<PAGE> 1
Filed pursuant to Rule 424(b)(5)
Registration No. 333-79317
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN DECLARED EFFECTIVE
WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 17, 1999
PROSPECTUS SUPPLEMENT
(To Prospectus dated September 17, 1999)
[AMERADA HESS LOGO]
Amerada Hess Corporation
$
% Notes due
$
% Notes due
Interest payable and
The 20 Notes will mature on and the 20 Notes will mature
on . Interest will accrue from , 1999. We may redeem
some or all of the Notes in whole or in part at any time at the redemption
prices described on page S-26. The Notes will be issued in minimum denominations
of $1,000 increased in multiples of $1,000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus supplement or the accompanying
prospectus. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PROCEEDS TO
PRICE TO DISCOUNTS AND AMERADA HESS
PUBLIC COMMISSIONS CORPORATION
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per 20 Note % % %
- --------------------------------------------------------------------------------------------------------------
Total $ $ $
- --------------------------------------------------------------------------------------------------------------
Per 20 Note % % %
- --------------------------------------------------------------------------------------------------------------
Total $ $ $
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes will not be listed on any national securities exchange. Currently,
there is no public market for the Notes.
It is expected that delivery of the Notes will be made to investors on or about
, 1999.
J.P. MORGAN & CO.
GOLDMAN, SACHS & CO.
BANC OF AMERICA SECURITIES LLC
CHASE SECURITIES INC.
SALOMON SMITH BARNEY
BARCLAYS CAPITAL
CIBC WORLD MARKETS
SCOTIA CAPITAL MARKETS
, 1999
<PAGE> 2
You should rely only on the information contained or incorporated by reference
in this prospectus supplement and the accompanying prospectus. We and the
underwriters have not authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. We and the underwriters are not making an offer to
sell these securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in this prospectus
supplement and the accompanying prospectus, as well as information we previously
filed with the Securities and Exchange Commission and incorporated by reference,
is accurate as of the date on the front cover of this prospectus only. Our
business, financial condition, results of operations and prospects may have
changed since that date.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Amerada Hess Corporation.................................... S-3
Use of Proceeds............................................. S-3
Capitalization.............................................. S-3
Selected Consolidated Financial Data........................ S-4
Management's Discussion and Analysis of Results of
Operations and Financial Condition........................ S-7
Business.................................................... S-17
Description of the Notes.................................... S-26
Underwriting................................................ S-33
Legal Opinions.............................................. S-34
PROSPECTUS
About This Prospectus....................................... 2
Where You Can Find More Information......................... 2
Amerada Hess Corporation.................................... 3
Recent Developments......................................... 3
Use of Proceeds............................................. 3
Ratio of Earnings to Fixed Charges.......................... 4
Description of Debt Securities.............................. 5
Plan of Distribution........................................ 10
Legal Opinions.............................................. 10
Experts..................................................... 10
Glossary.................................................... 11
</TABLE>
S-2
<PAGE> 3
AMERADA HESS CORPORATION
We are a Delaware corporation that, together with our subsidiaries, explores
for, produces, purchases, transports and sells crude oil and natural gas. We do
this mainly in the United States, United Kingdom, Norway, Denmark and Gabon, and
also in Azerbaijan, Brazil, Indonesia, Thailand and other countries. We also
manufacture, purchase, transport and market refined petroleum products. We own
50% of a refinery joint venture in the United States Virgin Islands, as well as
another refining facility, terminals and retail outlets located mainly on the
East Coast of the United States.
Our principal executive offices are located at 1185 Avenue of the Americas, New
York, NY 10036, and our telephone number is (212) 997-8500.
USE OF PROCEEDS
We expect the net proceeds from the issuance of the Notes to be approximately
. We will use the net proceeds from the sale of the 20 Notes and
the 20 Notes (collectively, the "Notes") for repayment and refinancing of
revolving credit debt with a weighted average interest rate of 5.6% as of
September 15, 1999 that is due in 2002.
CAPITALIZATION
The table below sets forth our consolidated capitalization as of June 30, 1999
and as adjusted to give effect to the offering of the Notes and the application
of the net proceeds. See "Use of Proceeds".
<TABLE>
<CAPTION>
AT JUNE 30, 1999
---------------------
ACTUAL AS ADJUSTED
------ -----------
(IN MILLIONS)
<S> <C> <C>
Notes payable and current maturities of long-term debt...... $ 49 $ 49
20 Notes............................................... --
20 Notes............................................... --
Other long-term debt........................................ 2,647
------ ------
Total debt........................................ 2,696
------ ------
Stockholders' equity
Preferred Stock, par value $1.00 per share; 20,000,000
shares authorized for issuance in series; none issued
and outstanding........................................ -- --
Common Stock, par value $1.00 per share; 200,000,000
shares authorized; 90,564,005 shares issued and
outstanding............................................ 91 91
Capital in excess of par value............................ 775 775
Retained earnings......................................... 2,025 2,025
Accumulated other comprehensive income.................... (122) (122)
------ ------
Total stockholders' equity........................ 2,769 2,769
------ ------
Total capitalization.............................. $5,465 $
====== ======
</TABLE>
S-3
<PAGE> 4
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data below are derived from our audited
consolidated historical financial statements. This information should be read
together with the financial statements and the accompanying notes incorporated
by reference into this prospectus supplement and with "Management's Discussion
and Analysis of Results of Operations and Financial Condition" included
elsewhere in this prospectus supplement. The unaudited financial information
presented below at June 30, 1999 and for the six-month periods ended June 30,
1999 and 1998 reflects all normal and recurring adjustments that, in the opinion
of management, are necessary for a fair presentation of our financial position,
results of operations and cash flows.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
---------------- ----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
STATEMENT OF CONSOLIDATED INCOME ------ ------ ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Sales (excluding excise taxes) and
other operating revenues......... $2,969 $3,434 $6,580 $8,224 $8,270 $7,299 $6,600
Non-operating income
Gain (loss) on asset sales....... 108 80 (26) 16 529 96 42
Equity in income (loss) of
HOVENSA L.L.C. ................ 17 -- (16) -- -- -- --
Other............................ 86 44 67 98 125 125 49
------ ------ ------ ------ ------ ------ ------
Total revenues.............. 3,180 3,558 6,605 8,338 8,924 7,520 6,691
------ ------ ------ ------ ------ ------ ------
Costs and expenses
Cost of products sold.............. 1,864 2,288 3,996 5,214 4,987 4,143 3,406
Production expenses................ 209 238 502 535 621 610 601
Marketing expenses................. 180 180 497 373 292 281 271
Other operating expenses........... 116 113 483 556 506 527 507
Exploration expenses, including dry
holes and lease impairment....... 141 204 365 432 395 393 340
General and administrative
expenses......................... 114 129 271 221 222 247 217
Interest expense................... 77 67 153 136 166 247 245
Depreciation, depletion and
amortization..................... 275 327 646 663 721 840 868
Impairment of assets and operating
leases........................... -- -- 206 81 -- 584 --
------ ------ ------ ------ ------ ------ ------
Total costs and expenses.... 2,976 3,546 7,119 8,211 7,910 7,872 6,455
------ ------ ------ ------ ------ ------ ------
Income (loss) before income taxes.... 204 12 (514) 127 1,014 (352) 236
Provision (benefit) for income
taxes.............................. 56 46 (55) 119 354 42 162
------ ------ ------ ------ ------ ------ ------
Net income (loss).................... $ 148 $ (34) $ (459) $ 8 $ 660 $ (394) $ 74
====== ====== ====== ====== ====== ====== ======
Net income (loss) per share
Basic.............................. $ 1.65 $ (.38) $(5.12) $ .08 $ 7.13 $(4.26) $ .80
Diluted............................ $ 1.65 $ (.38) $(5.12) $ .08 $ 7.09 $(4.26) $ .79
Common stock dividends per share..... $ .30 $ .30 $ .60 $ .60 $ .60 $ .60 $ .60
Weighted average number of shares
outstanding........................ 90 90 90 92 93 93 93
</TABLE>
- ---------------
See accompanying notes to Selected Consolidated Financial Data.
S-4
<PAGE> 5
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
AT JUNE 30, ----------------------------------------------
SUMMARIZED CONSOLIDATED BALANCE SHEET 1999 1998 1997 1996 1995 1994
----------- ------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Total current assets........................ $2,240 $1,887 $2,204 $2,427 $1,962 $1,722
Investments and advances.................... 944 935 250 218 185 140
Net property, plant and equipment
Exploration and production................ 3,654 3,587 3,093 2,869 3,264 3,669
Refining, marketing and other............. 601 605 2,098 2,038 2,106 2,697
Note receivable from PDVSA, V.I. ........... 515 539 -- -- -- --
Deferred income taxes and other assets...... 252 330 290 232 239 110
------ ------ ------ ------ ------ ------
Total assets....................... $8,206 $7,883 $7,935 $7,784 $7,756 $8,338
====== ====== ====== ====== ====== ======
Current liabilities (excluding short-term
debt)..................................... $1,985 $1,621 $1,616 $1,509 $1,410 $1,016
Total debt.................................. 2,696 2,652 2,127 1,939 2,718 3,340
Deferred liabilities and credits............ 756 967 976 952 968 882
Stockholders' equity........................ 2,769 2,643 3,216 3,384 2,660 3,100
------ ------ ------ ------ ------ ------
Total liabilities and stockholders'
equity........................... $8,206 $7,883 $7,935 $7,784 $7,756 $8,338
====== ====== ====== ====== ====== ======
Ratio of total debt to total
capitalization............................ 49.3% 50.1% 39.8% 36.4% 50.5% 51.9%
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
SUMMARIZED CONSOLIDATED STATEMENT ---------------- -----------------------------------------------
OF CASH FLOWS 1999 1998 1998 1997 1996 1995 1994
------ ------ ------- ------- ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss).................. $ 148 $ (34) $ (459) $ 8 $ 660 $ (394) $ 74
Depreciation, depletion and
amortization, exploratory dry
hole costs and lease
impairment....................... 316 450 1,070 982 948 1,656 1,081
(Gain) loss on asset sales......... (108) (80) 26 (16) (529) (96) (42)
Provision (benefit) for deferred
income taxes..................... (32) (1) (138) (80) 43 (156) 30
Changes in operating assets and
liabilities and other............ (96) 26 20 356 (314) 231 (186)
----- ----- ------- ------- ------ ------ ------
Net cash provided by
operating activities...... 228 361 519 1,250 808 1,241 957
----- ----- ------- ------- ------ ------ ------
Cash flows from investing activities
Capital expenditures............... (420) (709) (1,439) (1,346) (861) (692) (596)
Proceeds from asset sales and
other............................ 185 108 503 63 1,037 146 73
----- ----- ------- ------- ------ ------ ------
Net cash provided by (used
in) investing
activities................ (235) (601) (936) (1,283) 176 (546) (523)
----- ----- ------- ------- ------ ------ ------
Cash flows from financing activities
Net borrowings (repayments)........ 46 260 517 191 (867) (638) (406)
Cash dividends paid................ (41) (41) (55) (55) (56) (56) (56)
Stock options exercised............ 10 -- -- -- -- -- --
Common stock acquired.............. -- (28) (59) (122) (8) -- --
----- ----- ------- ------- ------ ------ ------
Net cash provided by (used
in) financing
activities................ 15 191 403 14 (931) (694) (462)
----- ----- ------- ------- ------ ------ ------
Effect of exchange rate changes on
cash............................... -- (1) (3) (2) 3 2 2
----- ----- ------- ------- ------ ------ ------
Net increase (decrease) in cash and
cash equivalents................... $ 8 $ (50) $ (17) $ (21) $ 56 $ 3 $ (26)
===== ===== ======= ======= ====== ====== ======
</TABLE>
- ---------------
See accompanying notes to Selected Consolidated Financial Data.
S-5
<PAGE> 6
NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA
(a) The income statements for the period ended December 31, 1998 and prior
periods have been reclassified to conform with the income statement
presentation used in the six month period ended June 30, 1999.
(b) The following table summarizes special items affecting income for each of
the five years in the period ended December 31, 1998 and for the six months
ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------ --------------------------------------
SPECIAL ITEMS (IN MILLIONS) 1999 1998 1998 1997 1996 1995 1994
- --------------------------- ---- ---- ----- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gain (loss) on asset sales............. $70 $56 $ (50) $ 11 $421 $ 68 $41
Impairment of assets and operating
leases............................... -- -- (198) (55) (22) (416) --
Tax refunds............................ -- -- -- 38 -- 44 --
Litigation settlement.................. -- -- -- -- 25 -- --
Other.................................. -- -- (15) -- -- (25) --
--- --- ----- ---- ---- ----- ---
Total special items................ $70 $56 $(263) $ (6) $424 $(329) $41
=== === ===== ==== ==== ===== ===
</TABLE>
(c) Foreign currency gains, including income tax effect, amounted to $35 million
in the first six months of 1999 (none in the corresponding period of 1998).
Foreign currency gains (losses) in the years ended December 31 were as
follows: $3 million in 1998; $5 million in 1997; $2 million in 1996; $1
million in 1995; and $(1) million in 1994.
(d) On January 1, 1999, we adopted the last-in, first-out (LIFO) inventory
method.
(e) In 1998 we sold 50% of our St. Croix refinery and formed a refining joint
venture. We account for the joint venture using the equity method.
(f) In 1996 we sold significant exploration and production assets. The assets
sold included our Canadian operations, certain United States and United
Kingdom producing properties and Abu Dhabi assets.
(g) We adopted the provisions of Statement of Financial Accounting Standards No.
121 in 1995. Our policy for impairment of oil and gas assets is as follows:
Oil and gas properties are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amounts may not be
recovered. If the carrying amounts are not expected to be recovered by
undiscounted future cash flow, these properties are impaired and an
impairment loss is recorded. The amount of the impairment is based on the
estimated fair value of the properties determined by discounting anticipated
future net cash flows. The net present value of future cash flows is based
on our estimates of future prices applied to projected production profiles,
discounted at a rate commensurate with the risks involved. The oil and gas
prices used for determining asset impairments may differ from those used at
year-end in the standardized measure of discounted future net cash flows
under FAS No. 69. The impact of forward sales on asset impairments is not
material.
Provisions for impairment of undeveloped oil and gas leases are based on
periodic evaluations and other factors.
S-6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
The following analysis should be read in conjunction with Amerada Hess
Corporation's financial statements, and the accompanying notes, incorporated by
reference into the accompanying prospectus.
RESULTS OF OPERATIONS -- SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Income excluding asset sales for the first half of 1999 was $78 million compared
with a loss of $90 million in the first half of 1998. Including gains on asset
sales, net income was $148 million in the first half of 1999, compared with a
net loss of $34 million in the corresponding period of 1998.
The after-tax results by major operating activity for the six-month periods
ended June 30, 1999 and 1998 were as follows (in millions, except per share
data):
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
--------------
1999 1998
----- -----
<S> <C> <C>
Exploration and production.................................. $ 78 $ 2
Refining, marketing and shipping............................ 72 (15)
Corporate................................................... (15) (20)
Interest expense............................................ (57) (57)
----- -----
Income (loss) excluding asset sales......................... 78 (90)
Gains on asset sales........................................ 70 56
----- -----
Net income (loss)........................................... $ 148 $ (34)
===== =====
Net income (loss) per share (diluted)....................... $1.65 $(.38)
===== =====
</TABLE>
The net gain from asset sales in the first half of 1999 reflects the sale of the
southeast pipeline terminals and certain retail sites in South Carolina as well
as the sale of natural gas properties in California. The 1998 asset sales
reflect the sales of three oil and gas properties in the United States and
Norway.
Comparison of Results
Exploration and Production
Excluding gains on asset sales, earnings from exploration and production
activities increased by $76 million in the first half of 1999 compared with the
corresponding period of 1998. Earnings in the first half of 1999 also include
net nonrecurring income of $18 million, principally from foreign currency
translation adjustments. The year-to-date increase also reflects higher
production volumes, reduced exploration expenses and a lower effective income
tax rate in the United Kingdom. These variances are more fully explained below.
Our average selling prices, including the effects of hedging, were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
----------------
1999 1998
------ ------
<S> <C> <C>
Crude oil and natural gas liquids (per barrel)
United States............................................. $12.47 $12.86
Foreign................................................... 12.87 14.18
Natural gas (per Mcf)
United States............................................. 1.91 2.16
Foreign................................................... 1.87 2.48
</TABLE>
S-7
<PAGE> 8
Our net daily worldwide production was as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
------------------
1999 1998
------- -------
<S> <C> <C>
Crude oil and natural gas liquids (barrels per day)
United States............................................. 57,809 44,516
Foreign................................................... 154,841 161,751
------- -------
Total.................................................. 212,650 206,267
======= =======
Natural gas (Mcf per day)
United States............................................. 333,840 293,133
Foreign................................................... 287,200 293,182
------- -------
Total.................................................. 621,040 586,315
======= =======
Barrels of oil equivalent (per day)......................... 316,157 303,986
======= =======
</TABLE>
The increase in United States crude oil and natural gas production principally
reflects new fields which came onstream in late 1998. Lower foreign crude oil
production in 1999 was due largely to shut-in production while damage to a
floating production vessel in the United Kingdom was repaired by the operator of
the vessel. Production has resumed in the third quarter. New production
commenced in July from the South Arne Field in Denmark. Production from this
field is expected to reach 30,000 barrels of crude oil per day in 2000.
In the first half of 1999, depreciation, depletion, and amortization charges
relating to exploration and production activities were comparable to the 1998
amounts, but lower on a per barrel-produced basis, reflecting the impact of new
lower-cost fields and the effect of positive oil and gas reserve revisions at
the end of 1998. Production expenses were lower in the first half of 1999 as a
result of lower operating costs of new fields and shut-in production as a result
of the vessel damage noted above. Exploration expenses were lower in 1999 due to
a reduced exploration budget. General and administrative expenses were lower in
the first half of 1999, primarily due to cost reduction initiatives in the
United States and United Kingdom.
The following items are included in 1999 exploration and production income (in
millions):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999
----------------
<S> <C>
United Kingdom foreign currency translation gain............ $20
Tax impact of foreign currency translation.................. 17
State income tax refund..................................... 6
Loss on renegotiation of drilling rig contracts............. (17)
Marine service vessel contract termination charge........... (8)
---
$18
===
</TABLE>
In 1999, we changed the functional currency of our United Kingdom operations
from the British pound sterling to the U.S. dollar. During the first half of
1999, the U.S. dollar strengthened in relation to the pound sterling resulting
in the currency gain and tax effect shown above. The United Kingdom tax
calculation continues to be Sterling based and includes deductible losses on
dollar denominated liabilities.
The effective income tax rate on exploration and production earnings was lower
in the first half of 1999, principally reflecting reduced provisions for United
Kingdom taxes due to the foreign currency translation adjustment indicated above
and higher deductible allowances. Allowances deducted in calculating the U.K.
Petroleum Revenue Tax provided incremental tax benefits of approximately $18
million when compared with allowances recorded in the comparable period of 1998.
The effective income tax rate on exploration and production earnings is expected
to increase in the second half of the year.
S-8
<PAGE> 9
The selling price of crude oil has increased from the low levels experienced in
late 1998 and early 1999. However, we anticipate continued volatility.
Refining, Marketing and Shipping
Excluding asset sales, refining, marketing and shipping operations had income of
$72 million compared with a loss of $15 million in the first half of 1998. Our
downstream operations include HOVENSA, a 50% owned refining joint venture, and
retail, energy marketing and other activities as discussed below.
HOVENSA
In the first half of 1999, our equity income from HOVENSA was $17 million
compared with $4 million in 1998, when the refinery was wholly-owned. Results in
1999 and 1998 included $16 million (our share) and $44 million, respectively,
resulting from the reversal of inventory writedowns that had been recorded at
the prior year-ends. Income taxes are not recorded on HOVENSA results due to
available loss carryforwards.
Refining, marketing and shipping results also include interest income of $24
million in the first half of 1999 on the note received in connection with the
formation of the joint venture.
As a result of equity accounting for HOVENSA, our share of HOVENSA income is
recorded in the line item "Equity in income of HOVENSA L.L.C." Therefore, in
1999 no amounts for HOVENSA are included in the income statement captions below.
Prior to the formation of HOVENSA, refinery results were fully consolidated. In
1998, the amounts shown below were reflected in the captions indicated (in
millions):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998
----------------
<S> <C>
Sales to third parties and other operating revenues......... $386
Cost of products sold....................................... 289
Other operating expenses.................................... 51
Depreciation and amortization............................... 43
</TABLE>
Our share of refinery runs amounted to 222,000 barrels per day in the first half
of 1999 compared with 436,000 barrels per day in 1998 when the refinery was
wholly-owned.
Retail, energy marketing and other
Retail and energy marketing results improved somewhat in the first half of 1999
compared with the corresponding period of 1998. However, gasoline and distillate
margins continued to be negatively affected by competitive industry conditions.
Marketing sales volumes decreased to 64 million barrels in the first half of
1999 compared with 74 million barrels in the first half of 1998, reflecting
lower spot and contract sales. Operating expenses, excluding amounts related to
the refinery in 1998 as indicated above, increased due to expanded third party
shipping activities.
We periodically take forward positions on energy contracts outside of our
hedging program. We also have a 50% interest in a consolidated partnership which
trades energy commodities. The combined results of these activities were a gain
of $19 million in the first half of 1999 compared with a loss of $3 million in
the comparable period of 1998.
Corporate
In the first half of 1999, net corporate expenses were $5 million lower than in
1998. The net expenses for both periods were offset by dividend income from
insurers, with approximately $5 million more received in 1999.
S-9
<PAGE> 10
Sales and Other Operating Revenues
Sales and other operating revenues decreased by 14% in the first half of 1999
compared with the corresponding period of 1998. In addition to the exclusion of
HOVENSA third party sales in 1999 due to equity accounting (as discussed above),
the decrease is primarily due to lower refined product sales volumes and lower
average selling prices.
LIQUIDITY AND CAPITAL RESOURCES -- AT JUNE 30, 1999
Net cash provided by operating activities, including changes in operating assets
and liabilities, amounted to $228 million in the first half of 1999 compared
with $361 million in the first half of 1998. The decrease was primarily due to
increases in working capital components, principally accounts receivable and
inventories. The sales of fixed assets, including the southeast pipeline
terminals, South Carolina gasoline stations and natural gas properties in
California, generated proceeds of $169 million in the first half of 1999. We
received additional proceeds of $226 million and recorded $106 million of income
in the third quarter upon the closing of the sale of our Gulf Coast terminals
and additional retail sites. In 1998, the sales of oil and gas properties in the
United States and Norway generated proceeds of $98 million.
Total debt was $2,696 million at June 30, 1999 compared with $2,652 million at
December 31, 1998. The debt to capitalization ratio was 49.3% at June 30,
compared with 50.1% at year-end. At June 30, 1999, floating rate debt amounted
to 41.5% of total debt, including the effect of interest rate conversion (swap)
agreements. At June 30, 1999, we had $930 million of additional borrowing
capacity available under our revolving credit agreements and additional unused
lines of credit under uncommitted arrangements with banks of $310 million.
At the end of 1998, we recorded a charge of $90 million before income taxes for
the decline in market value of fixed-price drilling service contracts. During
the first half of 1999, we accrued an additional $5 million for a drilling rig
that was subcontracted at an amount less than previously estimated. We reduced
the reserve by $43 million for contract payments. The balance of the reserve at
the end of the first half of 1999 was $52 million. At this time, we are unable
to determine with any certainty our ability to continue to subcontract drilling
rigs, or the value of possible subcontracts, and therefore are unable to
reasonably estimate the adequacy of our reserve. It is possible that future
income could be reduced by as much as an additional $30 million related to the
rig contracts.
At the beginning of 1999, we had a reserve for severance costs of $21 million
and for exit costs (accrued office lease costs) of $8 million. During the first
half of 1999, we charged $15 million in payments against the severance reserve.
All employees included in the 1998 severance program have been terminated and
the remaining severance liability of $6 million will be paid in the second half
of the year.
Futures, forwards, options and swaps are used to reduce the effects of changes
in the selling prices of crude oil, natural gas and refined products. These
instruments fix the selling prices of a portion of our products and the related
gains or losses are an integral part of our selling prices. At June 30, 1999, we
had open hedge positions equal to 2% of our estimated worldwide crude oil
production over the next twelve months. As market conditions change, we will
adjust our hedge positions.
We reduce our exposure to fluctuating foreign exchange rates by using forward
contracts to fix the exchange rate on a portion of the currency required in our
North Sea operations. At June 30, 1999, we had $568 million of foreign currency
exchange contracts outstanding. In addition, we use interest-rate conversion
agreements to reduce exposure to floating interest rates. At June 30, we had
$290 million of interest-rate conversion agreements outstanding.
Capital expenditures in the first half of 1999 amounted to $420 million compared
with $709 million in the first half of 1998. Capital expenditures for
exploration and production activities were $383 million in the first half of
1999 compared with $659 million in the first half of 1998. Capital expenditures
for the remainder of 1999 are expected to be approximately $450 million and will
be financed by internally generated funds.
S-10
<PAGE> 11
CONSOLIDATED RESULTS OF OPERATIONS -- YEARS ENDED DECEMBER 31, 1998, 1997 AND
1996
The results of operations for 1998, excluding special items, amounted to a loss
of $196 million compared with income of $14 million in 1997 and $236 million in
1996.
The after-tax results by major operating activity for 1998, 1997 and 1996 are
summarized below (in millions, except per share data):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Exploration and production............................. $ (18) $ 258 $ 210
Refining, marketing and shipping....................... (18) (110) 181
Corporate.............................................. (37) (16) (19)
Interest expense....................................... (123) (118) (136)
------ ----- -----
Income (loss) excluding special items.................. (196) 14 236
Special items.......................................... (263) (6) 424
------ ----- -----
Net income (loss)...................................... $ (459) $ 8 $ 660
====== ===== =====
Net income (loss) per share (diluted).................. $(5.12) $ .08 $7.09
====== ===== =====
</TABLE>
Comparison of Results
Exploration and Production
Excluding special items, exploration and production earnings decreased by $276
million in 1998, due primarily to substantially lower worldwide crude oil
selling prices and lower United Kingdom crude oil sales volumes. Natural gas
selling prices in the United States and United Kingdom were also lower.
Partially offsetting these factors were lower exploration expenses, principally
in the Gulf of Mexico and North Sea.
Exploration and production earnings increased by $48 million in 1997 compared
with 1996. The increase reflected primarily higher average crude oil and natural
gas selling prices in the United States and higher natural gas selling prices
and a lower effective income tax rate in the United Kingdom.
Our average selling prices, including the effects of hedging, were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Crude oil and natural gas liquids (per barrel)
United States...................................... $12.02 $18.43 $16.49
Foreign............................................ 13.05 19.16 20.18
Natural gas (per Mcf)
United States...................................... 2.08 2.42 2.13
Foreign............................................ 2.26 2.46 2.03
</TABLE>
S-11
<PAGE> 12
Our net daily worldwide production was as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Crude oil and natural gas liquids (barrels per day)
United States....................................... 44,920 43,950 50,125
Foreign............................................. 161,069 174,622 186,672
------- ------- -------
Total............................................ 205,989 218,572 236,797
======= ======= =======
Natural gas (Mcf per day)
United States....................................... 293,849 311,915 337,653
Foreign............................................. 282,628 257,339 347,013
------- ------- -------
Total............................................ 576,477 569,254 684,666
======= ======= =======
Barrels of oil equivalent (per day)................... 302,069 313,448 350,908
======= ======= =======
</TABLE>
The decrease in foreign crude oil production in 1998 largely reflects
maintenance related interruptions at three United Kingdom fields. United States
natural gas production was lower in 1998, principally reflecting first quarter
asset sales and natural decline. Foreign natural gas production increased in
1998 due to higher demand in the United Kingdom. Lower United States and foreign
production in 1997 was primarily due to asset sales in 1996.
Depreciation, depletion and amortization charges were lower in 1998, principally
reflecting lower foreign crude oil production. In addition, we had positive oil
and gas reserve revisions at the end of 1997, which reduced depreciation and
amortization charges in 1998. Exploration expenses were lower in 1998 due to
reduced drilling in the United States and United Kingdom in response to lower
oil prices. Marketing expenses related to exploration and production operations
were higher in 1998, due primarily to the expansion of natural gas marketing in
the United Kingdom. General and administrative expenses were also higher in 1998
largely due to accrued severance costs.
The effective income tax rate on exploration and production earnings was higher
in 1998 than in 1997. The increase was due primarily to exploration expenses in
some foreign areas outside of the United States and North Sea, for which income
tax benefits have not been currently provided. Although international
exploration expenses were comparable in both years, the impact was greater in
1998 due to lower pre-tax exploration and production earnings. Both years
included the benefit of tax adjustments for reductions in the United Kingdom
statutory income tax rate. The effective income tax rate on exploration and
production earnings in 1997 was lower than in 1996, principally reflecting lower
Petroleum Revenue Taxes in the United Kingdom.
Earnings from exploration and production activities have been severely affected
by low crude oil prices. We anticipate that prices will remain volatile. We had
net additions to oil and gas reserves at the end of 1998. However, constrained
exploration and production spending may impair reserve additions in the future.
Refining, Marketing and Shipping
Excluding special items, refining, marketing and shipping operations resulted in
losses of $18 million in 1998 and $110 million in 1997 compared with income of
$181 million in 1996. Refining margins were weak in both 1998 and 1997, and in
addition, there was an inventory write-down at the end of 1997. The results in
both years were hurt by relatively mild winter weather, which affected heating
oil and residual fuel oil margins. Gasoline margins were adversely affected by
extremely competitive market conditions.
We are expanding our retail operations by purchasing and constructing gasoline
stations. We are also expanding our energy marketing activities. The cost of
operating the expanded retail and energy marketing businesses increased
marketing expenses in 1998.
S-12
<PAGE> 13
On October 30, 1998, we completed a refinery joint venture, HOVENSA, L.L.C.,
with a subsidiary of Petroleos de Venezuela, S.A. We account for our 50%
investment in the joint venture using the equity method. We recorded a loss of
$16 million for the first two months of the joint venture's operation. The loss
was due to a write-down of inventory values at year-end. Income taxes or
benefits are not recorded on HOVENSA results due to loss carryforwards available
to the partners. Refining and marketing results include interest income of $8
million on the Petroleos de Venezuela note received in connection with the
formation of the joint venture.
Total refined product sales volumes amounted to 176 million barrels in 1998, 186
million barrels in 1997 and 181 million barrels in 1996. As a result of the
formation of, and equity accounting for, HOVENSA, sales made to third parties
are no longer included in our reported revenues. Through the first ten months of
1998, these sales accounted for 32 million barrels and $600 million in revenues.
In 1997, refined product selling prices were lower than in 1996. The lower
selling prices in relation to our inventory costs resulted in lower margins on
the sales of refined products and a reduction in inventory values at year-end.
HOVENSA accounts for inventories on the last-in, first-out (LIFO) method.
Effective January 1, 1999, we also adopted LIFO for our refining and marketing
inventories.
Corporate
Net corporate expenses amounted to $37 million in 1998, $16 million in 1997 and
$19 million in 1996. Administrative expenses were comparable in each period. The
variances in net expenses are due primarily to corporate income tax adjustments,
including the impact of foreign source earnings on United States income taxes
and recognition of capital loss carryforwards in 1997.
Interest Expense
After-tax interest expense increased by 4% in 1998 compared with a decrease of
13% in 1997. The increase in 1998 reflects higher outstanding borrowings, offset
by lower interest rates and increased interest capitalization.
Sales and Other Operating Revenues
Sales and other operating revenues decreased by approximately 20% in 1998, due
principally to lower crude oil and refined product selling prices and, to a
lesser extent, lower sales volumes. Sales and other operating revenues declined
slightly in 1997 compared with 1996.
S-13
<PAGE> 14
Special Items
After-tax special items in 1998, 1997 and 1996 are summarized below (in
millions):
<TABLE>
<CAPTION>
REFINING,
EXPLORATION MARKETING
AND AND
TOTAL PRODUCTION SHIPPING
----- ----------- ---------
<S> <C> <C> <C>
1998
Gain (loss) on asset sales........................... $ (50) $ 56 $(106)
Impairment of assets and operating leases............ (198) (154) (44)
Severance............................................ (15) (15) --
----- ----- -----
Total........................................... $(263) $(113) $(150)
===== ===== =====
1997
Asset impairment..................................... $ (55) $ (55) $ --
Foreign tax refund................................... 38 38 --
Gain on asset sale................................... 11 11 --
----- ----- -----
Total........................................... $ (6) $ (6) $ --
===== ===== =====
1996
Gain on asset sales.................................. $ 421 $ 421 $ --
Litigation settlement................................ 25 25 --
Asset write-downs.................................... (22) (22) --
----- ----- -----
Total........................................... $ 424 $ 424 $ --
===== ===== =====
</TABLE>
The 1998 special items include a loss of $106 million on the sale of 50% of the
St. Croix refinery and formation of the HOVENSA joint venture. We also had gains
of $56 million on the sale of oil and gas assets in the United States and
Norway. Asset impairment in 1998 includes $44 million for our crude oil storage
terminal in St. Lucia. The terminal's value was affected by reduced storage
requirements as a result of the crude oil supply provisions of the HOVENSA joint
venture. In addition, we recorded $42 million for the reduction in carrying
value of exploration and production assets, including $29 million for our share
of asset impairment of Premier Oil plc, an equity affiliate. The remaining $13
million represents the reduction in carrying value of developed and undeveloped
properties in the United States and United Kingdom. We estimate that these
charges will reduce future expenses, principally depreciation, depletion and
amortization, by approximately $19 million in 1999 and $9 million in 2000.
We also recorded a charge of $77 million, after income tax effect, for the
decline in value of fixed-price drilling service contracts and $35 million for
the impairment of a North Sea oil discovery. Our accrual for fixed-price
drilling service contracts includes amounts that will be paid, and otherwise
would have been expensed, in 1999 and 2000 of approximately $30 million and $47
million after income tax effect. Severance and exit costs of $15 million
(approximately $32 million before income taxes) were also recorded in 1998 and
are expected to result in an annual benefit of a comparable after-tax amount.
Approximately $2 million of severance was paid in 1998 and substantially all of
the remainder will be paid in 1999.
The 1997 special items include an after-tax charge of $55 million for the
reduction in carrying values and provision for future costs of two United
Kingdom North Sea oil fields. Approximately 70% of the remaining crude oil from
these fields was produced during 1998 and the balance will be produced in 1999.
Other 1997 special items included income of $38 million from a refund of United
Kingdom Petroleum Revenue Taxes and a gain of $11 million on the sale of a
United States natural gas field.
The net gain on asset sales in 1996 of $421 million reflected the sale of our
Canadian operations, certain United States and United Kingdom producing
properties and Abu Dhabi assets. The other 1996 special
S-14
<PAGE> 15
items included income from the settlement of litigation on the right to drill
certain South Atlantic leases and a charge principally to reduce the carrying
values of certain United States undeveloped leases.
LIQUIDITY AND CAPITAL RESOURCES -- AT DECEMBER 31, 1998
Net cash provided by operating activities, including changes in operating assets
and liabilities, amounted to $519 million in 1998, $1,250 million in 1997 and
$808 million in 1996. The variance between 1998 and 1997 was due largely to
operating results and working capital changes, principally reduced inventory
balances in 1997 and increased prepaid expenses in 1998.
We received proceeds of approximately $370 million on finalization of the
refining joint venture, including $307 million for inventory and other working
capital sold to HOVENSA and $62.5 million from Petroleos de Venezuela
representing the cash portion of the purchase price. These amounts are reflected
in proceeds from asset sales in the statement of cash flows. We also recorded a
note for $562.5 million bearing interest at 8.46% per annum. In addition, the
sale of three oil and gas properties in the United States and Norway generated
proceeds of $98 million in 1998.
In our asset rationalization program, we periodically review and consider for
sale assets that are underperforming or non-strategic. When determining our
capital budget, we take into account the estimated proceeds from these
anticipated asset sales, as well as estimates of cash to be provided by
operations. In 1998, these amounts totaled $987 million, consisting of $519
million in cash provided by operating activities and $468 million in proceeds
from major asset sales.
Total debt was $2,652 million at December 31, 1998 compared with $2,127 million
at December 31, 1997. The debt to capitalization ratio increased to 50.1% from
39.8% at year-end 1997. At December 31, 1998, floating rate debt amounted to 32%
of total debt, including the effect of interest rate conversion (swap)
agreements.
During 1998, we completed private placements of $225 million of fixed rate debt
with three insurance companies having a weighted average maturity of 7.4 years.
We also completed the sale and leaseback of our interest in the production
platforms and related facilities of two Gulf of Mexico producing properties.
These transactions have been accounted for as financings.
We sold subsequent year crude oil production for $249 million in 1998 and $174
million in 1997. These amounts are recorded as deferred revenue and resulted in
reduced debt at the end of each year.
During 1998, we purchased 1,071,500 shares of common stock for $56 million under
our $250 million stock repurchase program. Through December 31, 1998, we spent
$190 million on repurchased shares under this program. Our stock repurchase
program expired on March 31, 1999.
We conduct exploration and production activities in the United Kingdom, Norway,
Denmark, Gabon, Indonesia, Azerbaijan and in other countries. Therefore, we are
subject to the risks associated with foreign operations. These risks include the
effects of changes in values of currencies on the financial statements. However,
the effect of foreign currency translation on our earnings and stockholders'
equity has not affected our liquidity or ability to raise capital. Although the
financial problems in Asia and other parts of the world have contributed to the
worldwide decline in crude oil prices, the Asian financial problems have not had
a material adverse effect on the carrying values of our foreign investments.
S-15
<PAGE> 16
Capital Expenditures
The following table summarizes our capital expenditures in 1998, 1997 and 1996
(in millions):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1998 1997 1996
------ ------ ----
<S> <C> <C> <C>
Exploration and production
Exploration.............................................. $ 242 $ 286 $236
Development.............................................. 915 679 512
Acquisitions............................................. 150 193 40
------ ------ ----
1,307 1,158 788
Refining, marketing and shipping........................... 132 188 73
------ ------ ----
Total................................................. $1,439 $1,346 $861
====== ====== ====
</TABLE>
Development expenditures include approximately $690 million in 1998 and $460
million in 1997 for major new oil and gas developments. Acquisitions in 1998
reflect $100 million for exploration and production interests in Azerbaijan and
$50 million for an increased interest in a consolidated subsidiary with proved
crude oil reserves and exploration licenses in Gabon. Acquisitions in 1997
principally represent purchases of developed and undeveloped oil and gas
properties in the United Kingdom. Refining and marketing expenditures in 1997
include the purchase of a chain of retail marketing properties in Florida.
Oil and gas development expenditures are expected to be lower in 1999 as new
fields come onstream, and we have significantly reduced planned exploration
expenditures due to lower crude oil prices. As a result, we expect our total
capital expenditures, excluding acquisitions if any, to approximate $900 million
in 1999. These expenditures will be financed by internally generated funds and
external borrowings.
DERIVATIVE FINANCIAL INSTRUMENTS
We are exposed to market risks related to volatility in the selling prices of
crude oil, natural gas and refined products, as well as to changes in interest
rates and foreign currency values. We use derivative instruments to reduce the
risks of these price and rate fluctuations, and we have guidelines for, and
controls over, the use of these instruments.
We use derivative instruments such as futures, forwards, options and swaps to
reduce the effects of changes in the selling prices of crude oil, natural gas
and refined products. These instruments fix the selling prices of a portion of
our products, and the related gains or losses are an integral part of our
selling prices. At December 31, 1998, we had open hedge positions equal to 3% of
our estimated 1999 United States natural gas production. In addition, we had
hedges covering 9% of our refining and marketing inventories. As market
conditions change, we will adjust our hedge positions.
We own an interest in a partnership that trades energy commodities and energy
derivatives. The accounts of the partnership are consolidated with our accounts.
We also engage in trading for our own account.
FORWARD LOOKING INFORMATION
Some information in Management's Discussion and Analysis, including references
to our future results of operations and financial position, capital
expenditures, asset sales, and derivative disclosures is forward looking. The
disclosures are based on our current understanding and assessment of these
activities and reasonable assumptions about the future. Actual results may
differ from these disclosures because of changes in market conditions,
government actions and other factors.
S-16
<PAGE> 17
BUSINESS
We are a Delaware corporation that, together with our subsidiaries, explores
for, produces, purchases, transports and sells crude oil and natural gas. We do
this mainly in the United States, United Kingdom, Norway, Denmark and Gabon, and
also in Azerbaijan, Brazil, Indonesia, Thailand and other countries. We also
manufacture, purchase, transport and market refined petroleum products. We own
50% of a refinery joint venture in the United States Virgin Islands, as well as
another refining facility, terminals and retail outlets located mainly on the
East Coast of the United States.
EXPLORATION AND PRODUCTION
Amerada Hess Corporation has sought to increase oil and gas reserves and replace
production through exploration, development and acquisitions. We have
strategically repositioned our assets, focusing on core areas in the North Sea
and the Gulf of Mexico while selectively pursuing international prospects with
higher growth potential.
In 1998, we replaced 209% of our hydrocarbon production, including purchases and
sales. Our proved reserves increased by 13% on a crude oil equivalent basis. Our
reserve replacement and finding costs were reduced. We had significant increases
in reserves in Gabon and Indonesia, as well as in Denmark. We now have over one
billion barrels of proved oil equivalent reserves, despite having sold over 220
million barrels of proved reserves in the last three years in fields that were
mature or had lower returns than those currently owned.
During 1998, we began receiving production from five new developments in the
Gulf of Mexico and the United Kingdom North Sea and made progress in ten other
developments. At the same time, we actively pursued international opportunities
outside our traditional areas of the Gulf of Mexico and the North Sea. These
opportunities are becoming available as more countries seek foreign investment
in their oil and gas sectors and become willing to grant more competitive
commercial terms. These opportunities may enable us to discover or develop
fields with larger, lower cost reserves than in the more mature oil provinces.
We currently have interests in producing fields in Gabon, Azerbaijan, Indonesia
and Thailand. We obtained exploration rights in 1998 on two blocks offshore
Malaysia and in 1999 on three blocks offshore Brazil where we will be the
operator. At the end of 1998, 13% of our proved reserves were outside North
America and the North Sea, compared with 6% at the end of 1997.
In 1998, we made reserve acquisitions totaling $150 million in Azerbaijan and
Gabon to access longer-life reserves with upside potential and we sold less
strategic, mature assets in the United States and Norway for about $100 million.
In early 1999, we sold our California natural gas properties for $54 million.
WORLDWIDE RESERVES
Amerada Hess Corporation's reserves are estimated by DeGolyer and MacNaughton,
independent petroleum engineers and consultants. At December 31, 1998, 29% of
our proved reserves on a barrel of oil equivalent basis were in the United
States, 58% were in the United Kingdom, Norwegian and Danish sectors of the
North Sea and the remainder were in Azerbaijan, Gabon, Indonesia and Thailand.
At December 31, 1998, we had 695 million barrels of proved crude oil and natural
gas liquids reserves compared with 595 million barrels at the end of 1997.
Proved natural gas reserves were 2,055 million Mcf at December 31, 1998 compared
with 1,935 million Mcf at December 31, 1997. We have a number of oil and gas
developments in progress in the United States, the United Kingdom, Denmark and
other international areas. We have also assembled an inventory of domestic and
foreign drillable prospects.
S-17
<PAGE> 18
The table below shows our estimated net proved oil and gas reserves at December
31, 1994 through 1998. In computing barrels of oil equivalent, natural gas
volumes are converted to barrels of oil equivalent using the ratio of 6 Mcf of
natural gas to 1 barrel of crude oil. "Mcf" refers to one thousand cubic feet.
<TABLE>
<CAPTION>
PROVED DEVELOPED AND UNDEVELOPED AT DECEMBER 31, PROVED DEVELOPED AT DECEMBER 31,
---------------------------------------------------- -------------------------------------
1998 1997 1996 1995 1994 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CRUDE OIL, INCLUDING
CONDENSATE AND NATURAL GAS
LIQUIDS (MILLIONS OF
BARRELS)
United States............. 169 174 171 205 198 132 123 121 157 171
Europe.................... 434 395 383 412 373 293 280 280 310 264
Africa, Asia and Other.... 92 26 24 18 14 27 17 11 13 11
Canada and Abu Dhabi...... -- -- -- 60 59 -- -- -- 60 59
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total.................. 695 595 578 695 644 452 420 412 540 505
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
NATURAL GAS (MILLIONS OF
MCF)
United States............. 780* 809 847 1,038 1,002 525 497 553 755 838
Europe.................... 1,009 951 931 927 998 753 796 815 823 814
Africa, Asia and Other.... 266 175 88 53 -- 52 49 -- -- --
Canada and Abu Dhabi...... -- -- -- 463 581 -- -- -- 458 558
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total.................. 2,055 1,935 1,866 2,481 2,581 1,330 1,342 1,368 2,036 2,210
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
BARRELS OF OIL EQUIVALENT
(MILLIONS OF BARRELS)..... 1,038 918 889 1,109 1,074 674 644 640 879 873
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
- ---------------
* Excludes 483 million Mcf of carbon dioxide gas for sale or use in our
operations.
S-18
<PAGE> 19
WORLDWIDE PRODUCTION
The table below shows average daily net production for the years ended December
31, 1994 through 1998 and the six months ended June 30, 1999.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------
1999 1998 1997 1996 1995 1994
---------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
CRUDE OIL (BARRELS PER DAY)
United States......................... 50,615 36,784 35,707 41,020 52,284 55,638
United Kingdom........................ 106,248 109,463 126,427 134,726 135,429 122,043
Norway................................ 25,406 26,943 29,516 27,603 25,576 24,279
Gabon................................. 10,891 14,345 10,127 9,725 9,512 8,857
Indonesia and Azerbaijan.............. 4,247 2,949 531 -- -- --
Canada and Abu Dhabi.................. -- -- -- 5,929 16,976 17,854
-------- ------- ------- ------- ------- -------
Total.............................. 197,407 190,484 202,308 219,003 239,777 228,671
======== ======= ======= ======= ======= =======
NATURAL GAS LIQUIDS (BARRELS PER DAY)
United States......................... 7,194 8,136 8,243 9,105 10,722 11,964
United Kingdom........................ 6,728 5,990 6,364 6,628 6,900 6,756
Norway................................ 1,321 1,379 1,657 1,585 1,414 1,320
Canada................................ -- -- -- 476 1,647 1,809
-------- ------- ------- ------- ------- -------
Total.............................. 15,243 15,505 16,264 17,794 20,683 21,849
======== ======= ======= ======= ======= =======
NATURAL GAS (MCF PER DAY)
United States......................... 333,840 293,849 311,915 337,653 401,581 427,103
United Kingdom........................ 253,200 251,000 225,804 253,983 239,307 208,742
Norway................................ 30,600 27,828 30,312 30,445 27,743 24,417
Indonesia............................. 3,400 3,800 1,223 -- -- --
Canada................................ -- -- -- 62,585 215,500 185,856
-------- ------- ------- ------- ------- -------
Total.............................. 621,040 576,477 569,254 684,666 884,131 846,118
======== ======= ======= ======= ======= =======
TOTAL BARRELS OF OIL EQUIVALENT (PER
DAY).................................. 316,157 302,069 313,448 350,908 407,815 391,540
======== ======= ======= ======= ======= =======
</TABLE>
UNITED STATES
Amerada Hess Corporation operates mainly offshore in the Gulf of Mexico and
onshore in Texas, Louisiana and North Dakota. During 1998, 22% of our crude oil
and natural gas liquids production and 51% of our natural gas production were
from United States operations.
S-19
<PAGE> 20
The table below shows our average daily net production by area in the United
States:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
SIX MONTHS ENDED ------------------
JUNE 30, 1999 1998 1997
---------------- ------- -------
<S> <C> <C> <C>
CRUDE OIL, INCLUDING CONDENSATE AND NATURAL GAS LIQUIDS
(BARRELS PER DAY)
Gulf of Mexico........................................ 26,131 11,041 10,295
Texas................................................. 14,090 15,803 16,136
North Dakota.......................................... 12,690 12,958 12,077
Louisiana............................................. 1,851 1,588 1,700
Other................................................. 3,047 3,530 3,742
-------- ------- -------
Total.............................................. 57,809 44,920 43,950
======== ======= =======
NATURAL GAS (MCF PER DAY)
Gulf of Mexico........................................ 184,247 116,392 104,803
North Dakota.......................................... 57,440 58,476 59,576
Louisiana............................................. 54,033 56,627 43,668
Texas................................................. 21,660 26,023 52,402
New Mexico............................................ 10,635 12,442 17,467
California*........................................... 2,995 18,320 17,779
Mississippi........................................... 2,830 5,569 14,972
Other................................................. -- -- 1,248
-------- ------- -------
Total.............................................. 333,840 293,849 311,915
======== ======= =======
TOTAL BARRELS OF OIL EQUIVALENT (PER DAY)............... 113,449 93,895 95,936
======== ======= =======
</TABLE>
- ---------------
* Properties sold in January 1999.
Offshore
In 1998 production from all of Amerada Hess Corporation's properties in various
blocks in the Gulf of Mexico averaged 116,392 net Mcf of natural gas per day and
11,041 net barrels of crude oil and natural gas liquids per day. In the first
half of 1999, production from the Gulf of Mexico averaged 184,247 net Mcf of
natural gas and 26,131 net barrels of crude oil and natural gas liquids per day.
We have an interest in 144 exploration blocks in the Gulf of Mexico of which we
operate 96. We have 431,000 net undeveloped acres in the Gulf of Mexico.
We own and operate a 50% interest in the Baldpate Field located on Garden Banks
Blocks 259/260 and the Penn State Field located on Garden Banks Block 216. In
the third quarter of 1998, we brought the Baldpate Field on stream using a
technologically innovative compliant tower. In May 1999, we commenced production
from the Penn State discovery on Garden Banks Block 216 through a sub-sea system
tied to the Baldpate production facilities. Currently, combined production from
the Baldpate and Penn State Fields exceeds gross levels of 50,000 barrels of oil
per day and 220,000 Mcf of natural gas per day.
In 1997, we discovered the Conger Field in which we have a 37.50% interest on
Garden Banks Block 215 northwest of the Baldpate Field. We plan to develop the
Conger Field with a sub-sea system tied back to the B platform on the nearby
Enchilada Field. Further drilling occurred this year as part of the Conger
development plan. The design and procurement of high-pressure sub-sea system
components and materials are in progress. We expect the Conger Field to commence
production late in 2000.
In the Enchilada Field, production from the A Platform began in 1997. The A
Platform produces from Garden Banks Blocks 83, 84, 127 and 128, in each of which
we own a 25% interest. In the third quarter of
S-20
<PAGE> 21
1998, production began from the B platform on Garden Banks Block 172 in which we
own a 60% interest. Our net portion of the production from the Enchilada Field
peaked at 67,000 Mcf of natural gas per day and 3,300 barrels of oil per day in
early 1999.
In 1998, we drilled a discovery well in 1,750 feet of water on our Northwestern
prospect on Garden Banks Block 200 in which we own a 50% interest. The well
encountered 163 feet of net pay. A second exploration play drilled on this block
in the first quarter of 1999 was unsuccessful. Contingent upon the completion of
an appraisal well in October 1999, we will be evaluating development options for
the prospect.
Four successful development wells have been completed in 1999 in the South Pass
87 Field in the Gulf of Mexico. Amerada Hess Corporation has a 33.33% interest
in one well and a 50% interest in each of the other wells. These wells are
currently producing in aggregate at gross rates of 40,000 Mcf of natural gas and
5,500 barrels of crude oil per day.
During 1998, we acquired 37 blocks in the Gulf of Mexico at a net cost of $36
million. Thirty-five of the blocks are in water depths greater than 600 feet. At
the Central Gulf of Mexico lease sale in March 1999, we were the high bidder on
nine blocks with a total net bid of $6.8 million. Eight of these blocks are in
water depths greater than 600 feet. The federal government has awarded us all
nine of these leases. At the Western Gulf of Mexico lease sale in August 1999,
we were the high bidder on 6 blocks with a total net bid of $795,000. All six of
these blocks are in water depths greater than 600 feet. The federal government
is in the process of awarding these leases. None of these leases have been
awarded to date.
Onshore
Onshore activities were reduced in 1998 and focused on maximizing value in North
Dakota, Texas and Louisiana. Three successful development wells were drilled in
the Egypt Field, in Wharton County, Texas in which we have a 75% interest,
bringing peak daily gross production in 1998 up to 30,000 Mcf of natural gas per
day and 800 barrels of crude oil per day.
In the Maurice Field in South Louisiana, in which we have a 58% interest, we
drilled two wells in 1998 bringing peak gross daily production in 1998 up to
20,000 Mcf of natural gas per day and 400 barrels of crude oil per day.
UNITED KINGDOM
Our activities in the United Kingdom are conducted by our wholly-owned
subsidiary, Amerada Hess Limited. During 1998, 56% of our crude oil and natural
gas liquids production and 44% of our natural gas production were from United
Kingdom operations.
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<PAGE> 22
The table below shows Amerada Hess Limited's average daily net production in the
United Kingdom by field and its interest in each at June 30, 1999:
<TABLE>
<CAPTION>
YEARS ENDED
SIX MONTHS DECEMBER 31,
ENDED ------------------
PRODUCING FIELD INTEREST JUNE 30, 1999 1998 1997
- --------------- -------- ------------- ------- -------
CRUDE OIL, INCLUDING CONDENSATE AND NATURAL
GAS LIQUIDS (BARRELS PER DAY)
<S> <C> <C> <C> <C>
Scott.................................. 34.95% 31,565 33,291 41,040
Beryl/Ness/Nevis....................... 22.22/22.22/37.35 23,403 23,472 22,901
Fife/Fergus/Flora...................... 85.00/65.00/85.00 11,468 20,761 25,981
Schiehallion........................... 15.67 11,604 3,149 --
Arbroath/Montrose/Arkwright............ 28.21 9,615 8,945 9,617
Telford................................ 31.42 7,347 10,603 10,548
Hudson................................. 28.00 6,771 2,262 8,456
Ivanhoe/Rob Roy/Hamish................. 42.08 4,233 5,041 8,622
Other.................................. Various 6,970 7,929 5,626
------- ------- -------
Total............................... 112,976 115,453 132,791
======= ======= =======
NATURAL GAS (MCF PER DAY)
Beryl/Ness/Nevis....................... 22.22/22.22/37.35% 69,200 51,700 40,943
Everest/Lomond......................... 18.67/16.67 60,500 60,500 50,732
Davy/Bessemer.......................... 27.78/23.08 40,100 29,000 41,292
Indefatigable.......................... 23.08 37,200 36,600 27,360
Scott.................................. 34.95 18,700 17,200 18,811
Leman.................................. 21.74 15,700 31,600 21,454
Telford................................ 31.42 6,500 13,900 10,768
Other.................................. Various 5,300 10,500 14,444
------- ------- -------
Total............................... 253,200 251,000 225,804
======= ======= =======
TOTAL BARRELS OF OIL EQUIVALENT (PER
DAY)................................... 155,176 157,286 170,425
======= ======= =======
</TABLE>
Production began from three new developments in the United Kingdom North Sea in
1998 and we expect development of five new fields to be completed in 1999. The
Schiehallion Field came on stream in the third quarter of 1998. Amerada Hess
Limited expects its share of production to reach approximately 13,000 barrels of
oil per day in 1999. In the fourth quarter of 1998, production began from the
Amerada Hess Limited operated Flora Field. The Flora Field was developed by
sub-sea tieback to the Fife Field. Amerada Hess Limited expects its share of
production from the Flora Field to peak briefly at over 15,000 barrels of oil
per day in the latter part of 1999. The floating production storage and
offloading vessel serving the Fife, Fergus and Flora Fields was damaged in April
1999 and has since been repaired. The vessel resumed production in August 1999.
The Bittern Field, located on Blocks 29/1a and 29/1b, will come on stream around
the end of 1999. Amerada Hess Limited manages the joint team that is developing
and will operate the Bittern Field facilities. Amerada Hess Limited has a 29.12%
interest in the Bittern Field. It expects its share of production to reach over
15,000 barrels per day within six months of the commencement of production.
The Renee and Rubie Fields were brought on stream in the first half of 1999. The
fields produce through the Amerada Hess Limited operated Ivanhoe/Rob Roy
facilities on Block 15/21. Amerada Hess Limited expects its share of production
from the Renee and Rubie Fields to peak at 4,000 barrels of oil per day during
1999. The Buckland Field in which Amerada Hess Limited has a 14.07% interest
commenced production in August 1999. Peak production for Amerada Hess Limited's
share will be 4,000 barrels of oil per day and 5,000 Mcf of natural gas per day
in 2000. Phase two of the development of the Nevis Field was completed in 1998.
Phase three will come on stream through the Beryl production facilities in the
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<PAGE> 23
third quarter of 1999. Amerada Hess Limited expects its share of production from
Nevis to peak at 12,000 barrels of oil per day and 13,000 Mcf of natural gas per
day in 2000.
Amerada Hess Limited has a 27.68% interest in a number of natural gas fields in
the Easington Catchment Area in the southern North Sea. It expects production
from these fields to begin in late 1999. Amerada Hess Limited expects to receive
peak production of 60,000 Mcf of natural gas per day from these fields.
Development of the discovery known as Goldeneye on Blocks 20/4b, in which
Amerada Hess Limited has a 40% interest, and 14/29a is pending. Late in 1998, we
concluded that the Mariner Field in which Amerada Hess Limited has a 26.67%
interest was uneconomic to develop given then current oil prices. The Mariner
Field contains a large but complex heavy oil reservoir. We wrote off our
capitalized costs in this Field in the fourth quarter of 1998.
The Cook Field in which Amerada Hess Limited has a 28.46% interest on Block
21/20a is being developed by tieback to the Anasuria floating production,
storage and offloading vessel. Peak production for Amerada Hess Limited is
expected to reach 4,000 barrels of oil per day in 2001. We are developing the
Bell Field in which Amerada Hess Limited has a 23.08% interest by tieback to the
Bessemer Field. We expect production from the Bell Field to peak at 15,000 Mcf
of natural gas per day for Amerada Hess Limited in 2000.
NORWAY
Our activities in Norway are conducted through our wholly-owned Norwegian
subsidiary, Amerada Hess Norge A/S. Our Norwegian operations accounted for crude
oil and natural gas liquids production of 28,322 net barrels per day in 1998 and
31,173 net barrels per day in 1997. About 83% of the 1998 Norwegian production
is from our 28.09% interest in the Valhall Field. An enhanced-recovery
waterflood project for the Valhall Field is being evaluated.
DENMARK
Amerada Hess A/S, our Danish subsidiary, has successfully installed the platform
on the South Arne Field which it operates with a 57.48% interest. The South Arne
Field was brought on stream in July 1999 and is expected to provide net
production peaking at 30,000 barrels of oil per day and 40,000 Mcf of natural
gas per day in 2000. Successful development drilling resulted in a significant
positive reserve revision for the South Arne Field in 1998.
GABON
We acquired the minority interest in Amerada Hess Production Gabon, our Gabonese
subsidiary, in 1998. This subsidiary has a 10% interest in the Rabi Kounga
Field, the largest producing field in Gabon.
Amerada Hess Production Gabon has a 40% interest in the developing onshore Atora
Field. Production is expected to begin in 2000 and to reach a net level of 7,000
barrels of oil per day for Amerada Hess Production Gabon late in 2000.
Amerada Hess Production Gabon's share of production from Gabon averaged 14,345
net barrels of crude oil per day in 1998 and 10,127 net barrels per day in 1997.
In early 1999, we sold approximately 16% of our investment in Amerada Hess
Production Gabon. This will reduce 1999 average production by approximately
2,000 barrels of crude oil per day.
AZERBAIJAN
We acquired a 1.68% interest in the AIOC Consortium in the Caspian Sea in 1998.
Net production from our interest is currently averaging about 1,500 barrels of
oil per day and is expected to peak at 12,000 barrels of oil per day in 2007.
S-23
<PAGE> 24
In January 1999, Amerada Hess Corporation and a partner were awarded a 20%
interest in the Kursanga and Karabagly Fields onshore in Azerbaijan. The
contract was ratified by the Azerbaijan Parliament in April 1999 and a plan to
redevelop the fields has been submitted for approval. Initial net production
from our interest is expected to be around 1,000 barrels per day of crude oil.
THAILAND
We have a 15% interest in the Pailin gas field offshore Thailand. The field came
on stream in August 1999. Net production from our interest is expected to
average 25,000 Mcf of natural gas per day in 2000 rising to a peak of 50,000 Mcf
per day in 2002.
INDONESIA
We have a 30% interest in the Jabung Production Sharing Contract which contains
the North Geragai Field and the Makmur Field. Net production from these fields
is averaging a total of 3,000 barrels of oil per day.
Other activities under the Jabung Production Sharing Contract include crude oil
and natural gas discoveries on the North Betara and Gemah prospects in 1998.
After these discoveries and successful appraisal drilling on Northeast Betara,
natural gas equivalent reserves of about 300 Bcf net to Amerada Hess Corporation
have been found. Discussions are in progress to sell this natural gas
production. Development plans are being finalized for the Betara complex and
further drilling is planned for the Gemah prospect.
We operate and have a 50% interest in the Lematang Production Sharing Contract
in Southern Sumatra, on which a discovery well in 1997 tested at 30,000 Mcf of
natural gas per day. A second well has recently been drilled and completed.
Development plans are in progress for gross production of up to 50,000 Mcf of
natural gas per day.
An exploration well drilled under the Pangkah Production Sharing Contract in
which we have a 36% interest tested at 20,000 Mcf of natural gas per day and 987
barrels of oil per day. The discovery is in shallow water on the East Coast of
Java. Development options are being studied.
We have acquired a 25% interest in the Jambi Merang contract onshore South
Sumatra. This block contains part of the Gelam Field, which currently produces
85,000 gross Mcf of natural gas per day. A successful gas appraisal well was
drilled on the Pulau Gading discovery which flowed a total of 19,000 Mcf of
natural gas per day and up to 1,000 barrels of condensate per day.
MALAYSIA
In 1998, we obtained a 70% interest in Block PM304 offshore Malaysia and an 80%
interest in Block SK306 offshore Sarawak in Malaysia. Both blocks contain
undeveloped discoveries, and substantial 2D and 3D seismic programs have been
acquired and processed ahead of drilling on these blocks in 2000.
BRAZIL
We acquired 32% net equity interests in and operatorship of Blocks BC-8 in the
Southern Campos Basin and BS-2 in the Northern Santos Basin offshore Brazil
early in 1999. These blocks aggregate 7,500 square kilometers. This marks the
first time that a non-Brazilian company has been granted exploration acreage in
the Campos Basin. A 3D seismic survey is currently being acquired over 4,000
square kilometers on these blocks and we expect to commence an exploration
drilling program in the middle of 2000.
In the First License Round auction held in June 1999, we and our partners were
successful in our bid for Block BM S-3 in the Santos Basin. This block covers
6,591 square kilometers and was awarded with a nine year exploration license. We
will operate this block with a net equity interest of 45%.
S-24
<PAGE> 25
REFINING AND MARKETING
Refining
We have a 50% interest in a refining joint venture in the United States Virgin
Islands and own and operate a refining facility in Port Reading, New Jersey.
Refining Joint Venture
On October 30, 1998, we and Petroleos de Venezuela, S.A. formed a 50% joint
venture, HOVENSA L.L.C, to own and operate a refinery in the United States
Virgin Islands. The refinery was previously owned by our subsidiary. In this
transaction, PDVSA, V.I., Inc., a wholly-owned subsidiary of Petroleos de
Venezuela, purchased a 50% interest in the refinery's fixed assets for $625
million consisting of $62.5 million in cash, a ten-year note for $562.5 million
bearing interest at 8.46% per year and a contingent note for $125 million,
payment of which depends on cash flows from the refinery, bearing interest at
the same rate. HOVENSA also purchased from our subsidiary net current assets
including inventory for approximately $307 million. PDVSA, V.I. and our
subsidiary each contributed its 50% interests in the refinery fixed assets to
HOVENSA, which is jointly owned by both companies. The joint venture will result
in transportation and storage synergies with Petroleos de Venezuela.
In 1998, total refinery crude runs averaged 433,000 barrels per day for the two
months after inception of the joint venture and 419,000 barrels per day for the
ten months before. Refinery crude runs were 411,000 barrels per day in 1997.
Petroleos de Venezuela supplies 155,000 barrels per day of Venezuelan Mesa crude
oil to HOVENSA under a long-term crude oil supply contract. The remaining crude
oil is supplied mainly under contracts of one year or less with third parties
and through spot purchases on the open market. After sales of refined products
by HOVENSA to third parties, we and affiliates of Petroleos de Venezuela each
purchase 50% of HOVENSA's remaining production of gasolines, distillates,
intermediates and other refined products.
In 1999, HOVENSA will begin building a 58,000 barrel per day coker to be
completed in 2001. HOVENSA has a long-term supply contract with Petroleos de
Venezuela to purchase 115,000 barrels per day of Venezuelan heavy Merey crude
oil beginning when the coker is completed.
Port Reading Facility
Through a wholly-owned subsidiary, we own and operate a fluid catalytic cracking
facility in Port Reading, New Jersey, completed in 1985. This facility processes
vacuum gas oil and residual fuel oil and currently operates at a rate of
approximately 60,000 barrels per day and produces substantially all gasoline and
heating oil.
Marketing
We market refined petroleum products mainly on the East Coast of the United
States to the motoring public, wholesale distributors, industrial and commercial
users, other petroleum companies, commercial airlines, governmental agencies and
public utilities. We also market natural gas to utilities and other industrial
and commercial customers and are currently expanding our energy marketing
activities to include electricity.
At June 30, 1999, we had 711 HESS(R) gasoline stations of which approximately
75% were operated by us. Most of our stations are concentrated in densely
populated areas, principally in New York, New Jersey and Florida. Of our
stations, 413 have convenience stores. We own approximately 70% of the
properties on which our stations are located.
During 1998, we opened 18 new HESS EXPRESS stores in key markets and began
building nine others. The largest of our new stations contain 5,000 square foot
HESS EXPRESS convenience stores and offer up to four fast food outlets.
S-25
<PAGE> 26
As part of the reshaping of our asset base for improved financial returns, we
reached agreement to sell our Gulf Coast terminals, Southeast pipeline terminals
and 40 retail sites located in Georgia and sections of South Carolina for an
aggregate price of $308 million. These assets were no longer strategic after the
formation of the HOVENSA joint venture. The sales of the Southeast pipeline
terminals and South Carolina retail sites were completed on June 30, 1999 and
the sales of our Gulf Coast terminals and the remaining retail sites were
completed at the end of July 1999. Following the terminal sales, we have 27
terminals with an aggregate storage capacity of 25 million barrels concentrated
in our East Coast marketing areas.
Refined product sales averaged 482,000 barrels per day in 1998 and 509,000
barrels per day in 1997. Average daily petroleum product sales for the year
ended December 31, 1998 and the six months ended June 30, 1999 and 1998 were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------ YEAR ENDED
1999 1998 DECEMBER 31, 1998
------- ------- -----------------
<S> <C> <C> <C>
PETROLEUM PRODUCT SALES (BARRELS PER DAY)
Gasoline, distillates and other light
products................................... 291,000 438,000 411,000
Residual fuel oils............................ 65,000 77,000 71,000
------- ------- -------
Total petroleum product sales.............. 356,000 515,000 482,000
======= ======= =======
</TABLE>
DESCRIPTION OF THE NOTES
The following description of the terms of the Notes supplements the description
in the accompanying Prospectus of the general terms of the debt securities.
GENERAL
The Notes due 20 and the Notes due 20 will each be issued as a separate series
of debt securities under an indenture dated as of , 1999, as
supplemented, between Amerada Hess Corporation and The Chase Manhattan Bank, as
trustee. The Notes due 20 are limited to $ in aggregate principal
amount and the Notes due 20 are limited to $ in aggregate principal
amount. The Notes due 20 will mature on , 20 and the Notes due
20 will mature on , 20 . In addition to the Notes, we may issue
from time to time other series of debt securities under the indenture consisting
of notes, debentures or other evidences of indebtedness. Such other series will
be separate from and independent of the Notes. The following description of the
terms of the Notes supplements and modifies the description of the general terms
of the debt securities set forth in the accompanying prospectus, which we
request that you read.
The Notes will constitute a series of debt securities to be issued under the
indenture. The Notes and any future debt securities issued under the indenture
will be unsecured obligations of Amerada Hess Corporation and will rank on a
parity with all other unsecured and unsubordinated indebtedness of Amerada Hess
Corporation. The indenture does not limit the aggregate principal amount of debt
securities that may be issued under it and provides that debt securities may be
issued under it from time to time in one or more additional series. The
indenture does not limit Amerada Hess Corporation's ability to incur additional
indebtedness.
The Notes will not be subject to any sinking fund.
OPTIONAL REDEMPTION
The Notes will be redeemable, in whole or in part, at our option at any time at
a redemption price equal to accrued interest to the date of redemption plus the
greater of the principal amount of such Notes and the sum of the present values
of the remaining scheduled payments of principal and interest other than
interest accrued as of the date of redemption. The present values will be
determined by the quotation
S-26
<PAGE> 27
agent by discounting to the date of redemption on a semi-annual basis (assuming
a 360-day year consisting of twelve 30-day months) at the adjusted treasury rate
plus 25 basis points.
"Adjusted treasury rate" means, with respect to any date of redemption, the rate
per annum equal to the semi-annual equivalent yield to maturity of the
comparable treasury issue, assuming a price for the comparable treasury issue
(expressed as a percentage of its principal amount) equal to the comparable
treasury price for such date of redemption.
"Comparable treasury issue" means the United States Treasury security selected
by the quotation agent as having a maturity comparable to the remaining term of
the Notes to be redeemed that would be used, at the time of selection and under
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of the Notes.
"Comparable treasury price" means, with respect to any date of redemption, the
average of the reference treasury dealer quotations for the date of redemption,
after excluding the highest and lowest reference treasury dealer quotations, or
if the trustee obtains fewer than three reference treasury dealer quotations,
the average of all reference treasury dealer quotations.
"Quotation agent" means the reference treasury dealer appointed by Amerada Hess
Corporation.
"Reference treasury dealers" means each of J.P. Morgan Securities Inc. and its
respective successors and any other primary treasury dealer we select. If any of
the foregoing ceases to be a primary U.S. Government securities dealer in New
York City, we must substitute another primary treasury dealer.
"Reference treasury dealer quotations" means, with respect to each reference
treasury dealer and any date of redemption, the average, as determined by the
trustee, of the bid and asked prices for the comparable treasury issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the trustee by the reference treasury dealer at 5:00 p.m., New York
City time, on the third business day before the date of redemption.
Notice of any redemption will be mailed at least 30 days but not more than 60
days before the date of redemption to each holder of the Notes to be redeemed.
Unless we default in payment of the redemption price, on and after the date of
redemption interest will cease to accrue on the Notes or portions of Notes
called for redemption.
SAME-DAY SETTLEMENT AND PAYMENT
The Notes will trade in the same-day funds settlement system of The Depository
Trust Company ("DTC") until maturity or until we issue the Notes in definitive
form. DTC will therefore require secondary market trading activity in the Notes
to settle in immediately available funds. We can give no assurance as to the
effect, if any, of settlement in immediately available funds on trading activity
in the Notes.
BOOK-ENTRY SYSTEM; DELIVERY AND FORM
General
The Notes will be issued in the form of one or more fully registered global
securities. The global securities will be deposited with the trustee as
custodian for DTC and registered in the name of Cede & Co. as DTC's nominee. For
purposes of this prospectus supplement, "global security" refers to the Global
security or Global Securities representing the entire issue of Notes. Except in
the limited circumstances described below, the Notes will not be issued in
definitive certificated form. The global security may be transferred, in whole
and not in part, only to another nominee of DTC.
We understand as follows with respect to the rules and operating procedures of
DTC, and with respect to secondary market trading, of Morgan Guaranty Trust
Company of New York, Brussels office, as operator
S-27
<PAGE> 28
for the Euroclear System, and Cedel Bank, societe anonyme, incorporated under
the laws of the Grand Duchy of Luxembourg, which affect transfers of interests
in the global security:
DTC
DTC is a limited purpose trust company organized under the New York Banking Law,
a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participants and to facilitate the
clearance and settlement of securities transactions, such as transfers and
pledges, between participants through electronic computerized book-entry changes
in the accounts of its participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers,
banks, trust companies and clearing corporations and may include certain other
organizations, such as the Underwriters. DTC is owned by a number of
participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Indirect
access to the DTC system also is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Persons who are not participants may beneficially own Notes held by DTC only
through participants or indirect participants (including Euroclear and Cedel).
Beneficial ownership of Notes may be reflected:
- for investors who are participants, in the records of DTC,
- for investors holding through a participant, in the records of the
participant whose aggregate interests on behalf of all investors
holding through such participant will be reflected in turn in the
records of DTC, or
- for investors holding through an indirect participant, in the records
of the indirect participant, whose aggregate interests on behalf of
all investors holding through it will be reflected in turn in the
records of a participant.
Accordingly, transfers of beneficial ownership in a global security can be
effected only through DTC, a participant or an indirect participant. Each of the
underwriters is a participant or an indirect participant. Investors may also
hold beneficial interests in a global security directly through Euroclear or
Cedel as indirect participants in DTC, if they are participants in such systems,
or indirectly through organizations that are participants in such systems.
Euroclear and Cedel hold beneficial interests in a global security on behalf of
their participants through customers' securities accounts in their names on the
books of their depositories, which in turn hold such securities in customers'
securities accounts in the depositories' names on the books of DTC.
Interests in the global security will be shown on, and transfers thereof will be
effected only through, records maintained by DTC and its participants. The
global security will trade in DTC's Same-Day Funds Settlement System until
maturity, and secondary market trading activity for the global security will
therefore settle in immediately available funds. The laws of some states require
that certain persons take physical delivery in definitive form of securities.
Consequently, the ability to transfer beneficial interests in the global
security to such persons may be limited.
So long as Cede, as the nominee of DTC, is the registered owner of the global
security, Cede for all purposes will be considered the sole holder of the Notes
under the indenture. Except as provided below, owners of beneficial interests in
the global security will not be entitled to have Notes registered in their
names, will not receive or be entitled to receive physical delivery of Notes in
definitive form, and will not be considered the holders thereof under the
Indenture. Thus, any person owning a beneficial interest in the global security
must rely on the procedures of DTC and, if such person is not a participant in
DTC, on the procedures of the participant through which such person directly or
indirectly owns its interest, to exercise any rights of a holder of Notes.
S-28
<PAGE> 29
Because DTC can act only on behalf of participants, who in turn act on behalf of
indirect participants and certain banks, the ability of an owner of a beneficial
interest in Notes to pledge the Notes to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Notes, may be affected by the lack of a physical certificate for such Notes.
Payment of principal of and interest on the Notes will be made to Cede, the
nominee for DTC, as the registered owner of the global security. Neither we nor
the trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the global security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
On receipt of any payment of principal of or interest on the global security, we
understand that it is the practice of DTC to credit the participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of the global security as shown on the records of DTC.
Payments by a participant to owners of beneficial interests in the global
security held through it will be the responsibility of the participants, as is
the case with securities held for the accounts of customers registered in
"street name." Distributions with respect to beneficial interests in the Global
security held through Euroclear or Cedel will be credited to the cash accounts
of Euroclear participants or Cedel participants in accordance with the relevant
system's rules and procedures, to the extent received by its depository.
DTC will take any action permitted to be taken by a holder of Notes only at the
direction of one or more participants to whose account with DTC the Notes are
credited and only in respect of that portion of the aggregate principal amount
of the Notes as to which the participants have given the direction. The trustee
will act upon instructions received from DTC in respect of the aggregate
percentages of interests in the Notes necessary for the trustee to take action
under the indenture.
Although DTC has agreed to these procedures to facilitate transfers of Notes
among its participants, it is under no duty to perform or continue to perform
these procedures and they may be discontinued at any time. Neither we nor the
trustee will have any responsibility for the performance by DTC or its
participants or indirect participants of their duties under the rules and
procedures governing their operations.
If an event of default has occurred and is continuing and all principal and
accrued interest in respect of the Notes has become immediately due and payable
or if DTC is at any time unwilling, unable or ineligible to continue as
depositary for any global security and we do not appoint a successor depository
within 60 days, we will issue individual certificated Notes in definitive form
in exchange for the global security. In addition, we may at any time determine
not to have the Notes represented by global securities, and, in such event, will
issue individual certificated Notes in definitive form in exchange for such
global securities. In any such instance, an owner of a beneficial interest in a
global security will be entitled to physical delivery of individual certificated
Notes in definitive form equal in principal amount to its beneficial interest in
such global securities and to have all such certificated Notes registered in its
name. Individual certificated Notes so issued in definitive form will be issued
in denominations of $1,000 and integral multiples thereof and will be issued in
registered form only, without coupons.
Global Clearance and Settlement
Although DTC, Euroclear and Cedel have agreed to the procedures provided below
in order to facilitate transfers of Notes among participants of DTC, Euroclear
and Cedel, they are under no duty to perform or continue to perform these
procedures, and they may be modified or discontinued at any time. Neither we nor
the trustee will have any responsibility for the performance by DTC, Euroclear
or Cedel or their participants or indirect participants of their duties under
the rules and procedures governing their operations.
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<PAGE> 30
Euroclear and Cedel
Euroclear and Cedel each hold securities for participating organizations and
facilitate the clearance and settlement of securities transactions between their
participants by electronic book-entry changes in the accounts of the
participants. Euroclear and Cedel provide to their participants, among other
things, services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Euroclear and Cedel also deal with domestic securities markets in several
countries through established depositary and custodial relationships. Euroclear
and Cedel participants are financial institutions such as underwriters,
securities brokers and dealers, banks, trust companies and other organizations
and include some of the underwriters. Indirect access to Euroclear and Cedel is
also available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Euroclear or
Cedel participant, either directly or indirectly.
Euroclear is operated by Morgan Guaranty Trust Company of New York, Brussels,
Belgium office under contract with Euroclear Clearance System S.C., a Belgian
cooperative corporation. All operations are conducted by the Euroclear operator,
and all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear operator, not the cooperative. The cooperative
establishes policy for Euroclear on behalf of Euroclear participants.
The Euroclear operator is the Belgian branch of a New York banking corporation
which is a member bank of the Federal Reserve System. It is regulated and
examined by the Board of Governors of the Federal Reserve System and the New
York State Banking Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear operator are
governed by the Terms and Conditions Governing Use of Euroclear, the related
Operating Procedures of Euroclear and applicable Belgian law. The Terms and
Conditions govern transfers of securities and cash within Euroclear, withdrawal
of securities and cash from Euroclear, and receipts of payments with respect to
securities in Euroclear. All securities in Euroclear are held on a fungible
basis without attribution of specific certificates to specific clearance
accounts. The Euroclear Operator acts under the Terms and Conditions only on
behalf of Euroclear participants, and has no record of or relationship with
persons holding through Euroclear participants.
Cedel was incorporated in 1970 as a limited company under Luxembourg law. Cedel
is owned by banks, securities dealers and financial institutions, and currently
has about 100 shareholders, including U.S. financial institutions or their
subsidiaries. No single entity may own more than five percent of Cedel's stock.
Cedel is registered as a bank in Luxembourg, and is subject to regulation by the
Institut Monetaire Luxembourgeois, which supervises Luxembourg banks. Cedel
currently accepts over 70,000 securities issues on its books.
Initial Settlements
Investors electing to hold their Notes through DTC (other than through accounts
at Euroclear or Cedel) will follow the settlement practices applicable to U.S.
corporate debt obligations. The securities custody accounts of investors will be
credited with their holding against payment in same-day funds on the settlement
date.
Investors electing to hold their Notes through their depositaries for Euroclear
accounts or Cedel accounts (as indirect participants in DTC), respectively, will
follow the settlement procedures applicable to conventional Eurobonds in
registered form. Notes will be credited to the securities custody accounts of
Euroclear holders on the business day following the settlement date against
payment of value on the settlement date and of Cedel holders on the settlement
date against payment in same-day funds.
S-30
<PAGE> 31
Secondary Market Trading
Because the purchaser determines the place of delivery, it is important to
establish at the time of trading any Notes the location of both the purchaser's
and seller's accounts to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants
Secondary market trading between DTC participants (other than depositories for
Euroclear and Cedel, respectively) will be settled using the procedures
applicable to U.S. corporate debt obligations in same-day funds.
Trading between Euroclear and/or Cedel Participants
Secondary market trading between Euroclear participants and/or Cedel
participants will be settled using the procedures applicable to conventional
Eurobonds in same-day funds.
Trading between DTC Seller and Euroclear or Cedel Purchaser
When Notes are to be transferred from the account of a DTC participant to the
account of a Euroclear participant or a Cedel participant, the purchaser must
send instructions to Euroclear or Cedel through a participant at least one
business day prior to settlement. Euroclear or Cedel, as the case may be, will
instruct their depositary to receive the Notes against payment. Payment will
include interest accrued on the Notes from and including the last payment date
to and excluding the settlement date, on the basis of a calendar year consisting
of twelve 30-day calendar months. For transactions settling on the 31st day of
the month, payment will include interest accrued to and excluding the first day
of the following month. Payment will then be made by the relevant depositary of
Euroclear or Cedel to the DTC participant's account against delivery of the
Notes. After settlement has been completed, the Notes will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures, to the Euroclear participant's or Cedel participant's account.
Credit for the Notes will appear on the next day (European time) and cash debit
will be back-valued to, and the interest on the Notes will accrue from, the
value date (which would be the preceding day when settlement occurs in New
York). If settlement is not completed on the intended value date (i.e., the
trade fails), the Euroclear or Cedel cash debit will be valued instead as of the
actual settlement date.
Euroclear participants and Cedel participants will need to make available to the
respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Euroclear or Cedel. Under this approach,
they may take on credit exposure to Euroclear or Cedel until the Notes are
credited to their accounts one day later.
As an alternative, if Euroclear or Cedel has extended a line of credit to them,
participants can elect not to pre-position funds and allow that credit line to
be drawn upon to finance settlement. Under this procedure, Euroclear
participants or Cedel participants purchasing Notes would incur overdraft
charges for one day, assuming they cleared the overdraft when the Notes were
credited to their accounts. However, interest on the Notes would accrue from the
value date. Therefore, in many cases, the investment income on Notes earned
during that one-day period may reduce or offset the amount of such overdraft
charges, although this result will depend on each participant's particular cost
of funds.
Because settlement takes place during New York business hours, DTC participants
can employ their usual procedures for sending notes to the respective
depositaries of Euroclear or Cedel, as the case may be, for the benefit of
Euroclear participants or Cedel participants. The sale proceeds will be
available to the DTC seller on the settlement date. Thus, to the DTC
participant, a cross-market transaction will settle no differently than a trade
between two DTC participants.
S-31
<PAGE> 32
Trading between Euroclear or Cedel Seller and DTC Purchaser
Due to time zone differences in their favor, Euroclear participants and Cedel
participants may employ their customary procedures for transactions in which
Notes are to be transferred by the respective clearing system, through their
respective depositaries, to another DTC participant. The seller must send
instructions to Euroclear or Cedel through a participant at least one business
day prior to settlement. In these cases, Euroclear or Cedel will instruct their
respective depositaries to credit the Notes to the DTC participant's account
against payment. Payment will include interest accrued on the Notes from and
including the last payment date to and excluding the settlement date on the
basis of a calendar year consisting of twelve 30-day calendar months. For
transactions settling on the 31st day of the month, payment will include
interest accrued to and excluding the first day of the following month. The
payment will then be reflected in the account of the Euroclear participant or
Cedel participant the following day, and receipt of the cash proceeds in the
Euroclear or Cedel participant's account will be back-valued to the value date
(which would be the preceding day, when settlement occurs in New York). If the
Euroclear participant or Cedel participant has a line of credit with its
respective clearing system and elects to draw on such line of credit in
anticipation of receipt of the sale proceeds in its account, the back-valuation
will offset any overdraft charges incurred over that one-day period. If
settlement is not completed in the intended value date (i.e., the trade failed),
receipt of the cash proceeds in the Euroclear or Cedel participant's account
would instead be valued as of the actual settlement date.
Finally, day traders that use Euroclear or Cedel and that purchase Notes from
DTC participants for credit to Euroclear participants or Cedel participants
should note that these trades would automatically fail on the sale side unless
affirmative action were taken. At least three techniques should be readily
available to eliminate this potential problem:
(1) borrowing through Euroclear or Cedel for one day (until the
purchase side of the day trade is reflected in their Euroclear account or
Cedel account) in accordance with the clearing system's customary
procedures;
(2) borrowing the Notes in the United States from a DTC participant no
later than one day prior to settlement, which would give the Notes
sufficient time to be reflected in the borrower's Euroclear account or
Cedel account in order to settle the sale side of the trade; or
(3) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC participant is at
least one day prior to the value date for the sale to the Euroclear
participant or Cedel participant.
S-32
<PAGE> 33
UNDERWRITING
Under the terms set forth in an underwriting agreement dated , we
have agreed to sell to each of the underwriters named below, severally, and each
of the underwriters has severally agreed to purchase, the principal amount of
the Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
UNDERWRITER AMOUNT OF 20 NOTES AMOUNT OF 20 NOTES
- ----------- -------------------- --------------------
<S> <C> <C>
J.P. Morgan Securities Inc....................... $ $
Goldman, Sachs & Co..............................
Banc of America Securities LLC...................
Chase Securities Inc. ...........................
Salomon Smith Barney Inc. .......................
Barclays Capital Inc. ...........................
CIBC World Markets Corp. ........................
Scotia Capital Markets (USA) Inc.................
-------- --------
Total.................................. $ $
======== ========
</TABLE>
Under the terms and conditions of the under agreement, if the underwriters take
any of the Notes, then the underwriters are obligated to take and pay for all of
the Notes.
The Notes are a new issue of securities with no established trading market and
will not be listed on any national securities exchange. The underwriters have
advised us that they intend to make a market for the Notes, but they have no
duty to do so and may cease market making at any time without notice. No
assurance can be given as to the liquidity of any trading market for the Notes.
The underwriters initially propose to offer part of the Notes directly to the
public at the offering price described on the cover page and part to some
dealers at a price that represents a concession not in excess of % of the
principal amount of the 20 Notes and % of the principal amount of the 20
Notes. Any underwriter may allow, and any such dealer may reallow, a
concession not in excess of % of the principal amount of the 20 Notes and
% of the principal amount of the 20 Notes to other dealers. After the
initial offering of the Notes, the underwriters may from time to time vary the
offering price and other selling terms.
We have also agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, and to
contribute to payments which the underwriters may be required to make in respect
of these liabilities.
In connection with the offering of the Notes, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the underwriters may overallot in connection with the
offering of the Notes, creating a syndicate short position. In addition, the
underwriters may bid for and purchase Notes in the open market to cover
syndicate short positions or to stabilize the price of the Notes. Finally, the
underwriting syndicate may reclaim selling concessions allowed for distributing
the Notes, if the syndicate repurchases previously distributed Notes in
syndicate covering transactions, stabilization transactions or otherwise. These
activities may stabilize or maintain the market price of the Notes above
independent market levels. The underwriters are not required to engage in any of
these activities, and may end any of them at any time.
Expenses associated with this offering, to be paid by us, are estimated to be
$620,000.
In the ordinary course of their respective businesses, the underwriters and
their affiliates have engaged, and may in the future engage, in commercial
banking and/or investment banking transactions with us and our affiliates.
Because more than 10% of the net proceeds of the offering will be paid to the
underwriters or affiliates of the underwriters, the offering is being made in
accordance with Rule 2710(c)(8) of the Conduct Rules of the National Association
of Securities Dealers, Inc. The Chase Manhattan Bank, the trustee, is an
affiliate of Chase Securities Inc.
S-33
<PAGE> 34
LEGAL OPINIONS
Milbank, Tweed, Hadley & McCloy LLP, New York, New York, will issue an opinion
about the legality of the Notes for us. Davis Polk & Wardwell, New York, New
York, will issue such an opinion on behalf of the underwriters.
S-34
<PAGE> 35
PROSPECTUS
Amerada Hess Corporation
$1,500,000,000
Debt Securities
We will provide specific terms of these debt securities in supplements to this
prospectus. You should read this prospectus and any prospectus supplement
carefully before you invest.
We may list the debt securities on the New York Stock Exchange.
This prospectus may not be used to sell debt securities unless accompanied by a
prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 17, 1999.
<PAGE> 36
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the SEC
using a shelf registration process. Under this shelf process, we may sell any
combination of the debt securities described in this prospectus in one or more
offerings up to a total dollar amount of $1,500,000,000. This prospectus
describes generally the debt securities we may offer. Each time we sell debt
securities, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement may also
add, update or change information contained in this prospectus. You should read
both this prospectus and any prospectus supplement together with additional
information described under the heading "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's public reference rooms in Washington, D.C. and
New York, New York. Please call the SEC at (800) SEC-0330 for further
information on the public reference rooms.
The SEC allows us to incorporate by reference the information we file with them,
which means that we can disclose important information to you by referring you
to those documents. The information incorporated by reference is an important
part of this prospectus, and information that we file later with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings we make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
we sell all of the debt securities:
- Annual Report on Form 10-K for the year ended December 31, 1998;
- Quarterly Reports on Form 10-Q for the quarters ended June 30, 1999 and
March 31, 1999; and
- Proxy Statement dated March 29, 1999.
You may request a copy of these filings at no cost by writing or telephoning us
at our principal executive offices at the following address and phone number:
Amerada Hess Corporation
1185 Avenue of the Americas
New York, NY 10036
Attention: Corporate Secretary
(212) 997-8500
You should rely only on the information incorporated by reference or provided in
this prospectus or any prospectus supplement. We have not authorized anyone else
to provide you with different information. We are not making an offer of these
debt securities in any state where the offer is prohibited. You should not
assume that the information in this prospectus or any prospectus supplement is
accurate as of any date other than the date on the front of these documents.
We have filed exhibits with this registration statement that include the form of
proposed underwriting agreement and indenture. You should read the exhibits
carefully for provisions that may be important to you.
2
<PAGE> 37
AMERADA HESS CORPORATION
We are a Delaware corporation that, together with our subsidiaries, explores
for, produces, purchases, transports and sells crude oil and natural gas. We do
this mainly in the United States, United Kingdom, Norway, Denmark and Gabon, and
also in Azerbaijan, Brazil, Indonesia, Thailand and other parts of the world. We
also manufacture, purchase, transport and market refined petroleum products. We
own 50% of a refinery joint venture in the United States Virgin Islands, as well
as another refining facility, terminals and retail outlets located mainly on the
East Coast of the United States.
Our principal executive offices are located at 1185 Avenue of the Americas, New
York, NY 10036, and our telephone number is (212) 997-8500.
RECENT DEVELOPMENTS
During the second quarter of 1999, as part of our program to reshape our asset
base for improved returns, we reached agreement to sell our Gulf Coast
terminals, Southeast pipeline terminals and 40 retail sites located in Georgia
and South Carolina for an aggregate price of $308 million. We believe that these
assets were no longer strategic after the formation of our joint venture. The
sales of our Southeast pipeline terminals and the South Carolina retail sites
were completed on June 30, 1999 and the sales of our Gulf Coast terminals and
the remaining retail sites were completed at the end of July 1999. Following the
terminal sales, we will have 27 terminals remaining with an aggregate storage
capacity of approximately 25 million barrels concentrated in our East Coast
marketing areas.
In the first Brazilian oil licensing round in June 1999, we were awarded an
exploration block in the offshore Santos basin. We are the operator of this
block and have a 45% interest. The award is in addition to joint ventures signed
earlier in the year for two other exploration blocks offshore Brazil.
USE OF PROCEEDS
We will use the net proceeds from the sale of the debt securities for general
corporate purposes including repayment and refinancing of debt. The amount and
timing of the sales of debt securities will depend on market conditions and the
availability of other funds to us.
3
<PAGE> 38
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges shows the coverage of earnings before
income taxes to fixed charges, which consist primarily of interest expense. Our
ratio of earnings to fixed charges for each of the periods ended is as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, --------------------------------
1999 1998 1997 1996 1995 1994
- ---------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
3.0 (a) 1.6 5.9 (b) 1.9
</TABLE>
- ---------------
(a) Losses, including special items, and fixed charges resulted in a less than
one-to-one earnings ratio. In 1998, the deficiency was $480 million. Losses
reflected special items of $285 million including asset and operating lease
impairments of $237 million.
(b) Losses, including special items, and fixed charges resulted in a less than
one-to-one earnings coverage ratio. In 1995, the deficiency was $326
million. Losses reflected special items of $457 million including asset
impairments of $584 million, partially offset by gains on asset sales and a
tax refund.
To calculate the ratio of earnings to fixed charges, we calculate earnings by
adding fixed charges other than capitalized interest to income before income
taxes. By fixed charges we mean total interest, including capitalized interest,
and a portion of long-term rent expense that we believe represents the interest
factor of our rent expense. Earnings and fixed charges exclude our share of
earnings and fixed charges of our refinery joint venture in the United States
Virgin Islands.
4
<PAGE> 39
DESCRIPTION OF DEBT SECURITIES
The debt securities covered by this prospectus will be our direct unsecured
obligations. The debt securities will be issued in one or more series under an
indenture between us and The Chase Manhattan Bank, as trustee. The indenture
will be qualified under the Trust Indenture Act of 1939. The indenture is
governed by New York law.
This prospectus briefly outlines the main indenture provisions. The indenture
has been filed as an exhibit to the registration statement and you should read
the indenture for provisions that may be important to you.
GENERAL
The debt securities will rank equally with all of our other unsecured and
unsubordinated debt. The indenture does not limit the amount of debt we may
issue under the indenture or otherwise. We may issue the debt securities in one
or more series with the same or various maturities, at a price of 100% of their
principal amount or at a premium or a discount.
The prospectus supplement relating to any series of debt securities being
offered will include specific terms relating to the offering. These terms will
include some or all of the following:
- the title of the debt securities;
- the total principal amount of the debt securities;
- the percentage of the principal amount at which the debt securities will
be issued;
- the date or dates on which principal will be payable and whether the debt
securities will be payable on demand on any date;
- the interest rate or rates and the method for calculating the interest
rate;
- the interest payment dates;
- the maturity dates;
- optional or mandatory redemption terms;
- any mandatory or sinking fund provisions;
- authorized denominations;
- the currency in which the debt securities will be denominated;
- whether the principal and any premium or interest is payable in a
different currency than the currency in which the debt securities are
denominated, including a currency other than U.S. dollars;
- the manner in which any payments of principal and any premium or interest
will be calculated, if the payment will be based on an index or formula;
- whether the debt securities are to be issued as individual certificates
to each holder or in the form of global securities held by a depositary
on behalf of holders or in uncertificated form;
- whether the debt securities will be issued as registered securities or as
bearer securities;
- information describing any book-entry features;
- whether and under what circumstances we will pay additional amounts on
any debt securities held by a person who is not a United States person
for tax purposes and whether we can redeem the debt securities if we have
to pay additional amounts;
- provisions, other than those already in the indenture, that allow for the
discharge of our obligations under the indenture; and
- any other terms.
5
<PAGE> 40
We may issue debt securities of any series as registered securities or bearer
securities or both. In addition, we may issue uncertificated securities. Unless
we state otherwise in a prospectus supplement, we will not offer, sell or
deliver any bearer debt securities, including any bearer securities issued in
temporary or permanent global form, to any United States person. By "United
States person" we mean a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any of its political subdivisions, or an estate
or trust whose income is subject to United States federal income taxation
regardless of its source.
PAYMENT AND TRANSFER
We will normally issue the debt securities in book-entry only form, which means
that they will be represented by one or more permanent global certificates
registered in the name of The Depository Trust Company, New York, New York
("DTC"), or its nominee. We will refer to this form here and in the prospectus
supplement as "book-entry only."
Alternatively, we may issue the debt securities in certificated form registered
in the name of the holder. Under these circumstances, holders may receive
certificates representing the debt securities. Debt securities in certificated
form will be issued only in increments of $1,000 and will be exchangeable
without charge except for reimbursement of taxes or other governmental charges,
if any. We will refer to this form in the prospectus supplement as
"certificated."
If we issue original issue discount debt securities, we will describe the
special United States federal income tax and other considerations of a purchase
of original issue discount debt securities in the prospectus supplement. By
"original issue discount debt securities," we mean securities that are issued at
a substantial discount below their principal amount because they pay no interest
or pay interest that is below market rates at the time of issuance.
The following discussion pertains to debt securities that are issued in
book-entry only form.
One or more global securities would be issued to DTC or its nominee. DTC would
keep a computerized record of its participants (for example, your broker) whose
clients have purchased the debt securities. The participant would then keep a
record of its clients who purchased the debt securities. A global security may
not be transferred, except that DTC, its nominees and their successors may
transfer an entire global security to one another.
Under book-entry only, we will not issue certificates to individual holders of
the debt securities. Beneficial interests in global securities will be shown on,
and transfers of global securities will be made only through, records maintained
by DTC and its participants.
DTC has provided us with the following information. DTC is:
- a limited-purpose trust company organized under the New York Banking Law;
- a "banking organization" within the meaning of the New York Banking Law;
- a member of the United States Federal Reserve System;
- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- a "clearing agency" registered under Section 17a of the Securities
Exchange Act of 1934.
DTC holds securities that its participants deposit with DTC. DTC also
facilitates settlement among participants of securities transactions, such as
transfers and pledges, in deposited securities through computerized records for
participants' accounts. This eliminates the need to exchange certificates.
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations.
DTC's book-entry system is also used by other organizations such as securities
brokers and dealers, banks and trust companies that work through a participant.
The rules that apply to DTC and its participants are on file with the SEC.
6
<PAGE> 41
DTC is owned by a number of its participants and by The New York Stock Exchange,
Inc., The American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc.
We will wire principal and interest payments to DTC's nominee. We and the
trustee will treat DTC's nominee as the owner of the global securities for all
purposes. Accordingly, we and the trustee will have no direct responsibility or
liability to pay amounts due on the securities to owners of beneficial interests
in the global securities.
It is DTC's current practice, upon receipt of any payment of principal or
interest, to credit participants' accounts on the payment date according to
their respective holdings of beneficial interests in the global securities as
shown on DTC's records as of the record date for such payment. In addition, it
is DTC's current practice to assign any consenting or voting rights to
participants whose accounts are credited with securities on a record date, by
using an omnibus proxy. Payments by participants to owners of beneficial
interests in the global securities, and voting by participants, will be governed
by the customary practices between the participants and owners of beneficial
interests, as is the case with debt securities held for the account of customers
registered in "street name". However, these payments will be the responsibility
of the participants and not of DTC, the trustee or us.
Debt securities represented by a global security would be exchangeable for debt
securities represented by certificates with the same terms in authorized
denominations only if:
- DTC notifies us that it is unwilling or unable to continue as depository
or if DTC ceases to be a clearing agency registered under applicable law;
or
- we instruct the trustee that the global security is now exchangeable; or
- an event of default has occurred and is continuing.
COVENANTS
We have agreed to some restrictions on our activities for the benefit of holders
of the debt securities. The restrictive covenants summarized below will apply
(unless the covenants are waived or amended) so long as any of the debt
securities are outstanding unless the prospectus supplement states otherwise. We
have provided a glossary at the end of this prospectus to define capitalized
terms used in the covenants. The prospectus supplement may contain different
covenants. In the covenants, all references to us, we, our and ours mean Amerada
Hess Corporation only and not any of our subsidiaries.
Limitation on Secured Indebtedness. We have agreed that we will not, and we
will not permit any of our Restricted Subsidiaries to, create, assume, incur or
guarantee any Secured Indebtedness unless we secure these debt securities to the
same extent as the Secured Indebtedness. However, we may incur Secured
Indebtedness without securing these debt securities if, immediately after
incurring the Secured Indebtedness, the aggregate amount of all Secured
Indebtedness and the Attributable Debt payable under leases entered into in
connection with sale and leaseback transactions subject to the amount limitation
described below would not exceed 15% of Consolidated Net Tangible Assets. The
aggregate amount of all Secured Indebtedness in the preceding sentence excludes
Secured Indebtedness that is secured to the same extent as these debt securities
and Secured Indebtedness that is being repaid concurrently.
Limitation on Sale and Leaseback Transactions. We have agreed that we will not,
and we will not permit any of our Restricted Subsidiaries to, enter into any
lease longer than three years covering any Principal Property of ours or of any
of our Restricted Subsidiaries that is sold to any other person in connection
with the lease, unless immediately after consummation of the sale and leaseback
transaction either:
- the sum of the Attributable Debt and the aggregate amount of all Secured
Indebtedness, excluding Secured Indebtedness which is secured to the same
extent as these debt securities or that is being repaid concurrently,
does not exceed 15% of Consolidated Net Tangible Assets; or
7
<PAGE> 42
- an amount equal to the net proceeds received in connection with such sale
is used within 180 days to retire or redeem indebtedness of ours or our
Restricted Subsidiaries, the proceeds are at least equal to the fair
market value of the property sold and the trustee is informed of the
transaction.
CONSOLIDATION, MERGER OR SALE
We have agreed not to consolidate with or merge into any other person or convey
or transfer substantially all of our properties and assets to any person,
unless:
- the successor is a U.S. corporation; and
- the successor corporation expressly assumes by a supplemental indenture
the due and punctual payment of the principal of and any premium or any
interest on all the debt securities and the performance of every covenant
in the indenture that we would otherwise have to perform.
MODIFICATION OF THE INDENTURE
Under the indenture, our rights and obligations and the rights of the holders
may be modified if the holders of a majority in aggregate principal amount of
the outstanding debt securities of all series voting as a single class affected
by the modification consent. However, no modification of the principal or
interest payment terms, and no modification reducing the percentage required for
modifications, is effective against any holder without its consent.
EVENTS OF DEFAULT
When we use the term "Event of Default" in the indenture, here are some examples
of what we mean.
Unless otherwise specified in a prospectus supplement, an Event of Default with
respect to a series of debt securities occurs if:
- we fail to pay the principal of, or any premium on, any debt security
when due;
- we fail to pay interest when due on any debt security for 30 days;
- we fail to perform any other covenant in the indenture and this failure
continues for 60 days after we receive written notice of it from the
trustee or from the holders of 25% in principal amount of the outstanding
debt securities of the series;
- we default under any other loans or similar indebtedness in an amount in
excess of $50,000,000 and that default results in the acceleration of the
loan and the situation continues for a period of 20 days after we receive
written notice from the trustee or from holders of 25% of the principal
amount of the outstanding securities of such series; or
- we or a court take certain actions relating to the bankruptcy, insolvency
or reorganization of Amerada Hess Corporation for the benefit of our
creditors.
A supplemental indenture may include, or pursuant to a resolution from our board
of directors there may be added, additional Events of Default or changes to the
Events of Default described above with respect to a particular series of debt
securities. For the Events of Default applicable to a particular series of debt
securities, see the prospectus supplement relating to the series.
The trustee may withhold notice to the holders of debt securities of any default
(except in the payment of principal or interest) if it considers withholding of
notice to be in the best interests of the holders. No notice of a covenant
default may be given until 30 days after the default occurs. By default we mean
any event which is an Event of Default described above or would become an Event
of Default with the giving of notice or the passage of time.
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If a payment Event of Default for any series of debt securities occurs and
continues, the trustee or the holders of at least 25% in aggregate principal
amount of the debt securities of the series may require us to repay immediately:
- the entire principal of the debt securities of the series or, if the debt
securities are original issue discount securities, the portion of the
principal described in the applicable prospectus supplement; and
- all the accrued interest.
If the default results from a failure to perform a covenant or the acceleration
of other indebtedness, the trustee or the holders of 25% in aggregate principal
amount of all debt securities may require the immediate payment of principal and
interest. If the default is in connection with an event of bankruptcy or similar
event, the principal and interest will become immediately due and payable.
The holders of a majority of the principal amount of the debt securities of the
affected series can rescind this accelerated payment requirement or waive any
past default or Event of Default or allow us to not comply with any indenture
provision. However, rescission is not permitted if there is a default in payment
of principal of, or premium or interest on, any of the debt securities of the
series apart from the acceleration itself.
Other than its duties during a default, the trustee is not obligated to exercise
any of its rights or powers under the indenture at the request, order or
direction of any holders, unless the holders offer the trustee reasonable
indemnity. If they provide this indemnity, the holders of 25% of the principal
amount of any series of debt securities may, subject to limitations, direct the
time, method and place of conducting any proceeding or any remedy available to
the trustee, or exercising any power conferred on the trustee, for any series of
debt securities.
DEFEASANCE
When we use the term defeasance, we mean discharge from some or all of our
obligations under the indenture. Unless otherwise indicated in an applicable
prospectus supplement, if we deposit with the trustee sufficient cash or
government securities to pay the principal, interest, any premium and any other
sums due to the stated maturity date or a redemption date of the debt securities
of a particular series, then we will either be discharged from any and all
obligations in respect of any series of debt securities or we will no longer be
under any obligation to comply with restrictive covenants under the indenture
and certain Events of Default will no longer apply to us.
If this happens, the holders of the debt securities of the affected series will
not be entitled to the benefits of the indenture except for registration of
transfer and exchange of debt securities and replacement of lost, stolen or
mutilated debt securities. These holders may look only to the deposited funds or
obligations for payment.
We must deliver to the trustee a ruling by the United States Internal Revenue
Service or an opinion of counsel to the effect that the deposit and related
defeasance would not cause the holders of the debt securities to recognize
income, gain or loss for federal income tax purposes.
CONCERNING THE TRUSTEE
The trustee has loaned money to us and provided other services to us in the past
and may do so in the future as a part of its regular business.
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PLAN OF DISTRIBUTION
We may sell the offered debt securities through underwriters or dealers, through
agents or directly to one or more purchasers.
SALE THROUGH UNDERWRITERS
If we use underwriters in the sale, they will acquire the debt securities for
their own account. The underwriters may resell the debt securities in one or
more transactions, including negotiated transactions at a fixed public offering
price or at varying prices determined at the time of sale. The obligations of
the underwriters to purchase the debt securities will be subject to conditions.
The underwriters will be obligated to purchase all the debt securities of the
series offered if any of the debt securities are purchased. The underwriters
from time to time may change any initial public offering price and any discounts
or concessions allowed or re-allowed or paid to dealers.
SALE THROUGH AGENTS
We may sell offered debt securities through agents we designate. Unless
indicated in the prospectus supplement, the agents have agreed to use their
reasonable best efforts to solicit purchases for the period of their
appointment.
DIRECT SALES
We also may sell offered debt securities directly. In this case, no underwriters
or agents would be involved.
GENERAL INFORMATION
Underwriters, dealers and agents that participate in the distribution of the
offered debt securities may be underwriters as defined in the Securities Act of
1933. Any discount or commissions they receive from us and any profit they
receive on the resale of the offered debt securities may be treated as
underwriting discounts and commissions under the Securities Act. We will
identify any underwriters or agents, and describe their compensation, in a
prospectus supplement.
We may agree with the underwriters, dealers and agents to indemnify them against
civil liabilities, including liabilities under the Securities Act. We may also
agree to contribute to payments that the underwriters, dealers or agents may be
required to make. Underwriters, dealers and agents may engage in transactions
with, or perform services for, us or our subsidiaries in the ordinary course of
their businesses.
LEGAL OPINIONS
Milbank, Tweed, Hadley & McCloy LLP, New York, New York, will issue an opinion
about the legality of the offered debt securities for us. Davis Polk & Wardwell,
New York, New York, will issue such an opinion on behalf of any agent,
underwriter or dealer.
EXPERTS
The consolidated balance sheet of Amerada Hess Corporation as of December 31,
1998 and 1997 and the statements of consolidated income, retained earnings,
changes in common stock and capital in excess of par value, cash flows and
comprehensive income for each of the three years in the period ended December
31, 1998, incorporated by reference in this Form S-3, have been incorporated
into this prospectus in reliance on the report of Ernst & Young LLP, independent
auditors, given on the authority of that firm as experts in accounting and
auditing.
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GLOSSARY
We have used the following definitions in describing the restrictive covenants
that we have agreed to in the indenture. You can also find the precise legal
definitions of these terms in Section 1.01 of the indenture.
"Attributable Debt" means, when used in connection with a sale and lease-back
transaction referred to in the indenture, on the date upon which the amount is
to be determined, the product of
- the net proceeds from the sale and lease-back transaction multiplied by
- a fraction, the numerator of which is the number of full years of the
term of the lease relating to the property involved in that sale and
lease-back transaction remaining on that date and the denominator of
which is the number of full years on the term of that lease measured from
the first day of the term.
"Consolidated Net Tangible Assets" means our total assets and those of our
consolidated subsidiaries, less current liabilities and intangible assets.
"Principal Property" means any oil or gas producing property, onshore or
offshore, or any refining or manufacturing plant owned or leased under a capital
lease by us or any of our Restricted Subsidiaries, but does not include any
property that has been determined by a resolution of our board of directors not
to be of material importance to the business conducted by us and our
subsidiaries taken as a whole.
"Restricted Subsidiary" means any Subsidiary that owns or leases, under a
capital lease, any Principal Property.
"Secured Indebtedness" means indebtedness of ours or any Restricted Subsidiary
for borrowed money secured by any lien on (or in respect of any conditional sale
or other title retention agreement covering) any Principal Property or the stock
or indebtedness of a Restricted Subsidiary, but excluding from such definition
all indebtedness:
- secured by liens (or arising from conditional sale or other title
retention agreements) existing on the date of the indenture;
- owing to us or any other Restricted Subsidiary;
- secured by liens on Principal Property or the stock or indebtedness of
Restricted Subsidiaries and existing at the time of acquisition thereof;
- in connection with industrial development bond, pollution control revenue
bond or similar financings;
- secured by purchase money security interests;
- secured by liens existing at the time a corporation becomes a Restricted
Subsidiary;
- statutory liens, liens made in connection with bids and other standard
exempted liens;
- liens on oil and/or gas properties or other mineral interests arising as
a security in connection with conducting certain business;
- royalties and other payments to be paid out of production from oil and/or
gas properties or other mineral interests from the proceeds from their
sale; and
- constituting any replacement, extension or renewal of any such
indebtedness to the extent such indebtedness is not increased.
"Subsidiary" means, with respect to any person, any corporation, association or
other business entity of which more than 50% of the outstanding voting equity is
owned, directly or indirectly, by such person and one or more other subsidiaries
of such person.
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