund. The supplemental schedules and Fund
Information have been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, are
fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas
June 28, 1999
<PAGE>
<PAGE>
<TABLE>
PENNZOIL-QUAKER STATE COMPANY SAVINGS AND INVESTMENT PLAN
FOR HOURLY EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
(WITH FUND INFORMATION)
DECEMBER 31, 1998
<CAPTION>
Participant Directed Funds
------------------------------------------------------------------------------------
Merrill J. P. Dreyfus Davis
Lynch Morgan Fidelity Basic New
Retirement Institutional Advisor S&P 500 York
Preservation Bond Balanced Stock Index Venture
Trust Fund Fund Fund Fund
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at current value-
Pennzoil-Quaker State Company
common stock $ - $ - $ - $ - $ -
PennzEnergy Company common stock - - - - -
Battle Mountain Gold Company
common stock - - - - -
Merrill Lynch Retirement
Preservation Trust 3,291,343 - - - -
Mutual funds - 270,884 407,828 5,216,067 1,140,719
Participant loans - - - - -
Cash and temporary investments 49,686 - - - -
Receivables-
Employee contributions 33,851 4,326 8,118 47,039 17,072
Employer contributions - - - - -
Investment income 231 - - - -
------------ ------------ ------------ ------------ ------------
Total assets 3,375,111 275,210 415,946 5,263,106 1,157,791
LIABILITIES:
Payable to brokers 13,682 2,114 3,967 20,038 5,763
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE
FOR BENEFITS $3,361,429 $ 273,096 $ 411,979 $5,243,068 $1,152,028
============ ============ ============ ============ ============
<FN>
See notes to financial statements.
</FN>
<CAPTION>
Non-
Participant
Participant Directed Funds Directed
------------------------------ ------------
Company Company
Loan Stock Stock
Fund Fund Fund Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at current value-
Pennzoil-Quaker State Company
common stock $ - $1,484,714 $1,472,587 $2,957,301
PennzEnergy Company common stock - 1,635,893 1,634,668 3,270,561
Battle Mountain Gold Company
common stock - 4,582 4,064 8,646
Merrill Lynch Retirement
Preservation Trust - - - 3,291,343
Mutual funds - - - 7,035,498
Participant loans 1,022,117 - - 1,022,117
Cash and temporary investments - - 89,014 138,700
Receivables-
Employee contributions - 65,392 - 175,798
Employer contributions - - 46,033 46,033
Investment income - - 9,691 9,922
------------ ------------ ------------ ------------
Total assets 1,022,117 3,190,581 3,256,057 17,955,919
LIABILITIES:
Payable to brokers - - 63,002 108,566
------------ ------------ ------------ ------------
NET ASSETS AVAILABLE
FOR BENEFITS $1,022,117 $3,190,581 $3,193,055 $17,847,353
============ ============ ============ ============
<FN>
See notes to financial statements.
</FN>
</TABLE>
<PAGE>
<PAGE>
<TABLE>
PENNZOIL-QUAKER STATE COMPANY SAVINGS AND INVESTMENT PLAN
FOR HOURLY EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
(WITH FUND INFORMATION)
DECEMBER 31, 1997
<CAPTION>
Participant Directed Funds
------------------------------------------------------------------------------------
Merrill J. P. Dreyfus Davis
Lynch Morgan Fidelity Basic New
Retirement Institutional Advisor S&P 500 York
Preservation Bond Balanced Stock Index Venture
Trust Fund Fund Fund Fund
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at current value-
Pennzoil Company common stock $ - $ - $ - $ - $ -
Battle Mountain Gold Company
common stock - - - - -
Merrill Lynch Retirement
Preservation Trust 3,867,164 - - - -
Mutual funds - 209,355 405,708 4,678,558 1,542,380
Participant loans - - - - -
Cash and temporary investments 51,760 - - 339 -
Receivables-
Employee contributions 20,960 1,627 4,679 24,702 9,845
Employer contributions - - - - -
Investment income 5,243 2,542 27,663 - -
------------ ------------ ------------ ------------ ------------
Total assets 3,945,127 213,524 438,050 4,703,599 1,552,225
LIABILITIES:
Payable to brokers 4,985 - - - -
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE
FOR BENEFITS $3,940,142 $ 213,524 $ 438,050 $4,703,599 $1,552,225
============ ============ ============ ============ ============
<FN>
See notes to financial statements.
</FN>
<CAPTION>
Non-
Participant
Participant Directed Funds Directed
------------------------------ ------------
Company Company
Loan Stock Stock
Fund Fund Fund Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at current value-
Pennzoil Company common stock $ - $2,196,879 $5,945,421 $8,142,300
Battle Mountain Gold Company
common stock - 6,485 5,751 12,236
Merrill Lynch Retirement
Preservation Trust - - - 3,867,164
Mutual funds - - - 6,836,001
Participant loans 1,032,917 - - 1,032,917
Cash and temporary investments - - 50,040 102,139
Receivables-
Employee contributions - 13,210 - 75,023
Employer contributions - - 24,473 24,473
Investment income - - 3,563 39,011
------------ ------------ ------------ ------------
Total assets 1,032,917 2,216,574 6,029,248 20,131,264
LIABILITIES:
Payable to brokers - - 18,072 23,057
------------ ------------ ------------ ------------
NET ASSETS AVAILABLE
FOR BENEFITS $1,032,917 $2,216,574 $6,011,176 $20,108,207
============ ============ ============ ============
<FN>
See notes to financial statements.
</FN>
</TABLE>
<PAGE>
<PAGE>
<TABLE>
PENNZOIL-QUAKER STATE COMPANY SAVINGS AND INVESTMENT PLAN
FOR HOURLY EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(WITH FUND INFORMATION)
FOR THE YEAR ENDED DECEMBER 31,1998
<CAPTION>
Participant Directed Funds
---------------------------------------------------------------------------------------
Merrill J.P. Dreyfus Davis
Lynch Morgan Fidelity Basic New
Retirement Institutional Advisor S&P 500 York
Preservation Bond Balanced Stock Index Venture
Trust Fund Fund Fund Fund
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year $3,940,142 $ 213,524 $ 438,050 $4,703,599 $1,552,225
CONTRIBUTIONS:
Employee 487,217 45,064 91,311 568,671 270,160
Employer 44,472 4,381 9,045 55,783 26,464
INVESTMENT INCOME:
Dividends - 16,925 47,138 86,824 26,877
Interest 247,211 - - - -
Loan Repayment Interest 27,255 2,396 2,584 24,740 12,326
NET APPRECIATION (DEPRECIATION)
IN FAIR VALUE OF INVESTMENTS - (1,050) 10,975 1,145,972 140,650
NET TRANSFERS (Note 2)
Among Funds (795,136) 37,368 (149,833) (951,238) (746,043)
To Salaried Plan (421,665) (3,738) (45,052) (106,810) (67,809)
PARTICIPANT LOANS (Note 2)
New Loans Issued (92,983) (7,224) (6,048) (96,992) (30,054)
Principal Received 108,252 14,511 14,964 107,846 64,120
EXPENSES (667) (40) (34) (965) (265)
DISTRIBUTIONS AND WITHDRAWALS
(Note 2) (182,669) (49,021) (1,121) (294,362) (96,623)
----------- ----------- ----------- ----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $3,361,429 $ 273,096 $ 411,979 $5,243,068 $1,152,028
=========== =========== =========== =========== ===========
<FN>
See notes to financial statements
</FN>
<CAPTION> Non-
Participant
Participant Directed Funds Directed
------------------------------ -----------
Company Company
Loan Stock Stock
Fund Fund Fund Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year $1,032,917 $2,216,574 $6,011,176 $20,108,207
CONTRIBUTIONS:
Employee - 416,564 - 1,878,987
Employer - - 714,088 854,233
INVESTMENT INCOME:
Dividends - 57,016 96,783 331,563
Interest - 1,394 2,366 250,971
Loan Repayment Interest - 29,231 - 98,532
NET APPRECIATION (DEPRECIATION)
IN FAIR VALUE OF INVESTMENTS - (1,957,847) (3,323,421) (3,984,721)
NET TRANSFERS (Note 2)
Among Funds - 2,619,477 (14,595) -
To Salaried Plan 7,426 (75,298) (170,004) (882,950)
PARTICIPANT LOANS (Note 2)
New Loans Issued 399,365 (166,064) - -
Principal Received (417,591) 107,898 - -
EXPENSES - - (517) (2,488)
DISTRIBUTIONS AND WITHDRAWALS
(Note 2) - (58,364) (122,821) (804,981)
----------- ----------- ----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $1,022,117 $3,190,581 $3,193,055 $17,847,353
=========== =========== =========== ===========
<FN>
See notes to financial statements
</FN>
</TABLE>
<PAGE>
<PAGE>
PENNZOIL-QUAKER STATE COMPANY SAVINGS AND INVESTMENT PLAN
FOR HOURLY EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
1. SPIN-OFF OF PENNZOIL-QUAKER STATE COMPANY FROM PENNZOIL COMPANY:
On December 30, 1998, Pennzoil Company (Pennzoil) distributed to its
shareholders 47.8 million shares of common stock of its wholly owned
subsidiary Pennzoil-Quaker State Company (the Company or Pennzoil-
Quaker State) representing all of the shares of the Company owned by
Pennzoil. As a result of the distribution, Pennzoil Company, renamed
PennzEnergy Company (PennzEnergy), and Pennzoil-Quaker State are no
longer affiliated entities.
As part of the spin-off transaction, the Pennzoil Company Savings and
Investment Plan for Hourly Employees (the Plan) was renamed Pennzoil-
Quaker State Company Savings and Investment Plan for Hourly Employees
and covered only the hourly employees of Pennzoil-Quaker State and
participating subsidiaries and affiliated companies, effective
December 31, 1998. Net assets related to PennzEnergy employees were
transferred to the PennzEnergy Company Savings and Investment Plan
effective November 30, 1998.
In connection with the spin-off, Pennzoil distributed one share of
Pennzoil-Quaker State common stock for every share of Pennzoil common
stock. As a result, the Company Stock Fund holds both PennzEnergy and
Pennzoil-Quaker State common stock. Effective with the distribution,
the Plan only purchases Pennzoil-Quaker State common stock.
During 1998, the Plan provided benefits for Pennzoil-Quaker State and
PennzEnergy employees (collectively Pennzoil).
2. DESCRIPTION OF THE PLAN:
General
The following description of the Plan provides only general
information. Participants should refer to the Plan agreement for a
more complete description of the Plan's provisions.
The Plan was established effective January 1, 1989 (effective date),
by Pennzoil. The purpose of the Plan is to encourage hourly employees
to save, and invest systematically, a portion of their current
compensation in order that they may have an additional source of
income upon their retirement or disability, or for their family in the
event of their death. Upon changing wage status to salaried, a
participant's account balance was, prior to 1999, transferred between
the Plan and the Pennzoil Company Savings and Investment Plan (renamed
PennzEnergy Company Savings and Investment Plan effective December 31,
1998); beginning in 1999, such transfers are between the Plan and the
Pennzoil-Quaker State Company Savings and Investment Plan.
Each person employed by Pennzoil prior to December 31, 1998, and
Pennzoil-Quaker State, subsequent to December 31, 1998, who is a
member of a collective bargaining unit which has agreed to participate
in the Plan and who receives remuneration on an hourly basis on or
after January 1, 1989, is eligible to participate in the Plan on the
later of the effective date or the entry date coinciding with or next
following their completion of one year of service.
<PAGE>
<PAGE>
In order to participate in the Plan, an eligible employee could elect
to make a contribution to the Plan in whole percentages of not less
than 1 percent and not more than 12 percent of annual compensation.
Employee contributions may be made "after-tax" or, under a Section
401(k) option, on a "before-tax" basis. The sum of the rates of
pretax and after-tax contributions are subject to the following
limitations:
Years of Participation (a) Maximum Combined Contribution Rate
Less than 5 years 9%
5 - 10 years 10%
More than 10 years 12%
For each Plan year, Pennzoil, contributed, prior to December 31, 1998,
and Pennzoil-Quaker State, subsequent to December 31, 1998,
contributes an amount on behalf of participating employees equal to
the following percentages of the aggregate pretax and after-tax
contribution rates shown above.
Applicable Percentage -
Years of Participation (a) Employer Matching Contribution
Less than 5 years 50%
5 - 10 years 75%
More than 10 years 100%
(a) Includes years of participation in the Plan or the Pennzoil
Company and participating companies Employees Stock Purchase Plans.
Investment Choices
Prior to December 30, 1998, employer contributions were invested
primarily in Pennzoil common stock and are invested primarily in
Pennzoil-Quaker State common stock subsequent to December 30, 1998.
At the Company's discretion, employer contributions may be made either
in cash or in common stock. Employee contributions are invested in
either common stock or in the other investment funds as designated by
the participant. The statements of net assets available for benefits
and statement of changes in net assets available for benefits present
participant directed and non-participant directed activity separately.
During 1998, Pennzoil contributed 13,917 shares of its common stock
valued at the average of the high and low market prices on the date of
the contribution. All employee and employer contributions (other than
stock) are initially invested in interest-bearing short-term, highly
liquid investments and are classified in the accompanying statements
of net assets available for benefits under the caption "Cash and
temporary investments."
<PAGE>
<PAGE>
Participants who have attained age 55 have the option to transfer all
or a part of their existing employer contributions to be invested
among the various investment options. Subject to the above,
PennzEnergy common stock held in the employer's contribution account
may not be transferred to be invested in other options. Employee
contributions are invested as designated by participating employees in
the following investment funds:
Fund Name Type of Investment(s)
I. Merrill Lynch Invests primarily in guaranteed
Retirement investment contracts (generally with
Preservation Trust insurance companies or banks which
agree to return principal and a stated
rate of return over a specified period
of time) and U.S. Government and U.S.
Government Agency securities.
II. J. P. Morgan Normally, at least 65% of the fund's
Institutional Bond assets will be represented by
Fund investment in securities rated "A" or
better by a major ratings agency. The
fund's duration (a measure of average
maturity) ranges between 3-1/2 and 5-
1/2 years.
III. Fidelity Advisor Invests in a diversified portfolio of
Balanced Fund equity and fixed-income securities
with income, growth of income and
capital appreciation potential.
IV. Dreyfus Basic Consists of common stocks that, to the
S&P 500 Stock Index extent possible, duplicate the
Fund composition of Standard & Poor's Index
of 500 stocks.
V. Davis New York Invests primarily in common stock and
Venture Fund securities convertible into common
(formerly New York stock. The fund ordinarily invests in
Venture Fund) securities which management believes
have above-average appreciation
potential.
VI. Company Stock Common stock of Pennzoil prior to
Fund December 30, 1998, and Pennzoil-Quaker
State Company subsequent to December
30, 1998.
Loans
A participant may apply to the administrative committee of the Plan to
borrow from his or her accounts, subject to certain limitations. Such
loans will be for a term not to exceed five years (up to 20 years in
the case of loans to purchase a primary residence). The minimum loan
amount is $1,000 and the maximum loan amount is the lesser of $50,000
or 50 percent of the participant's account balances. Interest rates on
loans are fixed at the Prime Rate plus one percent.
Repayment of loans are made each pay period by payroll deductions, or
a loan may be prepaid in full by a lump sum payment. Upon retirement,
death or termination of employment, participants have 60 days after
the next payment due date to pay the loan in full.
Participant loans are reported as an asset of the Loan Fund and
principal and interest payments received are transferred to the
investment funds based on the participant's current contribution
elections.
<PAGE>
<PAGE>
Vesting and Disposition of Forfeitures
Participants are always fully vested in employee contributions.
Participants vest in employer contributions at a rate of 25 percent
per year beginning at the end of two years of service, becoming fully
vested after five years of service. Any nonvested portion of employer
contributions shall be forfeited upon termination. Forfeitures shall
be allocated as follows: first, to reinstate any employer
contribution amounts of participants who return to service and,
second, to restore any amounts previously forfeited as unclaimed
benefits. Any remaining amounts are applied to reduce succeeding
employer contributions.
Withdrawals
Withdrawals may be made from either an employee's previous pretax or
after-tax contributions, net of previous withdrawals, upon written
notice to the administrative committee of the Plan. After-tax
withdrawals result in the participant's forfeiture of the right to
participate in the Plan for 180 days. Pretax withdrawals are allowed
only when the participant's age is 59-1/2 or older, unless a financial
hardship exists. Hardship withdrawals will cause the participants to
be suspended from making further contributions for 365 days.
Withdrawals may be made from employer contributions only if the
participant has been a member of the Plan for five full Plan years and
will cause an employee to be suspended from participation in the Plan
for 180 days.
Distribution of Benefits
Benefits that are vested are payable to participants or their
beneficiaries at retirement, permanent disability, death or
termination of service.
Plan Administration
The Plan is administered by an administrative committee consisting of
at least three members appointed by the Board of Directors of the
Company. The sole trustee of the Plan is Mellon Bank, N.A. All
administrative expenses are borne by the Company with the exception of
fees for investment management and loan processing fees for
participant loans.
The Plan is subject to reporting and regulations pursuant to the
Employee Retirement Income Security Act of 1974.
Termination or Amendment of the Plan
The Plan may be terminated, amended or modified by the Board of
Directors of the Company at any time. Upon complete or partial
termination of the Plan, all amounts credited to the accounts with
respect to which the Plan has been terminated shall become fully
vested and nonforfeitable.
<PAGE>
<PAGE>
3. SUMMARY OF ACCOUNTING POLICIES:
Basis of Accounting
The financial statements of the Plan are presented on the accrual
basis of accounting, except that amounts allocated to accounts of
persons who have withdrawn from participation in the earnings and
operations of the Plan are not recorded as a liability of the Plan but
are classified as a component of net assets available for benefits.
There were no such amounts outstanding at December 31, 1998 and 1997.
A separate account is maintained for each participant which reflects
the participant's contributions, net of withdrawals, and the
participant's allocable share of employer contributions and the Plan's
investment earnings.
Management's Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Plan's management to use
estimates and assumptions that affect the accompanying financial
statements and disclosures. Actual results could differ from those
estimates.
Asset Valuation
The Plan's investments are reflected in the accompanying financial
statements at year-end current values, which represent fair values.
For the Company Stock Fund, fair value was determined by using the
applicable closing price of the funds listed on the New York Stock
Exchange on the last trading day of the Plan year. For all mutual
funds at December 31, 1998 and 1997, fair value was determined
based on the closing price of the securities held by the
collective fund as listed on the applicable stock exchange on the
last trading day of the Plan year and the number of participating
units held by the Plan in each fund. The Merrill Lynch Retirement
Preservation Trust Fund is a common/collective trust fund
investing primarily in guaranteed investment contracts and U.S.
Government securities. The guaranteed investment contracts are
fully benefit responsive and are recorded at contract value,
which approximates fair value. Effective yields were approximately
6.6% for both years ended December 31, 1998 and 1997. Contract
value for the Merrill Lynch Retirement Preservation Trust was
determined based on contributions made under the investment contract
plus interest earned at the contract's rate less funds used to pay
investment fees charged by the insurance companies.
Investments in the Company Stock Fund are assigned units of
participation. The unit value is determined daily based upon the fair
market value of the underlying net assets, which consisted of
PennzEnergy common stock, Pennzoil-Quaker State common stock, cash and
temporary investments as of December 31, 1998. The total units of
PennzEnergy common stock assigned to participants at December 31, 1998
were 450,054. The unit value for PennzEnergy common stock at December
31, 1998 was $7.38. The total units of Pennzoil-Quaker State common
stock assigned to participants at December 31, 1998 were 293,930. The
unit value for Pennzoil-Quaker State common stock at December 31, 1998
was $10.00. The total units of Pennzoil Common Stock assigned to
participants at December 31, 1997 were 280,554. The unit value for
Pennzoil common stock at December 31, 1997 was $29.14.
Net appreciation in fair value of investments consists of realized
gains on sale of investments and unrealized appreciation of
investments.
<PAGE>
<PAGE>
4. FEDERAL INCOME TAXES:
The Plan obtained its latest determination letter on October 26, 1994,
in which the Internal Revenue Service stated that the Plan, as then
designed, was in compliance with the applicable requirements of the
Internal Revenue Code. The Plan administrator believes that the Plan
is currently designed and being operated in compliance with the
applicable requirements of the Internal Revenue Code. Therefore, the
Plan administrator believes that the Plan was qualified and the
related trust was tax-exempt as of December 31, 1998 and 1997.
5. RISKS AND UNCERTAINTIES:
The Plan provides for various investments in equity securities,
common/collective trust funds, mutual funds and cash and temporary
investments. Investment securities, in general, are exposed to
various risks, such as interest rate, credit and overall market
volatility risk. Due to the level of risk associated with certain
investment securities, it is reasonably possible that changes in the
values of investment securities will occur in the near term and that
such changes could materially affect the amounts reported in the
statements of net assets available for benefits and participant
accounts.
6. SUBSEQUENT EVENT:
On May 19, 1999, Devon Energy Corporation and PennzEnergy signed an
agreement and plan of merger. PennzEnergy common stock will be
exchanged for .4475 shares of common stock of a new Devon Energy
Corporation at the consummation of the merger.
<PAGE>
<PAGE>
<TABLE>
SCHEDULE I
PENNZOIL-QUAKER STATE COMPANY SAVINGS AND INVESTMENT PLAN
FOR HOURLY EMPLOYEES
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
<CAPTION>
Current
Identity of Issue Description of Investment Cost Value
- --------------------- ------------------------- ----------- -----------
<S> <C> <C>
EQUITY SECURITIES:
Common stock-
Pennzoil-Quaker State Company <F1> 200,495 shares--$.10 par value $ 4,899,500 $ 2,957,301
PennzEnergy Company 200,488 shares--$.83-1/3 par value 5,099,799 3,270,561
Battle Mountain Gold Company 2,128 shares--$.10 par value 9,754 8,646
----------- -----------
Total equity securities 10,009,053 6,236,508
----------- -----------
COMMON/COLLECTIVE TRUST FUNDS:
Merrill Lynch Retirement
Preservation Trust 3,291,343 units 3,291,343 3,291,343
----------- -----------
MUTUAL FUNDS:
Dreyfus Basic S&P 500
Stock Index Fund 201,626 units 3,141,183 5,216,067
Davis New York Venture Fund 45,611 units 909,391 1,140,719
Fidelity Advisor Balanced Fund 21,820 units 385,635 407,828
J.P. Morgan Institutional Bond Fund 27,197 units 270,381 270,884
----------- -----------
Total mutual funds 4,706,590 7,035,498
----------- -----------
OTHER ASSETS:
Mellon Bank - EB temporary
investment fund <F1> 138,700 units 138,700 138,700
Pennzoil-Quaker State Company
Savings and Investment Plan Participant Loans with interest
for Hourly Employees <F1> rates ranging from 7.0% to 10.0% 1,022,117 1,022,117
----------- -----------
Total other assets 1,160,817 1,160,817
----------- -----------
Total assets held for
investment purposes $19,167,803 $17,724,166
=========== ===========
<FN>
<F1> Represents party in interest.
</FN>
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SCHEDULE II
PENNZOIL-QUAKER STATE COMPANY SAVINGS AND INVESTMENT PLAN
FOR HOURLY EMPLOYEES
SCHEDULE OF REPORTABLE TRANSACTIONS
(SERIES OF INVESTMENT TRANSACTIONS)
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
Identity of Party Involved Purchase Selling Cost of Net
and Description of Assets Price<F1> Price<F1> Asset Gain
- ------------------------------- ---------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Pennzoil Company common stock,
$.83-1/3 par value -
Purchases (144 transactions) $4,023,152 $ - $4,023,152 $ -
Sales (71 transactions) - 662,136 633,114 29,022
Mellon Bank - EB Temporary
Investment Fund -
Purchases (157 transactions) 2,574,799 - 2,574,799 -
Sales (125 transactions) - 2,538,238 2,538,238 -
Merrill Lynch Retirement
Preservation Trust -
Purchases (74 transactions) 1,353,732 - 1,353,732 -
Sales (85 transactions) - 1,929,553 1,929,553 -
Dreyfus Basic S&P 500 Stock
Index Fund -
Purchases (56 transactions) 1,045,247 - 1,045,247 -
Sales (104 transactions) - 1,653,710 1,059,917 593,793
<FN>
<F1> Current value of asset on transaction date is equal to the purchase or selling price.
Prices are shown net of related expenses.
NOTE: This schedule is a listing of a series of investment
transactions in the same security which exceed 5% of the
current value of the Plan's assets as of the beginning
of the Plan year.
</FN>
</TABLE>
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Administrative Committee has duly caused this report to be
signed by the undersigned thereunto duly authorized.
PENNZOIL-QUAKER STATE COMPANY SAVINGS
AND INVESTMENT PLAN FOR HOURLY
EMPLOYEES
By S/N JAMES W. SHADDIX
James W. Shaddix
Chairman of the Administrative
Committee
June 29, 1999
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report dated June 28, 1999, included herein, into
Pennzoil-Quaker State Company's previously filed Registration Statement
on Form S-8 No. 333-69835.
ARTHUR ANDERSEN LLP
Houston, Texas
June 28, 1999
