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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
COMMISSION FILE NUMBER 1-1204
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AMERADA HESS CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
13-4921002
(I.R.S. Employer Identification Number)
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<S> <C>
1185 AVENUE OF THE AMERICAS, NEW YORK, N.Y. 10036
(Address of principal executive offices) (Zip Code)
</TABLE>
(Registrant's telephone number, including area code, is (212) 997-8500)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Stock (par value $1.00) New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
Registrant amounted to $3,881,000,000 as of February 29, 2000.
At February 29, 2000, 90,676,405 shares of Common Stock were outstanding.
Certain items in Parts I and II incorporate information by reference from
the 1999 Annual Report to Stockholders and Part III is incorporated by reference
from the Proxy Statement for the annual meeting of stockholders to be held on
May 3, 2000.
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PART I
ITEM 1. BUSINESS
Amerada Hess Corporation (the "Registrant") is a Delaware corporation,
incorporated in 1920. The Registrant and its subsidiaries (collectively referred
to as the "Corporation") explore for, produce, purchase, transport and sell
crude oil and natural gas. These exploration and production activities take
place in the United States, United Kingdom, Norway, Denmark, Gabon, Indonesia,
Azerbaijan, Thailand and in certain other countries. The Corporation also
manufactures, purchases, transports and markets refined petroleum and other
energy products. The Corporation owns 50% of a refinery joint venture in the
United States Virgin Islands, and another refining facility, terminals and
retail outlets located on the East Coast of the United States.
EXPLORATION AND PRODUCTION
At December 31, 1999, the Corporation had 698 million barrels of proved
crude oil and natural gas liquids reserves compared with 695 million barrels at
the end of 1998. Proved natural gas reserves were 1,904 million Mcf at December
31, 1999 compared with 2,055 million Mcf at December 31, 1998. Of the
Corporation's proved reserves (on a barrel of oil equivalent basis), 26% are
located in the United States, 60% are located in the United Kingdom, Norwegian
and Danish sectors of the North Sea and the remainder are located in Azerbaijan,
Gabon, Indonesia and Thailand.
Worldwide crude oil and natural gas liquids production amounted to 232,407
barrels per day in 1999 compared with 205,989 barrels per day in 1998. Worldwide
natural gas production was 642,544 Mcf per day in 1999 compared with 576,477 Mcf
per day in 1998. The Corporation has a number of oil and gas developments in
progress and it also has an inventory of domestic and foreign drillable
prospects.
UNITED STATES. Amerada Hess Corporation operates mainly offshore in the
Gulf of Mexico and onshore in Texas, Louisiana and North Dakota. During 1999,
28% of the Corporation's crude oil and natural gas liquids production and 53% of
its natural gas production were from United States operations.
The table below sets forth the Corporation's average daily net production
by area in the United States:
<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
CRUDE OIL, INCLUDING CONDENSATE AND
NATURAL GAS LIQUIDS (BARRELS PER DAY)
Gulf of Mexico............................................ 31,926 11,041
Texas..................................................... 14,577 15,803
North Dakota.............................................. 13,170 12,958
Louisiana................................................. 1,848 1,588
Other..................................................... 3,084 3,530
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Total............................................. 64,605 44,920
======= =======
NATURAL GAS (MCF PER DAY)
Gulf of Mexico............................................ 191,002 116,392
North Dakota.............................................. 59,237 58,476
Louisiana................................................. 52,280 56,627
Texas..................................................... 21,839 26,023
New Mexico................................................ 11,533 12,442
California*............................................... 1,463 18,320
Mississippi............................................... 690 5,569
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Total............................................. 338,044 293,849
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BARRELS OF OIL EQUIVALENT (PER DAY)......................... 120,946 93,895
======= =======
</TABLE>
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* Properties sold in January 1999.
At December 31, 1999, the Corporation has an interest in 150 exploration
blocks in the Gulf of Mexico of which it operates 100. The Corporation has
439,092 net undeveloped acres in the Gulf of Mexico.
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UNITED KINGDOM. The Corporation's activities in the United Kingdom are
conducted by its wholly-owned subsidiary, Amerada Hess Limited. During 1999, 51%
of the Corporation's crude oil and natural gas liquids production and 40% of its
natural gas production were from United Kingdom operations.
The table below sets forth the Corporation's average daily net production
in the United Kingdom by field and the Corporation's interest in each at
December 31, 1999:
<TABLE>
<CAPTION>
INTEREST 1999 1998
PRODUCING FIELD -------- ------- -------
<S> <C> <C> <C>
CRUDE OIL, INCLUDING CONDENSATE AND
NATURAL GAS LIQUIDS (BARRELS PER DAY)
Scott................................. 34.95% 29,306 33,291
Beryl/Ness/Nevis/Buckland............. 22.22/22.22/37.35/14.07 25,431 23,472
Fife/Fergus/Flora..................... 85.00/65.00/85.00 17,507 20,761
Schiehallion.......................... 15.67 12,315 3,149
Arbroath/Montrose/Arkwright........... 28.21 8,946 8,945
Telford............................... 31.42 6,894 10,603
Hudson................................ 28.00 6,697 2,262
Ivanhoe/Rob Roy/Hamish................ 42.08 4,102 5,041
Renee/Rubie........................... 14.00/19.20 2,742 --
Durward/Dauntless..................... 28.00 639 5,012
Other................................. Various 3,220 2,917
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Total............................ 117,799 115,453
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NATURAL GAS (MCF PER DAY)
Beryl/Ness/Nevis/Buckland............. 22.22/22.22/37.35/14.07% 81,900 51,700
Everest/Lomond........................ 18.67/16.67 56,900 60,500
Davy/Bessemer......................... 27.78/23.08 42,300 29,000
Indefatigable......................... 23.08 26,000 36,600
Scott................................. 34.95 17,600 17,200
Leman................................. 21.74 17,200 31,600
Telford............................... 31.42 7,900 13,900
Other................................. Various 8,000 10,500
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Total............................ 257,800 251,000
======= =======
BARRELS OF OIL EQUIVALENT (PER DAY)..... 160,766 157,286
======= =======
</TABLE>
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The Corporation is developing several oil and gas fields in the United
Kingdom North Sea and is evaluating other discoveries.
Amerada Hess Limited owns 25% of the shares of Premier Oil plc, a United
Kingdom company with worldwide exploration and production interests. In 1999,
Amerada Hess Limited, Petronas (the Malaysian state oil company) and Premier
created an alliance. Both Amerada Hess Limited and Petronas purchased new shares
in Premier and each has a 25% interest.
NORWAY. The Corporation's activities in Norway are conducted through its
wholly-owned Norwegian subsidiary, Amerada Hess Norge A/S. Norwegian operations
accounted for crude oil and natural gas liquids production of 27,009 net barrels
per day in 1999 and 28,322 net barrels per day in 1998. Substantially all of the
1999 Norwegian production is from the Corporation's 28.09% interest in the
Valhall Field. An enhanced-recovery waterflood project for the Valhall Field is
being evaluated.
DENMARK. Amerada Hess A/S, the Corporation's Danish subsidiary, brought
the South Arne Field on-stream in the third quarter of 1999. The Corporation
operates this field with a 57.48% interest. Net production from the South Arne
Field has reached 32,000 barrels of oil per day and 35,000 Mcf of natural gas
per day.
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GABON. Amerada Hess Production Gabon (AHPG), the Corporation's
majority-owned Gabonese subsidiary, has a 10% interest in the Rabi Kounga Field
in Gabon. AHPG's share of production averaged 10,226 net barrels of crude oil
per day in 1999 and 14,345 net barrels per day in 1998. The decrease in the
Corporation's share of production was largely due to a reduced interest in AHPG
in 1999. AHPG has a 40% interest in the developing onshore Atora Field.
Production is expected to begin in 2000 and to reach a net level of 4,000
barrels of oil per day late in 2000.
INDONESIA. The Corporation has a 30% interest in the Jabung Production
Sharing Contract, which contains the North Geragai and Makmur fields. Net
production from these fields is averaging 3,000 barrels of oil per day. The
Jabung production sharing contract area contains additional discoveries for
which development plans are either underway or being considered. In addition,
the Corporation has interests in other production sharing contracts in Indonesia
on which discoveries have been made.
THAILAND. The Corporation has a 15% interest in the Pailin gas field
offshore Thailand. The field came onstream in August 1999. Net production from
the Corporation's interest currently is averaging 25,000 Mcf of natural gas per
day.
AZERBAIJAN. The Corporation has a 1.68% equity interest in the AIOC
Consortium in the Caspian Sea. Net production from its interest is currently
averaging about 1,500 barrels of oil per day. In 1999, the Corporation acquired
interests in two onshore fields with initial net production of approximately
1,000 barrels per day of crude oil.
BRAZIL. The Corporation has 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. A 3D seismic survey was acquired on these blocks and the
Corporation expects to commence exploration drilling in the middle of 2000. The
Corporation also acquired a 45% interest in an exploration license on Block BM
S-3 in the Santos Basin.
REFINING AND MARKETING
REFINING. The Corporation owns a 50% interest in the HOVENSA refining
joint venture in the United States Virgin Islands. In addition, it owns and
operates a refining facility in Port Reading, New Jersey.
HOVENSA. In 1999, total refinery crude runs averaged 418,000 barrels per
day compared with 421,000 barrels per day in 1998. The refinery joint venture
with a subsidiary of Petroleos de Venezuela S.A. was formed on October 30, 1998.
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 purchased mainly under contracts of one year or less from third parties
and through spot purchases on the open market. After sales of refined products
by HOVENSA to third parties, the Corporation must purchase 50% of HOVENSA's
remaining production at market prices.
In February 2000, HOVENSA reached agreement on a $600 million bank
financing for the construction of a 58,000-barrel per day delayed coking unit
and related facilities at its refinery. HOVENSA has begun building the coker,
which is anticipated to be completed in 2002. 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. The Corporation owns and operates a fluid catalytic
cracking facility in Port Reading, New Jersey. This facility processes vacuum
gas oil and residual fuel oil. It currently operates at a rate of approximately
60,000 barrels per day and produces substantially all gasoline and heating oil.
MARKETING. The Corporation markets refined petroleum products 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. It also markets natural gas to
utilities and other industrial and commercial customers. The Corporation is
currently expanding its energy marketing activities to include electricity.
At December 31, 1999, the Corporation had 701 HESS(R) gasoline stations of
which approximately 75% were company operated. Most of the gasoline stations are
concentrated in densely populated areas, principally
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in New York, New Jersey and Florida and approximately 400 have convenience
stores. The Corporation owns approximately 70% of the properties on which
stations are located.
On February 14, 2000, the Corporation announced that it entered into an
agreement with the Meadville Corporation to acquire the 51% of Meadville's
outstanding stock that it does not already own for approximately $168 million in
cash and deferred payments, preferred stock or a combination of both as selected
by the Meadville stockholders. The purchase includes 178 retail gasoline
stations located in the Northeast. The transaction is expected to close in early
May.
The Corporation sold its Gulf Coast and Southeast pipeline terminals in
1999. Following the terminal sales, the Corporation has 27 terminals with an
aggregate storage capacity of 22 million barrels concentrated in its East Coast
marketing areas.
Refined product sales averaged 344,000 barrels per day in 1999 and 482,000
barrels per day in 1998. Of total refined products sold in 1999, approximately
70% was obtained from HOVENSA and Port Reading. The Corporation purchased the
balance from others under short-term supply contracts and by spot purchases from
various sources.
COMPETITION AND MARKET CONDITIONS
The petroleum industry is highly competitive. The Corporation encounters
competition from numerous companies in each of its activities, particularly in
acquiring rights to explore for crude oil and natural gas and in the purchasing
and marketing of refined products. Many competitors are larger and have
substantially greater resources than the Corporation. The Corporation is also in
competition with producers and marketers of other forms of energy.
The petroleum business involves large-scale capital expenditures and
risk-taking. In the search for new oil and gas reserves, long lead times are
often required from successful exploration to subsequent production. Operations
in the petroleum industry depend on a depleting natural resource. The number of
areas where it can be expected that hydrocarbons will be discovered in
commercial quantities is constantly diminishing and exploration risks are high.
Areas where hydrocarbons may be found are often in remote locations or offshore
where exploration and development activities are capital intensive and operating
costs are high.
The major foreign oil producing countries, including members of the
Organization of Petroleum Exporting Countries ("OPEC"), exert considerable
influence over the supply and price of crude oil and refined petroleum products.
Their ability or inability to agree on a common policy on rates of production
and other matters has a significant impact on oil markets and the Corporation.
The derivatives markets are also important in influencing the prices of crude
oil, natural gas and refined products. The Corporation cannot predict the extent
to which future market conditions may be affected by foreign oil producing
countries, the derivatives markets or other external influences.
OTHER ITEMS
The Corporation's operations may be affected by federal, state, local,
territorial and foreign laws and regulations relating to tax increases and
retroactive tax claims, expropriation of property, cancellation of contract
rights, and changes in import regulations, as well as other political
developments. The Corporation has been affected by certain of these events in
various countries in which it operates. The Corporation markets motor fuels
through lessee-dealers and wholesalers in certain states where legislation
prohibits producers or refiners of crude oil from directly engaging in retail
marketing of motor fuels. Similar legislation has been periodically proposed in
the U.S. Congress and in various other states. The Corporation, at this time,
cannot predict the effect of any of the foregoing on its future operations.
Compliance with various environmental and pollution control regulations
imposed by federal, state and local governments is not expected to have a
materially adverse effect on the Corporation's earnings and competitive position
within the industry. Capital expenditures for facilities, primarily to comply
with federal, state and local environmental standards, were $2 million in 1999
and the Corporation anticipates comparable
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capital expenditures in 2000. In addition, the Corporation expended $8 million
in 1999 for environmental remediation, with a comparable amount anticipated for
2000.
The number of persons employed by the Corporation averaged 8,485 in 1999
and 9,777 in 1998.
Additional operating and financial information relating to the business and
properties of the Corporation appears in the text on pages 8 through 14 under
the heading "Exploration and Production," on pages 17 and 18 under the heading
"Refining and Marketing," on pages 20 through 26 under the heading "Financial
Review" and on pages 27 through 57 of the accompanying 1999 Annual Report to
Stockholders, which information is incorporated herein by reference.*
ITEM 2. PROPERTIES
Reference is made to Item 1 and the operating and financial information
relating to the business and properties of the Corporation, which is
incorporated in Item 1 by reference.
Additional information relating to the Corporation's oil and gas operations
follows:
1. OIL AND GAS RESERVES
The Corporation's net proved oil and gas reserves at the end of 1999, 1998
and 1997 are presented under Supplementary Oil and Gas Data in the accompanying
1999 Annual Report to Stockholders, which has been incorporated herein by
reference.
During 1999, the Corporation provided oil and gas reserve estimates for
1998 to the Department of Energy. Such estimates are compatible with the
information furnished to the SEC on Form 10-K, although not necessarily directly
comparable due to the requirements of the individual requests. There were no
differences in excess of 5%.
The Corporation has no contracts or agreements to sell fixed quantities of
its crude oil production. In the United States, natural gas is sold through the
Company's marketing division to local distribution companies, and commercial,
industrial, and other purchasers, on a spot basis and under contracts for
varying periods. The Corporation's United States production is expected to
approximate 40% of its 2000 commitments under these contracts which total
approximately 800,000 Mcf per day. Third party purchases will be used to
supplement the Corporation's production in fulfilling its sales commitments and
in making spot sales. In the United Kingdom, approximately 35% of annual natural
gas production is sold under field specific take or pay contracts. Additionally,
approximately 300,000 Mcf per day of natural gas is sold by the Corporation's
United Kingdom marketing subsidiary to commercial and industrial companies,
generally under one year contracts, and to residential customers. After take or
pay sales, the Company can supply approximately 40% of United Kingdom marketing
sales commitments from its own production. The remainder will be supplied by
purchases of natural gas from third parties. The Corporation attempts to
minimize price and supply risks associated with its United States and United
Kingdom natural gas supply commitments by entering into purchase contracts with
third parties having adequate sources of supply, on terms substantially similar
to those under its commitments.
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* Except as to information specifically incorporated herein by reference under
Items 1, 2, 5, 6, 7, 7A and 8, no other information or data appearing in the
1999 Annual Report to Stockholders is deemed to be filed with the Securities
and Exchange Commission (SEC) as part of this Annual Report on Form 10-K, or
otherwise subject to the SEC's regulations or the liabilities of Section 18 of
the Securities Exchange Act of 1934, as amended.
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2. AVERAGE SELLING PRICES AND AVERAGE PRODUCTION COSTS
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<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
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Average selling prices (Note A)
Crude oil, including condensate and natural gas
liquids (per barrel)
United States $16.23 $12.02 $18.43
Europe 17.85 13.15 19.20
Africa, Asia and other 18.38 12.35 18.48
Average 17.44 12.83 19.01
Natural gas (per Mcf)
United States $ 2.14 $ 2.08 $ 2.42
Europe 1.77 2.28 2.46
Africa, Asia and other (Note B) 2.24 1.10 1.05
Average 1.96 2.18 2.44
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</TABLE>
<TABLE>
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Average production (lifting) costs per barrel of
production (Note C)
United States $ 2.86 $ 3.76 $ 4.10
Europe 4.58 5.14 5.41
Africa, Asia and other (Note B) 3.87 4.87 1.34
Average 3.93 4.70 4.87
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</TABLE>
Note A: Includes inter-company transfers valued at approximate market
prices and the effect of the Corporation's hedging activities.
Note B: Variations in selling prices and production costs reflect changes
in the mix of the Corporation's production in Africa and Asia during the three
year period.
Note C: Production (lifting) costs consist of amounts incurred to operate
and maintain the Corporation's producing oil and gas wells, related equipment
and facilities (including lease costs of floating production and storage
facilities) and production and severance taxes. The average production costs per
barrel reflect the crude oil equivalent of natural gas production converted on
the basis of relative energy content (6 Mcf equals one barrel).
The foregoing tabulation does not include substantial costs and charges
applicable to finding and developing proved oil and gas reserves, nor does it
reflect significant outlays for related general and administrative expenses,
interest expense and income taxes. Prior year amounts have been restated to
conform with the current period presentation.
3. GROSS AND NET UNDEVELOPED ACREAGE AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
UNDEVELOPED ACREAGE*
(IN THOUSANDS)
--------------------
GROSS NET
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United States........................................ 1,200 678
Europe............................................... 9,840 3,191
Africa, Asia and other............................... 26,308 12,667
------ ------
Total...................................... 37,348 16,536
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</TABLE>
* Includes acreage held under production sharing contracts.
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4. GROSS AND NET DEVELOPED ACREAGE AND PRODUCTIVE WELLS AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
DEVELOPED
ACREAGE PRODUCTIVE WELLS (NOTE A)
APPLICABLE TO -------------------------
PRODUCTIVE WELLS OIL GAS
(IN THOUSANDS) ------------ -----------
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GROSS NET GROSS NET GROSS NET
----- --- ----- --- ----- ---
<S> <C> <C> <C> <C> <C> <C>
United States............................. 1,833 505 2,263 641 248 124
Europe.................................... 539 145 328 75 154 32
Africa, Asia and other.................... 871 158 178 19 22 5
----- --- ----- --- ---- ---
Total........................... 3,243 808 2,769 735 424 161
===== === ===== === ==== ===
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</TABLE>
Note A: Includes multiple completion wells (wells producing from different
formations in the same bore hole) totaling 53 gross wells and 22 net wells.
5. NUMBER OF NET EXPLORATORY AND DEVELOPMENT WELLS DRILLED
<TABLE>
<CAPTION>
NET EXPLORATORY WELLS NET DEVELOPMENT WELLS
------------------------ ------------------------
1999 1998 1997 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
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Productive wells
United States........................ 4 3 5 19 22 27
Europe............................... - 2 5 10 9 8
Africa, Asia and other............... 2 4 2 4 8 6
--- --- --- --- --- ---
Total........................... 6 9 12 33 39 41
--- --- --- --- --- ---
Dry holes
United States........................ 4 11 11 - 6 3
Europe............................... 4 4 8 - - 1
Africa, Asia and other............... 1 4 1 - - -
--- --- --- --- --- ---
Total........................... 9 19 20 - 6 4
--- --- --- --- --- ---
Total..................................... 15 28 32 33 45 45
=== === === === === ===
</TABLE>
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6. NUMBER OF WELLS IN PROCESS OF DRILLING AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
GROSS NET
WELLS WELLS
<S> <C> <C>
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United States.............................................. 6 3
Europe..................................................... 5 1
Africa, Asia and other..................................... 3 1
-- --
Total............................................ 14 5
== ==
</TABLE>
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7. NUMBER OF WATERFLOODS AND PRESSURE MAINTENANCE PROJECTS IN PROCESS OF
INSTALLATION AT DECEMBER 31, 1999 -- One
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ITEM 3. LEGAL PROCEEDINGS
As reported in Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998, allegations were made to the Registrant's internal
reporting hotline concerning noncompliance at the Corpus Christi terminal,
formerly owned by Registrant, with federal and state environmental regulations
and its investigation of those allegations. These allegations and the subsequent
investigations were voluntarily disclosed to the Texas Natural Resource
Conservation Commission ("TNRCC") and related to (i) onsite disposal of wastes
and whether or not such wastes should have been managed as hazardous wastes
under the
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Resource Conservation and Recovery Act; and (ii) nonreporting or misreporting of
the results of wastewater discharge samples required to be obtained by the
Corpus Christi wastewater discharge permit. The Registrant settled all civil
liabilities to TNRCC that might have attached as a result of the alleged
discharge of hydrocarbons and certain specified waste disposal and wastewater
discharge allegations. Investigations by TNRCC and the United States
Environmental Protection Agency ("EPA") relating to waste disposal practices and
wastewater discharge reporting at Corpus Christi may be continuing. It is not
possible at this time for Registrant to state whether any additional proceedings
arising out of the investigations will be commenced against the Registrant, or
what claims would be asserted or what relief would be sought.
The Registrant investigated and disclosed to TNRCC allegations made to the
Registrant's internal reporting hotline of noncompliance at the Galena Park,
Texas terminal, formerly owned by Registrant, with state environmental
regulations. The Registrant's investigation focused on whether (i) the vapor
control system at Galena Park met applicable regulatory requirements during
loading of marine vessels; and (ii) Galena Park implemented required controls on
air emissions resulting from tank cleaning operations. It is not possible at
this time for Registrant to state whether any proceedings arising out of the
investigations will be commenced against the Registrant, or what claims would be
asserted or what relief would be sought.
On February 16, 1999, the Florida Department of Environmental Protection
("FLDEP") mailed the Registrant a proposed consent order relating to alleged
violations of the Industrial Wastewater Discharge Permit limits for the Tampa,
Florida terminal. The consent order proposes a fine of $1,060,000. The
Registrant has previously undertaken a program of corrective measures and other
appropriate responses to these alleged permit violations. The Registrant is
engaging in discussions with the FLDEP to resolve this matter and expects that
the amount, if any, ultimately paid by the Registrant will be substantially less
than the proposed fine.
The Corporation periodically receives notices from EPA that the Corporation
is a "potentially responsible party" under the Superfund legislation with
respect to various waste disposal sites. Under this legislation, all potentially
responsible parties are jointly and severally liable. For certain sites, EPA's
claims or assertions of liability against the Corporation relating to these
sites have not been fully developed. With respect to the remaining sites, EPA's
claims have been settled, or a proposed settlement is under consideration, in
all cases for amounts which are not material. The ultimate impact of these
proceedings, and of any related proceedings by private parties, on the business
or accounts of the Corporation cannot be predicted at this time due to the large
number of other potentially responsible parties and the speculative nature of
clean-up cost estimates, but is not expected to be material.
The Corporation is from time to time involved in other judicial and
administrative proceedings, including proceedings relating to other
environmental matters. Although the ultimate outcome of these proceedings cannot
be ascertained at this time and some of them may be resolved adversely to the
Corporation, no such proceeding is required to be disclosed under applicable
rules of the Securities and Exchange Commission. In management's opinion, based
upon currently known facts and circumstances, such proceedings in the aggregate
will not have a material adverse effect on the financial condition of the
Corporation.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1999, no matter was submitted to a vote of
security holders through the solicitation of proxies or otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table presents information as of February 1, 2000 regarding
executive officers of the Registrant:
<TABLE>
<CAPTION>
YEAR
INDIVIDUAL
BECAME AN
EXECUTIVE
NAME AGE OFFICE HELD* OFFICER
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John B. Hess............ 45 Chairman of the Board, Chief Executive Officer and 1983
Director
W. S. H. Laidlaw........ 44 President, Chief Operating Officer and Director 1986
J. Barclay Collins II... 55 Executive Vice President, General Counsel and 1986
Director
John Y. Schreyer........ 60 Executive Vice President, Chief Financial Officer and 1990
Director
Alan A. Bernstein....... 55 Senior Vice President 1987
F. Lamar Clark.......... 66 Senior Vice President 1990
John A. Gartman......... 52 Senior Vice President 1997
Neal Gelfand............ 55 Senior Vice President 1980
Gerald A. Jamin......... 58 Senior Vice President and Treasurer 1985
Lawrence H. Ornstein.... 48 Senior Vice President 1995
F. Borden Walker........ 46 Senior Vice President 1996
</TABLE>
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* All officers referred to herein hold office in accordance with the
By-Laws until the first meeting of the Directors following the annual meeting of
stockholders of the Registrant, and until their successors shall have been duly
chosen and qualified. Each of said officers was elected to the office set forth
opposite his name on May 5, 1999. The first meeting of Directors following the
next annual meeting of stockholders of the Registrant is scheduled to be held
May 3, 2000.
Except for Messrs. Walker and Gartman, each of the above officers has been
employed by the Registrant or its subsidiaries in various managerial and
executive capacities for more than five years. Prior to his employment with the
Registrant in August 1996, Mr. Walker had been a general manager in the areas of
gasoline marketing, convenience store development and advertising at Mobil
Corporation. Mr. Gartman had been a vice president of Public Service Electric
and Gas Company in the area of energy marketing prior to his employment with the
Registrant in October 1997.
9
<PAGE> 11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Information pertaining to the market for the Registrant's Common Stock,
high and low sales prices of the Common Stock in 1999 and 1998, dividend
payments and restrictions thereon and the number of holders of Common Stock is
presented on page 26 (Financial Review), pages 36 and 37 (Long-Term Debt) and on
page 54 (Ten-Year Summary of Financial Data) of the accompanying 1999 Annual
Report to Stockholders, which has been incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
A Ten-Year Summary of Financial Data is presented on pages 52 through 55 of
the accompanying 1999 Annual Report to Stockholders, which has been incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is presented on pages 20 through 26
of the accompanying 1999 Annual Report to Stockholders, which has been
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is presented under "Derivative
Financial Instruments" on pages 24 and 25 and in Footnote 14 on pages 42 and 43
of the accompanying 1999 Annual Report to Stockholders, which has been
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, including the Report of Ernst &
Young LLP, Independent Auditors, the Supplementary Oil and Gas Data (unaudited)
and the Quarterly Financial Data (unaudited) are presented on pages 26 through
51 of the accompanying 1999 Annual Report to Stockholders, which has been
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
------------------------
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to Directors is incorporated herein by reference to
"Election of Directors" from the Registrant's definitive proxy statement for the
annual meeting of stockholders to be held on May 3, 2000.
Information regarding executive officers is included in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is incorporated herein by
reference to "Election of Directors-Executive Compensation and Other
Information," other than information under "Compensation Committee Report on
Executive Compensation" and "Performance Graph" included therein, from the
Registrant's definitive proxy statement for the annual meeting of stockholders
to be held on May 3, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information pertaining to security ownership of certain beneficial owners
and management is incorporated herein by reference to "Election of
Directors-Ownership of Voting Securities by Certain Beneficial Owners" and
"Election of Directors-Ownership of Equity Securities by Management" from the
Registrant's definitive proxy statement for the annual meeting of stockholders
to be held on May 3, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to this item is incorporated herein by reference to
"Election of Directors" from the Registrant's definitive proxy statement for the
annual meeting of stockholders to be held on May 3, 2000.
------------------------
10
<PAGE> 12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. AND 2. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The financial statements filed as part of this Annual Report on
Form 10-K are listed in the accompanying index to financial statements
and schedules.
3. EXHIBITS
<TABLE>
<S> <C> <C>
3(1) -Restated Certificate of Incorporation of Registrant
incorporated by reference to Exhibit 19 of Form 10-Q of
Registrant for the three months ended September 30, 1988.
3(2) -By-Laws of Registrant incorporated by reference to Exhibit
3(2) of Form 10-K of Registrant for the fiscal year ended
December 31, 1985.
4(1) -Note and Warrant Purchase Agreement, dated June 27, 1991
(including the form of the Common Stock Purchase Warrant
expiring June 27, 2001, included as Exhibit B thereof)
incorporated by reference to Exhibit 4 of Form 10-Q of
Registrant for the three months ended June 30, 1991.
4(2) -Amendment, dated as of May 15, 1992 to the Note and Warrant
Purchase Agreement, dated June 27, 1991 (including the
form of the common stock purchase warrant expiring June
27, 2001, included as Exhibit B thereof), incorporated by
reference to Exhibit 19 of Form 10-Q of Registrant for the
three months ended June 30, 1992.
4(3) -Credit Agreement dated as of May 20, 1997 among Registrant,
the Subsidiary Borrowers thereunder, The Chase Manhattan
Bank as Administrative Agent and the Lenders party
thereto, incorporated by reference to Exhibit 4 of Form
10-Q of Registrant for the three months ended June 30,
1997.
4(4) -Indenture dated as of October 1, 1999 between Registrant
and The Chase Manhattan Bank, as Trustee, incorporated by
reference to Exhibit 4(1) of Form 10-Q of Registrant for
the three months ended September 30, 1999.
4(5) -First Supplemental Indenture dated as of October 1, 1999
between Registrant and The Chase Manhattan Bank, as
Trustee, relating to Registrant's 7 3/8% Notes due 2009
and 7 7/8% Notes due 2029, incorporated by reference to
Exhibit 4(2) to Form 10-Q of Registrant for the three
months ended September 30, 1999.
-Other instruments defining the rights of holders of
long-term debt of Registrant and its consolidated
subsidiaries are not being filed since the total amount of
securities authorized under each such instrument does not
exceed 10 percent of the total assets of Registrant and
its subsidiaries on a consolidated basis. Registrant
agrees to furnish to the Commission a copy of any
instruments defining the rights of holders of long-term
debt of Registrant and its subsidiaries upon request.
10(1) -Extension and Amendment Agreement between the Government of
the Virgin Islands and Hess Oil Virgin Islands Corp.
incorporated by reference to Exhibit 10(4) of Form 10-Q of
Registrant for the three months ended June 30, 1981.
10(2) -Restated Second Extension and Amendment Agreement dated
July 27, 1990 between Hess Oil Virgin Islands Corp. and
the Government of the Virgin Islands incorporated by
reference to Exhibit 19 of Form 10-Q of Registrant for the
three months ended September 30, 1990.
</TABLE>
11
<PAGE> 13
3. EXHIBITS (continued)
<TABLE>
<S> <C> <C>
10(3) -Technical Clarifying Amendment dated as of November 17,
1993 to Restated Second Extension and Amendment Agreement
between the Government of the Virgin Islands and Hess Oil
Virgin Islands Corp. incorporated by reference to Exhibit
10(3) of Form 10-K of Registrant for the fiscal year ended
December 31, 1993.
10(4) -Third Extension and Amendment Agreement dated April 15,
1998 and effective October 30, 1998 among Hess Oil Virgin
Islands Corp., PDVSA V.I., Inc., HOVENSA L.L.C. and the
Government of the Virgin Islands.
10(5)* -Incentive Compensation Award Plan for Key Employees of
Amerada Hess Corporation and its subsidiaries incorporated
by reference to Exhibit 10(2) of Form 10-K of Registrant
for the fiscal year ended December 31, 1980.
10(6)* -Financial Counseling Program description incorporated by
reference to Exhibit 10(3) of Form 10-K of Registrant for
the fiscal year ended December 31, 1980.
10(7)* -Executive Long-Term Incentive Compensation and Stock
Ownership Plan of Registrant dated June 3, 1981
incorporated by reference to Exhibit 10(5) of Form 10-Q of
Registrant for the three months ended June 30, 1981.
10(8)* -Amendment dated as of December 5, 1990 to the Executive
Long-Term Incentive Compensation and Stock Ownership Plan
of Registrant incorporated by reference to Exhibit 10(9)
of Form 10-K of Registrant for the fiscal year ended
December 31, 1990.
10(9)* -Amerada Hess Corporation Pension Restoration Plan dated
January 19, 1990 incorporated by reference to Exhibit
10(9) of Form 10-K of Registrant for the fiscal year ended
December 31, 1989.
10(10)* -Letter Agreement dated August 8, 1990 between Registrant
and Mr. John Y. Schreyer relating to Mr. Schreyer's
participation in the Amerada Hess Corporation Pension
Restoration Plan incorporated by reference to Exhibit
10(11) of Form 10-K of Registrant for the fiscal year
ended December 31, 1991.
10(11)* -1995 Long-Term Incentive Plan, as amended, incorporated by
reference to Appendix A of Registrant's definitive proxy
statement dated March 28, 1996 for the Annual Meeting of
Stockholders held on May 1, 1996.
10(12)* -Amended and Restated 1995 Long-Term Incentive Plan
incorporated by reference to Exhibit 4 of Registrant's
Registration Statement on Form S-8 No. 333-94851, filed
December 30, 1999.
10(13)* -Stock Award Program for non-employee directors dated August
6, 1997 incorporated by reference to Exhibit 10(11) of
Form 10-K of Registrant for the fiscal year ended December
31, 1997.
10(14)* -Change of Control Termination Benefits Agreement dated as
of September 1, 1999 between Registrant and John B. Hess,
incorporated by reference to Exhibit 10(1) of Form 10-Q of
Registrant for the three months ended September 30, 1997.
Substantially identical agreements (differing only in the
signatories thereto) were entered into between Registrant
and W. S. H. Laidlaw, J. Barclay Collins and John Y.
Schreyer.
10(15)* -Change of Control Termination Benefits Agreement dated as
of September 1, 1999 between Registrant and F. Borden
Walker. Substantially identical agreements (differing only
in the signatories thereto) were entered into between
Registrant and other executive officers (other than the
named executive officers referred to in Exhibit 10(14)).
10(16)* -Deferred Compensation Plan of Registrant dated December 1,
1999.
</TABLE>
12
<PAGE> 14
3. EXHIBITS (continued)
<TABLE>
<S> <C> <C>
10(17) -Asset Purchase and Contribution Agreement dated as of
October 26, 1998, among PDVSA V.I., Inc., Hess Oil Virgin
Islands Corp. and HOVENSA L.L.C. (including Glossary of
definitions) incorporated by reference to Exhibit 2.1 of
Form 8-K of Registrant dated October 30, 1998.
10(18) -Amended and Restated Limited Liability Company Agreement of
HOVENSA L.L.C. dated as of October 30, 1998 incorporated
by reference to Exhibit 10.1 of Form 8-K of Registrant
dated October 30, 1998.
13 -1999 Annual Report to Stockholders of Registrant.
18 -Letter from Ernst & Young LLP dated May 14, 1999 relating
to preferability of last-in, first-out (LIFO) inventory
method, adopted January 1, 1999, incorporated by reference
to Exhibit 18 to Form 10-Q of Registrant for the three
months ended March 31, 1999.
21 -Subsidiaries of Registrant.
23 -Consent of Ernst & Young LLP, Independent Auditors, dated
March 22, 2000, to the incorporation by reference in
Registrant's Registration Statements on Form S-3 (No.
33-79317) and Form S-8 (Nos. 333-94851, 333-43569,
333-43571 and 33-65115) of its report relating to
Registrant's financial statements, which consent appears
on page F-2 herein.
27 -Financial Data Schedule (for electronic filing only).
</TABLE>
- --------------------------------------------------------------------------------
* These exhibits relate to executive compensation plans and arrangements.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the last quarter of Registrant's
fiscal year ended December 31, 1999.
13
<PAGE> 15
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 22ND DAY OF
MARCH 2000.
AMERADA HESS CORPORATION
(REGISTRANT)
By /s/ JOHN Y. SCHREYER
................................
(JOHN Y. SCHREYER)
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Director, Chairman of
the Board and
Chief Executive Officer
/s/ JOHN B. HESS (Principal Executive Officer) March 22, 2000
.....................................................
(JOHN B. HESS)
Director, President and Chief
/s/ W.S.H. LAIDLAW Operating Officer March 22, 2000
.....................................................
(W.S.H. LAIDLAW)
/s/ NICHOLAS F. BRADY Director March 22, 2000
.....................................................
(NICHOLAS F. BRADY)
/s/ J. BARCLAY COLLINS II Director March 22, 2000
.....................................................
(J. BARCLAY COLLINS II)
/s/ PETER S. HADLEY Director March 22, 2000
.....................................................
(PETER S. HADLEY)
/s/ EDITH E. HOLIDAY Director March 22, 2000
.....................................................
(EDITH E. HOLIDAY)
/s/ WILLIAM R. JOHNSON Director March 22, 2000
.....................................................
(WILLIAM R. JOHNSON)
/s/ THOMAS H. KEAN Director March 22, 2000
.....................................................
(THOMAS H. KEAN)
/s/ FRANK A. OLSON Director March 22, 2000
.....................................................
(FRANK A. OLSON)
/s/ ROGER B. ORESMAN Director March 22, 2000
.....................................................
(ROGER B. ORESMAN)
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Director, Executive Vice President
and Chief Financial Officer
(Principal Accounting and
/s/ JOHN Y. SCHREYER Financial Officer) March 22, 2000
............................................................................................................
(JOHN Y. SCHREYER)
/s/ WILLIAM I. SPENCER Director March 22, 2000
............................................................................................................
(WILLIAM I. SPENCER)
/s/ ROBERT N. WILSON Director March 22, 2000
............................................................................................................
(ROBERT N. WILSON)
/s/ ROBERT F. WRIGHT Director March 22, 2000
............................................................................................................
(ROBERT F. WRIGHT)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 17
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
- -----------------------------------------------------------------------
Statement of Consolidated Income for each of the three years
in the period ended December 31, 1999..................... *
Statement of Consolidated Retained Earnings for each of the
three years in the period ended December 31, 1999......... *
Consolidated Balance Sheet at December 31, 1999 and 1998.... *
Statement of Consolidated Cash Flows for each of the three
years in the period ended December 31, 1999............... *
Statement of Consolidated Changes in Common Stock and
Capital in Excess of Par Value for each of the three years
in the period ended December 31, 1999..................... *
Statement of Consolidated Comprehensive Income for each of
the three years in the period ended December 31, 1999..... *
Notes to Consolidated Financial Statements.................. *
Report of Ernst & Young LLP, Independent Auditors........... *
Quarterly Financial Data.................................... *
Supplementary Oil and Gas Data.............................. *
Consent of Independent Auditors............................. F-2
Schedules**
II -- Valuation and Qualifying Accounts................... F-3
</TABLE>
- --------------------------------------------------------------------------------
* The financial statements and notes thereto together with the Report of
Ernst & Young LLP, Independent Auditors, on pages 27 through 46, the Quarterly
Financial Data (unaudited) on page 26, and the Supplementary Oil and Gas Data
(unaudited) on pages 47 through 51 of the accompanying 1999 Annual Report to
Stockholders are incorporated herein by reference.
** Schedules other than Schedule II have been omitted because of the absence
of the conditions under which they are required or because the required
information is presented in the financial statements or the notes thereto.
F-1
<PAGE> 18
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of Amerada Hess Corporation of our report dated February 24, 2000,
included in the 1999 Annual Report to Stockholders of Amerada Hess Corporation.
Our audits also included the financial statement schedule of Amerada Hess
Corporation listed in Item 14(a). This schedule is the responsibility of the
Corporation's management. Our responsibility is to express an opinion based on
our audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration
Statement (Form S-3 No. 33-79317) and in the related Prospectus, and in the
Registration Statements (Form S-8, Nos. 333-94851, 333-43569, 333-43571 and
33-65115) pertaining to the Amerada Hess Corporation Employees' Savings and
Stock Bonus Plan, Amerada Hess Corporation Savings and Stock Bonus Plan for
Retail Operations Employees and the 1995 Long-Term Incentive Plan, of our report
dated February 24, 2000, with respect to the consolidated financial statements
incorporated herein by reference.
/s/ERNST & YOUNG LLP
Ernst & Young LLP
New York, N.Y.
March 22, 2000
F-2
<PAGE> 19
SCHEDULE II
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
---------------------
CHARGED
TO COSTS CHARGED DEDUCTIONS
BALANCE AND TO OTHER FROM BALANCE
DESCRIPTION JANUARY 1 EXPENSES ACCOUNTS RESERVES DECEMBER 31
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999
Losses on receivables...... $ 6,411 $ 353 $ 26 $ 1,074 $ 5,716
======== ======== ====== ========= ========
Deferred income tax
valuation................ $141,113 $ 41,140 $ -- $ -- $182,253
======== ======== ====== ========= ========
Major maintenance.......... $ 33,210 $ 13,304 $ -- $ 10,116 $ 36,398
======== ======== ====== ========= ========
1998
Losses on receivables...... $ 2,840 $ 92 $3,858(A) $ 379 $ 6,411
======== ======== ====== ========= ========
Deferred income tax
valuation................ $330,119 $ 28,994 $ -- $ 218,000(B) $141,113
======== ======== ====== ========= ========
Major maintenance.......... $ 63,427 $ 59,109 $ -- $ 89,326(C) $ 33,210
======== ======== ====== ========= ========
1997
Losses on receivables...... $ 2,840 $ 2,498 $ 154 $ 2,652 $ 2,840
======== ======== ====== ========= ========
Deferred income tax
valuation................ $271,213 $ 58,906 $ -- $ -- $330,119
======== ======== ====== ========= ========
Major maintenance.......... $ 56,459 $ 65,068 $ -- $ 58,100 $ 63,427
======== ======== ====== ========= ========
- -------------------------------------------------------------------------------------------------------
</TABLE>
(A) Reflects increase resulting from acquisition of gas marketing customer
accounts.
(B) Reflects effect of reduction in deferred tax assets on formation of refining
joint venture.
(C) Includes reduction of $42,419 due to formation of HOVENSA joint venture in
October 1998.
F-3
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <C>
3(1) -- Restated Certificate of Incorporation of Registrant
incorporated by reference to Exhibit 19 of Form 10-Q of
Registrant for the three months ended September 30, 1988.
3(2) -- By-Laws of Registrant incorporated by reference to Exhibit
3(2) of Form 10-K of Registrant for the fiscal year ended
December 31, 1985.
4(1) -- Note and Warrant Purchase Agreement, dated June 27, 1991
(including the form of the Common Stock Purchase Warrant
expiring June 27, 2001, included as Exhibit B thereof)
incorporated by reference to Exhibit 4 of Form 10-Q of
Registrant for the three months ended June 30, 1991.
4(2) -- Amendment, dated as of May 15, 1992 to the Note and
Warrant Purchase Agreement, dated June 27, 1991 (including
the form of the common stock purchase warrant expiring
June 27, 2001, included as Exhibit B thereof),
incorporated by reference to Exhibit 19 of Form 10-Q of
Registrant for the three months ended June 30, 1992.
4(3) -- Credit Agreement dated as of May 20, 1997 among
Registrant, the Subsidiary Borrowers thereunder, The Chase
Manhattan Bank as Administrative Agent and the Lenders
party thereto, incorporated by reference to Exhibit 4 of
Form 10-Q of Registrant for the three months ended June
30, 1997.
4(4) -- Indenture dated as of October 1, 1999 between Registrant
and The Chase Manhattan Bank, as Trustee, incorporated by
reference to Exhibit 4(1) of Form 10-Q of Registrant for
the three months ended September 30, 1999.
4(5) -- First Supplemental Indenture dated as of October 1, 1999
between Registrant and The Chase Manhattan Bank, as
Trustee, relating to Registrant's 7 3/8% Notes due 2009
and 7 7/8% Notes due 2029, incorporated by reference to
Exhibit 4(2) to Form 10-Q of Registrant for the three
months ended September 30, 1999.
-- Other instruments defining the rights of holders of
long-term debt of Registrant and its consolidated
subsidiaries are not being filed since the total amount of
securities authorized under each such instrument does not
exceed 10 percent of the total assets of Registrant and
its subsidiaries on a consolidated basis. Registrant
agrees to furnish to the Commission a copy of any
instruments defining the rights of holders of long-term
debt of Registrant and its subsidiaries upon request.
10(1) -- Extension and Amendment Agreement between the Government
of the Virgin Islands and Hess Oil Virgin Islands Corp.
incorporated by reference to Exhibit 10(4) of Form 10-Q of
Registrant for the three months ended June 30, 1981.
10(2) -- Restated Second Extension and Amendment Agreement dated
July 27, 1990 between Hess Oil Virgin Islands Corp. and
the Government of the Virgin Islands incorporated by
reference to Exhibit 19 of Form 10-Q of Registrant for the
three months ended September 30, 1990.
10(3) -- Technical Clarifying Amendment dated as of November 17,
1993 to Restated Second Extension and Amendment Agreement
between the Government of the Virgin Islands and Hess Oil
Virgin Islands Corp. incorporated by reference to Exhibit
10(3) of Form 10-K of Registrant for the fiscal year ended
December 31, 1993.
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <C>
10(4) -- Third Extension and Amendment Agreement dated April 15,
1998 and effective October 30, 1998 among Hess Oil Virgin
Islands Corp., PDVSA V.I., Inc., HOVENSA L.L.C. and the
Government of the Virgin Islands.
10(5)* -- Incentive Compensation Award Plan for Key Employees of
Amerada Hess Corporation and its subsidiaries incorporated
by reference to Exhibit 10(2) of Form 10-K of Registrant
for the fiscal year ended December 31, 1980.
10(6)* -- Financial Counseling Program description incorporated by
reference to Exhibit 10(3) of Form 10-K of Registrant for
the fiscal year ended December 31, 1980.
10(7)* -- Executive Long-Term Incentive Compensation and Stock
Ownership Plan of Registrant dated June 3, 1981
incorporated by reference to Exhibit 10(5) of Form 10-Q of
Registrant for the three months ended June 30, 1981.
10(8)* -- Amendment dated as of December 5, 1990 to the Executive
Long-Term Incentive Compensation and Stock Ownership Plan
of Registrant incorporated by reference to Exhibit 10(9)
of Form 10-K of Registrant for the fiscal year ended
December 31, 1990.
10(9)* -- Amerada Hess Corporation Pension Restoration Plan dated
January 19, 1990 incorporated by reference to Exhibit
10(9) of Form 10-K of Registrant for the fiscal year ended
December 31, 1989.
10(10)* -- Letter Agreement dated August 8, 1990 between Registrant
and Mr. John Y. Schreyer relating to Mr. Schreyer's
participation in the Amerada Hess Corporation Pension
Restoration Plan incorporated by reference to Exhibit
10(11) of Form 10-K of Registrant for the fiscal year
ended December 31, 1991.
10(11)* -- 1995 Long-Term Incentive Plan, as amended, incorporated by
reference to Appendix A of Registrant's definitive proxy
statement dated March 28, 1996 for the Annual Meeting of
Stockholders held on May 1, 1996.
10(12)* -- Amended and Restated 1995 Long-Term Incentive Plan
incorporated by reference to Exhibit 4 of Registrant's
Registration Statement on Form S-8 No. 333-94851, filed
December 30, 1999.
10(13)* -- Stock Award Program for non-employee directors dated
August 6, 1997 incorporated by reference to Exhibit 10(11)
of Form 10-K of Registrant for the fiscal year ended
December 31, 1997.
10(14)* -- Change of Control Termination Benefits Agreement dated as
of September 1, 1999 between Registrant and John B. Hess,
incorporated by reference to Exhibit 10(1) of Form 10-Q of
Registrant for the three months ended September 30, 1997.
Substantially identical agreements (differing only in the
signatories thereto) were entered into between Registrant
and W. S. H. Laidlaw, J. Barclay Collins and John Y.
Schreyer.
10(15)* -- Change of Control Termination Benefits Agreement dated as
of September 1, 1999 between Registrant and F. Borden
Walker. Substantially identical agreements (differing only
in the signatories thereto) were entered into between
Registrant and other executive officers (other than the
named executive officers referred to in Exhibit 10(14)).
10(16)* -- Deferred Compensation Plan of Registrant dated December
31, 1999.
10(17) -- Asset Purchase and Contribution Agreement dated as of
October 26, 1998, among PDVSA V.I., Inc., Hess Oil Virgin
Islands Corp. and HOVENSA L.L.C. (including Glossary of
definitions) incorporated by reference to Exhibit 2.1 of
Form 8-K of Registrant dated October 30, 1998.
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <C>
10(18) -- Amended and Restated Limited Liability Company Agreement
of HOVENSA L.L.C. dated as of October 30, 1998
incorporated by reference to Exhibit 10.1 of Form 8-K of
Registrant dated October 30, 1998.
13 -- 1999 Annual Report to Stockholders of Registrant.
18 - Letter from Ernst & Young LLP dated May 14, 1999 relating
to preferability of last-in, first-out (LIFO) inventory
method, adopted January 1, 1999, incorporated by reference
to Exhibit 18 to Form 10-Q of Registrant for the three
months ended March 31, 1999.
21 -- Subsidiaries of Registrant.
23 -- Consent of Ernst & Young LLP, Independent Auditors, dated
March 22, 2000, to the incorporation by reference in
Registrant's Registration Statements on Form S-3 (No.
33-79317) and Form S-8 (Nos. 333-94851, 333-43569,
333-43571 and 33-65115) of its report relating to
Registrant's financial statements, which consent appears
on page F-2 herein.
27 -- Financial Data Schedule (for electronic filing only).
</TABLE>
- --------------------------------------------------------------------------------
* These exhibits relate to executive compensation plans and arrangements.
<PAGE> 1
EXHIBIT 10(15)
CHANGE IN CONTROL
TERMINATION BENEFITS AGREEMENT
THIS CHANGE IN CONTROL TERMINATION BENEFITS AGREEMENT (the
"Agreement"), dated as of the first day of September, 1999 is between Amerada
Hess Corporation, a Delaware corporation (the "Company"), and F. Borden Walker
(the "Executive").
W I T N E S S E T H:
WHEREAS, the Company considers it essential to the best interests of
the Company and its stockholders that its management be encouraged to remain
with the Company and to continue to devote full attention to the Company's
business in the event of a transaction or series of transactions that could
result in a change in control of the Company through a tender offer or
otherwise;
WHEREAS, the Company recognizes that the possibility of a change in
control and the uncertainty which it may raise among management may result in
the departure or distraction of management personnel to the detriment of the
Company and its stockholders;
WHEREAS, the Executive is a key Executive of the Company;
WHEREAS, the Company believes the Executive has made valuable
contributions to the productivity and profitability of the Company;
WHEREAS, should the Company receive a proposal for, or otherwise
consider any such transaction, in addition to the Executive's regular duties,
the Executive may be called upon to assist in the assessment of such proposals,
advise management and the Board of Directors of the Company (the "Board") as to
whether a proposed transaction would be in the best interests of the Company and
its stockholders, and to take such other actions as the Board might determine to
be appropriate; and
WHEREAS, the Board has determined that it is in the best interests of
the Company and its stockholders to assure that the Company will have the
continued services of the Executive, notwithstanding the possibility, threat or
occurrence of a change in control of the Company and believes that it is
imperative to diminish the potential distraction of the Executive by virtue of
the personal uncertainties and risks created by a pending or threatened change
in control, to assure the Executive's full attention and dedication to the
Company in the event of any threatened or pending change in control, and to
provide the Executive with appropriate severance arrangements following a change
in control.
<PAGE> 2
NOW, THEREFORE, to assure the Company that it will have the continued
undivided attention and services of the Executive and the availability of the
Executive's advice and counsel notwithstanding the possibility, threat or
occurrence of a change in control of the Company, and to induce the Executive to
remain in the employ of the Company, and for other good and valuable
consideration, the Company and the Executive agree as follows:
1. Change in Control.
For purposes of the Agreement, a Change in Control shall be deemed to
have taken place if any of the following shall occur:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 (the "Exchange Act")), of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of either the then (i)
outstanding shares of Common Stock of the Company (the "Outstanding Company
Common Stock") or (ii) combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Voting Securities") provided, however, that the
following acquisitions shall not constitute a Change in Control: (i) any
acquisition by the Company or any of its subsidiaries, (ii) any acquisition by
an employee benefit plan (or related trust) sponsored or maintained by the
Company or any of its subsidiaries, (iii) any acquisition by any company with
respect to which, following such acquisition, more than 60% of, respectively,
the then outstanding shares of common stock of such company and the combined
voting power of the then outstanding voting securities of such company entitled
to vote generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Voting Securities immediately prior to such
acquisition in substantially the same proportions as their ownership,
immediately prior to such acquisition, of the Outstanding Company Common Stock
and Outstanding Voting Securities, as the case may be, or (iv) any acquisition
by one or more Hess Entity (for this purpose a "Hess Entity" means (A) Mr. John
Hess or any of his children, parents or siblings, (B) any spouse of any person
described in Section (A) above, (C) any trust with respect to which any of the
persons described in (A) has substantial voting authority (D) any affiliate (as
such term is defined in Rule 12b-2 under the Exchange Act) of any person
described in (A) above, (E) the Hess Foundation Inc., or (F) any persons
comprising a group controlled (as such term is defined in such Rule 12b-2) by
one or more of the foregoing persons or entities described in this Section
1(a)(iv)); or
(b) Within any 24 month period, individuals who, immediately prior
to the beginning of such period, constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board; provided,
however, that any
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individual becoming a director during such period whose election, or nomination
for election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened solicitation to
which Rule 14a-11 of Regulation 14A promulgated under the Exchange Act applies
or other actual or threatened solicitation of proxies or consents; or
(c) Consummation of a reorganization, merger or consolidation, in
each case, with respect to which all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Voting Securities immediately prior to such
reorganization, merger or consolidation do not, following such reorganization,
merger or consolidation, beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the company
resulting from such reorganization, merger or consolidation in substantially the
same proportions as their ownership, immediately prior to such reorganization,
merger or consolidation, of the Outstanding Company Common Stock and Outstanding
Voting Securities, as the case may be; or
(d) Consummation of (i) a complete liquidation or dissolution of
the Company or (ii) the sale or other disposition of all or substantially all of
the assets of the Company, other than to a company, with respect to which
following such sale or other disposition, more than 60% of, respectively, the
then outstanding shares of common stock of such company and the combined voting
power of the then outstanding voting securities of such company entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their ownership, immediately
prior to such sale or other disposition, of the Outstanding Company Common Stock
and Outstanding Voting Securities, as the case may be. The term "the sale or
other disposition of all or substantially all of the assets of the Company"
shall mean a sale or other disposition in a transaction or series of related
transactions involving assets of the Company or of any direct or indirect
subsidiary of the Company (including the stock of any direct or indirect
subsidiary of the Company) in which the value of the assets or stock being sold
or otherwise disposed of (as measured by the purchase price being paid therefor
or by such other method as the Board determines is appropriate in a case where
there is no readily ascertainable purchase price) constitutes more than
two-thirds of the fair market value of the Company (as hereinafter defined). The
"fair market value of the Company" shall be the aggregate market value of the
then Outstanding Company Common Stock (on a fully diluted basis) plus the
aggregate market value of the Company's other outstanding
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<PAGE> 4
equity securities. The aggregate market value of the shares of Outstanding
Company Common Stock shall be determined by multiplying the number of shares of
such Common Stock (on a fully diluted basis) outstanding on the date of the
execution and delivery of a definitive agreement with respect to the transaction
or series of related transactions (the "Transaction Date") by the average
closing price of the shares of Outstanding Company Common Stock for the ten
trading days immediately preceding the Transaction Date. The aggregate market
value of any other equity securities of the Company shall be determined in a
manner similar to that prescribed in the immediately preceding sentence for
determining the aggregate market value of the shares of Outstanding Company
Common Stock or by such other method as the Board shall determine is
appropriate.
2. Circumstances Triggering Receipt of Termination Benefits.
(a) Subject to Section 2(c), the Company will provide the
Executive with the benefits set forth in Section 4 upon any termination of the
Executive's employment:
(i) by the Company at any time within the first 24 months
after a Change in Control;
(ii) by the Executive for "Good Reason" (as defined in
Section 2(b) below) at any time within the first 24 months after a
Change in Control; or
(iii) by the Company or the Executive pursuant to Section
2(d).
(b) In the event of a Change in Control, the Executive may
terminate employment with the Company and/or any subsidiary for "Good Reason"
and receive the payments and benefits set forth in Section 4 upon the occurrence
of one or more of the following events (regardless of whether any other reason,
other than Cause as provided below, for such termination exists or has
occurred):
(i) Failure to elect or reelect or otherwise to maintain
the Executive in the office or the position, or at least a
substantially equivalent office or position, of or with the Company (or
any successor thereto), which the Executive held immediately prior to a
Change in Control, or the removal of the Executive as a director of the
Company (or any successor thereto), if the Executive shall have been a
director of the Company immediately prior to the Change in Control;
(ii) (A) Any material adverse change in the nature or
scope of the Executive's authorities, powers, functions,
responsibilities or duties from those in effect immediately prior to
the Change in Control, (B) a reduction in the Executive's annual base
salary rate, (C) a reduction in the Executive's annual incentive
compensation target or any material reduction in the Executive's other
bonus opportunities, or (D) the termination or denial of the
Executive's ability
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<PAGE> 5
to participate in Employee Benefits (as defined in Section 4(b)) or
retirement benefits (as described in Section 4(c)) or a material
reduction in the scope or value thereof, any of which is not remedied
by the Company within 10 days after receipt by the Company of written
notice from the Executive of such change, reduction or termination, as
the case may be;
(iii) The liquidation, dissolution, merger, consolidation
or reorganization of the Company or transfer of all or substantially
all of its businesses and/or assets, unless the successor or successors
(by liquidation, merger, consolidation, reorganization, transfer or
otherwise) to which all or substantially all of its businesses and/or
assets have been transferred (directly or by operation of law) assumed
all duties and obligations of the Company under this Agreement pursuant
to Section 9(a);
(iv) The Company requires the Executive to change the
Executive's principal location of work to a location that is in excess
of 30 miles from the location thereof immediately prior to the Change
in Control, or requires the Executive to travel in the course of
discharging the Executive's responsibilities or duties at least 20%
more (in terms of aggregate days in any calendar year or in any
calendar quarter when annualized for purposes of comparison to any
prior year) than was required of the Executive in any of the three full
years immediately prior to the Change in Control without, in either
case, the Executive's prior written consent;
(v) Without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the Company or any
successor thereto, which breach is not remedied within 10 days after
written notice to the Company from the Executive describing the nature
of such breach.
(c) Notwithstanding Sections 2(a) and (b) above, no benefits shall
be payable by reason of this Agreement in the event of:
(i) Termination of the Executive's employment with the
Company and/or its subsidiaries by reason of the Executive's death or
Disability, provided that the Executive has not previously given a
valid "Notice of Termination" pursuant to Section 3. For purposes
hereof, "Disability" shall be defined as the inability of the Executive
due to illness, accident or other physical or mental disability to
perform the Executive's duties for any period of six consecutive months
or for any period of eight months out of any 12-month period, as
determined by an independent physician selected by the Executive (or
the Executive's legal representative) and reasonably acceptable to the
Company, provided that the Executive does not return to work on
substantially a full-time basis within 30 days after written notice
from the Company, pursuant to Section 3, of an intent to terminate the
Executive's employment due to Disability;
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<PAGE> 6
(ii) Termination of the Executive's employment with the
Company and/or its subsidiaries on account of the Executive's
retirement, pursuant to the Company's Employees' Pension Plan;
provided, however, that if the Executive has Good Reason to terminate
employment at the time of retirement, the Executive's retirement shall
be treated hereunder as a termination of the Executive's employment for
Good Reason and the Executive shall be entitled to the benefits
provided in Section 4 hereof;
(iii) Termination of the Executive's employment with the
Company and its subsidiaries for Cause. For the purposes hereof,
"Cause" shall be defined as (A) a felony conviction of the Executive or
the failure of the Executive to contest prosecution for a felony, (B)
the Executive's gross and willful misconduct in connection with the
performance of the Executive's duties with the Company and/or its
subsidiaries or (C) the willful and continued failure of the Executive
to substantially perform the Executive's duties with the Company (or
any successor thereto) after a written demand from the Company's
internal Executive Committee, any successor or similar internal
management committee or, absent any such committee, its Chief Executive
Officer (such committee, or the Chief Executive Officer, being the
"Notifying Party") for substantial performance which specifically
identifies the manner in which the Notifying Party believes that the
Executive has not performed the Executive's duties with the Company,
any of which is directly and materially harmful to the business or
reputation of the Company or any subsidiary or affiliate.
Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for "Cause" hereunder unless and until the
Executive shall have been afforded, after reasonable notice, an
opportunity to appear, together with counsel (if the Executive chooses
to have counsel present), before the Notifying Party, if the Notifying
Party is a committee, or in the event that the Notifying Party is the
Chief Executive Officer, the three most highly compensated senior
executive officers of the Company, not including the Chief Executive
Officer (such Notifying Party or the three senior executive officers,
as the case may be, being the "Hearing Party"), and after such hearing
there shall have been delivered to the Executive a written
determination by the Hearing Party that, in the good faith opinion of
the Hearing Party the Executive shall have been terminated for "Cause"
as herein defined and specifying the particulars thereof in detail.
Nothing herein will limit the right of the Executive or the Executive's
beneficiaries to contest the validity or propriety of any such
determination.
This Section 2(c) shall not preclude the payment of any amounts
otherwise payable to the Executive under any of the Company's employee benefit
plans, pension plans, stock plans, programs and arrangements.
(d) A termination of the Executive's employment by the
Company without Cause or by the Executive for an event that would constitute
Good Reason following a Change in Control that occurs, in either event, prior to
a Change in Control, but occurs
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<PAGE> 7
(i) not more than 180 days prior to the date on which a Change in Control occurs
and (ii) (x) at the request of a third party who has indicated an intention or
taken steps reasonably calculated to effect a Change in Control or (y) otherwise
arose in connection with, or in anticipation of, a Change in Control, shall be
deemed to be a termination or removal of the Executive without Cause within the
first 24 months after a Change in Control for purposes of this Agreement and the
date of such Change in Control shall be deemed to be the date immediately
preceding the date the Executive's employment terminates.
2. Notice of Termination.
Any termination of the Executive's employment with the Company and its
subsidiaries as contemplated by Section 2 shall be communicated by written
"Notice of Termination" to the other party hereto. Any "Notice of Termination"
shall indicate the effective date of termination which shall not be less than 30
days or more than 60 days after the date the Notice of Termination is delivered
(the "Termination Date"), the specific provision in this Agreement relied upon,
and, except for a termination pursuant to Section 2(d), will set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
such termination including, if applicable, the failure by the Company, after
provision of written notice by the Executive, to effect a remedy pursuant to the
final clause of Section 2(b)(ii) or 2(b)(v).
4. Termination Benefits.
Subject to the conditions set forth in Section 2, the following
benefits shall be paid or provided to the Executive:
(a) Compensation.
The Company shall pay to the Executive two times the sum of (i) "Base
Pay", which shall be an amount equal to the greater of (A) the Executive's rate
of annual base salary (prior to any deferrals) at the Termination Date or (B)
the Executive's rate of annual base salary (prior to any deferrals) immediately
prior to the Change in Control, plus (ii) "Incentive Pay", which shall be an
amount equal to the greater of (X) the target annual bonus payable to the
Executive under the Company's incentive compensation plan or any other annual
bonus plan for the fiscal year of the Company in which the Change in Control
occurred or (Y) the highest annual bonus earned by the Executive under the
Company's incentive compensation plan or any other annual bonus plan (whether
paid currently or on a deferred basis) during the three fiscal years of the
Company immediately preceding the fiscal year of the Company in which the Change
in Control occurred. In addition, the Executive shall receive a pro rata portion
of the target bonus for the fiscal year in which the Executive's termination of
employment occurs.
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<PAGE> 8
(b) Welfare Benefits.
For a period of 24 months following the Termination Date (the
"Continuation Period"), the Company shall arrange to provide the Executive with
benefits (the "Employee Benefits"), including travel accident, major medical,
dental care and other welfare benefit programs, substantially similar to those
in effect immediately prior to the Change in Control, or, if greater, to those
that the Executive was receiving or entitled to receive immediately prior to the
Termination Date (or, if greater, immediately prior to the reduction,
termination, or denial described in Section 2(b)(ii)(D)). If and to the extent
that any benefit described in this Section 4(b) is not or cannot be paid or
provided under any policy, plan, program or arrangement of the Company or any
subsidiary, as the case may be, then the Company will itself pay or provide for
the payment to the Executive, the Executive's dependents and beneficiaries, of
such Employee Benefits along with, in the case of any benefit which is subject
to tax because it is not or cannot be paid or provided under any such policy,
plan, program or arrangement of the Company or any subsidiary, an additional
amount such that after payment by the Executive, or the Executive's dependents
or beneficiaries, as the case may be, of all taxes so imposed, the recipient
retains an amount equal to such taxes. Employee Benefits otherwise receivable by
the Executive pursuant to this Section 4(b) will be reduced to the extent
comparable welfare benefits are actually received by the Executive from another
employer during the Continuation Period, and any such benefits actually received
by the Executive shall be reported by the Executive to the Company. In addition,
the Executive shall receive additional age and service credit for the
Continuation Period for purposes of the Executive's eligibility to receive any
retiree medical benefits.
(c) Retirement Benefits.
The Executive shall be deemed to be completely vested in the
Executive's currently accrued benefits under the Company's Employees' Pension
Plan and the Company's Pension Restoration Plan or other supplemental pension
plan ("SERP") in effect as of the date of the Change in Control (collectively,
the "Plans"), regardless of the Executive's actual vesting service credit
thereunder. In addition, the Executive shall be deemed to earn age and service
credit for benefit calculation purposes thereunder for the Continuation Period.
The additional retirement benefits to be paid pursuant to the Plans shall be
calculated as though the Executive's compensation rate for the years during the
Continuation Period equaled the sum of Base Pay plus Incentive Pay. Any benefits
payable pursuant to this Section 4(c) that are not payable out of the Plans for
any reason (including but not limited to any applicable benefit limitations
under the Employee Retirement Income Security Act of 1974, as amended, or any
restrictions relating to the qualification of the Company's Employees' Pension
Plan under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code")) shall be paid directly by the Company out of its general assets at the
time such benefits would be payable under the applicable Plan.
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(d) Stock Based Compensation Plans.
(i) Any issued and outstanding stock options shall vest
and become exercisable on the Termination Date (to the extent they have
not already become vested and exercisable) and any other stock-based
awards under any compensation plan or program maintained by the Company
(including, without limitation, awards of restricted stock and book
value appreciation units) and the Executive's rights thereunder shall
vest on the Termination Date (to the extent they have not already
vested) and any performance criteria under any such compensation plan
or program shall be deemed met at target as of the Termination Date.
(ii) If and to the extent that any benefit or entitlement
(or portion thereof) described in paragraph (i) above is not able to be
implemented by the Company under the then applicable terms of any plan,
program or award agreement applicable to the Executive, the Company
shall pay to the Executive cash and/or other property (including,
without limitation, common stock of the Company or any successor
thereto) with a value, as determined by the Board, equal to the value
of any such option, award or other entitlement (or portion thereof)
that the Executive was not able to receive under paragraph (i) above,
and such payment shall be in full satisfaction of the option, award or
other entitlement (or portion thereof) to which such payment relates.
(e) Deferred Compensation.
The Company shall pay to the Executive all other amounts
accrued or earned by the Executive through the Termination Date and amounts
otherwise owing under the then existing plans and policies of the Company,
including but not limited to, all amounts of compensation previously deferred by
the Executive (together with any accrued interest or other earnings thereon) and
not yet paid by the Company.
(f) Outplacement Services.
If so requested by the Executive, outplacement services shall
be provided to the Executive by a professional outplacement firm or provider
selected by the Executive that is reasonably acceptable to the Company at a cost
to the Company not in excess of $30,000.
(g) The Company shall pay to the Executive the amounts due
pursuant to Sections 4(a) and 4(d)(ii), in a lump sum on the first business day
of the month following the Termination Date. The Company shall pay to the
Executive the amounts due pursuant to Section 4(e) in accordance with the terms
and conditions of the existing plans and policies of the Company.
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<PAGE> 10
5. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that it shall be determined (as hereafter provided) that any payment
(other than the Gross-Up payments provided for in this Section 5) or benefit
provided by the Company or any of its subsidiaries to or for the benefit of the
Executive, whether paid or payable or provided pursuant to the terms of this
Agreement or otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement, including without limitation any stock option,
stock appreciation right or similar right, restricted stock, deferred stock or
the lapse or termination of any restriction on, deferral period for, or the
vesting or exercisability of any of the foregoing (a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Code (or any successor
provision thereto) by reason of being considered "contingent on a change in
ownership or control" of the Company, within the meaning of Section 280G of the
Code (or any successor provision thereto) or to any similar tax imposed by state
or local law, or any interest or penalties with respect to any such tax (such
tax or taxes, together with any such interest and penalties, being hereafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment or payments (collectively, a "Gross-Up
Payment"). The Gross-Up Payment shall be in an amount such that, after payment
by the Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax and any income tax imposed upon
the Gross-Up Payment, the Executive retains an amount of Gross-Up Payment equal
to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 5(f), all determinations
required to be made under this Section 5, including whether an Excise Tax is
payable by the Executive and the amount of such Excise Tax and whether a
Gross-Up Payment is required to be paid by the Company to the Executive and the
amount of such Gross-Up Payment, if any, shall be made by the Company's outside
auditors immediately prior to the Change in Control (the "Accounting Firm"). The
Executive shall direct the Accounting Firm to submit its determination and
detailed supporting calculations to both the Company and the Executive within 30
days after the Change in Control Date, the Termination Date, if applicable, and
any such other time or times as may be requested by the Company or the
Executive. If the Accounting Firm determines that any Excise Tax is payable by
the Executive, the Company shall pay the required Gross-Up Payment to the
Executive within five business days after receipt of such determination and
calculations with respect to any Payment to the Executive. If the Accounting
Firm determines that no Excise Tax is payable by the Executive, it shall, at the
same time as it makes such determination, furnish the Company and the Executive
an opinion that the Executive has substantial authority not to report any Excise
Tax on the Executive's federal, state or local income or other tax return. As a
result of the uncertainty in the application of Section 4999 of the Code (or any
successor provision thereto) and the possibility of similar uncertainty
regarding applicable state of local tax law at the time of any determination by
the Accounting Firm hereunder, it is possible that a Gross-Up Payment which will
not have been made by the Company should have been
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made (an "Underpayment'), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts or fails to pursue its
remedies pursuant to Section 5(f) and the Executive thereafter is required to
make a payment of any Excise Tax, the Executive shall direct the Accounting Firm
to determine the amount of the Underpayment that has occurred and to submit its
determination and detailed supporting calculations to both the Company and the
Executive as promptly as possible. Any such Underpayment shall be promptly paid
by the Company to, or for the benefit of, the Executive within five business
days after receipt of such determination and calculations.
(c) The Company and the Executive shall each provide the
Accounting Firm access to and copies of any books, records and documents in the
possession of the Company or the Executive, as the case may be, reasonably
requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determinations and
calculations contemplated by Section 5(b). Any determination by the Accounting
Firm as to the amount of the Gross-Up Payment shall be binding upon the Company
and the Executive.
(d) The federal, state and local income or other tax returns filed
by the Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive shall make proper payment of the amount of any
Excise Tax, and at the request of the Company, provide to the Company true and
correct copies (with any amendments) of the Executive's federal income tax
return as filed with the Internal Revenue Service and corresponding state and
local tax returns, if relevant, as filed with the applicable taxing authority,
and such other documents reasonably requested by the Company, evidencing such
payment. If prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-Up Payment should be reduced, the
Executive shall, within five business days, pay to the Company the amount of
such reduction.
(e) The fees and expenses of the Accounting Firm for its services
in connection with the determinations and calculations contemplated by Section
5(b) shall be borne by the Company. If such fees and expenses are initially paid
by the Executive, the Company shall reimburse the Executive the full amount of
such fees and expenses within five business days after receipt from the
Executive of a statement therefor and reasonable evidence of payment thereof.
(f) The Executive shall notify the Company in writing of any
claim, by the Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up Payment or
any additional Gross-Up Payment. Such notification shall be given as promptly as
practicable but no later than l0 business days after the Executive actually
receives notice of such claim, and the Executive shall further apprise the
Company of the nature of such claim and the date on
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which such claim is requested to be paid (in each case, to the extent known by
the Executive). The Executive shall not pay such claim prior to the earlier of
(x) the expiration of the 30-day period following the date on which the
Executive gives such notice to the Company and (y) the date that any payment
with respect to such claim is due. If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) provide the Company with any written records or documents in
the Executive's possession relating to such claim reasonably requested
by the Company;
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including without limitation accepting legal representation with
respect to such claim by an attorney competent in respect of the
subject matter and reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively
to contest such claim; and
(iv) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax including interest and
penalties with respect thereto, imposed as a result of such contest and payment
of costs and expenses. Without limiting the foregoing provisions of this Section
5(f), the Company shall control all proceedings taken in connection with the
contest of any claim contemplated by this Section 5(f) and, at its sole option,
may pursue or forego any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim (provided,
however, that the Executive may participate therein at the Executive's own cost
and expense) and may, at its option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay the tax claimed and sue for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income or other tax, including interest
or penalties with respect thereto, imposed with respect to such advance; and
provided further, that any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with respect to which the
contested amount is claimed to be due is limited solely to such contested
amount.
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Furthermore, the Company's control of any such contested claim shall be limited
to issues with respect to which a Gross-Up Payment would be payable hereunder
and the Executive shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other taxing
authority.
(g) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 5(f), the Executive receives any refund with
respect to such claim, the Executive shall (subject to the Company's complying
with the requirements of Section 5(f)) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after any taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(f), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial or refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of any such advance shall offset, to the extent
thereof, the amount of any Gross-Up Payment required to be paid by the Company
to the Executive pursuant to this Section 5.
6. No Mitigation Obligation; Obligations Absolute. The payment of
the severance compensation by the Company to the Executive in accordance with
the terms of this Agreement is hereby acknowledged by the Company to be
reasonable, and the Executive will not be required to mitigate the amount of any
payment or other benefit provided in this Agreement by seeking other employment
or otherwise, nor will any profits, income, earnings or other benefits from any
source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of the Executive hereunder or otherwise, except as
expressly provided in the second to last sentence of Section 4(b) and Section 13
hereof. The obligations of the Company to make the payments and provide the
benefits provided herein to the Executive are absolute and unconditional and may
not be reduced under any circumstances, including without limitation any
set-off, counterclaim, recoupment, defense or other right which the Company may
have against the Executive or any third party at any time.
7. Legal Fees and Expenses.
It is the intent of the Company that the Executive not be required to
incur legal fees and the related expenses associated with the interpretation,
enforcement or defense of the Executive's rights under this Agreement by
litigation or otherwise because the cost and expense thereof would substantially
detract from the benefits intended to be extended to the Executive hereunder.
Accordingly, if, following a Change in Control, it should appear to the
Executive that the Company has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other person takes
or threatens to take any action to declare this Agreement void or unenforceable,
or institutes any litigation or other action or proceeding designed to deny, or
to recover from, the Executive any or all of the benefits provided or intended
to be provided to the
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Executive hereunder, the Company irrevocably authorizes the Executive from time
to time to retain counsel of the Executive's choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation or other legal
action, whether by or against the Company or any director, officer, stockholder
or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a confidential relationship
shall exist between the Executive and such counsel. Without respect to whether
the Executive prevails, in whole or in part, in connection with any of the
foregoing, the Company will pay and be solely financially responsible for all
reasonable attorneys' fees and related expenses incurred by the Executive in
good faith in connection with any of the foregoing; provided, however, that the
Company shall have no obligation hereunder to pay any attorneys' fees or related
expenses with respect to any frivolous claims made by the Executive. Payments by
the Company shall be made within 10 business days after receipt of the
Executive's written request for payment accompanied by such evidence of fees and
expenses as the Company may reasonably require.
8. Continuing Obligations.
The Executive hereby agrees that all documents, records, techniques,
business secrets and other information which have come into the Executive's
possession from time to time during the Executive's employment with the Company
shall be deemed to be confidential and proprietary to the Company and, except
for personal documents and records of the Executive, shall be returned to the
Company. The Executive further agrees to retain in confidence any confidential
information known to him concerning the Company and its subsidiaries and their
respective businesses so long as such information is not otherwise publicly
disclosed, except that Executive may disclose any such information required to
be disclosed in the normal course of the Executive's employment with the Company
or pursuant to any court order or other legal process or as necessary to enforce
the Executive's rights under this Agreement.
9. Successors.
(a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place. Failure of such successor entity to enter into such agreement prior to
the effective date of any such succession (or, if later, within three business
days after first receiving a written request for such agreement) shall
constitute a breach of this Agreement and shall entitle the Executive to
terminate
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<PAGE> 15
employment pursuant to Section 2(a)(ii) and to receive the payments and benefits
provided under Section 4. As used in this Agreement, "Company" shall mean the
Company as herein before defined and any successor to its business and/or assets
as aforesaid which executes and delivers the Agreement provided for in this
Section 9 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive dies while any amounts are payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's designee or, if there is no such designee, to
the Executive's estate.
10. Notices.
For all purposes of this Agreement, all communications, including
without limitation notices, consents, requests or approvals, required or
permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five business days
after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been
sent by a nationally recognized overnight courier service such as FedEx, UPS, or
Purolator, addressed to the Company (to the attention of the Secretary of the
Company, with a copy to the General Counsel of the Company) at its principal
executive office and to the Executive at the Executive's principal residence, or
to such other address as any party may have furnished to the other in writing
and in accordance herewith, except that notices of changes of address shall be
effective only upon receipt.
11. Governing Law.
THE VALIDITY, INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
12. Miscellaneous.
No provisions of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in a writing signed
by the Executive and the Company. No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this
15
<PAGE> 16
Agreement (or in any employment or other written agreement relating to the
Executive). Nothing expressed or implied in this Agreement will create any right
or duty on the part of the Company or the Executive to have the Executive remain
in the employment of the Company or any subsidiary prior to or following any
Change in Control. The Company may withhold from any amounts payable under this
Agreement all federal, state, city or other taxes as the Company is required to
withhold pursuant to any law or government regulation or ruling. In the event
that the Company refuses or otherwise fails to make a payment when due and it is
ultimately decided that the Executive is entitled to such payment, such payment
shall be increased to reflect an interest factor, compounded annually, equal to
the prime rate in effect as of the date the payment was first due plus two
points. For this purpose, the prime rate shall be based on the rate identified
by Chase Manhattan Bank as its prime rate.
Notwithstanding anything in this Agreement to the contrary, if any
right or entitlement of the Executive under this Agreement would cause a
transaction involving the Company to be ineligible for "pooling of interests"
accounting treatment and that transaction would, but for such right or
entitlement hereunder, be eligible for such accounting treatment (each as
determined by the Company's outside auditors), the Board may, unilaterally and
without notice, modify, adjust or terminate any such right or entitlement so
that the transaction will be eligible for "pooling of interests" accounting
treatment (as determined by the Company's outside auditors); provided, however,
that any such right or entitlement that is modified, adjusted or terminated
under this paragraph shall be fully reinstated (with retroactive payments, if
necessary) if the transaction which caused such modification, adjustment or
termination to be made is not consummated or if "pooling of interest" accounting
treatment is not applied to such transaction.
13. Reduction for Other Severance.
Any payments or other benefits provided to the Executive under this
Agreement shall be reduced by any payments or other benefits, under any
severance plan or employment agreement, which the Executive is eligible to
receive as a result of the termination of the Executive's employment.
14. Separability.
The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
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<PAGE> 17
15. Non-assignability.
This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign or transfer this Agreement or
any rights or obligations hereunder, except as provided in Section 9. Without
limiting the foregoing, the Executive's right to receive payments hereunder
shall not be assignable or transferable, whether by pledge, creation of a
security interest or otherwise, other than a transfer by will or by the laws of
descent or distribution, and in the event of any attempted assignment or
transfer by the Executive contrary to this Section 15 the Company shall have no
liability to pay any amount so attempted to be assigned or transferred to any
person other than the Executive or, in the event of death, the Executive's
designated beneficiary or, in the absence of an effective beneficiary
designation, the Executive's estate.
16. Effectiveness; Term.
This Agreement will be effective and binding as of the date first above
written immediately upon its execution and shall continue in effect through the
second anniversary of such date; provided, however, that the term of this
Agreement shall automatically be extended for an additional day for each day
that passes so that there shall at any time be two years remaining in the term
unless the Company provides written notice to the Executive that it does not
wish the term of this Agreement to continue to be so extended, in which case the
Agreement shall terminate on the second anniversary of such notice if there has
not been a Change in Control prior to such second anniversary. In the event that
a Change in Control has occurred during the term of this Agreement, then this
Agreement shall continue to be effective until the second anniversary of such
Change in Control. Notwithstanding any other provision of this Agreement, if,
prior to a Change in Control, the Executive ceases for any reason to be an
employee of the Company and any subsidiary (other than a termination of
employment pursuant to Section 2(d) hereof), thereupon without further action
the term of this Agreement shall be deemed to have expired and this Agreement
will immediately terminate and be of no further effect. For purposes of this
Section 16, the Executive shall not be deemed to have ceased to be an employee
of the Company and any subsidiary by reason of the transfer of the Executive's
employment between the Company and any subsidiary, or among any subsidiaries.
Notwithstanding any provision of this Agreement to the contrary, the parties'
respective rights and obligations under Sections 4 through 9 will survive any
termination or expiration of this Agreement or the termination of the
Executive's employment following a Change in Control for any reason whatsoever.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
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18. Prior Agreement. This Agreement supersedes and terminates any
and all prior similar agreements by and among Company (and/or a subsidiary) and
the Executive.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above set forth.
AMERADA HESS CORPORATION
By: /s/ John B. Hess
------------------------------
John B. Hess
Chairman of the Board and
Chief Executive Officer
/s/ F. Borden Walker
- ------------------------------
Signature
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<PAGE> 1
EXHIBIT 10(16)
AMERADA HESS CORPORATION
DEFERRED COMPENSATION PLAN
* * * * *
SECTION 1. PURPOSE. The purpose of the Plan is to provide certain
select employees of the Company with an opportunity to defer the receipt of
compensation for services rendered to the Company. The Plan is intended to aid
the Company in retaining and attracting employees whose abilities, experience
and judgment can contribute to the continued progress of the Company. The Plan
is being maintained primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated employees of the Company.
SECTION 2. DEFINITIONS.
(a) "Account(s)" means the Deferred Compensation
Account(s).
(b) "Board" means the Company's Board of Directors.
(c) "Bonus" means any special and/or discretionary
compensation amounts in excess of Salary, determined by the Company to be
payable to a Participant with respect to services rendered.
(d) "Change in Control" shall mean:
(1) The acquisition by an individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either the then
(i) outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (ii) combined voting power of the then
outstanding voting
<PAGE> 2
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Voting Securities"); provided, however,
that the following acquisitions shall not constitute a Change in
Control: (i) any acquisition by the Company or any of its subsidiaries,
(ii) any acquisition by an employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its subsidiaries,
(iii) any acquisition by any corporation with respect to which,
following such acquisition, more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Voting Securities immediately prior to such
acquisition in substantially the same proportions as their ownership,
immediately prior to such acquisition, of the Outstanding Company
Common Stock and Outstanding Voting Securities, as the case may be, or
(iv) any acquisition by one or more Hess Entity (for this purpose a
"Hess Entity" means (A) Mr. John Hess or any of his children, parents
or siblings (B) any spouse of any person described in Section
2(d)(1)(iv)(A), (C) any trust as to which any of the persons described
in Section 2(d)(1)(iv)(A) has substantial voting authority, (D) any
affiliate (as such term is defined in Rule 12b-2 under the Exchange
Act) of any person described in Section 2(d)(1)(iv)(A), (E) the Hess
Foundation Inc., or (F) any persons comprising a group controlled (as
such term is defined in such Rule 12b-2) by one or more of the
foregoing persons or entities described in Section 2(d)(1)(iv)(A).
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<PAGE> 3
(2) Individuals who, as of the effective date of
the Plan, constitute the Board (the "Incumbent Board") ceasing for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the
effective date of the Plan whose election, or nomination for election
by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened solicitation to which Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act applies or other actual threatened
solicitation of proxies or consents; or
(3) Consummation of a reorganization, merger or
consolidation, in each case, with respect to which all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Voting Securities immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or
consolidation, beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such reorganization, merger
or consolidation in substantially the same proportions as their
ownership, immediately prior to such reorganization, merger or
consolidation, of the Outstanding Company Common Stock and Outstanding
Voting Securities, as the case may be; or
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<PAGE> 4
(4) Consummation of (i) a complete liquidation
or dissolution of the Company or (ii) the sale or other disposition of
all or substantially all of the assets of the Company other than to a
corporation with respect to which following such sale or other
disposition, more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Voting Securities immediately prior to such sale or other disposition
in substantially the same proportion as their ownership, immediately
prior to such sale or other disposition, of the Outstanding Company
Common Stock and Outstanding Voting Securities, as the case may be. The
term "the sale or other disposition of all or substantially all of the
assets of the Company" shall mean a sale or other disposition
transaction or series of related transactions involving assets of the
Company or of any direct or indirect subsidiary of the Company
(including the stock of any direct or indirect subsidiary of the
Company) in which the value of the assets or stock being sold or
otherwise disposed of (as measured by the purchase price being paid
therefor or by such other method as the Board determines is appropriate
in a case where there is no readily ascertainable purchase price)
constitutes more than two-thirds of the fair market value of the
Company (as hereinafter defined). The "fair market value of the
Company" shall be the aggregate market value of the then Outstanding
Company Common Stock (on a fully diluted basis ) plus the aggregate
market value of the Company's other outstanding equity securities. The
aggregate market value of the shares
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<PAGE> 5
of Outstanding Company Common Stock shall be determined by multiplying
the number of shares of such Common Stock (on a fully diluted basis)
outstanding on the date of the execution and delivery of a definitive
agreement with respect to the transaction or series of related
transactions (the "Transaction Date") by the average closing price of
the shares of Outstanding Company Common Stock for the ten trading days
immediately preceding the Transaction Date. The aggregate market value
of any other equity securities of the Company shall be determined in a
manner similar to that prescribed in the immediately preceding sentence
for determining the aggregate market value of the shares of Outstanding
Company Common Stock or by such other method as the Board shall
determine is appropriate.
(e) "Committee" means the Compensation Committee of the
Board.
(f) "Company" means the Amerada Hess Corporation.
(g) "Deferred Compensation" means the Eligible Earnings
that are the subject of an elective deferral under Section 5.
(h) "Deferred Compensation Account" means the bookkeeping
account established for a Participant under the Plan and to which Deferred
Compensation amounts with respect to such Participant are credited from time to
time, as adjusted from time to time as provided in the Plan.
(i) "Deferred Compensation Election Form" means the form
pursuant to which Eligible Employees elect to become Participants in the Plan
and to defer Eligible Earnings thereunder, in such form as the Committee
determines from time to time in its sole discretion.
(j) "Disability" means mental or physical disability as
determined by the Committee in accordance with standards and procedures similar
to those under the Company's
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<PAGE> 6
broad-based regular long-term disability plan, if any. At any time that the
Company does not maintain such a long-term disability plan, Disability shall
mean the inability of a Participant, as determined by the Committee,
substantially to perform such Participant's regular duties and responsibilities
due to a medically determinable physical or mental illness which has lasted (or
can reasonably be expected to last) for a period of at least six (6) consecutive
months.
(k) "Eligible Earnings" means a Participant's aggregate
cash Salary and Bonus payments for the Plan Year.
(l) "Eligible Employee" means any employee of the Company
who is selected as being eligible for participation by the Committee.
(m) "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time. References to any provision of the Exchange
Act shall be deemed to include successor provisions thereto and any rules and
regulations thereunder.
(n) "Participant" means an Eligible Employee who has
elected to defer Eligible Earnings pursuant to the Plan.
(o) "Plan" means the Amerada Hess Corporation Deferred
Compensation Plan, as set forth herein and as amended from time to time.
(p) "Plan Year" means the calendar year.
(q) "Salary" means the regular gross base compensation
paid by the Company to an employee (without regard to any reduction thereof
pursuant to the Plan or any cafeteria, flexible spending, thrift or savings plan
maintained by the Company), exclusive of Bonus payments and any other incentive
or special payments made by the Company to such employee, as determined by the
Committee.
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<PAGE> 7
SECTION 3. ELIGIBILITY. Individuals eligible to participate in the
Plan shall consist of the Eligible Employees of the Company.
SECTION 4. ADMINISTRATION.
(a) The Plan shall be administered by the Committee. The
Committee is authorized to construe and interpret the Plan and promulgate, amend
and rescind rules and regulations relating to the implementation, administration
and maintenance of the Plan. Subject to the terms and conditions of the Plan,
the Committee shall make all determinations necessary or advisable for the
implementation, administration and maintenance of the Plan including, without
limitation, determining the Eligible Employees and correcting any technical
defect(s) or technical omission(s), or reconciling any technical
inconsistency(ies), in the Plan. The Committee may designate persons other than
members of the Committee to carry out the day-to day ministerial administration
of the Plan under such conditions and limitations as it may prescribe; provided,
however, that the Committee shall not delegate its authority with regard to the
determination of Eligible Employees. The Committee's determinations under the
Plan need not be uniform and may be made selectively among Participants, whether
or not such Participants are similarly situated. Any determination, decision or
action of the Committee in connection with the construction, interpretation,
administration, implementation or maintenance of the Plan shall be final,
conclusive and binding upon all Participants and any person(s) claiming under or
through any Participants.
(b) The Company will indemnify and hold harmless the
Committee and each member thereof against any cost or expense (including without
limitation attorney's fees) or liability (including without limitation any sum
paid in settlement of a claim with the approval of
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<PAGE> 8
the Company) arising out of any act or omission to act, except in the case of
willful gross misconduct or gross negligence.
(c) All fees and expenses incurred by the Committee and
the Company with respect to the administration of the Plan shall be paid by the
Company.
(d) The Committee shall have final and exclusive
authority to decide all questions arising in connection with a Participant's or
a beneficiary of a deceased Participant's (such Participant or beneficiary being
referred to herein as a "Claimant") claim for benefits under the Plan.
SECTION 5. PARTICIPATION; ELECTIVE DEFERRALS. To elect to
participate in the Plan for a particular Plan Year, an Eligible Employee must
execute a Deferred Compensation Election Form and file such form with the
Committee (or its designee) before the commencement of such Plan Year. To
participate in the Plan during the year in which the Plan is first implemented,
the Eligible Employee must make an election to defer Eligible Earnings for
services to be performed subsequent to the election within 30 days after the
effective date of the Plan. To participate in the Plan during the first year in
which an individual becomes eligible to participate in the Plan, the new
Eligible Employee must make an election to defer Eligible Earnings for services
to be performed subsequent to the election within 30 days after the date the new
Eligible Employee becomes eligible. Such election shall:
(i) contain a statement that the Eligible Employee elects
to defer a portion of the Eligible Employee's Eligible Earnings up to
100% thereof for a specified Plan Year that become payable to the
Eligible Employee after the filing of such election, or such other
limit as the Committee may determine from time to time in its sole
discretion. The minimum dollar amount of Eligible Earnings that an
Eligible Employee may elect to
8
<PAGE> 9
defer is $10,000, or such other minimum as the Committee may determine
from time to time in its sole discretion, and such amount shall be pro
rated with respect to an individual who becomes an Eligible Employee
during a Plan Year;
(ii) apply only to the Eligible Earnings consisting of
Salary otherwise payable to the Eligible Employee during the Plan Year
for which such election is made and to any Bonus payment that is
attributable to the Eligible Employee's services rendered to the
Company during the Plan Year for which such election is made (whether
or not actually payable in such Plan Year);
(iii) be irrevocable with respect to the Plan Year to which
it applies;
(iv) specify whether upon the Participant's termination of
employment by reason of retirement, the balance of the Participant's
Deferred Compensation Account shall be paid, or in the case of
installment payments, commence being paid, as soon as administratively
possible after the end of the month in which the termination of the
Participant's employment by reason of retirement occurs, or as soon as
administratively possible following the beginning of the Plan Year
immediately following the Plan Year in which such termination of
employment by reason of retirement occurs;
(v) specify a date, no earlier than three years after the
date such election is made, that the Deferred Compensation will be paid
to the Participant. A Participant may elect to delay the date that the
Deferred Compensation will be paid or the date of commencement of
Deferred Compensation distributions; provided, however, that such
election to delay the payment date or the commencement date of Deferred
Compensation distributions shall only be effective with respect to
payments of Deferred Compensation to be made or commencing no earlier
than 13 months after the date of such changed
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<PAGE> 10
election. If a Participant is to commence receiving payments of
Deferred Compensation prior to the date which is 13 months after the
date of such changed election, such Participant's Deferred Compensation
shall be paid in accordance with his or her most recent other election
made more than 13 months prior to the payment date of, or commencement
of distributions of, such Participant's Deferred Compensation; and
(vi) specify the form, either a lump sum or annual
installments over a five year period, in which the Deferred
Compensation will be paid to the Participant; provided, however, that
in the event of a Participant's termination of employment for any
reason other than his or her retirement prior to the distribution of
his or her Deferred Compensation or the commencement of his or her
Deferred Compensation distributions, such Participant's Deferred
Compensation shall be paid in a single lump sum regardless of his or
her election under this Section 5(vi). A Participant may change his or
her election as to the form in which Deferred Compensation will be paid
at any time prior to the payment of Deferred Compensation or the
commencement of Deferred Compensation distributions; provided, however,
that such election to change the distribution form shall only be
effective with respect to payments of Deferred Compensation made or
commencing no earlier than 13 months after the date of such changed
election. If a Participant does commence receiving payments of Deferred
Compensation prior to the date which is 13 months after the date of
such changed election, such Participant's Deferred Compensation shall
be paid in accordance with his or her most recent other election made
more than 13 months prior to the payment date of, or commencement of,
such Participant's Deferred Compensation.
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<PAGE> 11
Upon receipt of an Eligible Employee's Deferred Compensation Election Form, the
Company shall establish as an accounting entry an individual Deferred
Compensation Account for such Eligible Employee and such Eligible Employee shall
become a Participant under the Plan. Thereafter, the Company shall credit the
Participant's Deferred Compensation Account with all Deferred Compensation which
would otherwise have been payable to the Eligible Employee in the absence of an
election under the Plan. The Deferred Compensation Account shall be credited no
less frequently than the last day of each month in an amount equal to the sum of
the Deferred Compensation that would otherwise have been paid by the Company in
accordance with the Company's normal payroll practices for such month.
SECTION 6. INVESTMENT OF ACCOUNT BALANCES. During and for each Plan
Year, the balances in each Participant's Deferred Compensation Account will be
deemed to be invested, as of the date elective deferrals are credited to such
Deferred Compensation Account under the Plan, in such investment vehicle(s)
offered by the Committee in its sole discretion and selected by the Participant.
The Committee shall, in its sole discretion, have the right to change the
investment vehicles(s) offered to Participants at any time and from time to
time. At the end of each month, each Participant's Deferred Compensation Account
shall be adjusted pursuant to Section 7 below and such adjusted Deferred
Compensation Account balance shall then be reinvested for the immediately
succeeding month.
SECTION 7. VALUATION. At the end of each month, the balance in the
Deferred Compensation Account of each Participant shall be determined by the
Company, taking into account any increase therein resulting from such
Participant's Deferred Compensation contributions for such month under Section
6, if any, and any earnings attributable to such Participant's existing Deferred
Compensation Account balance, including deferred Eligible
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<PAGE> 12
Earnings for such month under Section 5, if any, and any decrease therein
resulting from the distribution to such Participant, or such Participant's
Designated Beneficiary(ies), of any installment pursuant to such Participant's
Deferred Compensation Election Form and Section 8, and any losses attributable
to such Participant's existing Deferred Compensation Account balance under
Section 6. The balance determined, as of the end of each Plan Year, shall be
communicated in writing to each Participant as soon as practicable after the end
of the Plan Year. In the case of any payment to be made upon a Participant's
termination of employment or payment upon a Change in Control under Section 8
below, the balances in the Deferred Compensation Account of any affected
Participant shall be valued and determined by the Company as of the date on
which occurs any such termination or payment upon a Change in Control.
SECTION 8. PAYMENT OF DEFERRED COMPENSATION.
(a) Where no Change in Control has occurred the accrued
balance in a Participant's Deferred Compensation Account shall be paid (or in
the case of installments, commence being paid) to a Participant, or, in the case
of any Participant's death prior to payment, the Participant's designated
beneficiary(ies), in cash, in either a lump sum or installments, as specified by
the Participant in accordance with Section 5, no later than the earlier of:
(i) as soon as administratively possible after the end of
the month in which the termination of the Participant's employment for
any reason (other than retirement) including, but not limited to, death
or Disability, occur;
12
<PAGE> 13
(ii) in the event of a Participant's termination of
employment by reason of his or her retirement, the date specified by
the Participant on the applicable Deferred Compensation Election Form
in accordance with Section 5; or
(iii) the date specified by the Participant on the
applicable Deferred Compensation Election Form in accordance with
Section 5.
(b) Upon the occurrence of a Change in Control, the
balance of each Participant's Deferred Compensation Account shall be paid by the
Company in a cash lump sum to the Participant, or in the case of any
Participant's death prior to such payment, the Participant's designated
beneficiary(ies) in accordance with the Participant's Deferred Compensation
Election Form (as soon as practicable after such occurrence).
(c) All payments of Deferred Compensation under this
Section 8 shall include earnings and/or losses attributable to the deferred
Eligible Earnings as determined in accordance with Section 6.
SECTION 9. WITHDRAWAL ELECTION. A Participant may elect, at any time,
to withdraw all or any portion (subject to a minimum of $10,000) of his or her
Account balance, calculated as if the Participant had terminated employment as
of the day of the election, less a withdrawal penalty equal to 10% of such
amount (the net amount shall be referred to as the "Withdrawal Amount"). This
election can be made by the Participant at any time before the Participant's
termination of employment for any reason, including retirement, Disability or
death, and whether or not the Participant is in the process of being paid
pursuant to an installment payment schedule. Once the Withdrawal Amount is paid,
the Participant shall not be eligible to make a new deferral under the Plan for
the next 13 months.
13
<PAGE> 14
SECTION 10. AMENDMENT; TERMINATION. The Plan may be amended or modified
at any time by the Board except that no such amendment or modification shall
have a material adverse effect on the balance or the payment schedule (including
any material change to Section 8(b) above) of any Participant's Deferred
Compensation Account as of the effective date of any such amendment,
modification or termination (without the consent of the Participant or, if the
Participant is dead, his or her beneficiary(ies)). The Company may terminate the
Plan at any time, in which event each Deferred Compensation Account will be paid
out in a lump sum as soon as practicable after such termination.
SECTION 11. PARTICIPANT'S RIGHTS UNSECURED; NO DUTY TO INVEST. The
right of a Participant to receive any distribution hereunder shall be an
unsecured claim against the general assets of the Company. No Company assets
shall in any way be subject to any prior claim by any Participant. The Company
shall have no duty whatsoever to set aside or invest any amounts credited to any
Deferred Compensation Account established under the Plan. Nothing in the Plan
shall confer upon any employee of the Company any right to continued employment
with the Company, nor shall it interfere in any way with the right, if any, of
the Company to terminate the employment of any employee at any time for any
reason. A Participant shall have no right, title, or interest whatsoever in or
to any specific assets of the Company, nor any investments, if any, which the
Company may make to aid it in meeting its obligations hereunder. Nothing
contained in this Plan, and no action taken pursuant to its provisions, shall
create or be construed to create a trust of any kind, or a fiduciary
relationship, between the Company and any Participant or any other person. The
Company may, but is not obligated to, enter into a "rabbi" trust agreement to
provide for a source of funds out of which all or any portion of the benefits
under the Plan may be satisfied.
14
<PAGE> 15
SECTION 12. RESTRICTIONS ON ALIENATION. No amount deferred or credited
to any Account under the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, levy or charge. Any
attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber,
levy or charge the same shall be void; nor shall any amount in any manner be
subject to any claims for the debts, contracts, liabilities, engagements or
torts of the Participant (or the Participant's beneficiary or personal
representative) entitled to such benefit. No Participant shall be entitled to
borrow at any time any portion of the Participant's Account balance under the
Plan.
SECTION 13. WITHHOLDING. There shall be deducted from all payments
under the Plan the amount of any taxes required to be withheld by any Federal,
state, local or other government. The Participants, their beneficiaries and
personal representatives shall bear any and all Federal, foreign, state, local,
income, or other taxes imposed on amounts paid under the Plan.
SECTION 14. PARTICIPANTS BOUND BY TERMS OF THE PLAN. By electing to
become a Participant, each Eligible Employee shall be deemed conclusively to
have accepted and consented to all terms of the Plan and all actions or
decisions made by the Company with regard to the Plan. Such terms and consent
shall also apply to and be binding upon the beneficiaries, personal
representatives and other successors in interest of each Participant.
SECTION 15. DESIGNATION OF BENEFICIARY(IES). Each Participant under the
Plan may designate a beneficiary or beneficiaries to receive any payment which
under the terms of the Plan becomes payable on, after or as a result of the
Participant's death. At any time, and from time to time, any such designation
may be changed or cancelled by the Participant without the consent of any such
beneficiary(ies). Any such designation, change or cancellation must be on a form
provided for that purpose by the Committee and shall not be effective until
received by the
15
<PAGE> 16
Committee. If no beneficiary(ies) has been designated by a deceased Participant,
or if the designated beneficiaries have predeceased the Participant, the
beneficiary shall be the Participant's estate. If the Participant designates
more than one beneficiary, any payments under the Plan to such beneficiaries
shall be made in equal shares unless the Participant has expressly designated
otherwise, in which case the payments shall be made in the shares designated by
the Participant.
SECTION 16. SEVERABILITY OF PROVISIONS. In the event any provision of
the Plan would serve to invalidate the Plan, that provision shall be deemed to
be null and void, and the Plan shall be construed as if it did not contain the
particular provision that would make it invalid. The Plan shall be binding upon
and inure to the benefit of (a) the Company and its respective successors and
assigns, and (b) each Participant, his or her designees and estate. Nothing in
the Plan shall preclude the Company from consolidating or merging into or with,
or transferring all or substantially all of its assets to, another corporation,
or engaging in any other corporate transaction.
SECTION 17. GOVERNING LAW AND INTERPRETATION. The Plan shall be
construed and enforced in accordance with, and the rights of the parties hereto
shall be governed by, the laws of the State of New York, without regard to the
principles of conflict of laws thereof. This Plan shall not be interpreted as
either an employment or trust agreement.
SECTION 18. OTHER COMPANY BENEFIT AND COMPENSATION PROGRAMS. Payments
and other benefits received by a Participant under the Plan shall not be deemed
a part of a Participant's compensation for purposes of the determination of
benefits under any other employee welfare or benefit plans or arrangements, if
any, provided by the Company or any affiliate of the Company. The existence of
the Plan notwithstanding, the Company may adopt
16
<PAGE> 17
such other compensation plans or programs and additional compensation
arrangements as it deems necessary to attract, retain and motivate employees.
The Committee is authorized to cause to be established a trust agreement or
several trust agreements or similar arrangements from which the Committee may
make payments of amounts due or to become due to any Participants under the
Plan.
SECTION 19. EFFECTIVE DATE OF THE PLAN. The Plan shall be effective
upon its adoption by the Company.
IN WITNESS WHEREOF, the Plan is hereby adopted by the Company on this
1st day of December, 1999.
Amerada Hess Corporation
By: /s/ John B. Hess
---------------------------
Title: Chairman of the Board and
-------------------------
Chief Executive Officer
-------------------------
17
<PAGE> 1
[GRAPHIC OMITTED]
AMERADA HESS
------------------
1999 ANNUAL REPORT
<PAGE> 2
EXPLORATION
AND PRODUCTION
- --------------------------------------------------------------------------------
UNITED STATES
Crude oil and natural gas liquids production in the United States increased to
64,600 barrels per day in 1999 from 44,900 barrels per day in 1998. Natural gas
production increased to 338,000 Mcf per day from 294,000 Mcf per day in 1998.
The increased production was primarily due to a full year of peak production
from the Baldpate Field on Garden Banks Blocks 259 and 260. The Corporation's
net production from Baldpate reached peak levels of 26,800 barrels of crude oil
and natural gas liquids per day and 77,000 Mcf of natural gas per day during the
year. Amerada Hess is the operator of the Baldpate Field with a 50% interest.
Northwest of the Baldpate Field, Amerada Hess is developing the Conger
Field (AHC 37.50%) on Garden Banks Block 215. The third development well was
successfully drilled in 1999 and installation of high-pressure, subsea trees and
related facilities is scheduled to begin during the summer of 2000. Three subsea
wells will be tied back to the Garden Banks Block 172 "B" Platform which is
located on the Enchilada Field. Initial production from the Conger Field is
scheduled for late 2000 with the Corporation's share of production expected to
reach 7,000 barrels of oil per day and 35,000 Mcf of natural gas per day in
2001.
Amerada Hess drilled a successful appraisal well on the Northwestern Field
on Garden Banks Block 200 in 1999. The Corporation is in the final stages of
engineering the development of the Northwestern Field, which is located in 1,750
feet of water. Production is expected to begin late in 2000 and the
Corporation's share of production is expected to peak at about 35,000 Mcf of
natural gas per day in 2001. Amerada Hess has a 50% interest in the Northwestern
Field.
On the South Pass Block 89 Field (AHC 33.33%) five successful development
wells in 1999 increased the Corporation's average production to 16,000 Mcf of
natural gas per day and 3,000 barrels of oil per day from a previous level of
8,000 Mcf of natural gas per day and 1,500 barrels of oil per day. On Galveston
Block 210 (AHC 55%), the Corporation drilled a successful development well that
currently is producing at a gross rate of 12,000 Mcf of natural gas per day.
Onshore, Amerada Hess produces 33,000 barrels of crude oil and natural gas
liquids and 147,000 Mcf of natural gas per day. About 40% of this production is
in North Dakota where the Corporation drilled 14 horizontal wells on fields in
which it has, on average, 89% interests. Infill and extension drilling is
ongoing in the area.
8
<PAGE> 3
[GRAPHIC OMITTED]
GULF OF MEXICO
9
<PAGE> 4
[GRAPHIC OMITTED]
NORTH SEA
10
<PAGE> 5
UNITED KINGDOM
Production in the United Kingdom North Sea increased to 117,800 barrels of crude
oil and natural gas liquids per day and 257,800 Mcf of natural gas per day from
115,450 barrels per day and 251,000 Mcf per day in 1998. Five new fields were
brought onstream in 1999, development of the Bittern Field was nearly completed
and older fields maintained good production rates.
The Renee (AHL14%) and Rubie (AHL 19.20%) Fields began producing crude oil
in February 1999 through the Ivanhoe/Rob Roy facilities operated by Amerada Hess
Limited, the Corporation's British subsidiary. Amerada Hess Limited's share of
production from those fields is averaging 4,000 barrels of oil per day.
Production began from the Neptune and Mercury Fields as part of phase one
of the development of the Easington Catchment Area of the southern North Sea.
Amerada Hess Limited's share of production from these fields, in which it has
approximately 23% interests, will average about 40,000 Mcf of natural gas per
day in 2000.
The Buckland Field (AHL 14.07%) came onstream in August 1999. Production
for Amerada Hess Limited currently is averaging about 4,000 barrels of oil per
day and 7,000 Mcf of natural gas per day.
The Triton floating production, storage and offloading vessel for the
Bittern Field has sailed to location. Production from the Bittern Field is
expected to commence early in the second quarter and Amerada Hess Limited's
share of production will peak at 15,000 barrels of oil per day late in 2000.
Amerada Hess Limited manages the joint team that will operate the production
facilities and has a 29.12% interest in the field.
The Skene Field (AHL 9.07%) is expected to be sanctioned for development
in the second quarter of 2000. Amerada Hess Limited's share of production is
expected to peak at 24,000 Mcf of natural gas per day late in 2001.
Approval for development of the Cook Field (AHL28.46%) located on Block
21/20a in the central North Sea has been received. The field is expected to come
onstream late in the second quarter of 2000 and net production is expected to
peak at 4,000 barrels of oil per day in 2002.
An appraisal program is in progress for the natural gas discoveries on
Blocks 13/30a (AHL 90%), 14/26a (AHL 20%) and 20/4b (AHL 55%). Development
decisions are likely to be made during 2000.
11
<PAGE> 6
DENMARK
Amerada Hess A/S, the Corporation's Danish subsidiary, brought the South Arne
Field onstream in the third quarter of 1999. Amerada Hess A/S developed the
field with a concrete gravity base and integrated top sides. Net production is
expected to average 30,000 barrels of oil per day and 40,000 Mcf of natural gas
per day for Amerada Hess A/S in 2000. Further development wells, including water
injectors, are being drilled to enhance future recovery. Amerada Hess A/S is the
operator of the South Arne Field and has a 57.48% interest in the field.
NORWAY
Amerada Hess Norge A/S, the Corporation's Norwegian subsidiary, and its partners
continue to evaluate the large enhanced-recovery, waterflood project for the
Valhall Field, in which Amerada Hess Norge has a 28.09% interest. Early in 2000,
the Norwegian Government provided royalty relief for fields on the Norwegian
Continental Shelf. That decision is expected to accelerate the decision making
process for the waterflood project and increase Amerada Hess Norge's share of
production from the Valhall Field by about 2,000 barrels of oil per day.
Production for Amerada Hess Norge averaged 27,009 barrels of crude oil and
natural gas liquids per day and 30,600 Mcf of natural gas per day in 1999.
GABON
Amerada Hess Production Gabon, in which Amerada Hess has a 77.50% interest, has
a 40% interest in the Atora Field which is being developed. Production is
expected to begin late in 2000 and to peak at a rate of 4,000 barrels of oil per
day for Amerada Hess. By year-end 2000, the Corporation's Gabonese production is
expected to reach 11,000 barrels of oil per day compared with the current level
of 7,000 barrels per day. Current production is primarily from the Rabi Kounga
Field, in which Amerada Hess Production Gabon has a 10% interest. Amerada Hess
Production Gabon plans to participate in the drilling of three exploration wells
in Gabon in 2000.
12
<PAGE> 7
BRAZIL
Seismic was shot over 4,000 square kilometers on Block BS-2 on the Santos Basin
and BC-8 in the Campos Basin. Amerada Hess is the operator of these blocks with
a 32% interest and exploration drilling is planned on both blocks in 2000.
During 1999, Amerada Hess acquired a 45% interest and operatorship of
Block BMS-3 in the Santos Basin, on which acquisition of seismic is planned for
2000. Early in 2000, Amerada Hess acquired a 16% interest in Block BCE-2 in the
Ceara Basin. Amerada Hess now has 1,427,700 net acres in Brazil.
INDONESIA
On the Jabung Production Sharing Contract (PSC) in which Amerada Hess holds a
30% interest, the North and Northeast Betara Fields and the Gemah discovery have
been successfully appraised. The first phase of oil production is expected to
begin late in 2000 and negotiations for sale of natural gas from the fields are
nearly complete. The Corporation's share of production from the producing fields
on the Jabung PSC, North Geragai and Makmur, is averaging about 3,000 barrels of
oil per day.
On the Jambi Merang License (AHC 25%), the Corporation's share of
production from the Gelam Field has averaged 5,700 Mcf of natural gas per day
and 100 barrels of condensate per day since the interest was acquired in August
1999. On an adjacent discovery, the Pulau Gading Field, two successful appraisal
wells were drilled in 1999 with gross flow rates of up to 17,000 Mcf of natural
gas per day. Various options for developing the Pulau Gading Field are being
assessed.
On the Lematang PSC, which Amerada Hess operates with a 70% interest, a
successful natural gas discovery well was drilled on the Singa Field in 1999.
Possible development scenarios for the development of this discovery are being
analyzed. Emphasis is being placed on the sale of this natural gas to local
markets.
Further appraisal drilling is planned in 2000 on the Pangkah PSC, in which
the Corporation has a 36% interest. An oil and gas discovery was made on this
concession in 1998.
In Indonesia, Amerada Hess has interests in five Production Sharing
Contracts covering 3,300,000 net acres and plans to drill a total of six
exploration wells in 2000.
13
<PAGE> 8
THAILAND
Amerada Hess has a 15% interest in the Pailin Field that came onstream in August
1999. The Corpo ration's share of production is currently averaging 25,000 Mcf
of natural gas per day and 1,500 barrels of condensate per day. Natural gas
production is expected to increase to 50,000 Mcf of natural gas per day as
demand justifies bringing the phase two development onstream. The Pailin Field
is offshore Thailand and its production is sold in the Thailand gas market.
MALAYSIA
Amerada Hess expects to drill one well each on SK-306 (AHC 80%) and PM-304 (AHC
70%) in 2000. There are oil and gas discoveries on these blocks and the
Corporation will evaluate the commercial potential of the hydrocarbons on these
blocks.
VIETNAM
Amerada Hess acquired a 24.50% interest in Block 16-1 in the Mekong Basin,
offshore Vietnam, in 1999. Seismic work is planned in 2000.
AZERBAIJAN
Amerada Hess has a 1.68% equity interest in the Azeri, Chirag and Guneshli
Fields being developed in the Caspian Sea by the AIOCconsortium. Current net
production is 1,500 barrels of oil per day and is expected to peak in 2008 at
about 14,000 barrels of oil per day, assuming pipeline capacity is increased.
Amerada Hess has acquired an interest in the Kursanga and Karabagly Fields
onshore Azerbaijan and plans for the rehabilitation of these fields have been
approved. The Corporation's share of production from these fields is expected to
rise from approximately 1,300 barrels of oil per day in 2000 to a peak of 7,000
barrels of oil per day in 2005.
14
<PAGE> 9
[GRAPHIC OMITTED]
PAILIN FIELD, THAILAND
15
<PAGE> 10
[GRAPHIC OMITTED]
ORLANDO, FLORIDA
16
<PAGE> 11
REFINING
AND MARKETING
- --------------------------------------------------------------------------------
REFINING
The past year was the first full year of operation for HOVENSA L.L.C., the joint
venture between Amerada Hess and Petroleos de Venezuela, S.A. that owns and
operates the St. Croix refinery. Despite some of the worst refining margins in
history, HOVENSA was profitable for the year. HOVENSA supplies refined petroleum
products to both joint venture partners for markets primarily on the East Coast
and Gulf Coast of the United States as well as to third parties in the
Caribbean. Capitalizing on its strategic location and operational capabilities
to maximize profitability, HOVENSA shipped 16 cargoes of gasoline and
distillates to California in 1999 during periods of shortages caused by refinery
outages on the West Coast of the United States.
Early in 2000, HOVENSA secured financing for the construction of a 58,000
barrel per day delayed coking unit. The coking unit will enable the refinery to
process lower cost, heavy crude oil that will enhance financial returns and make
the refinery one of the most sophisticated in the world. The refinery currently
is processing 155,000 barrels per day of Venezuelan Mesa crude oil. Upon
completion of construction of the coking unit, the refinery will also process
115,000 barrels per day of lower cost, Venezuelan Merey crude oil. Construction
of the delayed coking unit and related facilities is expected to take about two
years.
Refinery runs at HOVENSA averaged 418,000 barrels per day in 1999. The
refinery's fluid catalytic cracking unit operated at rates that reached 140,000
barrels per day at times during 1999, making it one of the largest fluid
catalytic cracking units in the world.
The Corporation's Port Reading fluid catalytic cracking unit ran at a rate
of approximately 60,000 barrels per day in 1999 processing vacuum gas oil and
residual fuel oil to manufacture primarily high quality gasoline for markets in
the northeast.
17
<PAGE> 12
MARKETING
Amerada Hess is building high-volume HESS EXPRESS convenience retail sites,
upgrading existing gasoline stations and convenience stores, making acquisitions
in key geographic areas and increasing the number of independent HESS branded
retailers. The number of HESS retail outlets increased to 701 at year-end 1999
from 637 at year-end 1998. It is anticipated that by the end of 2000 there will
be approximately 950 HESS retail outlets.
During 1999, 21 new HESS EXPRESS stores were opened, and construction
began on 10 others. Twenty-three retail sites were upgraded by adding
convenience stores or rebuilding existing facilities. The Corporation acquired
50 retail sites in central Pennsylvania and 10 retail sites in Florida.
Early in 2000, Amerada Hess reached agreement to purchase 178 Merit retail
gasoline stations located in the northeast. All of the stations will be
rebranded HESS. This acquisition greatly strengthens the HESS brand in the New
York City, Boston and Philadelphia metropolitan areas and is expected to close
early in May.
The reshaping of the Corporation's downstream asset base for increased
profitability continued in 1999 with the sale of 12 terminals with approximately
19 million barrels of storage capacity and 40 retail sites in Atlanta, Georgia
and Greenville, South Carolina where fuel margins for the Corporation were lower
than in its other markets. Proceeds from these sales aggregated $340 million.
Early in 2000, the Corporation strengthened its energy marketing position
on the East Coast of the United States when it reached agreement to purchase the
energy marketing business of Statoil Energy Services. That company sells natural
gas and electricity to industrial and commercial customers primarily in New
York, Pennsylvania, Maryland, Virginia and Washington, D.C. The acquisition
expands the HESS customer base, which previously was concentrated in the New
York metropolitan area, and more than doubles sales of natural gas to end users.
The transaction expands the Corporation's energy marketing and operating
capabilities and is scheduled to close in the second quarter of 2000.
18
<PAGE> 13
Financial Review
Amerada Hess Corporation and Consolidated Subsidiaries
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Consolidated Results of Operations
Operating earnings (income excluding special items) for 1999 amounted to $307
million compared with a loss of $196 million in 1998 and income of $14 million
in 1997.
The after-tax results by major operating activity for 1999, 1998 and 1997
are summarized below (in millions):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Exploration and production $ 324 $ (18) $ 258
Refining, marketing
and shipping 133 (18) (110)
Corporate (31) (37) (16)
Interest (119) (123) (118)
- --------------------------------------------------------------------------------
Operating earnings (loss) 307 (196) 14
Special items 131 (263) (6)
- --------------------------------------------------------------------------------
Net income (loss) $ 438 $(459) $ 8
================================================================================
Net income (loss) per
share (diluted) $4.85 $(5.12) $ .08
================================================================================
</TABLE>
Comparison of Results
Exploration and Production: Operating earnings from exploration and production
activities increased by $342 million in 1999, primarily due to significantly
higher worldwide crude oil selling prices, increased crude oil and natural gas
sales volumes and reduced exploration expenses in connection with a refocused
exploration program. Exploration and production earnings decreased by $276
million in 1998 compared with 1997, principally reflecting lower crude oil
selling prices.
The Corporation's average selling prices, including the effects of
hedging, were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Crude oil and natural gas
liquids (per barrel)
United States $16.23 $12.02 $18.43
Foreign 17.90 13.05 19.16
Natural gas (per Mcf)
United States 2.14 2.08 2.42
Foreign 1.79 2.26 2.46
================================================================================
</TABLE>
The Corporation's net daily worldwide production was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Crude oil and natural gas
liquids (barrels per day)
United States 64,605 44,920 43,950
Foreign 167,802 161,069 174,622
- --------------------------------------------------------------------------------
Total 232,407 205,989 218,572
- --------------------------------------------------------------------------------
Natural gas (Mcf per day)
United States 338,044 293,849 311,915
Foreign 304,500 282,628 257,339
- --------------------------------------------------------------------------------
Total 642,544 576,477 569,254
- --------------------------------------------------------------------------------
Barrels of oil equivalent
(per day) 339,498 302,069 313,448
================================================================================
</TABLE>
The 1999 increases in United States crude oil and natural gas production
were primarily due to new production from deepwater Gulf of Mexico fields which
came onstream in late 1998. Increased foreign crude oil production was largely
due to new production in 1999 from a field in the Danish sector of the North
Sea. The 1999 increase in foreign natural gas production reflected increases in
the North Sea, Indonesia and Thailand.
In 1998, United States crude oil production was comparable to 1997 and
foreign crude oil production declined, largely due to maintenance related
interruptions at three United Kingdom fields. United States natural gas
production was lower in 1998, principally reflecting asset sales and natural
decline. Foreign natural gas production increased in 1998 due to higher demand
in the United Kingdom.
20
<PAGE> 14
Depreciation, depletion, and amortization charges relating to exploration
and production activities were higher in 1999 reflecting increased crude oil and
natural gas production volumes. However, on a barrel of oil equivalent produced,
depreciation and related charges were comparable in 1999 and 1998, and lower
than in 1997. Production expenses were lower in 1999, reflecting lower costs of
new fields. Exploration expenses were also lower in 1999, principally in the
United States and United Kingdom, as a result of a reduced drilling program.
Production and exploration expenses were also lower in 1998 than in 1997.
General and administrative expenses in 1999 were somewhat lower than in 1998,
reflecting cost reduction initiatives in the United States and United Kingdom.
Excluding special charges, the total cost per barrel of depreciation,
production, exploration and administrative expenses was $11.75 in 1999, $13.80
in 1998 and $14.50 in 1997.
Operating earnings from exploration and production activities in 1999
included net nonrecurring charges of $9 million, principally reflecting buyouts
and renegotiations of drilling rig contracts and services, partially offset by
$18 million in foreign currency exchange gains and related tax benefits. Pre-tax
foreign currency gains or losses are included in other non-operating income in
the income statement.
The effective income tax rate on exploration and production earnings in
1999 was 44%. Generally, this rate exceeds the U.S. statutory rate because of
special petroleum taxes in the United Kingdom and Norway and exploration
expenses in certain foreign areas for which income tax benefits are not
available. The 1999 effective rate was lower than in 1998 because of the use of
a net operating loss carryforward in Denmark and the reduced impact of
international drilling outside of the North Sea. The Corporation anticipates
that its effective income tax rate on exploration and production earnings will
continue to exceed the U.S. statutory rate.
The selling price of crude oil has increased significantly from the low
levels experienced in late 1998 and early 1999, however, there can be no
assurance that the current higher selling prices will continue.
Refining, Marketing and Shipping: Operating earnings for refining, marketing and
shipping activities increased to $133 million in 1999 compared with a loss of
$18 million in 1998 and a loss of $110 million in 1997. The Corporation's
downstream operations include HOVENSA L.L.C. (HOVENSA), a 50% owned refining
joint venture with a subsidiary of Petroleos de Venezuela S.A. (PDVSA), formed
in October 1998. The joint venture is accounted for on the equity method.
Additional refining and marketing operations include a fluid catalytic cracking
facility in Port Reading, New Jersey, as well as retail gasoline stations,
energy marketing, shipping and trading.
HOVENSA: The Corporation's share of HOVENSA's income was $7 million in
1999 compared with income of $24 million in 1998 when the refinery was
wholly-owned for the first ten months of the year. Margins for all refined
products continued to be weak during 1999 as the cost of crude oil increased
significantly. Income taxes or benefits are not recorded on HOVENSA results due
to available loss carryforwards. Operating earnings from refining, marketing and
shipping activities in 1999 also include $47 million of interest income on the
note received from PDVSA in connection with the formation of the joint venture.
In 1998, $8 million of interest was recorded on the note. Interest is reflected
in non-operating income in the income statement.
Because HOVENSA is accounted for on the equity method, revenues and
expenses of the refinery are no longer included in each caption in the
Corporation's income statement. Prior to the formation of HOVENSA, refinery
results were fully consolidated. In 1998 and 1997, the amounts shown below for
the refinery were included in the income statement captions indicated (in
millions):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales and other operating revenues $622 $928
Cost of products sold 439 874
Other operating expenses 83 122
Depreciation and amortization 70 78
================================================================================
</TABLE>
Refinery runs in 1999 and 1998 were 418,000 and 421,000 barrels per day,
respectively.
In February 2000, HOVENSA reached agreement on a $600 million bank
financing for the construction of a 58,000 barrel per day delayed coking unit
and related facilities at its refinery. The financing also provides for general
working capital requirements.
21
<PAGE> 15
Refining and marketing operations: Operating earnings from the
Corporation's catalytic cracking facility in New Jersey improved in 1999 as a
result of its use of relatively low cost feedstocks. Earnings from retail
operations were higher in 1999, reflecting higher volumes and slightly improved
margins. However, results of energy marketing activities were lower, due to
extremely competitive industry conditions. Earnings in 1999 were determined on
the LIFO inventory method of accounting. During the year, the cost of inventory
increased significantly. As a result, cost of products sold determined using
LIFO was $149 million higher than it would have been using the average cost
method.
Sales volumes decreased to 126 million barrels in 1999 compared with 144
million barrels in 1998, excluding previously consolidated sales of the St.
Croix refinery. The decrease primarily reflects lower spot sales. Operating
expenses, excluding amounts related to the refinery, increased in 1999 due to
expanded third party shipping activities. Revenue from shipping operations is
included in operating revenue in the income statement.
The Corporation has a 50% voting interest in a consolidated partnership
which trades energy commodities. The Corporation also periodically takes forward
positions on energy contracts in addition to its hedging program. The combined
results of trading activities were gains of $19 million in 1999 compared with
losses of $26 million in 1998 and gains of $4 million in 1997. Expenses of the
trading partnership are included in marketing expenses and have increased in
1999.
Refining, marketing and shipping operations had losses in 1998 and 1997
reflecting weak refining margins and an inventory write-down at the end of 1997.
The results in both years were impacted by relatively mild winter weather and
extremely competitive market conditions.
The Corporation is expanding its retail operations by purchasing and
constructing gasoline stations. The Corporation is also expanding its energy
marketing activities. The costs of operating the retail and energy marketing
businesses are included in marketing expenses.
Refined product margins improved somewhat in early 2000 as a result of
tight supplies for heating oil caused by cold weather in the Corporation's
marketing areas. However, future results will continue to be volatile reflecting
competitive industry conditions and supply and demand factors, including the
effects of weather.
Corporate: Net corporate expenses amounted to $31 million in 1999, $37 million
in 1998 and $16 million in 1997. The decrease in 1999 reflects lower
administrative expenses and increased dividends from insurers. The Corporation
does not expect these dividends to continue at 1999 levels. The change in 1998
compared with 1997 principally reflects Corporate income tax adjustments.
Interest: After-tax interest expense decreased in 1999 compared with an increase
in 1998. The decrease in 1999 reflects lower average interest rates and
increased tax benefits resulting from borrowings in different tax jurisdictions.
This change was partially offset by, and the increase in pre-tax interest was
primarily due to, lower amounts capitalized. The increase in interest in 1998
was due to higher average borrowings than in 1997. Assuming interest rates
comparable to 1999, interest expense in 2000 is anticipated to be somewhat lower
than in 1999, reflecting a lower average outstanding debt balance.
Consolidated Operating Revenues: Sales and other operating revenues increased by
approximately 18% in 1999, excluding third party sales of the St. Croix refinery
in 1998. The HOVENSA joint venture is accounted for on the equity method, and
therefore, its revenues are not included in the Corporation's 1999 revenues. The
increase in the Corporation's revenues in 1999 is principally due to higher
crude oil and refined product selling prices and increased crude oil and natural
gas sales volumes, partially offset by lower refined product sales volumes.
Sales and other operating revenues decreased by 20% in 1998 compared with 1997
primarily due to lower crude oil and refined product selling prices.
22
<PAGE> 16
Special Items
After-tax special items in 1999, 1998 and 1997 are summarized below (in
millions):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Refining,
Exploration Marketing
and and
Total Production Shipping
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1999
Gain on asset sales $ 176 $ 30 $ 146
Income tax benefits 54 54 --
Impairment of assets
and operating leases (99) (65) (34)
- --------------------------------------------------------------------------------
Total $ 131 $ 19 $ 112
- --------------------------------------------------------------------------------
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) $ --
================================================================================
</TABLE>
The gain on asset sales of $146 million in 1999 reflects the sale of the
Corporation's Gulf Coast and Southeast pipeline terminals and certain retail
sites. The Corporation also sold natural gas properties in California resulting
in a gain of $30 million. Special income tax benefits of $54 million reflect
actions taken in 1999 to realize the United States tax impact of certain prior
year foreign exploration activities and capital losses.
Asset impairments in 1999 include $34 million for the Corporation's crude
oil storage terminal in St. Lucia as a result of the nonrenewal of a storage
contract. The carrying value of the terminal had been impaired by $44 million in
1998 reflecting the reduced crude oil storage requirements of the HOVENSA joint
venture. Net charges of $38 million were also recorded in 1999 for the
write-down in book value of the Corporation's interest in the Trans Alaska
Pipeline System. This impairment is due to a significant reduction of crude oil
volumes shipped through the Corporation's share of the pipeline. The Corporation
has no crude oil production in Alaska. It is estimated that asset impairments
recorded in 1999 and 1998 will reduce future depreciation expense (after income
tax effect) by approximately $14 million per year in 2000 and 2001.
The Corporation also recorded a 1999 net charge of $27 million for the
additional decline in value of a drilling service fixed-price contract due to
lower market rates. The Corporation had previously impaired drilling service
contracts in 1998 by recording a charge of $77 million. The Corporation's
accrual for drilling service contracts, including the remainder of amounts
provided in 1998, relates to payments that will be made in 2000 of approximately
$45 million (after income tax effect).
The 1998 special items also included a loss of $106 million on the sale of
50% of the St. Croix refinery and formation of the HOVENSA joint venture. The
Corporation had a gain of $56 million on the sale of oil and gas assets in the
United States and Norway.
Asset impairment in 1998 included $35 million for impairment of a North
Sea oil discovery and $13 million for other oil and gas assets in the United
States and United Kingdom. The Corporation also recorded a $29 million charge
for its share of asset impairment of Premier Oil plc, an equity affiliate.
Severance costs of $15 million were also recorded in 1998.
The 1997 special items included 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. These fields ceased production 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.
Liquidity and Capital Resources
Net cash provided by operating activities, including changes in operating assets
and liabilities amounted to $770 million in 1999, $519 million in 1998 and
$1,250 million in 1997. The increase in 1999 was primarily due to improved
operating results, partially offset by a reduction in deferred revenues of $249
million from the advance sale of crude oil production in 1998. There was no
comparable transaction in 1999. The variance between 1998 and 1997 was also due
to the results of operations and changes in working capital, including
inventory. Cash flow from operations, before changes in operating assets and
liabilities, amounted to $1,116 million in 1999, $521 million in 1998 and $854
million in 1997.
23
<PAGE> 17
The Corporation generated additional cash for capital expenditures and
debt reduction by selling non-core assets in 1999 and 1998. The gross proceeds
from asset sales amounted to $395 million in 1999 and $468 million in 1998.
Total debt was $2,310 million at December 31, 1999 compared with $2,652
million at December 31, 1998. The debt to capitalization ratio decreased to 43%
at December 31, 1999 from 50% at year-end 1998. At December 31, 1999, floating
rate debt amounted to 24% of total debt, including the effect of interest rate
conversion (swap) agreements. At December 31, 1999, the Corporation had $1,880
million of additional borrowing capacity available under its revolving credit
agreements and unused lines of credit under uncommitted arrangements with banks
of $376 million.
On October 1, 1999, the Corporation issued $1 billion of public
debentures. The proceeds of the issuance were used to repay revolving credit and
other debt. Of the $1 billion, $300 million bears interest at 73/8% and is due
in 2009 and $700 million bears interest at 77/8% and is due in 2029.
The Corporation conducts foreign exploration and production activities in
the United Kingdom, Norway, Denmark, Gabon, Indonesia, Thailand, Azerbaijan and
in other countries. The Corporation also has a refining joint venture with a
Venezuelan company. Therefore, the Corporation is subject to the risks
associated with foreign operations. These exposures may include political risk,
credit risk and currency risk. There have not been any material adverse effects
on the Corporation's results of operations or financial condition as a result of
its dealings with foreign entities.
Capital Expenditures
The following table summarizes the Corporation's capital expenditures in 1999,
1998 and 1997 (in millions):
- --------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------
Exploration and production
Exploration $ 101 $ 242 $ 286
Production and development 626 915 679
Acquisitions -- 150 193
- --------------------------------------------------------------------------------
727 1,307 1,158
Refining, marketing
and shipping 70 132 188
- --------------------------------------------------------------------------------
Total $ 797 $1,439 $1,346
================================================================================
The decrease in capital expenditures in 1999 reflects the completion of
several major development projects and the reduced 1999 exploration program.
Although not included in capital expenditures above, the Corporation increased
its investment in Premier Oil plc, an equity affiliate, by $59 million in 1999.
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.
Capital expenditures in 2000, excluding acquisitions, are currently
expected to be approximately $750 million. These expenditures will be financed
principally by internally generated funds.
On February 14, 2000, the Corporation announced that it entered into an
agreement with the Meadville Corporation to acquire the 51% of Meadville's
outstanding stock that it does not already own for approximately $168 million in
cash and deferred payments, preferred stock or a combination of both as selected
by the Meadville stockholders. The purchase includes 178 Merit retail gasoline
stations located in the Northeast. The transaction is expected to close in early
May.
Derivative Financial Instruments
The Corporation is 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. Derivative instruments are used to
reduce these price and rate fluctuations. The Corporation has guidelines for,
and controls over, the use of derivative instruments.
The Corporation uses 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 the
Corporation's products and the related gains or losses are an integral part of
the Corporation's selling prices. At December 31, the Corporation had open hedge
positions equal to 30% of its estimated 2000 worldwide crude oil production and
3% of its 2001 production. In addition, the Corporation had hedges covering 10%
of its refining and marketing inventories. As market conditions change, the
Corporation will adjust its hedge positions.
24
<PAGE> 18
The Corporation owns an interest in a partnership that trades energy
commodities and energy derivatives. The accounts of the partnership are
consolidated with those of the Corporation. The Corporation also engages in
trading for its own account.
The Corporation uses value at risk to estimate the potential effects of
changes in fair values of derivatives and other instruments used in hedging
activities and derivatives and commodities used in trading activities. This
method determines the potential one-day change in fair value with 95%
confidence. The analysis is based on historical simulation and other
assumptions. The Corporation estimates that at December 31, 1999, the value at
risk related to hedging activities, excluding the physical inventory hedged, was
$13 million ($1 million at December 31, 1998). During 1999, the average value at
risk for hedging activities was $6 million, the high was $13 million and the low
was $2 million. During 1998, the average value at risk for hedging activities
was $4 million, the high was $5 million and the low was $1 million. At December
31, 1999, the value at risk on trading activities, predominantly partnership
trading, was $6 million ($4 million at December 31, 1998). During 1999, the
average value at risk for trading activities was $7 million, the high was $10
million and the low was $5 million. During 1998, the average value at risk for
trading activities was $5 million, the high was $6 million and the low was $3
million.
The Corporation also uses interest-rate conversion agreements to balance
exposure to interest rates. At December 31, 1999, the Corporation has
substantially all fixed-rate debt and has $400 million of notional value,
interest-rate conversion agreements that increased its percentage of
floating-rate debt to 24%. At December 31, 1998, the Corporation had $400
million of notional value, interest-rate conversion agreements that decreased
its percentage of floating-rate debt to 32%. The Corporation's outstanding debt
of $2,310 million, which together with the interest-rate swaps, has a fair value
of $2,299 million at December 31, 1999. A 10% change in interest rates would
change the fair values of debt and related swaps by $120 million ($64 million at
December 31, 1998).
The Corporation uses foreign exchange contracts to reduce its exposure to
fluctuating foreign exchange rates, principally the Pound Sterling. At December
31, 1999, the Corporation has $865 million ($97 million at December 31, 1998) of
notional value foreign exchange contracts. Generally, the Corporation uses
foreign exchange contracts to fix the exchange rate on net monetary liabilities
of its North Sea operations. The change in fair value of the foreign exchange
contracts from a 10% change in the exchange rate is estimated to be $90 million
at December 31, 1999 ($10 million at December 31, 1998).
Environment, Health and Safety
The Corporation's awareness of its environmental responsibilities and
environmental regulations at the federal, state and local levels have led to
programs requiring higher operating costs and capital investments by the
Corporation. The Corporation continues to focus on energy conservation,
pollution control and waste minimization and treatment. There are also programs
for compliance evaluation, facility auditing and employee training to monitor
operational activities and to prevent conditions that might threaten the
environment.
The Corporation produces gasolines that meet the current requirements for
oxygenated and reformulated gasolines of the Clean Air Act of 1990, including
the requirements for reformulated gasolines that began in 2000. Reformulated
gasolines decrease emissions of volatile and toxic organic compounds. The
Corporation's production of reformulated gasolines from its Port Reading
facility and HOVENSA can meet its marketing requirements. In addition, the
HOVENSA refinery has desulfurization capabilities enabling it to produce
low-sulfur diesel fuel that meets the requirements of the Clean Air Act. HOVENSA
can currently produce gasolines that meet the requirements of the California Air
Resources Board.
In December 1999, the United States Environmental Protection Agency
("EPA") adopted rules which phase in limitations on the sulfur content of
gasoline beginning in 2004. The rules will require Port Reading and HOVENSA to
take steps to be in compliance and, increased capital expenditures are likely at
one or both facilities. The Corporation is reviewing options to determine the
most cost effective compliance strategy. EPA is also expected to propose
reductions in the allowable sulfur content of diesel fuel which, if ultimately
required, would result in additional capital expenditures.
The EPA is considering restrictions or a prohibition on the use of MTBE, a
gasoline additive that is produced by Port Reading and HOVENSA and is used
primarily to meet the Federal regulations requiring oxygenation of reformulated
gasolines. California has already adopted a ban on MTBE use beginning in 2003.
If MTBE is banned in other areas and the minimum oxygen content requirements for
gasoline remain in place, the effect on the Corporation will depend on the
specific regulations and the cost of alternative oxygenates.
25
<PAGE> 19
The Corporation expects continuing expenditures for environmental
assessment and remediation. Sites where corrective action may be necessary
include gasoline stations, terminals, refineries (including solid waste
management units under permits issued pursuant to the Resource Conservation and
Recovery Act) and, although not significant, Superfund sites where the
Corporation has been named a potentially responsible party under the Superfund
legislation. The Corporation expects that existing reserves for environmental
liabilities will adequately cover costs of assessing and remediating known
sites.
The Corporation expended $8 million in 1999, $9 million in 1998 and $12
million in 1997 for remediation. In addition, capital expenditures for
facilities, primarily to comply with federal, state and local environmental
standards, were $2 million in 1999, $4 million in 1998 and $5 million in 1997.
Year 2000
The Corporation has completed its program to address the year 2000 problem and
has experienced only a few minor interruptions in its embedded computer systems,
internal software and transactions with third parties. The total cost of the
year 2000 remediation program was $12 million. The Corporation will continue to
monitor systems during the year and will address any remaining year 2000 issues
should they arise.
Forward Looking Information
Certain sections of the Financial Review, including references to the
Corporation's future results of operations and financial position, capital
expenditures, derivative disclosures and environmental sections, represent
forward looking information. Forward looking disclosures are based on the
Corporation's 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.
Dividends
Cash dividends on common stock totaled $.60 per share ($.15 per quarter) during
1999 and 1998.
Stock Market Information
The common stock of Amerada Hess Corporation is traded principally on the New
York Stock Exchange (ticker symbol: AHC). High and low sales prices in 1999 and
1998 were as follows:
- --------------------------------------------------------------------------------
1999 1998
------------------- -----------------
Quarter Ended High Low High Low
- --------------------------------------------------------------------------------
March 31 53 1/4 43 3/4 61 1/16 48 5/16
June 30 65 3/8 47 15/16 59 1/8 50 5/16
September 30 66 5/16 56 3/4 59 5/8 46
December 31 63 1/16 53 1/2 59 1/8 48
================================================================================
Quarterly Financial Data
Quarterly results of operations for the years ended December 31, 1999 and 1998
follow (millions of dollars, except per share data):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Net
Sales income
and other Operating Net (loss)
operating earnings Special income per share
Quarter revenues (loss) items (loss) (diluted)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999
First $1,539 $ 41 $ 30(a) $ 71 $ .79
Second 1,430 37 40(a) 77 .86
Third 1,801 53 106(a) 159 1.75
Fourth 2,269 176 (45)(b) 131 1.45
- ------------------------------------------------------------------------
Total $7,039 $ 307 $ 131 $ 438
========================================================================
1998
First $1,826 $ (69) $ 56(a) $ (13) $ (.14)
Second 1,608 (22) -- (22) (.24)
Third 1,529 (6) -- (6) (.07)
Fourth 1,617 (99) (319)(c) (418) (4.70)
- ------------------------------------------------------------------------
Total $6,580 $(196) $(263) $(459)
========================================================================
</TABLE>
(a) Represents after-tax gains on asset sales.
(b) Includes special income tax benefits of $54 million, offset by impairment
of assets and operating leases of $99 million.
(c) Includes a loss of $106 million on the formation of the refining joint
venture, impairment of assets and operating leases of $198 million and
accrued severance costs of $15 million.
The results of operations for the periods reported herein should not be
considered as indicative of future operating results.
26
<PAGE> 20
Statement of Consolidated Income
Amerada Hess Corporation and Consolidated Subsidiaries
<TABLE>
<CAPTION>
For the Years Ended December 31
-----------------------------------------------
Thousands of dollars, except per share data 1999 1998 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Sales (excluding excise taxes) and other
operating revenues $ 7,039,138 $ 6,579,892 $ 8,223,582
Non-operating income
Gain (loss) on asset sales 273,441 (25,679) 16,463
Equity in income (loss) of HOVENSA L.L.C 6,988 (15,848) --
Other 141,787 82,740 120,435
- ------------------------------------------------------------------------------------------------------
Total revenues 7,461,354 6,621,105 8,360,480
- ------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of products sold 4,240,910 4,373,616 5,577,924
Production expenses 487,219 517,828 557,025
Marketing expenses 387,298 378,506 328,975
Other operating expenses 216,651 224,433 231,791
Exploration expenses, including dry holes
and lease impairment 261,038 348,951 421,863
General and administrative expenses 231,546 270,668 236,269
Interest expense 158,222 152,934 136,149
Depreciation, depletion and amortization 648,663 661,802 663,297
Impairment of assets and operating leases 127,998 206,478 80,602
- ------------------------------------------------------------------------------------------------------
Total costs and expenses 6,759,545 7,135,216 8,233,895
- ------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 701,809 (514,111) 126,585
Provision (benefit) for income taxes 264,193 (55,218) 119,085
- ------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 437,616 $ (458,893) $ 7,500
======================================================================================================
Net Income (Loss) Per Share
Basic $4.88 $(5.12) $.08
Diluted $4.85 $(5.12) $.08
======================================================================================================
</TABLE>
Statement of Consolidated Retained Earnings
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
For the Years Ended December 31
-----------------------------------------
Thousands of dollars, except per share data 1999 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at Beginning of Year $ 1,904,066 $ 2,463,005 $ 2,613,920
Net income (loss) 437,616 (458,893) 7,500
Dividends declared--common stock
($.60 per share in 1999, 1998 and 1997) (54,311) (54,520) (55,090)
Common stock acquired and retired -- (45,526) (103,325)
- -----------------------------------------------------------------------------------------
Balance at End of Year $ 2,287,371 $ 1,904,066 $ 2,463,005
=========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE> 21
Consolidated Balance Sheet
Amerada Hess Corporation and Consolidated Subsidiaries
<TABLE>
<CAPTION>
At December 31
-------------------------
Thousands of dollars 1999 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 40,926 $ 73,791
Accounts receivable
Trade 1,112,114 954,353
Other 62,930 58,831
Inventories 372,713 482,182
Current portion of deferred income taxes 67,418 114,194
Other current assets 171,469 203,355
- ------------------------------------------------------------------------------------------
Total current assets 1,827,570 1,886,706
- ------------------------------------------------------------------------------------------
Investments and Advances
HOVENSA L.L.C 709,569 702,581
Other 282,599 232,826
- ------------------------------------------------------------------------------------------
Total investments and advances 992,168 935,407
- ------------------------------------------------------------------------------------------
Property, Plant and Equipment
Exploration and production 9,974,117 9,718,424
Refining and marketing 980,806 1,193,353
Shipping 109,962 115,462
- ------------------------------------------------------------------------------------------
Total--at cost 11,064,885 11,027,239
Less reserves for depreciation, depletion, amortization and
lease impairment 7,013,233 6,835,301
- ------------------------------------------------------------------------------------------
Property, plant and equipment--net 4,051,652 4,191,938
- ------------------------------------------------------------------------------------------
Note Receivable 538,500 538,500
- ------------------------------------------------------------------------------------------
Deferred Income Taxes and Other Assets 317,822 330,432
- ------------------------------------------------------------------------------------------
Total Assets $ 7,727,712 $ 7,882,983
==========================================================================================
</TABLE>
28
<PAGE> 22
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
At December 31
--------------------------
1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable--trade $ 771,797 $ 713,831
Accrued liabilities 621,334 554,632
Deferred revenue 3,846 251,328
Taxes payable 158,852 100,686
Notes payable 17,912 3,500
Current maturities of long-term debt 5,109 172,820
- -----------------------------------------------------------------------------------------------
Total current liabilities 1,578,850 1,796,797
- -----------------------------------------------------------------------------------------------
Long-Term Debt 2,286,660 2,476,145
- -----------------------------------------------------------------------------------------------
Deferred Liabilities and Credits
Deferred income taxes 442,172 483,843
Other 381,838 482,786
- -----------------------------------------------------------------------------------------------
Total deferred liabilities and credits 824,010 966,629
- -----------------------------------------------------------------------------------------------
Stockholders' Equity
Preferred stock, par value $1.00
Authorized--20,000,000 shares for issuance in series -- --
Common stock, par value $1.00
Authorized--200,000,000 shares
Issued--90,676,405 shares in 1999; 90,356,705 shares in 1998 90,676 90,357
Capital in excess of par value 782,271 764,412
Retained earnings 2,287,371 1,904,066
Accumulated other comprehensive income (122,126) (115,423)
- -----------------------------------------------------------------------------------------------
Total stockholders' equity 3,038,192 2,643,412
- -----------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 7,727,712 $ 7,882,983
===============================================================================================
</TABLE>
The consolidated financial statements reflect the successful efforts method of
accounting for oil and gas exploration and producing activities.
See accompanying notes to consolidated financial statements.
29
<PAGE> 23
Statement of Consolidated Cash Flows
Amerada Hess Corporation and Consolidated Subsidiaries
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
For the Years Ended December 31
-----------------------------------------
Thousands of dollars 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $ 437,616 $ (458,893) $ 7,500
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation, depletion and amortization 648,663 661,802 663,297
Impairment of assets and operating leases 127,998 206,478 80,602
Exploratory dry hole costs 69,346 159,435 191,351
Lease impairment 36,790 31,191 37,185
(Gain) loss on asset sales (273,441) 25,679 (16,463)
Provision (benefit) for deferred income taxes 62,419 (137,922) (80,208)
Undistributed earnings of affiliates 7,102 33,430 (29,439)
- ------------------------------------------------------------------------------------------------------------
1,116,493 521,200 853,825
Changes in other operating assets and liabilities
(Increase) decrease in accounts receivable (155,525) 6,335 (148,488)
Decrease in inventories 79,648 122,204 333,477
Increase (decrease) in accounts payable, accrued
liabilities and deferred revenue (175,227) 185,403 198,596
Increase (decrease) in taxes payable 53,256 (87,118) (46,626)
Changes in prepaid expenses and other (148,640) (229,236) 59,223
- ------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 770,005 518,788 1,250,007
- ------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Capital expenditures
Exploration and production (727,086) (1,306,438) (1,157,938)
Refining, marketing and shipping (69,571) (132,240) (187,652)
- ------------------------------------------------------------------------------------------------------------
Total capital expenditures (796,657) (1,438,678) (1,345,590)
Investment in affiliate (59,171) -- --
Proceeds from asset sales and other 431,818 502,854 63,017
- ------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (424,010) (935,824) (1,282,573)
- ------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Issuance (repayment) of notes 14,412 (14,342) 1,982
Long-term borrowings 990,125 848,320 398,391
Repayment of long-term debt (1,347,745) (317,144) (209,000)
Cash dividends paid (54,262) (54,647) (55,373)
Common stock acquired -- (59,167) (122,283)
Stock options exercised 18,283 -- --
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (379,187) 403,020 13,717
- ------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash 327 (3,347) (2,519)
- ------------------------------------------------------------------------------------------------------------
Net Decrease in Cash and Cash Equivalents (32,865) (17,363) (21,368)
Cash and Cash Equivalents at Beginning of Year 73,791 91,154 112,522
- ------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 40,926 $ 73,791 $ 91,154
============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE> 24
Statement of Consolidated Changes in Common Stock
and Capital in Excess of Par Value
Amerada Hess Corporation and Consolidated Subsidiaries
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Common stock
-------------------------
Capital in
Number of excess of
Thousands of dollars shares Amount par value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1997 93,073,305 $93,073 $754,559
Awards of nonvested common stock to employees (net) 719,000 719 38,145
Common stock acquired and retired (2,368,100) (2,368) (19,419)
Employee stock options exercised 27,000 27 1,346
- --------------------------------------------------------------------------------------------------
Balance at December 31, 1997 91,451,205 91,451 774,631
Cancellations of nonvested common stock awards (net) (26,000) (26) (1,292)
Common stock acquired and retired (1,071,500) (1,071) (9,073)
Employee stock options exercised 3,000 3 146
- --------------------------------------------------------------------------------------------------
Balance at December 31, 1998 90,356,705 90,357 764,412
Cancellations of nonvested common stock awards (net) (2,500) (3) (102)
Employee stock options exercised 322,200 322 17,961
- --------------------------------------------------------------------------------------------------
Balance at December 31, 1999 90,676,405 $90,676 $782,271
==================================================================================================
</TABLE>
Statement of Consolidated Comprehensive Income
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
For the Years Ended December 31
-----------------------------------
Thousands of dollars 1999 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Components of Comprehensive Income (Loss)
Net income (loss) $ 437,616 $(458,893) $ 7,500
Change in foreign currency translation adjustment (6,703) (2,035) (35,467)
- -----------------------------------------------------------------------------------------
Comprehensive Income (Loss) $ 430,913 $(460,928) $ (27,967)
=========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE> 25
Notes to Consolidated Financial Statements
Amerada Hess Corporation and Consolidated Subsidiaries
1. Summary of Significant Accounting Policies
Nature of Business: Amerada Hess Corporation and subsidiaries (the
"Corporation") engage in the exploration for and the production, purchase,
transportation and sale of crude oil and natural gas. These activities are
conducted primarily in the United States, United Kingdom, Norway, Denmark and
Gabon. The Corporation also has oil and gas activities in Azerbaijan, Brazil,
Indonesia, Thailand and other countries. In addition, the Corporation
manufactures, purchases, transports and markets refined petroleum and other
energy products. The Corporation owns 50% of a refinery joint venture in the
United States Virgin Islands. An additional refining facility, terminals and
retail gasoline stations are located on the East Coast of the United States.
In preparing financial statements, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities in the
balance sheet and revenues and expenses in the income statement. Actual results
could differ from those estimates. Among the estimates made by management are:
oil and gas reserves, asset valuations and depreciable lives, pension
liabilities, environmental obligations, dismantlement costs and income taxes.
Principles of Consolidation: The consolidated financial statements include the
accounts of Amerada Hess Corporation and subsidiaries. The Corporation's
interests in oil and gas exploration and production ventures are proportionately
consolidated.
Investments in affiliated companies, 20% to 50% owned, including HOVENSA
L.L.C., the Corporation's refining joint venture, are stated at cost of
acquisition plus the Corporation's equity in undistributed net income since
acquisition, except as stated below. The change in the equity in net income of
these companies is included in non-operating income in the income statement. The
Corporation consolidates a trading partnership in which it owns a 50% voting
interest and over which it exercises control.
Intercompany transactions and accounts are eliminated in consolidation.
Certain amounts in prior years' financial statements have been
reclassified to conform with current year presentation.
Revenue Recognition: The Corporation recognizes revenues from the sale of crude
oil, natural gas, petroleum products and other merchandise when title passes to
the customer.
The Corporation recognizes revenues from the production of natural gas
properties in which it has an interest based on sales to customers. Differences
between natural gas volumes sold and the Corporation's share of natural gas
production are not material.
Cash and Cash Equivalents: Cash equivalents consist of highly liquid
investments, which are readily convertible into cash and have maturities of
three months or less.
Inventories: Crude oil and refined product inventories are valued at the lower
of cost or market, except for inventories held for trading purposes which are
marked to market. For inventories valued at cost, the Corporation uses
principally the last-in, first-out inventory method.
Inventories of materials and supplies are valued at or below cost.
Exploration and Development Costs: Oil and gas exploration and production
activities are accounted for using the successful efforts method. Costs of
acquiring undeveloped oil and gas leasehold acreage, including lease bonuses,
brokers' fees and other related costs, are capitalized.
Annual lease rentals and exploration expenses, including geological and
geophysical expenses and exploratory dry hole costs, are charged against income
as incurred.
Costs of drilling and equipping productive wells, including development
dry holes, and related production facilities are capitalized.
The Corporation does not carry the capitalized costs of exploratory wells
as an asset for more than one year, unless oil and gas reserves are found and
classified as proved, or additional exploration is underway or planned. If
exploratory wells do not meet these conditions, the costs are charged to
expense.
32
<PAGE> 26
Depreciation, Depletion and Amortization: Depreciation, depletion and
amortization of oil and gas production equipment, properties and wells are
determined on the unit-of-production method based on estimated recoverable oil
and gas reserves. Depreciation of all other plant and equipment is determined on
the straight-line method based on estimated useful lives.
The estimated costs of dismantlement, restoration and abandonment, less
estimated salvage values, of offshore oil and gas production platforms and
certain other facilities are taken into account in determining depreciation.
Retirement of Property, Plant and Equipment: Costs of property, plant and
equipment retired or otherwise disposed of, less accumulated reserves, are
reflected in net income.
Impairment of Long-Lived Assets: The Corporation reviews long-lived assets,
including oil and gas properties, 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
flows, the assets are impaired and an impairment loss is recorded. The amount of
impairment is based on the estimated fair value of the assets determined by
discounting anticipated future net cash flows. The net present value of future
cash flows is based on the Corporation's estimates, including future oil and gas
prices applied to projected production profiles, discounted at a rate
commensurate with the risks involved. 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.
Provisions for impairment of undeveloped oil and gas leases are based on
periodic evaluations and other factors.
Maintenance and Repairs: The estimated costs of major maintenance, including
turnarounds at the Port Reading refining facility, are accrued. Other
expenditures for maintenance and repairs are charged against income as incurred.
Renewals and improvements are treated as additions to property, plant and
equipment, and items replaced are treated as retirements.
Environmental Expenditures: The Corporation capitalizes environmental
expenditures that increase the life or efficiency of property or that reduce or
prevent environmental contamination. The Corporation accrues for environmental
expenses resulting from existing conditions related to past operations when the
future costs are probable and reasonably estimable.
Employee Stock Options and Nonvested Common Stock Awards: The Corporation uses
the intrinsic value method to account for employee stock options. Because the
exercise prices of employee stock options equal or exceed the market price of
the stock on the date of grant, the Corporation does not recognize compensation
expense. The Corporation records compensation expense for nonvested common stock
awards ratably over the vesting period.
Foreign Currency Translation: The U.S. dollar is the functional currency
(primary currency in which business is conducted) for most foreign operations.
For these operations, adjustments resulting from translating foreign currency
assets and liabilities into U.S. dollars are recorded in income. For operations
that use the local currency as the functional currency, adjustments resulting
from translating foreign functional currency assets and liabilities into U.S.
dollars are recorded in a separate component of stockholders' equity entitled
"Accumulated other comprehensive income." Gains or losses resulting from
transactions in other than the functional currency are reflected in net income.
Hedging: The Corporation uses futures, forwards, options and swaps to hedge the
effects of fluctuations in the prices of crude oil, natural gas and refined
products and changes in interest rates and foreign currency values. These
transactions meet the requirements for hedge accounting, including designation
and correlation. The resulting gains or losses, measured by quoted market
prices, termination values or other methods, are accounted for as part of the
transactions being hedged, except that losses not expected to be recovered upon
the completion of hedged transactions are expensed. On the balance sheet,
deferred gains and losses are included in current assets and liabilities.
Trading: Commodity trading activities are marked to market, with gains and
losses recorded in operating revenue.
33
<PAGE> 27
2. Special Items
1999: The Corporation recorded a gain of $274,100,000 ($176,000,000 after income
taxes) from the sale of its Gulf Coast and Southeast pipeline terminals, natural
gas properties in California and certain retail sites. Exploration and
production results include special income tax benefits of $54,600,000,
reflecting actions taken in 1999 to realize the United States tax impact of
certain prior year exploration activities and capital losses.
Exploration and production earnings also include an impairment of
$58,700,000 ($38,200,000 after income taxes) for the Corporation's interest in
the Trans Alaska Pipeline System. The Corporation currently has no crude oil
production in Alaska and there has been a significant reduction in crude oil
volumes shipped through the Corporation's share of the pipeline. Refining and
marketing results include an asset impairment of $34,000,000 (with no income tax
benefit) for the Corporation's crude oil storage terminal in St. Lucia, due to
the nonrenewal of a major third party storage contract. The terminal had been
partially impaired in 1998 as a result of the reduced crude oil storage
requirements of the HOVENSA joint venture. The Corporation also accrued
$35,300,000 ($27,300,000 after income taxes) for a further decline in the value
of a drilling service fixed-price contract due to lower market rates. At
December 31, 1999, the Corporation's reserve for drilling service contracts was
$54,600,000, including amounts provided in 1998. During the year, $70,700,000 of
contract payments were charged against the reserve.
Gains on asset sales are included on a separate line in non-operating
income in the income statement. The impairment of carrying values of the Alaska
pipeline and the crude oil storage terminal and the loss on the drilling service
contract are reflected in a separate impairment line in the income statement.
1998: The Corporation recorded a loss of $106,000,000 in connection with the
sale of the 50% interest in the fixed assets of its Virgin Islands refinery. The
Corporation also recorded an additional charge of $44,000,000 for the reduction
in carrying value of its crude oil storage terminal in St. Lucia that is being
used less as a result of the joint venture. No income tax benefit was recorded
on either charge. Exploration and production results included a charge of
$90,000,000 ($77,000,000 after income taxes) for the reduction in market value
of drilling service fixed-price contracts due to the decline in worldwide crude
oil prices. A charge of $54,000,000 ($35,000,000 after income taxes) was also
recorded for the impairment of capitalized costs related to a North Sea oil
discovery that was uneconomic. The Corporation expensed $29,000,000 for its
share of asset impairment of an equity affiliate and $13,000,000 for the
reduction in carrying value of developed and undeveloped properties in the
United States and United Kingdom. In addition, the Corporation recorded gains of
$80,300,000 ($56,200,000 after income taxes) on the sale of oil and gas assets
in the United States and Norway.
In 1998, the Corporation recorded pre-tax charges of $23,000,000
($15,000,000 after income taxes) for severance costs. The severance costs
covered approximately 400 exploration and production employees (of which
approximately 200 had been terminated at December 31, 1998). Approximately
$2,000,000 of severance was paid in 1998 and the remainder was paid in 1999. The
Corporation also recorded $8,000,000 of exit costs (accrued office lease costs).
Approximately $3,400,000 of this reserve was used in 1999 and the remainder was
reversed to income as a result of current plans for use of the office space.
1997: The Corporation recorded a charge of $80,600,000 ($55,000,000 after income
taxes) for impairment of long-lived assets and a long-term operating lease, as a
result of reserve revisions on two oil fields in the United Kingdom North Sea.
The Corporation also recorded income of $38,200,000 from a refund of United
Kingdom Petroleum Revenue Taxes. In 1997, the Corporation sold its interest in a
United States natural gas field resulting in an after-tax gain of $10,700,000.
34
<PAGE> 28
3. Accounting Changes
Effective January 1, 1999, the Corporation adopted the last-in, first-out (LIFO)
inventory method for valuing its refining and marketing inventories. The
Corporation believes that the LIFO method more closely matches current costs and
revenues and will improve comparability with other oil companies. The change to
LIFO decreased net income by $97,051,000 for the year ended December 31, 1999
($1.08 per share basic and diluted). There is no cumulative effect adjustment as
of the beginning of the year for this type of accounting change.
On January 1, 1998, the Corporation began capitalizing the cost of
internal use software in accordance with AICPA Statement of Position 98-1. This
accounting change increased net income for 1998 by $13,867,000 ($.15 per share).
In June 1998, the Financial Accounting Standards Board issued FAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. The Corporation
must adopt FAS No. 133 by January 1, 2001. This statement requires that the
Corporation recognize all derivatives on the balance sheet at fair value. For
derivatives that are not hedges, the change in fair value must be recognized in
income. For derivatives that hedge changes in the fair value of assets,
liabilities or firm commitments, the gains or losses are recognized in earnings
together with the offsetting losses or gains on the hedged items. For
derivatives that hedge cash flows of forecasted transactions, the gains or
losses are recognized in other comprehensive income until the hedged items are
recognized in income.
The Corporation has not yet determined what the effect of FAS No. 133 will
be on its income and financial position.
4. Inventories
Inventories at December 31 are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Thousands of dollars 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Crude oil and other charge stocks $ 67,539 $ 35,818
Refined and other finished products 393,064 386,917
Less: LIFO adjustment (149,309) --
- --------------------------------------------------------------------------------
311,294 422,735
Materials and supplies 61,419 59,447
- --------------------------------------------------------------------------------
Total $ 372,713 $ 482,182
================================================================================
</TABLE>
5. Refining Joint Venture
In 1998, the Corporation formed HOVENSA L.L.C. (HOVENSA), a joint venture with
Petroleos de Venezuela, S.A. (PDVSA). The Corporation's Virgin Islands
subsidiary and PDVSA, V.I., Inc. (PDVSA V.I.), a wholly-owned subsidiary of
PDVSA, contributed their 50% interests in the fixed assets of the Virgin Islands
refinery, previously wholly-owned by the Corporation, to HOVENSA. HOVENSA is 50%
owned by a subsidiary of the Corporation and 50% owned by PDVSA V.I. and
operates the refinery. The Corporation purchased refined products from HOVENSA
at a cost of approximately $1,196,000,000 during 1999 and $151,000,000 during
the two months ended December 31, 1998. The Corporation sold crude oil to
HOVENSA at a cost of approximately $81,000,000 during 1999 and $7,000,000 during
the two months ended December 31, 1998.
The Corporation's investment in the joint venture is accounted for using
the equity method. Summarized financial information for HOVENSA as of December
31, 1999 and for the year then ended and as of December 31, 1998 and for the two
months since inception follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Thousands of dollars 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Summarized Balance Sheet Information
At December 31
Current assets $ 432,877 $ 352,171
Net fixed assets 1,328,407 1,343,712
Other assets 27,094 27,711
Current liabilities (282,312) (133,454)
Long-term debt (150,000) (250,000)
Deferred liabilities and credits (25,750) (27,718)
- --------------------------------------------------------------------------------
Partners' equity $ 1,330,316 $ 1,312,422
- --------------------------------------------------------------------------------
Summarized Income Statement Information
For the periods ended December 31
Total revenues $ 3,081,969 $ 344,896
Costs and expenses (3,064,075) (375,903)**
- --------------------------------------------------------------------------------
Net income (loss)* $ 17,894 $ (31,007)
================================================================================
</TABLE>
* The Corporation's share of HOVENSA's income in 1999 was $6,988 and its
share of the 1998 loss was $15,848.
** 1998 results include an inventory writedown of $31,999, which reduced
costs of products sold in 1999.
35
<PAGE> 29
As part of the formation of the joint venture, PDVSA, V.I. purchased a 50%
interest in the fixed assets of the Corporation's Virgin Islands refinery for
$62,500,000 in cash and a 10-year note from PDVSA V.I. for $562,500,000 bearing
interest at 8.46% per annum and requiring principal payments over its term. At
December 31, 1999, the principal balance of the note was $538,500,000. In
addition, there was a $125,000,000, 10-year, contingent note, also bearing
interest at 8.46% per annum. The contingent note was not valued for accounting
purposes. PDVSA V.I.'s payment obligations under both notes are guaranteed by
PDVSA and secured by a pledge of PDVSA V.I.'s interest in the joint venture.
In February 2000, HOVENSA reached agreement on a $600,000,000 bank
financing for the construction of a 58,000 barrel per day delayed coking unit
and related facilities at its refinery and for general working capital
requirements. In connection with the financing, the Corporation and PDVSA V.I.
agreed to amend the note received by the Corporation at the formation of the
joint venture. PDVSA V.I. will defer principal payments on the note until after
completion of coker construction but not later than February 14, 2003. Principal
payments are due ratably until maturity on February 14, 2011. The interest rate
on the note has been increased to 9.46%. PDVSA V.I. has the option to reduce the
interest rate to the original rate of 8.46% by repaying principal in accordance
with the original amortization schedule.
6. Short-Term Notes and Related Lines of Credit
Short-term notes payable to banks amounted to $17,912,000 at December 31, 1999
and $3,500,000 at December 31, 1998. The weighted average interest rates on
these borrowings were 6.3% and 8.8% at December 31, 1999 and 1998, respectively.
At December 31, 1999, the Corporation has uncommitted arrangements with banks
for unused lines of credit aggregating $376,000,000.
7. Long-Term Debt
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Thousands of dollars 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
7 3/8% and 7 7/8% Debentures,
due in 2009 and 2029 $ 990,026 $ --
6.1% Marine Terminal Revenue
Bonds--Series 1994--
City of Valdez, Alaska,
due 2024 20,000 20,000
Pollution Control Revenue Bonds,
weighted average rate 6.6%,
due through 2022 52,623 52,607
Fixed rate notes, payable principally
to insurance companies,
weighted average rate 8.0%*,
due through 2014 915,000 1,154,285
Global Revolving Credit Facility
with banks, weighted average
rate 6.5%, due 2002 120,000 1,195,000
Project lease financing, weighted
average rate 5.1%, due
through 2014 182,588 185,513
Capitalized lease obligations,
weighted average rate 5.3%, due
through 2009 8,332 35,960
Other loans, weighted average rate
8.0%, due through 2007 3,200 5,600
- --------------------------------------------------------------------------------
2,291,769 2,648,965
Less amount included in
current maturities 5,109 172,820
- --------------------------------------------------------------------------------
Total $2,286,660 $2,476,145
================================================================================
</TABLE>
* Includes effect of interest rate conversion agreements.
The aggregate long-term debt maturing during the next five years is as
follows (in thousands): 2000--$5,109 (included in current liabilities);
2001--$25,411; 2002--$320,695; 2003--$80,990 and 2004--$159,794.
36
<PAGE> 30
The Corporation's long-term debt agreements contain various restrictions
and conditions, including working capital requirements and limitations on total
borrowings and cash dividends. At December 31, 1999, the Corporation meets the
required working capital ratio of 1 to 1. Under the agreements, the Corporation
is permitted to borrow an additional $2,225,000,000 for the construction or
acquisition of assets. In addition, at December 31, 1999 it has $638,000,000 of
retained earnings free of dividend restrictions.
In 1999, the Corporation issued $1,000,000,000 of public debentures, of
which $300,000,000 bears interest at 73/8% and is due in 2009 and the remainder
bears interest at 77/8% and is due in 2029. After discount and the effect of
interest rate conversion agreements, the effective borrowing rates are 6.48% and
7.97%, respectively.
The Corporation has a $2,000,000,000 Global Revolving Credit Facility (the
"Facility"), of which $120,000,000 is outstanding at December 31, 1999.
Borrowings bear interest at a margin above the London Interbank Offered Rate
("LIBOR") based on the Corporation's capitalization ratio. The borrowing rate at
December 31, 1999 is .20% above LIBOR. Facility fees of .125% per annum are
payable on the amount of the credit line.
In 1998, the Corporation entered into the sale and leaseback of its
interests in the production platforms and related facilities of two Gulf of
Mexico producing properties. These transactions were accounted for as
financings. At December 31, 1999, the outstanding obligations amount to
$182,588,000, maturing through 2014.
The Corporation sold a portion of its subsequent year crude oil production
in 1998 and used the proceeds to repay revolving credit debt. Accordingly, at
December 31, 1998, $249,325,000 is included in deferred revenue on the balance
sheet. There was no comparable transaction in 1999.
At December 31, 1999, the Corporation has interest rate conversion
agreements, accounted for by the accrual method, that effectively convert fixed
rate debt to floating rate debt, increasing the percentage of its floating rate
debt to 24%.
In 1999, 1998 and 1997, the Corporation capitalized interest of
$15,754,000, $23,559,000 and $10,284,000 on major development projects. The
total amount of interest paid (net of amounts capitalized), principally on
short-term and long-term debt, in 1999, 1998 and 1997 was $145,366,000,
$154,419,000 and $146,795,000, respectively.
8. Stock Based Compensation Plans
The Corporation has outstanding stock options and nonvested common stock under
its 1995 Long-Term Incentive Plan (as amended, subject to stockholder approval)
and its Executive Long-Term Incentive Compensation and Stock Ownership Plan
(which expired in 1997). Generally, stock options vest one year from the date of
grant and the exercise price equals or exceeds the market price on the date of
grant. Nonvested common stock vests three or five years from the date of grant,
depending on the terms of the award.
The Corporation's stock option activity in 1999, 1998 and 1997 consisted
of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Weighted-
average
Options exercise price
(thousands) per share
- --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at January 1, 1997 1,421 $58.99
Granted 873 54.75
Exercised (27) 50.86
Forfeited (19) 59.52
- --------------------------------------------------------------------------------
Outstanding at December 31, 1997 2,248 57.43
Granted 873 53.05
Exercised (3) 49.75
Forfeited (23) 56.22
- --------------------------------------------------------------------------------
Outstanding at December 31, 1998 3,095 56.21
Granted* 1,804 55.66
Exercised (322) 53.22
Forfeited (70) 58.08
- --------------------------------------------------------------------------------
Outstanding at December 31, 1999 4,507 $56.18
================================================================================
Exercisable at December 31, 1997 1,376 $59.14
Exercisable at December 31, 1998 2,230 57.44
Exercisable at December 31, 1999 2,702 56.52
================================================================================
</TABLE>
* 1,118 stock options with an exercise price of $58.13 per share were
granted in December 1999 subject to approval of stockholders in 2000.
Exercise prices for employee stock options at December 31, 1999 ranged
from $49.00 to $65.94 per share. The weighted-average remaining contractual life
of employee stock options is 8.2 years.
37
<PAGE> 31
The Corporation uses the Black-Scholes model to estimate the fair value of
employee stock options for pro forma disclosure of the effects on net income and
earnings per share. The Corporation used the following weighted-average
assumptions in the Black-Scholes model for 1999, 1998 and 1997, respectively:
risk-free interest rates of 5.9%, 5.6% and 5.9%; expected stock price volatility
of .207, .218 and .220; a dividend yield of 1.1%; and an expected life of seven
years. The Corporation's net income would have been reduced by approximately
$6,000,000 in 1999, $19,100,000 in 1998 and $7,600,000 in 1997 ($.07 per share
in 1999, $.21 per share in 1998 and $.08 per share in 1997, diluted) if option
expense were recorded using the fair value method.
The weighted-average fair values of options granted for which the exercise
price equaled the market price on the date of grant were $18.45 in 1999, $17.50
in 1998 and $18.69 in 1997.
Total compensation expense for nonvested common stock was $9,831,000 in
1999, $15,975,000 in 1998 and $11,553,000 in 1997. Awards of nonvested common
stock were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares of
nonvested Weighted-
common stock average
awarded price on date
(thousands) of grant
- --------------------------------------------------------------------------------
<S> <C> <C>
Granted in 1997 746 $53.94
Granted in 1998 18 53.08
Granted in 1999 24 56.07
================================================================================
</TABLE>
At December 31, 1999, the number of common shares reserved for issuance is
as follows (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
1995 Long-Term Incentive Plan
Future awards 3,882*
Stock options outstanding 4,507*
Stock appreciation rights 52
Warrants** 1,055
- --------------------------------------------------------------------------------
Total 9,496
================================================================================
</TABLE>
* Includes 3,882 shares reserved for future awards and 1,118 stock options
outstanding which are subject to approval of stockholders in 2000.
** Issued in connection with an insurance company financing, exercisable
through June 27, 2001 at $64.46 per share.
9. Foreign Currency Translation
Worldwide currency translation gains amounted to $17,577,000 (including
$7,688,000 of income tax benefits) in 1999. Foreign currency gains totaled
$2,511,000 in 1998 and $5,073,000 in 1997 after income tax effects. Effective
January 1, 1999, the Corporation changed the functional currency of its United
Kingdom operations from the British pound sterling to the U.S. dollar.
10. Pension Plans
The Corporation has defined benefit pension plans for substantially all of its
employees. The following table reconciles the benefit obligation and fair value
of plan assets and shows the funded status:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Thousands of dollars 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Reconciliation of pension benefit obligation
Benefit obligation at January 1 $542,704 $464,728
Service cost 21,639 19,280
Interest cost 34,333 32,841
Actuarial (gain) loss (71,262) 48,855
Benefit payments (26,306) (23,000)
- --------------------------------------------------------------------------------
Pension benefit obligation at
December 31 501,108 542,704
- --------------------------------------------------------------------------------
Reconciliation of fair value of plan assets
Fair value of plan assets at January 1 476,849 427,912
Actual return on plan assets 63,375 54,311
Employer contributions 19,678 16,833
Employee contributions -- 793
Benefit payments (26,306) (23,000)
- --------------------------------------------------------------------------------
Fair value of plan assets at
December 31 533,596 476,849
- --------------------------------------------------------------------------------
Funded status at December 31
Funded status 32,488 (65,855)
Unrecognized prior service cost 7,761 9,041
Unrecognized (gain) loss (91,629) 2,861
- --------------------------------------------------------------------------------
Accrued pension liability $(51,380) $(53,953)
================================================================================
</TABLE>
38
<PAGE> 32
Pension expense consisted of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Thousands of dollars 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 21,639 $ 19,280 $ 19,109
Interest cost 34,333 32,841 33,162
Expected return on
plan assets (41,072) (36,221) (32,390)
Amortization of transition
asset (obligation) 255 (72) (3,052)
Amortization of prior
service cost 1,280 1,280 1,280
Amortization of net gain -- (22) (1,692)
- --------------------------------------------------------------------------------
Pension expense $ 16,435 $ 17,086 $ 16,417
================================================================================
</TABLE>
Prior service costs and gains and losses in excess of 10% of the greater
of the benefit obligation and the market value of assets are amortized over the
average remaining service period of active employees.
The weighted-average actuarial assumptions used by the Corporation's
pension plans at December 31 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Discount rate 7.3% 6.4%
Expected long-term rate of return on
plan assets 8.7% 8.3%
Rate of compensation increases 4.5% 4.9%
================================================================================
</TABLE>
The Corporation also has a nonqualified supplemental pension plan covering
certain employees. The supplemental pension plan provides for incremental
pension payments from the Corporation's funds so that total pension payments
equal amounts that would have been payable from the Corporation's principal
pension plan were it not for limitations imposed by income tax regulations. The
benefit obligation related to this unfunded plan totaled $38,358,000 at December
31, 1999 and $41,802,000 at December 31, 1998. Pension expense for the plan was
$6,743,000 in 1999, $6,271,000 in 1998 and $5,098,000 in 1997. The Corporation
has accrued $29,310,000 for this plan at December 31, 1999 and $25,205,000 at
December 31, 1998. The trust established to fund the supplemental plan held
assets valued at $13,586,000 at December 31, 1999 and $6,209,000 at December 31,
1998.
11. Provision for Income Taxes
The provision (benefit) for income taxes consisted of:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Thousands of dollars 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States Federal
Current $ 6,093 $ 9,510 $ 16,210
Deferred 81,657 (68,203) (27,254)
State 6,483 1,702 1,418
- --------------------------------------------------------------------------------
94,233 (56,991) (9,626)
- --------------------------------------------------------------------------------
Foreign
Current 189,198 71,492 181,665(b)
Deferred (15,058) (66,310) (41,599)
- --------------------------------------------------------------------------------
174,140 5,182 140,066
- --------------------------------------------------------------------------------
Adjustment of deferred tax
liability for foreign
income tax rate change (4,180) (3,409) (11,355)
- --------------------------------------------------------------------------------
Total $ 264,193(a) $ (55,218) $ 119,085
================================================================================
</TABLE>
(a) Includes a benefit of $54,600 representing actions taken in 1999 to
realize the United States tax impact of certain prior year exploration
activities and capital losses.
(b) Includes income tax refund of $38,180.
Income (loss) before income taxes consisted of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Thousands of dollars 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $ 397,237 $(205,522) $ 3,533
Foreign* 304,572 (308,589) 123,052
- --------------------------------------------------------------------------------
Total $ 701,809 $(514,111) $ 126,585
================================================================================
</TABLE>
* Foreign income includes the Corporation's Virgin Islands, shipping and
other operations located outside of the United States.
39
<PAGE> 33
Deferred income taxes arise from temporary differences between the tax
basis of assets and liabilities and their reported amounts in the financial
statements. A summary of the components of deferred tax liabilities and assets
at December 31 follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Thousands of dollars 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities
Fixed assets and investments $ 320,324 $ 272,461
Foreign petroleum taxes 224,359 238,568
Other 55,917 58,251
- --------------------------------------------------------------------------------
Total deferred tax liabilities 600,600 569,280
- --------------------------------------------------------------------------------
Deferred tax assets
Accrued liabilities 98,510 194,109
Net operating and capital loss
carryforwards 299,962 224,765
Tax credit carryforwards 137,598 126,590
Other 78,691 41,592
- --------------------------------------------------------------------------------
Total deferred tax assets 614,761 587,056
Valuation allowance (182,253) (141,113)
- --------------------------------------------------------------------------------
Net deferred tax assets 432,508 445,943
- --------------------------------------------------------------------------------
Net deferred tax liabilities $ 168,092 $ 123,337
================================================================================
</TABLE>
The difference between the Corporation's effective income tax rate and the
United States statutory rate is reconciled below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States statutory rate 35.0% (35.0)% 35.0%
Effect of foreign operations,
including foreign tax credits 3.0 24.2 72.3
Effect of capital and other
loss carryforwards -- (.2) (8.3)
State income taxes, net of
Federal income tax benefit .6 .2 .7
Prior year adjustments (.8) (.3) (3.5)
Tax credits -- -- (.8)
Other (.2) .4 (1.3)
- --------------------------------------------------------------------------------
Total 37.6% (10.7)% 94.1%
================================================================================
</TABLE>
The Corporation has not recorded deferred income taxes applicable to
undistributed earnings of foreign subsidiaries that are indefinitely reinvested
in foreign operations. Undistributed earnings amounted to approximately $950
million at December 31, 1999, excluding amounts which, if remitted, generally
would not result in any additional U.S. income taxes because of available
foreign tax credits. If the earnings of such foreign subsidiaries were not
indefinitely reinvested, a deferred tax liability of approximately $120 million
would have been required.
For income tax reporting at December 31, 1999, the Corporation has general
business credit carryforwards of approximately $30 million, principally expiring
in 2000 and 2001. In addition, the Corporation has alternative minimum tax
credit carryforwards of approximately $110 million, which can be carried forward
indefinitely. At December 31, 1999, a net operating loss carryforward of
approximately $1 billion is also available to offset income of the HOVENSA joint
venture partners. Net operating loss carryforwards relating to several foreign
exploration and production areas amount to approximately $190 million at
December 31, 1999.
Income taxes paid (net of refunds) in 1999, 1998 and 1997 amounted to
$141,465,000, $140,470,000 and $259,767,000, respectively.
40
<PAGE> 34
12. Net Income Per Share
The weighted average number of common shares used in the basic and diluted
earnings per share computations are summarized below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Thousands of shares 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Common shares--basic 89,692 89,585 91,254
Effect of dilutive securities
Nonvested common stock 436 -- 428
Stock options 152 -- 51
- --------------------------------------------------------------------------------
Common shares--diluted 90,280 89,585 91,733
================================================================================
</TABLE>
Diluted common shares include shares that would be outstanding assuming
the fulfillment of restrictions on nonvested shares and the exercise of stock
options. In 1998, the above table excludes the antidilutive effect of 666,000
nonvested common shares and 78,000 stock options. The table also excludes the
effect of out-of-the-money options on 1,609,000 shares, 1,626,000 shares and
867,000 shares in 1999, 1998 and 1997, respectively.
13. Leased Assets
The Corporation and certain of its subsidiaries lease floating production
systems, drilling rigs, tankers, gasoline stations, office space and other
assets for varying periods. At December 31, 1999, future minimum rental payments
applicable to capital and noncancelable operating leases with remaining terms of
one year or more (other than oil and gas leases) are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Operating Capital
Thousands of dollars Leases Leases
- --------------------------------------------------------------------------------
<S> <C> <C>
2000 $ 274,551 $ 1,156
2001 172,149 1,156
2002 106,186 1,156
2003 90,570 1,156
2004 86,727 1,156
Remaining years 403,651 5,781
- --------------------------------------------------------------------------------
Total minimum lease payments 1,133,834 11,561
Less: Imputed interest -- 3,229
Income from subleases 17,263 --
- --------------------------------------------------------------------------------
Net minimum lease payments $1,116,571* $ 8,332
================================================================================
Capitalized lease obligations--
Current $ 531
Long-term 7,801
- --------------------------------------------------------------------------------
Total $ 8,332
================================================================================
</TABLE>
* Of the total future minimum payments under operating leases, $79,590 has
been accrued at December 31, 1999.
Rental expense for all operating leases, other than rentals applicable to
oil and gas leases, was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Thousands of dollars 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Total rental expense $156,362 $178,560 $195,246
Less income from subleases 51,418 29,979 11,792
- --------------------------------------------------------------------------------
Net rental expense $104,944 $148,581 $183,454
================================================================================
</TABLE>
41
<PAGE> 35
14. Financial Instruments, Hedging and Trading Activities
The Corporation uses futures, forwards, options and swaps, individually or in
combination, to reduce the effects of fluctuations in crude oil, natural gas and
refined product prices and in fixed-price sales contracts. In addition, the
Corporation uses interest-rate conversion agreements to adjust the interest
rates on a portion of its long-term, fixed-rate debt. Foreign currency contracts
are used to protect the Corporation from fluctuations in exchange rates.
Commodity Hedging: At December 31, 1999, the Corporation's hedging activities
included commodity and financial contracts, maturing mainly in 2000, covering
29,700,000 barrels of crude oil and 1,400,000 barrels of refined products
(3,000,000 net barrels of crude oil and refined products in 1998). The
Corporation also hedged 4,500,000 net Mcf of natural gas in 1998.
The Corporation produced 85,000,000 barrels of crude oil and natural gas
liquids and 235,000,000 Mcf of natural gas in 1999, and had approximately
14,000,000 barrels of crude oil and refined products in its refining and
marketing inventories at December 31, 1999. Since the contracts described above
are designated as hedges and correlate to price movements of crude oil, natural
gas and refined products, any gains or losses resulting from market changes will
be offset by losses or gains on the Corporation's hedged inventory or
production. Net deferred losses from the Corporation's hedging activities were
$61,200,000 at December 31, 1999, including $47,600,000 of unrealized losses
($5,000,000 of gains at December 31, 1998, including $2,000,000 of unrealized
gains).
Financial Instruments: At December 31, 1999, the Corporation has $400,000,000 in
interest-rate conversion agreements outstanding ($400,000,000 at December 31,
1998). The Corporation also has $865,000,000 of notional value foreign currency
forward and purchased option contracts maturing generally in 2000 ($97,000,000
at December 31, 1998) and $145,300,000 in letters of credit outstanding
($137,900,000 at December 31, 1998). Notional amounts do not quantify risk or
represent assets or liabilities of the Corporation, but are used in the
calculation of cash settlements under the contracts.
Fair Value Disclosure: The carrying amounts of cash and cash equivalents,
short-term debt and long-term, variable-rate debt approximate fair value. The
Corporation estimates the fair value of its long-term, fixed-rate note
receivable and debt generally using discounted cash flow analysis based on
current interest rates for instruments with similar maturities. Interest-rate
conversion agreements and foreign currency exchange contracts are valued based
on current termination values or quoted market prices of comparable contracts.
The Corporation's valuation of commodity contracts considers quoted market
prices, time value, volatility of the underlying commodities and other factors.
The carrying amounts of the Corporation's financial instruments and
commodity contracts, including those used in the Corporation's hedging and
trading activities, generally approximate their fair values at December 31,
1999, except as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1999 1998
------------------- --------------------
Balance Balance
Millions of dollars, Sheet Fair Sheet Fair
asset (liability) Amount Value Amount Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term, fixed-rate
note receivable $ 539 $ 493 $ 563 $ 563
Long-term, fixed-rate
debt (2,163) (2,141) (1,418) (1,477)
Interest-rate conversion
agreements -- (11) -- (24)
================================================================================
</TABLE>
Market and Credit Risks: The Corporation's financial instruments expose it to
market and credit risks and may at times be concentrated with certain
counterparties or groups of counterparties. The credit worthiness of
counterparties is subject to continuing review and full performance is
anticipated.
Commodity Trading: The Corporation, principally through a consolidated
partnership, trades energy commodities, including futures, forwards, options and
swaps, based on expectations of future market conditions. The Corporation's
results from trading activities, including its share of the earnings of the
trading partnership which has been profitable in 1999, 1998 and 1997, amounted
to net income of $19,000,000 in 1999, a net loss of $26,000,000 in 1998 and net
income of $4,000,000 in 1997.
42
<PAGE> 36
The following table presents the year-end fair values of energy
commodities and derivative instruments used in trading activities and the
average aggregate fair values during the year:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Fair Value
--------------------------------------------
At Average At Average
Millions of dollars, Dec. 31, for Dec. 31, for
asset (liability) 1999 1999 1998 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commodities $ 69 $ 85 $ 98 $ 75
Futures and forwards
Assets 225 143 29 43
Liabilities (233) (148) (29) (39)
Options
Held 178 67 (7) (3)
Written (192) (76) 8 5
Swaps
Assets 546 356 110 59
Liabilities (549) (342) (117) (60)
================================================================================
</TABLE>
Notional amounts of commodities and derivatives relating to trading
activities follow:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
At December 31,
----------------------
Millions of barrels of oil equivalent 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Commodities 3 7
Futures and forwards
Long 177 39
Short (168) (51)
Options
Held 343 20
Written (318) (21)
Swaps*
Held 304 83
Written (329) (81)
================================================================================
</TABLE>
* Includes 41 million barrels long and 53 million barrels short related to
basis swaps at December 31, 1999 (18 million barrels long and 20 million
barrels short in 1998).
15. Segment Information
The information which follows is required by FAS No. 131, Disclosures about
Segments of an Enterprise and Related Information, and includes financial
information by geographic area and operating segment. Financial information by
major geographic area for each of the three years ended December 31, 1999
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
United Consoli-
Millions of dollars States* Europe Other dated
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Operating revenues $4,948 $1,944 $ 147 $7,039
Property, plant and
equipment (net) 1,289 2,396 367 4,052
================================================================================
1998
Operating revenues $5,046 $1,474 $ 60 $6,580
Property, plant and
equipment (net) 1,457 2,351 384 4,192
================================================================================
1997
Operating revenues $6,552 $1,614 $ 58 $8,224
Property, plant and
equipment (net) 2,872 2,106 213 5,191
================================================================================
</TABLE>
* Includes U.S. Virgin Islands and shipping operations.
The Corporation operates principally in the petroleum industry and its
operating segments are (1) exploration and production and (2) refining,
marketing and shipping. Exploration and production operations include the
exploration for and the production, purchase, transportation and sale of crude
oil and natural gas. Refining, marketing and shipping operations include the
manufacture, purchase, transportation, marketing and trading of petroleum and
other energy products.
43
<PAGE> 37
15. Segment Information (Continued)
The following table presents financial data by major operating segment for each
of the three years ended December 31, 1999:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Refining,
Exploration and Marketing
Millions of dollars Production and Shipping Corporate Consolidated*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Operating revenues
Total operating revenues $ 2,719 $ 4,541 $ 1
Less: Transfers between affiliates 222 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Operating revenues from unaffiliated customers $ 2,497 $ 4,541 $ 1 $ 7,039
====================================================================================================================================
Operating earnings (loss) $ 324 $ 133 $ (150) $ 307
Special items 19 112 -- 131
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 343 $ 245 $ (150) $ 438
====================================================================================================================================
Earnings of equity affiliates $ (9) $ 11 $ 7 $ 9
Interest income 12 50 1 63
Interest expense -- -- 158 158
Depreciation, depletion, amortization and lease impairment 641 42 2 685
Provision (benefit) for income taxes 184 118 (38) 264
Investments in equity affiliates 148 778 61 987
Identifiable assets 4,396 2,993 339 7,728
Capital employed 3,137 2,211 -- 5,348
Capital expenditures 727 68 2 797
====================================================================================================================================
1998
Operating revenues
Total operating revenues $ 1,980 $ 4,717 $ 1
Less: Transfers between affiliates 118 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Operating revenues from unaffiliated customers $ 1,862 $ 4,717 $ 1 $ 6,580
====================================================================================================================================
Operating earnings (loss) $ (18) $ (18) $ (160) $ (196)
Special items (113) (150) -- (263)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (131) $ (168) $ (160) $ (459)
====================================================================================================================================
Earnings of equity affiliates $ (22) $ (13) $ 5 $ (30)
Interest income 11 11 1 23
Interest expense -- -- 153 153
Depreciation, depletion, amortization and lease impairment 566 125 2 693
Provision (benefit) for income taxes 7 (38) (24) (55)
Investments in equity affiliates 96 781 56 933
Identifiable assets 4,286 3,126 471 7,883
Capital employed 3,231 2,065 -- 5,296
Capital expenditures 1,307 129 3 1,439
====================================================================================================================================
1997
Operating revenues
Total operating revenues $ 3,086 $ 5,280 $ 1
Less: Transfers between affiliates 142 1 --
- ------------------------------------------------------------------------------------------------------------------------------------
Operating revenues from unaffiliated customers $ 2,944 $ 5,279 $ 1 $ 8,224
====================================================================================================================================
Operating earnings (loss) $ 258 $ (110) $ (134) $ 14
Special items (6) -- -- (6)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 252 $ (110) $ (134) $ 8
====================================================================================================================================
Earnings of equity affiliates $ 21 $ 6 $ 5 $ 32
Interest income 14 3 1 18
Interest expense -- -- 136 136
Depreciation, depletion, amortization and lease impairment 580 118 2 700
Provision (benefit) for income taxes 164 -- (45) 119
Investments in equity affiliates 114 77 53 244
Identifiable assets 3,727 3,713 495 7,935
Capital employed 2,468 2,875 -- 5,343
Capital expenditures 1,158 183 5 1,346
====================================================================================================================================
</TABLE>
* After elimination of transactions between affiliates, which are valued at
approximate market prices.
44
<PAGE> 38
Report of Management
Amerada Hess Corporation and Consolidated Subsidiaries
The consolidated financial statements of Amerada Hess Corporation and
consolidated subsidiaries were prepared by and are the responsibility of
management. These financial statements conform with generally accepted
accounting principles and are, in part, based on estimates and judgements of
management. Other information included in this Annual Report is consistent with
that in the consolidated financial statements.
The Corporation maintains a system of internal controls designed to
provide reasonable assurance that assets are safeguarded and that transactions
are properly executed and recorded. Judgements are required to balance the
relative costs and benefits of this system of internal controls.
The Corporation's consolidated financial statements have been audited by
Ernst & Young LLP, independent auditors, who have been selected by the Audit
Committee of the Board of Directors and approved by the stockholders. Ernst &
Young LLP assesses the Corporation's system of internal controls and performs
tests and procedures that they consider necessary to arrive at an opinion on the
fairness of the consolidated financial statements.
The Audit Committee of the Board of Directors, which consists solely of
independent directors, meets periodically with the independent auditors,
internal auditors and management to review and discuss the Corporation's
financial statements, the system of internal controls and the results of
internal and external audits. Ernst & Young LLP and the Corporation's internal
auditors have unrestricted access to the Audit Committee to discuss audit
findings and other financial matters.
/s/ John B. Hess
John B. Hess
Chairman of the Board and Chief Executive Officer
/s/ John Y. Schreyer
John Y. Schreyer
Executive Vice President and Chief Financial Officer
45
<PAGE> 39
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Stockholders
Amerada Hess Corporation
We have audited the accompanying consolidated balance sheet of Amerada Hess
Corporation and consolidated subsidiaries as of December 31, 1999 and 1998 and
the related consolidated statements of income, retained earnings, cash flows,
changes in common stock and capital in excess of par value and comprehensive
income for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Amerada Hess
Corporation and consolidated subsidiaries at December 31, 1999 and 1998 and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States.
As discussed in Note 3 to the consolidated financial statements, in 1999
the Corporation adopted the last-in, first-out (LIFO) inventory method for
valuing its refining and marketing inventories, and in 1998 the Corporation
adopted AICPA Statement of Position 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use.
/s/ Ernst & Young LLP
New York, NY
February 24, 2000
46
<PAGE> 40
Supplementary Oil and Gas Data
Amerada Hess Corporation and Consolidated Subsidiaries
The supplementary oil and gas data that follows is presented in accordance with
Statement of Financial Accounting Standards (FAS) No. 69, Disclosures about Oil
and Gas Producing Activities, and includes (1) costs incurred, capitalized costs
and results of operations relating to oil and gas producing activities, (2) net
proved oil and gas reserves, and (3) a standardized measure of discounted future
net cash flows relating to proved oil and gas reserves, including a
reconciliation of changes therein.
The Corporation produces crude oil and/or natural gas in the United
States, Europe, Gabon, Indonesia, Thailand and Azerbaijan. Exploration
activities are also conducted, or are planned, in additional countries.
The Corporation also owns a 25% interest in an oil and gas exploration
company that it accounts for on the equity method.
Costs Incurred in Oil and Gas Producing Activities
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
United Africa, Asia
For the Years Ended December 31 (Millions of dollars) Total States Europe and other
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Property acquisitions $ 24 $ 7 $ -- $ 17
Exploration 232 72 76 84
Development 626 137 451 38
Share of equity investee's costs incurred 38 -- 11 27
- ------------------------------------------------------------------------------------------------------------------------------------
1998
Property acquisitions $203 $ 41 $ 7 $155
Exploration 319 106 145 68
Development 915 182 650 83
Share of equity investee's costs incurred 70 -- 13 57
- ------------------------------------------------------------------------------------------------------------------------------------
1997
Property acquisitions $237 $ 39 $193 $ 5
Exploration 383 131 215 37
Development 679 231 408 40
Share of equity investee's costs incurred 45 -- 9 36
====================================================================================================================================
</TABLE>
Capitalized Costs Relating to Oil and Gas Producing Activities
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
At December 31 (Millions of dollars) 1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Unproved properties $ 369 $ 434
Proved properties 1,551 1,596
Wells, equipment and related facilities 8,054 7,688
- ----------------------------------------------------------------------------------------------
Total costs 9,974 9,718
Less: Reserve for depreciation, depletion, amortization and lease impairment 6,464 6,131
- ----------------------------------------------------------------------------------------------
Net capitalized costs $3,510 $3,587
- ----------------------------------------------------------------------------------------------
Share of equity investee's capitalized costs $ 233 $ 211
==============================================================================================
</TABLE>
47
<PAGE> 41
The results of operations for oil and gas producing activities shown below
exclude sales of purchased natural gas, non-operating income (including gains on
sales of oil and gas properties), interest expense and gains and losses
resulting from foreign currency exchange transactions. Therefore, these results
are on a different basis than the net income from exploration and production
operations reported in management's discussion and analysis of results of
operations and in Note 15 to the financial statements.
Results of Operations for Oil and Gas Producing Activities
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
United Africa, Asia
For the Years Ended December 31 (Millions of dollars) Total States Europe and other
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Sales and other operating revenues
Unaffiliated customers $ 1,776 $ 420 $ 1,242 $ 114
Inter-company 222 222 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues 1,998 642 1,242 114
- ------------------------------------------------------------------------------------------------------------------------------------
Costs and expenses
Production expenses, including related taxes 487 126 336 25
Exploration expenses, including dry holes and lease impairment 261 96 91 74
Other operating expenses 101 47 34 20
Depreciation, depletion and amortization 604 194 385 25
Impairment of assets and operating leases 94 59 -- 35
- ------------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 1,547 522 846 179
- ------------------------------------------------------------------------------------------------------------------------------------
Results of operations before income taxes 451 120 396 (65)
Provision (benefit) for income taxes 152 43 160 (51)
- ------------------------------------------------------------------------------------------------------------------------------------
Results of operations $ 299 $ 77 $ 236 $ (14)
- ------------------------------------------------------------------------------------------------------------------------------------
Share of equity investee's results of operations $ (6) $ -- $ (11) $ 5
====================================================================================================================================
1998
Sales and other operating revenues
Unaffiliated customers $ 1,352 $ 344 $ 975 $ 33
Inter-company 144 84 -- 60
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues 1,496 428 975 93
- ------------------------------------------------------------------------------------------------------------------------------------
Costs and expenses
Production expenses, including related taxes 518 129 357 32
Exploration expenses, including dry holes and lease impairment 349 133 135 81
Other operating expenses 151* 67 68 16
Depreciation, depletion and amortization 534 154 351 29
Impairment of assets and operating leases 162 7 104 51
- ------------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 1,714 490 1,015 209
- ------------------------------------------------------------------------------------------------------------------------------------
Results of operations before income taxes (218) (62) (40) (116)
Provision (benefit) for income taxes (38) (22) (22) 6
- ------------------------------------------------------------------------------------------------------------------------------------
Results of operations $ (180) $ (40) $ (18) $ (122)
- ------------------------------------------------------------------------------------------------------------------------------------
Share of equity investee's results of operations $ (31) $ -- $ (25) $ (6)
====================================================================================================================================
1997
Sales and other operating revenues
Unaffiliated customers $ 1,973 $ 506 $ 1,437 $ 30
Inter-company 134 76 -- 58
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues 2,107 582 1,437 88
- ------------------------------------------------------------------------------------------------------------------------------------
Costs and expenses
Production expenses, including related taxes 557 143 408 6
Exploration expenses, including dry holes and lease impairment 421 142 216 63
Other operating expenses 136 87 36 13
Depreciation, depletion and amortization 544 124 402 18
Impairment of assets and operating leases 81 -- 81 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 1,739 496 1,143 100
- ------------------------------------------------------------------------------------------------------------------------------------
Results of operations before income taxes 368 86 294 (12)
Provision for income taxes 143 30 107 6
- ------------------------------------------------------------------------------------------------------------------------------------
Results of operations $ 225 $ 56 $ 187 $ (18)
- ------------------------------------------------------------------------------------------------------------------------------------
Share of equity investee's results of operations $ 26 $ -- $ 17 $ 9
====================================================================================================================================
</TABLE>
* Includes severance and related costs of approximately $32 million.
48
<PAGE> 42
The Corporation's net oil and gas reserves have been estimated by DeGolyer
and MacNaughton, independent consultants. The reserves in the tabulation below
include proved undeveloped crude oil and natural gas reserves that will require
substantial future development expenditures. The estimates of the Corporation's
proved reserves of crude oil and natural gas (after deducting royalties and
operating interests owned by others) follow:
Oil and Gas Reserves
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
United Africa, Asia
Total States Europe and other
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Proved Developed and Undeveloped Reserves
Crude Oil, Including Condensate and Natural Gas Liquids (Millions of barrels)
At January 1, 1997 578 171 383 24
Revisions of previous estimates 47 7 40 --
Extensions, discoveries and other additions 39 12 21 6
Purchases of minerals in-place 14 1 13 --
Sales of minerals in-place (3) (1) (2) --
Production (80) (16) (60) (4)
- ------------------------------------------------------------------------------------------------------------------------------------
At December 31, 1997 595 174 395 26
Revisions of previous estimates 80 6 72 2
Extensions, discoveries and other additions 55 6 22 27
Purchases of minerals in-place 45 -- 2 43
Sales of minerals in-place (5) -- (5) --
Production (75) (17) (52) (6)
- ------------------------------------------------------------------------------------------------------------------------------------
At December 31, 1998 695 169 434 92
Revisions of previous estimates 21 13 10 (2)
Extensions, discoveries and other additions 68 5 49 14
Purchases of minerals in-place 4 -- -- 4
Sales of minerals in-place (5) -- -- (5)
Production (85) (24) (55) (6)
- ------------------------------------------------------------------------------------------------------------------------------------
At December 31, 1999 698 163 438 97
- ------------------------------------------------------------------------------------------------------------------------------------
Share of equity investee's crude oil reserves** 14 -- 9 5
====================================================================================================================================
Natural Gas (Millions of Mcf)
At January 1, 1997 1,866 847 931 88
Revisions of previous estimates 78 16 54 8
Extensions, discoveries and other additions 195 68 48 79
Purchases of minerals in-place 44 -- 44 --
Sales of minerals in-place (41) (8) (33) --
Production (207) (114) (93) --
- ------------------------------------------------------------------------------------------------------------------------------------
At December 31, 1997 1,935 809 951 175
Revisions of previous estimates 147 35 113 (1)
Extensions, discoveries and other additions 227 80 54 93
Purchases of minerals in-place 3 1 2 --
Sales of minerals in-place (47) (38) (9) --
Production (210) (107) (102) (1)
- ------------------------------------------------------------------------------------------------------------------------------------
At December 31, 1998 2,055 780 1,009 266
Revisions of previous estimates 34 (32) 35 31
Extensions, discoveries and other additions 94 25 60 9
Purchases of minerals in-place 4 4 -- --
Sales of minerals in-place (48) (48) -- --
Production (235) (124) (106) (5)
- ------------------------------------------------------------------------------------------------------------------------------------
At December 31, 1999 1,904 605* 998 301
- ------------------------------------------------------------------------------------------------------------------------------------
Share of equity investee's natural gas reserves** 277 -- 2 275
====================================================================================================================================
Net Proved Developed Reserves
Crude Oil, Including Condensate and Natural Gas Liquids (Millions of barrels)
At January 1, 1997 412 121 280 11
At December 31, 1997 420 123 280 17
At December 31, 1998 452 132 293 27
At December 31, 1999 513 136 351 26
Share of equity investee's crude oil reserves** 10 -- 8 2
Natural Gas (Millions of Mcf)
At January 1, 1997 1,368 553 815 --
At December 31, 1997 1,342 497 796 49
At December 31, 1998 1,330 525 753 52
At December 31, 1999 1,437 477 841 119
Share of equity investee's natural gas reserves** 87 -- 2 85
====================================================================================================================================
</TABLE>
* Excludes 373 million Mcf of carbon dioxide gas for sale or use in company
operations.
** Prior year reserves are not available on a comparable basis.
49
<PAGE> 43
The standardized measure of discounted future net cash flows relating to
proved oil and gas reserves required to be disclosed by FAS No. 69 is based on
assumptions and judgements. As a result, the future net cash flow estimates are
highly subjective and could be materially different if other assumptions were
used. Therefore, caution should be exercised in the use of the data presented
below.
Future net cash flows are calculated by applying year-end oil and gas
selling prices (adjusted for price changes provided by contractual arrangements,
including hedges) to estimated future production of proved oil and gas reserves,
less estimated future development and production costs and future income tax
expenses. Future net cash flows are discounted at the prescribed rate of 10%. No
recognition is given in the discounted future net cash flow estimates to
depreciation, depletion, amortization and lease impairment, exploration
expenses, interest expense, general and administrative expenses and changes in
future prices and costs. The selling prices of crude oil and natural gas have
increased significantly during 1999 and are highly volatile.
Standardized Measure of Discounted Future Net Cash Flows
Relating to Proved Oil and Gas Reserves
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
United Africa, Asia
At December 31 (Millions of dollars) Total States Europe and other
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Future revenues $19,858 $ 5,133 $12,810 $ 1,915
- --------------------------------------------------------------------------------------------------------------
Less:
Future development and production costs 6,500 1,396 4,484 620
Future income tax expenses 5,457 1,167 3,753 537
- --------------------------------------------------------------------------------------------------------------
11,957 2,563 8,237 1,157
- --------------------------------------------------------------------------------------------------------------
Future net cash flows 7,901 2,570 4,573 758
Less: Discount at 10% annual rate 2,814 1,027 1,441 346
- --------------------------------------------------------------------------------------------------------------
Standardized measure of discounted future
net cash flows $ 5,087 $ 1,543 $ 3,132 $ 412
- --------------------------------------------------------------------------------------------------------------
Share of equity investee's standardized measure $ 237 $ -- $ 71 $ 166
==============================================================================================================
1998
Future revenues $10,826 $ 2,866 $ 6,457 $ 1,503
- --------------------------------------------------------------------------------------------------------------
Less:
Future development and production costs 6,412 1,479 4,183 750
Future income tax expenses 1,411 374 795 242
- --------------------------------------------------------------------------------------------------------------
7,823 1,853 4,978 992
- --------------------------------------------------------------------------------------------------------------
Future net cash flows 3,003 1,013 1,479 511
Less: Discount at 10% annual rate 980 403 326 251
- --------------------------------------------------------------------------------------------------------------
Standardized measure of discounted future
net cash flows $ 2,023 $ 610 $ 1,153 $ 260
==============================================================================================================
1997
Future revenues $13,001 $ 4,078 $ 8,207 $ 716
- --------------------------------------------------------------------------------------------------------------
Less:
Future development and production costs 6,033 1,533 4,243 257
Future income tax expenses 3,127 831 2,073 223
- --------------------------------------------------------------------------------------------------------------
9,160 2,364 6,316 480
- --------------------------------------------------------------------------------------------------------------
Future net cash flows 3,841 1,714 1,891 236
Less: Discount at 10% annual rate 1,424 692 648 84
- --------------------------------------------------------------------------------------------------------------
Standardized measure of discounted future
net cash flows $ 2,417 $ 1,022 $ 1,243 $ 152
==============================================================================================================
</TABLE>
50
<PAGE> 44
Changes in Standardized Measure of Discounted Future Net
Cash Flows Relating to Proved Oil and Gas Reserves
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
For the years ended December 31 (Millions of dollars) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Standardized measure of discounted future net cash flows at beginning of year $ 2,023 $ 2,417 $ 4,184
- ----------------------------------------------------------------------------------------------------------------------------
Changes during the year
Sales and transfers of oil and gas produced during year, net of
production costs (1,511) (978) (1,550)
Development costs incurred during year 626 915 679
Net changes in prices and production costs applicable to future production 5,002 (2,215) (3,304)
Net change in estimated future development costs 28 (273) (392)
Extensions and discoveries (including improved recovery) of oil and
gas reserves, less related costs 678 220 140
Revisions of previous oil and gas reserve estimates 244 233 271
Purchases (sales) of minerals in-place, net (112) 126 90
Accretion of discount 288 435 769
Net change in income taxes (2,289) 1,036 1,355
Revision in rate or timing of future production and other changes 110 107 175
- ----------------------------------------------------------------------------------------------------------------------------
Total 3,064 (394) (1,767)
- ----------------------------------------------------------------------------------------------------------------------------
Standardized measure of discounted future net cash flows at end of year $ 5,087 $ 2,023 $ 2,417
============================================================================================================================
</TABLE>
51
<PAGE> 45
Ten-Year Summary of Financial Data
Amerada Hess Corporation and Consolidated Subsidiaries
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Thousands of dollars, except per share data 1999(a) 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Statement of Consolidated Income
Revenues
Sales (excluding excise taxes) and other operating revenues
Crude oil (including sales of purchased oil) $ 1,406,987 $ 893,921 $ 1,435,848 $ 1,528,692
Natural gas (including sales of purchased gas) 1,856,179 1,710,743 1,414,314 1,364,833
Petroleum products 3,003,280 3,464,229 4,960,986 5,080,790
Other operating revenues 772,692 510,999 412,434 295,871
- ------------------------------------------------------------------------------------------------------------------------------------
Total 7,039,138 6,579,892 8,223,582 8,270,186
Non-operating income
Gain (loss) on asset sales 273,441 (25,679) 16,463 529,271(d)
Equity in income (loss) of HOVENSA L.L.C 6,988 (15,848) -- --
Other 141,787 82,740 120,435 124,276
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues 7,461,354 6,621,105 8,360,480 8,923,733
- ------------------------------------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of products sold 4,240,910 4,373,616 5,577,924 5,386,316
Production expenses 487,219 517,828 557,025 620,533
Marketing expenses 387,298 378,506 328,975 264,295
Other operating expenses 216,651 224,433 231,791 129,454
Exploration expenses, including dry holes and
lease impairment 261,038 348,951 421,863 384,324
General and administrative expenses 231,546 270,668 236,269 237,868
Interest expense 158,222 152,934 136,149 165,501
Depreciation, depletion and amortization 648,663 661,802 663,297 721,498
Impairment of assets and operating leases 127,998 206,478 80,602 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 6,759,545 7,135,216 8,233,895 7,909,789
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 701,809 (514,111) 126,585 1,013,944
Provision (benefit) for income taxes 264,193 (55,218) 119,085 353,845
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 437,616(b) $ (458,893)(c) $ 7,500 $ 660,099
====================================================================================================================================
Net income (loss) per share
Basic $4.88 $(5.12) $.08 $7.13
Diluted 4.85 (5.12) .08 7.09
====================================================================================================================================
Dividends Per Share of Common Stock $.60 $.60 $.60 $.60
Weighted Average Number of
Shares Outstanding (diluted)--in thousands 90,280 89,585 91,733 93,110
====================================================================================================================================
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Thousands of dollars, except per share data 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Statement of Consolidated Income
Revenues
Sales (excluding excise taxes) and other operating revenues
Crude oil (including sales of purchased oil) $ 1,565,310 $ 1,228,045 $ 1,219,750 $ 1,362,118
Natural gas (including sales of purchased gas) 1,120,450 1,063,560 1,020,563 787,996
Petroleum products 4,311,082 3,980,563 3,348,900 3,428,702
Other operating revenues 302,465 327,816 290,308 279,541
- --------------------------------------------------------------------------------------------------------------------------------
Total 7,299,307 6,599,984 5,879,521 5,858,357
Non-operating income
Gain (loss) on asset sales 96,010 41,657 -- --
Equity in income (loss) of HOVENSA L.L.C -- -- -- --
Other 124,571 49,226 17,068 99,866
- --------------------------------------------------------------------------------------------------------------------------------
Total revenues 7,519,888 6,690,867 5,896,589 5,958,223
- --------------------------------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of products sold 4,501,053 3,795,094 3,508,295 3,213,748
Production expenses 610,457 600,501 626,377 684,292
Marketing expenses 259,214 260,552 247,029 228,953
Other operating expenses 185,477 124,258 242,266 233,989
Exploration expenses, including dry holes and
lease impairment 381,758 331,216 350,859 323,942
General and administrative expenses 262,950 230,110 229,218 238,032
Interest expense 247,465 245,149 156,615 147,099
Depreciation, depletion and amortization 840,002 868,175 759,406 764,683
Impairment of assets and operating leases 584,161(e) -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 7,872,537 6,455,055 6,120,065 5,834,738
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (352,649) 235,812 (223,476) 123,485
Provision (benefit) for income taxes 41,764 162,098 44,727 115,940
- --------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (394,413) $ 73,714 $ (268,203) $ 7,545
================================================================================================================================
Net income (loss) per share
Basic $(4.26) $.80 $(2.91) $.09
Diluted (4.26) .79 (2.91) .09
================================================================================================================================
Dividends Per Share of Common Stock $.60 $.60 $.60 $.60
Weighted Average Number of
Shares Outstanding (diluted)--in thousands 92,509 92,968 92,213 87,286
================================================================================================================================
<CAPTION>
- -----------------------------------------------------------------------------------------------
Thousands of dollars, except per share data 1991 1990
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Statement of Consolidated Income
Revenues
Sales (excluding excise taxes) and other operating revenues
Crude oil (including sales of purchased oil) $ 1,448,793 $ 1,248,193
Natural gas (including sales of purchased gas) 574,004 458,615
Petroleum products 3,897,748 4,587,646
Other operating revenues 346,300 653,051
- -----------------------------------------------------------------------------------------------
Total 6,266,845 6,947,505
Non-operating income
Gain (loss) on asset sales -- --
Equity in income (loss) of HOVENSA L.L.C -- --
Other 151,419 138,854
- -----------------------------------------------------------------------------------------------
Total revenues 6,418,264 7,086,359
- -----------------------------------------------------------------------------------------------
Costs and expenses
Cost of products sold 3,686,227 4,003,747
Production expenses 619,482 503,579
Marketing expenses 262,728 268,222
Other operating expenses 176,879 231,942
Exploration expenses, including dry holes and
lease impairment 397,267 360,168
General and administrative expenses 222,585 196,588
Interest expense 177,850 224,200
Depreciation, depletion and amortization 759,084 682,412
Impairment of assets and operating leases -- --
- -----------------------------------------------------------------------------------------------
Total costs and expenses 6,302,102 6,470,858
- -----------------------------------------------------------------------------------------------
Income (loss) before income taxes 116,162 615,501
Provision (benefit) for income taxes 31,854 132,788
- -----------------------------------------------------------------------------------------------
Net income (loss) $ 84,308 $ 482,713
===============================================================================================
Net income (loss) per share
Basic $1.05 $5.99
Diluted 1.04 5.96
===============================================================================================
Dividends Per Share of Common Stock $.60 $.60
Weighted Average Number of
Shares Outstanding (diluted)--in thousands 81,087 81,023
===============================================================================================
</TABLE>
(a) On January 1, 1999, the Corporation adopted the last-in, first-out (LIFO)
inventory method for refining and marketing inventories.
(b) Includes after-tax gains on asset sales of $176,000 and special tax
benefits of $54,600, partially offset by impairment of assets and
operating leases (after income taxes) of $99,500.
(c) Reflects after-tax special charges aggregating $262,800 representing
impairments of assets and operating leases, a net loss on asset sales and
accrued severance.
(d) After income taxes, the net gain was $421,150.
(e) After income taxes, the net charge was $415,542.
See accompanying notes to consolidated financial statements.
52 & 53
<PAGE> 46
Ten-Year Summary of Financial Data
Amerada Hess Corporation and Consolidated Subsidiaries
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Thousands of dollars, except per share data 1999 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Selected Balance Sheet Data at Year-End
Cash and cash equivalents $ 40,926 $ 73,791 $ 91,154 $ 112,522
Working capital 248,720 89,909 463,781 689,864
Property, plant and equipment
Exploration and production $ 9,974,117 $ 9,718,424 $ 8,779,807 $ 8,233,445
Refining, marketing and other 1,090,768 1,308,815 3,841,828 3,668,974
- -----------------------------------------------------------------------------------------------------------------------------------
Total--at cost 11,064,885 11,027,239 12,621,635 11,902,419
Less reserves 7,013,233 6,835,301 7,430,841 6,995,136
- -----------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment--net $ 4,051,652 $ 4,191,938 $ 5,190,794 $ 4,907,283
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 7,727,712 $ 7,882,983 $ 7,934,619 $ 7,784,481
Total debt 2,309,681 2,652,465 2,127,288 1,939,288
Stockholders' equity 3,038,192 2,643,412 3,215,699 3,383,631
Stockholders' equity per share $ 33.51 $ 29.26 $ 35.16 $ 36.35
===================================================================================================================================
Summarized Statement of Cash Flows
Net cash provided by operating activities $ 770,005 $ 518,788 $ 1,250,007 $ 807,721
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Capital expenditures
Exploration and production (727,086) (1,306,438) (1,157,938) (788,286)
Refining, marketing and other (69,571) (132,240) (187,652) (72,339)
- -----------------------------------------------------------------------------------------------------------------------------------
Total capital expenditures (796,657) (1,438,678) (1,345,590) (860,625)
Proceeds from sales of property, plant and equipment and other 372,647 502,854 63,017 1,037,073
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (424,010) (935,824) (1,282,573) 176,448
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Issuance (repayment) of notes 14,412 (14,342) 1,982 (72,046)
Long-term borrowings 990,125 848,320 398,391 --
Repayment of long-term debt (1,347,745) (317,144) (209,000) (794,527)
Issuance of common stock -- -- -- --
Cash dividends paid (54,262) (54,647) (55,373) (55,746)
Common stock acquired -- (59,167) (122,283) (8,236)
Stock options exercised 18,283 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (379,187) 403,020 13,717 (930,555)
- -----------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 327 (3,347) (2,519) 2,837
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents $ (32,865) $ (17,363) $ (21,368) $ 56,451
===================================================================================================================================
Stockholder Data at Year-End
Number of common shares outstanding (in thousands) 90,676 90,357 91,451 93,073
Number of stockholders (based on number of holders of record) 7,416 8,959 9,591 10,153
Market price of common stock $56.75 $49.75 $54.88 $57.88
===================================================================================================================================
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Thousands of dollars, except per share data 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Selected Balance Sheet Data at Year-End
Cash and cash equivalents $ 56,071 $ 53,135 $ 79,635 $ 141,014
Working capital 357,964 520,247 245,026 551,459
Property, plant and equipment
Exploration and production $ 9,392,184 $ 9,790,468 $ 9,360,871 $ 9,203,951
Refining, marketing and other 3,672,028 4,514,358 4,426,369 3,886,814
- -----------------------------------------------------------------------------------------------------------------------------------
Total--at cost 13,064,212 14,304,826 13,787,240 13,090,765
Less reserves 7,694,496 7,938,824 7,052,328 6,646,801
- -----------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment--net $ 5,369,716 $ 6,366,002 $ 6,734,912 $ 6,443,964
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 7,756,370 $ 8,337,940 $ 8,641,546 $ 8,721,756
Total debt 2,717,866 3,339,788 3,687,922 3,186,199
Stockholders' equity 2,660,396 3,099,629 3,028,911 3,387,599
Stockholders' equity per share $ 28.60 $ 33.33 $ 32.71 $ 36.59
===================================================================================================================================
Summarized Statement of Cash Flows
Net cash provided by operating activities $ 1,241,007 $ 957,018 $ 819,423 $ 1,137,707
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Capital expenditures
Exploration and production (626,518) (532,189) (755,419) (916,536)
Refining, marketing and other (65,593) (64,095) (592,622) (641,258)
- -----------------------------------------------------------------------------------------------------------------------------------
Total capital expenditures (692,111) (596,284) (1,348,041) (1,557,794)
Proceeds from sales of property, plant and equipment and other 145,792 72,804 12,436 25,423
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (546,319) (523,480) (1,335,605) (1,532,371)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Issuance (repayment) of notes 26,247 (54,153) 117,791 (159,756)
Long-term borrowings 25,000 289,843 547,704 675,016
Repayment of long-term debt (689,355) (642,112) (167,769) (524,384)
Issuance of common stock -- -- -- 497,360
Cash dividends paid (55,788) (55,711) (41,603) (64,194)
Common stock acquired -- -- -- --
Stock options exercised -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (693,896) (462,133) 456,123 424,042
- -----------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 2,144 2,095 (1,320) (8,534)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents $ 2,936 $ (26,500) $ (61,379) $ 20,844
===================================================================================================================================
Stockholder Data at Year-End
Number of common shares outstanding (in thousands) 93,011 92,996 92,587 92,584
Number of stockholders (based on number of holders of record) 11,294 11,506 12,000 13,088
Market price of common stock $53.00 $45.63 $45.13 $46.00
===================================================================================================================================
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Thousands of dollars, except per share data 1991 1990
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Selected Balance Sheet Data at Year-End
Cash and cash equivalents $ 120,170 $ 129,914
Working capital 625,370 603,244
Property, plant and equipment
Exploration and production $ 9,306,435 $ 8,340,951
Refining, marketing and other 3,223,397 2,817,032
- -----------------------------------------------------------------------------------------------------
Total--at cost 12,529,832 11,157,983
Less reserves 6,339,232 5,594,399
- -----------------------------------------------------------------------------------------------------
Property, plant and equipment--net $ 6,190,600 $ 5,563,584
- -----------------------------------------------------------------------------------------------------
Total assets $ 8,841,435 $ 9,056,636
Total debt 3,266,195 2,925,285
Stockholders' equity 3,131,982 3,106,029
Stockholders' equity per share $ 38.63 $ 38.34
=====================================================================================================
Summarized Statement of Cash Flows
Net cash provided by operating activities $ 1,364,268 $ 1,326,444
- -----------------------------------------------------------------------------------------------------
Cash flows from investing activities
Capital expenditures
Exploration and production (1,295,039) (1,267,506)
Refining, marketing and other (417,276) (193,921)
- -----------------------------------------------------------------------------------------------------
Total capital expenditures (1,712,315) (1,461,427)
Proceeds from sales of property, plant and equipment and other 37,788 (12,012)
- -----------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (1,674,527) (1,473,439)
- -----------------------------------------------------------------------------------------------------
Cash flows from financing activities
Issuance (repayment) of notes (183,351) 46,744
Long-term borrowings 786,280 461,413
Repayment of long-term debt (269,414) (287,531)
Issuance of common stock -- --
Cash dividends paid (36,468) (60,681)
Common stock acquired -- (6,213)
Stock options exercised -- --
- -----------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 297,047 153,732
- -----------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 3,468 2,877
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents $ (9,744) $ 9,614
=====================================================================================================
Stockholder Data at Year-End
Number of common shares outstanding (in thousands) 81,068 81,019
Number of stockholders (based on number of holders of record) 13,732 14,669
Market price of common stock $47.50 $46.38
=====================================================================================================
</TABLE>
54 & 55
<PAGE> 47
Ten-Year Summary of Operating Data
Amerada Hess Corporation and Consolidated Subsidiaries
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Production Per Day (net)
Crude oil (barrels)
United States 54,772 36,784 35,707 41,020 52,284
United Kingdom 112,129 109,463 126,427 134,726 135,429
Norway 25,326 26,943 29,516 27,603 25,576
Denmark 7,547 -- -- -- --
Gabon 10,226 14,345 10,127 9,725 9,512
Indonesia and Azerbaijan 4,662 2,949 531 -- --
Canada and Abu Dhabi -- -- -- 5,929 16,976
- ------------------------------------------------------------------------------------------------------------------------------
Total 214,662 190,484 202,308 219,003 239,777
==============================================================================================================================
Natural gas liquids (barrels)
United States 9,833 8,136 8,243 9,105 10,722
United Kingdom 5,670 5,990 6,364 6,628 6,900
Norway 1,683 1,379 1,657 1,585 1,414
Thailand 559 -- -- -- --
Canada -- -- -- 476 1,647
- ------------------------------------------------------------------------------------------------------------------------------
Total 17,745 15,505 16,264 17,794 20,683
==============================================================================================================================
Natural gas (Mcf)
United States 338,044 293,849 311,915 337,653 401,581
United Kingdom 257,800 251,000 225,804 253,983 239,307
Norway 30,600 27,828 30,312 30,445 27,743
Denmark 2,900 -- -- -- --
Indonesia 5,400 3,800 1,223 -- --
Thailand 7,800 -- -- -- --
Canada -- -- -- 62,585 215,500
- ------------------------------------------------------------------------------------------------------------------------------
Total 642,544 576,477 569,254 684,666 884,131
==============================================================================================================================
Well Completions (net)
Oil wells 28 28 42 39 33
Gas wells 11 20 11 25 41
Dry holes 9 25 24 40 50
Productive Wells at Year-End (net)
Oil wells 735 721 860 854 2,154
Gas wells 161 252 447 455 1,160
- ------------------------------------------------------------------------------------------------------------------------------
Total 896 973 1,307 1,309 3,314
==============================================================================================================================
Undeveloped Net Acreage (held at end of year)
United States 678,000 748,000 915,000 891,000 1,440,000
Foreign(a) 15,858,000 16,927,000 10,180,000 7,455,000 5,871,000
- ------------------------------------------------------------------------------------------------------------------------------
Total 16,536,000 17,675,000 11,095,000 8,346,000 7,311,000
==============================================================================================================================
Shipping
Vessels owned or under charter at year-end 8 9 14 13 16
Total deadweight tons 884,000 952,000 1,602,000 1,236,000 2,010,000
Refining (barrels daily)
Amerada Hess Corporation -- 419,000(b) 411,000 396,000 377,000
HOVENSA L.L.C.(c) 209,000 217,000 -- -- --
Petroleum Products Sold (barrels daily)
Gasoline, distillates and other light products 284,000 411,000 436,000 412,000 401,000
Residual fuel oils 60,000 71,000 73,000 83,000 86,000
- ------------------------------------------------------------------------------------------------------------------------------
Total 344,000 482,000 509,000 495,000 487,000
==============================================================================================================================
Storage Capacity at Year-End (barrels) 38,343,000 56,070,000 87,000,000 86,986,000 89,165,000
Number of Employees (average) 8,485(d) 9,777 9,216 9,085 9,574
==============================================================================================================================
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Production Per Day (net)
Crude oil (barrels)
United States 55,638 60,173 62,517 66,063 62,434
United Kingdom 122,043 80,019 86,265 59,979 56,027
Norway 24,279 26,388 29,598 28,619 24,351
Denmark -- -- -- -- --
Gabon 8,857 8,301 6,910 8,952 --
Indonesia and Azerbaijan -- -- -- -- --
Canada and Abu Dhabi 17,854 21,540 22,678 21,832 17,969
- -----------------------------------------------------------------------------------------------------------------------
Total 228,671 196,421 207,968 185,445 160,781
=======================================================================================================================
Natural gas liquids (barrels)
United States 11,964 11,798 11,063 10,047 9,436
United Kingdom 6,756 3,783 1,468 766 805
Norway 1,320 1,432 1,707 1,752 2,004
Thailand -- -- -- -- --
Canada 1,809 1,956 1,981 1,997 1,704
- -----------------------------------------------------------------------------------------------------------------------
Total 21,849 18,969 16,219 14,562 13,949
=======================================================================================================================
Natural gas (Mcf)
United States 427,103 502,459 601,824 583,740 457,042
United Kingdom 208,742 188,024 153,599 128,014 145,921
Norway 24,417 28,987 31,858 26,947 25,656
Denmark -- -- -- -- --
Indonesia -- -- -- -- --
Thailand -- -- -- -- --
Canada 185,856 167,839 137,680 104,151 76,768
- -----------------------------------------------------------------------------------------------------------------------
Total 846,118 887,309 924,961 842,852 705,387
=======================================================================================================================
Well Completions (net)
Oil wells 28 48 33 45 17
Gas wells 44 49 20 41 33
Dry holes 24 37 22 36 38
Productive Wells at Year-End (net)
Oil wells 2,160 2,189 2,082 2,103 2,111
Gas wells 1,146 1,115 966 927 905
- -----------------------------------------------------------------------------------------------------------------------
Total 3,306 3,304 3,048 3,030 3,016
=======================================================================================================================
Undeveloped Net Acreage (held at end of year)
United States 1,685,000 1,854,000 1,819,000 1,802,000 1,716,000
Foreign(a) 4,570,000 4,310,000 3,168,000 3,480,000 3,329,000
- -----------------------------------------------------------------------------------------------------------------------
Total 6,255,000 6,164,000 4,987,000 5,282,000 5,045,000
=======================================================================================================================
Shipping
Vessels owned or under charter at year-end 17 15 21 21 23
Total deadweight tons 2,265,000 2,398,000 3,223,000 2,825,000 3,012,000
Refining (barrels daily)
Amerada Hess Corporation 388,000 351,000 335,000 320,000 383,000
HOVENSA L.L.C.(c) -- -- -- -- --
Petroleum Products Sold (barrels daily)
Gasoline, distillates and other light products 375,000 291,000 275,000 285,000 296,000
Residual fuel oils 93,000 95,000 102,000 128,000 132,000
- -----------------------------------------------------------------------------------------------------------------------
Total 468,000 386,000 377,000 413,000 428,000
=======================================================================================================================
Storage Capacity at Year-End (barrels) 94,597,000 94,380,000 95,199,000 94,879,000 93,867,000
Number of Employees (average) 9,858 10,173 10,263 10,317 9,645
=======================================================================================================================
</TABLE>
(a) Includes acreage held under production sharing contracts.
(b) Through ten months of 1998.
(c) Reflects 50% of HOVENSA refinery crude runs from November 1, 1998.
(d) Includes approximately 4,200 employees of retail operations.
56 & 57
<PAGE> 1
EXHIBIT 21
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
ORGANIZED UNDER
NAME OF SUBSIDIARY THE LAWS OF
------------------ ---------------
A.H. Shipping Guaranty Corporation ...................... Delaware
Amerada Hess (Denmark) A/S .............................. Denmark
Amerada Hess Limited .................................... United Kingdom
Amerada Hess Norge A/S .................................. Norway
Amerada Hess Production Gabon ........................... Gabon
Amerada Hess Shipping Corporation ....................... Liberia
Hess Energy Trading Company, LLC ........................ Delaware
Hess Oil Virgin Islands Corp. ........................... U.S. Virgin Islands
Jamestown Insurance Company Limited ..................... Bermuda
Tioga Gas Plant, Inc. ................................... Delaware
Other subsidiaries (names omitted because such unnamed subsidiaries, considered
in the aggregate as a single subsidiary, would not constitute a significant
subsidiary).
Each of the foregoing subsidiaries conducts business under the name listed, and
is 100% owned by the Registrant, except for Hess Energy Trading Company, LLC,
which is a trading company that is a joint venture between the Registrant and
unrelated parties.
NAME OF AFFILIATE
-----------------
HOVENSA L.L.C. .......................................... U.S. Virgin Islands
Summarized Financial Information of HOVENSA L.L.C. is included in the
Registrant's 1999 Annual Report to Stockholders.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 40,926
<SECURITIES> 0
<RECEIVABLES> 1,175,044
<ALLOWANCES> 0
<INVENTORY> 372,713
<CURRENT-ASSETS> 1,827,570
<PP&E> 11,064,885
<DEPRECIATION> 7,013,233
<TOTAL-ASSETS> 7,727,712
<CURRENT-LIABILITIES> 1,578,850
<BONDS> 2,286,660
0
0
<COMMON> 90,676
<OTHER-SE> 2,947,516
<TOTAL-LIABILITY-AND-EQUITY> 7,727,712
<SALES> 7,039,138
<TOTAL-REVENUES> 7,461,354
<CGS> 4,240,910
<TOTAL-COSTS> 4,240,910
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 158,222
<INCOME-PRETAX> 701,809
<INCOME-TAX> 264,193
<INCOME-CONTINUING> 437,616
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 437,616
<EPS-BASIC> 4.88
<EPS-DILUTED> 4.85
</TABLE>
