<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
COMMISSION FILE NUMBER 1-1204
----------------------
AMERADA HESS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
13-4921002
(I.R.S. employer identification number)
1185 AVENUE OF THE AMERICAS, NEW YORK, N.Y.
(Address of principal executive offices)
10036
(Zip Code)
(Registrant's telephone number, including area code is (212) 997-8500)
Indicate by check mark whether the registrant (I) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---------- ----------
At September 30, 2000, 88,574,505 shares of Common Stock were
outstanding.
================================================================================
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
----------------------- -----------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Sales (excluding excise taxes) and
other operating revenues $ 2,833 $ 1,802 $ 8,308 $ 4,770
Non-operating income
Gains on asset sales - - 165 - - 273
Equity in income of HOVENSA L.L.C 24 7 76 24
Other 30 3 87 95
-------- -------- -------- --------
Total revenues 2,887 1,977 8,471 5,162
-------- -------- -------- --------
COSTS AND EXPENSES
Cost of products sold 1,768 1,073 5,361 2,935
Production expenses 139 111 401 327
Marketing expenses 157 108 385 288
Other operating expenses 60 52 168 168
Exploration expenses, including dry holes
and lease impairment 65 45 217 186
General and administrative expenses 50 70 152 184
Interest expense 42 39 119 116
Depreciation, depletion and amortization 176 159 516 434
-------- -------- -------- --------
Total costs and expenses 2,457 1,657 7,319 4,638
-------- -------- -------- --------
Income before income taxes 430 320 1,152 524
Provision for income taxes 173 162 469 217
-------- -------- -------- --------
NET INCOME $ 257 $ 158 $ 683 $ 307
======== ======== ======== ========
NET INCOME PER SHARE
Basic $ 2.89 $ 1.77 $ 7.63 $ 3.42
======== ======== ======== ========
Diluted $ 2.86 $ 1.75 $ 7.57 $ 3.40
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 89.8 90.5 90.2 90.2
COMMON STOCK DIVIDENDS PER SHARE $ .15 $ .15 $ .45 $ .45
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 3
PART I - FINANCIAL INFORMATION (CONT'D.)
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions of dollars)
<TABLE>
<CAPTION>
ASSETS
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 259 $ 41
Accounts receivable 1,848 1,175
Inventories 367 373
Other current assets 585 239
--------- ---------
Total current assets 3,059 1,828
--------- ---------
INVESTMENTS AND ADVANCES
HOVENSA L.L.C 785 710
Other 236 282
--------- ---------
Total investments and advances 1,021 992
--------- ---------
PROPERTY, PLANT AND EQUIPMENT
Total - at cost 11,621 11,065
Less reserves for depreciation, depletion,
amortization and lease impairment 7,423 7,013
--------- ---------
Property, plant and equipment - net 4,198 4,052
--------- ---------
NOTE RECEIVABLE 539 539
--------- ---------
DEFERRED INCOME TAXES AND OTHER ASSETS 252 317
--------- ---------
TOTAL ASSETS $ 9,069 $ 7,728
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 1,389 $ 772
Accrued liabilities 923 625
Taxes payable 329 159
Notes payable 2 18
Current maturities of long-term debt 57 5
--------- ---------
Total current liabilities 2,700 1,579
--------- ---------
LONG-TERM DEBT 1,940 2,287
--------- ---------
DEFERRED LIABILITIES AND CREDITS
Deferred income taxes 516 442
Other 370 382
--------- ---------
Total deferred liabilities and credits 886 824
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock, par value $1.00
Authorized - 20,000,000 shares for issuance in series
3% cumulative convertible series
Authorized -- 330,000 shares
Issued -- 326,805 shares in 2000 (liquidation preference of $16) - - - -
Common stock, par value $1.00
Authorized - 200,000,000 shares
Issued - 88,574,505 shares at September 30, 2000;
90,676,405 shares at December 31, 1999 89 91
Capital in excess of par value 825 782
Retained earnings 2,769 2,287
Accumulated other comprehensive income (140) (122)
--------- ---------
Total stockholders' equity 3,543 3,038
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,069 $ 7,728
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
PART I - FINANCIAL INFORMATION (CONT'D.)
AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
Nine Months Ended September 30
(in millions)
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 683 $ 307
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation, depletion and amortization 516 434
Exploratory dry hole costs 91 34
Lease impairment 20 23
Gains on asset sales - - (273)
Provision for deferred income taxes 181 45
Undistributed earnings of affiliates (69) (6)
------- -------
1,422 564
Changes in operating assets and liabilities and other 9 (120)
------- -------
Net cash provided by operating activities 1,431 444
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (610) (617)
Proceeds from asset sales and other (2) 413
------- -------
Net cash used in investing activities (612) (204)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in notes payable (16) 30
Long-term borrowings - - 621
Repayment of long-term debt (394) (902)
Cash dividends paid (54) (54)
Common stock acquired (188) - -
Stock options exercised 51 17
------- -------
Net cash used in financing activities (601) (288)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH - - - -
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 218 (48)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 41 74
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 259 $ 26
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
PART I - FINANCIAL INFORMATION (CONTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions)
Note 1 - The financial statements included in this report reflect all normal and
recurring adjustments which, in the opinion of management, are
necessary for a fair presentation of the Corporation's consolidated
financial position at September 30, 2000 and December 31, 1999, and the
consolidated results of operations for the three- and nine-month
periods ended September 30, 2000 and 1999 and the consolidated cash
flows for the nine-month periods ended September 30, 2000 and 1999. The
unaudited results of operations for the interim periods reported are
not necessarily indicative of results to be expected for the full year.
Certain notes and other information have been condensed or omitted from
these interim financial statements. Such statements, therefore, should
be read in conjunction with the consolidated financial statements and
related notes included in the 1999 Annual Report to Stockholders, which
have been incorporated by reference in the Corporation's Form 10-K for
the year ended December 31, 1999.
Note 2 - Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Crude oil and other charge stocks $ 119 $ 67
Refined and other finished products 469 393
Less: LIFO adjustment (310) (149)
------ ------
278 311
Materials and supplies 89 62
------ ------
Total inventories $ 367 $ 373
====== ======
</TABLE>
Note 3 - The Corporation accounts for its investment in HOVENSA L.L.C. using the
equity method. Summarized income statement information for HOVENSA
follows:
<TABLE>
<CAPTION>
Three months Nine months
ended September 30 ended September 30
--------------------- ---------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total revenues $ 1,353 $ 873 $ 3,825 $ 2,142
Costs and expenses 1,304 858 3,671 2,091
------- ------- ------- -------
Net income $ 49 $ 15 $ 154 $ 51
======= ======= ======= =======
Amerada Hess
Corporation's share $ 24 $ 7 $ 76 $ 24
======= ======= ======= =======
</TABLE>
4
<PAGE> 6
PART I - FINANCIAL INFORMATION (CONTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions)
In February 2000, HOVENSA reached agreement on a $600 bank financing
for the construction of a 58 thousand barrel per day delayed coking
unit and related facilities at its refinery and for general working
capital requirements. In connection with this 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. deferred
principal payments on the note until after completion of coker
construction but not later than February 14, 2003. The interest rate on
the note increased to 9.46%. In October 2000, PDVSA V.I. exercised its
option to repay principal in accordance with the original amortization
schedule and reduced the interest rate to the original rate of 8.46%.
Note 4 - The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
Three months Nine months
ended September 30 ended September 30
------------------- -------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Current $ 81 $ 84 $ 288 $ 172
Deferred 92 78 181 45
------ ------ ------ ------
Total $ 173 $ 162 $ 469 $ 217
====== ====== ====== ======
</TABLE>
Note 5 - Foreign currency gains (losses), after income tax effects, amounted to
the following:
<TABLE>
<CAPTION>
Three months Nine months
ended September 30 ended September 30
------------------------------------ ------------------------------------
2000 1999 2000 1999
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Foreign currency
gains (losses) $ - - $ (24) $ 3 $ 12
================ =============== =============== ================
</TABLE>
Note 6 - The weighted average number of common shares used in the basic
and diluted earnings per share computations are as follows:
<TABLE>
<CAPTION>
Three months Nine months
ended September 30 ended September 30
------------------- -------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Common shares - basic 88.8 89.8 89.5 89.6
Effect of dilutive securities
(equivalent shares)
Nonvested common stock .3 .4 .3 .5
Stock options .5 .3 .3 .1
Convertible preferred
stock .2 - - .1 - -
------ ------ ------ ------
Common shares - diluted 89.8 90.5 90.2 90.2
====== ====== ====== ======
</TABLE>
5
<PAGE> 7
PART I - FINANCIAL INFORMATION (CONTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions)
Note 7 - 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. These contracts
correlate to movements in the value of inventory and the prices of
crude oil and natural gas, and as hedges, any resulting gains or losses
are recorded as part of the hedged transaction. After-tax earnings from
exploration and production activities were reduced by approximately $50
and $100 for the third quarter and nine months of 2000, due to hedging
activities. At September 30, 2000, after-tax deferred losses on the
Corporation's petroleum hedging contracts expiring through 2001 were
approximately $190, including $145 of unrealized losses.
Note 8 - Interest costs related to certain long-term construction
projects have been capitalized in accordance with FAS No. 34 as
follows:
<TABLE>
<CAPTION>
Three months Nine months
ended September 30 ended September 30
------------------------------------ ------------------------------------
2000 1999 2000 1999
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Interest capitalized $ - - $ 3 $ 3 $ 14
================ =============== =============== ================
</TABLE>
Note 9 - Comprehensive income, which includes net income and the
effects of foreign currency translation recorded directly in
stockholders' equity, is as follows:
<TABLE>
<CAPTION>
Three months Nine months
ended September 30 ended September 30
------------------------------------ ------------------------------------
2000 1999 2000 1999
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Comprehensive income $ 247 $ 165 $ 665 $ 306
================ =============== =============== ================
</TABLE>
Note 10 - On May 15, 2000, the Corporation acquired the 51% of The
Meadville Corporation's outstanding stock that it did not already own
for approximately $168 in cash, deferred payments and preferred stock.
The deferred payments are non-interest bearing and have been
discounted to $97 using a market interest rate. The Corporation
accounted for this acquisition using the purchase method. The
Meadville Corporation owned and operated 178 Merit retail gasoline
stations located in the northeastern United States. This acquisition
does not materially affect the Corporation's financial position or
results of operations.
6
<PAGE> 8
PART I - FINANCIAL INFORMATION (CONTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions)
Note 11 - The Corporation's results by operating segment were as follows:
<TABLE>
<CAPTION>
Three months Nine months
ended September 30 ended September 30
------------------------- -------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating revenues
Exploration and production (1) $ 973 $ 766 $ 2,893 $ 1,984
Refining, marketing
and shipping 2,080 1,166 5,969 3,089
-------- -------- -------- --------
Total $ 3,053 $ 1,932 $ 8,862 $ 5,073
======== ======== ======== ========
Net income (loss)
Exploration and production (2) $ 238 $ 71 $ 634 $ 179
Refining, marketing
and shipping (3) 62 128 174 240
Corporate, including interest (43) (41) (125) (112)
-------- -------- -------- --------
Total $ 257 $ 158 $ 683 $ 307
======== ======== ======== ========
</TABLE>
(1) Includes transfers to affiliates of $220 and $554 during the three-
and nine-month periods ended September 30, 2000, respectively,
compared to $130 and $303 for the corresponding periods of 1999.
(2) Includes after-tax gains on asset sales of $30 during the
nine-months ended September 30, 1999.
(3) Includes after-tax gains on asset sales of $106 and $146 in the
three- and nine-month periods ended September 30, 1999,
respectively.
Note 12 - The Corporation will adopt FAS No. 133, Accounting for Derivative
Instruments and Hedging Activity, on January 1, 2001. The Corporation
has not yet determined what the effects of FAS No. 133 will be on its
income and financial position.
7
<PAGE> 9
PART I - FINANCIAL INFORMATION (CONT'D.)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
RESULTS OF OPERATIONS
Operating earnings for the third quarter of 2000 amounted to
$257 million compared with earnings of $52 million in the third quarter
of 1999. Operating earnings in the first nine months of 2000 were $683
million compared with earnings of $131 million in the first nine months
of 1999.
The after-tax results by major operating activity for the
three- and nine-month periods ended September 30, 2000 and 1999 were as
follows (in millions, except per share data):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
--------------------- ---------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Exploration and production $ 238 $ 71 $ 634 $ 149
Refining, marketing and shipping 62 22 174 94
Corporate (10) (11) (32) (26)
Interest expense (33) (30) (93) (86)
------ ------ ------ ------
Operating earnings 257 52 683 131
Gains on asset sales - - 106 - - 176
------ ------ ------ ------
Net income $ 257 $ 158 $ 683 $ 307
====== ====== ====== ======
Net income per share (diluted) $ 2.86 $ 1.75 $ 7.57 $ 3.40
====== ====== ====== ======
</TABLE>
The net gain from asset sales in the third quarter of 1999
reflects the sale of the Corporation's Gulf Coast terminals and certain
retail sites. The net gain from asset sales in the first nine months of
1999 also includes the sale of southeast pipeline terminals, additional
retail sites and natural gas properties in California.
Exploration and Production
Operating earnings from exploration and production activities
increased by $167 million in the third quarter of 2000 and $485 million
in the first nine months of 2000 over the 1999 periods, reflecting
higher worldwide crude oil and natural gas selling prices and
increased sales volumes.
8
<PAGE> 10
PART I - FINANCIAL INFORMATION (CONT'D.)
RESULTS OF OPERATIONS (CONTINUED)
The Corporation's average selling prices, including the
effects of hedging, were as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
----------------------- -----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Crude oil (per barrel)
United States $ 24.40 $ 18.93 $ 23.84 $ 15.10
Foreign 26.55 20.47 25.72 15.64
Natural gas liquids (per barrel)
United States $ 23.81 $ 14.42 $ 21.22 $ 11.76
Foreign 24.54 16.44 22.50 12.02
Natural gas (per Mcf)
United States $ 3.98 $ 2.39 $ 3.26 $ 2.07
Foreign 2.16 1.60 2.12 1.79
</TABLE>
The Corporation's net daily worldwide production was as
follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
------------------ -----------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Crude oil (barrels per day)
United States 56 57 54 53
United Kingdom 123 111 116 108
Norway 23 26 24 25
Denmark 26 7 25 2
Gabon 7 10 8 11
Indonesia and Azerbaijan 8 4 7 4
--- --- --- ---
Total 243 215 234 203
=== === === ===
Natural gas liquids (barrels per day)
United States 13 12 13 9
Foreign 8 7 9 7
--- --- --- ---
Total 21 19 22 16
=== === === ===
Natural gas (Mcf per day)
United States 282 346 292 338
United Kingdom 239 219 294 242
Norway 21 31 23 31
Denmark 45 - - 35 - -
Indonesia and Thailand 29 12 33 6
--- --- --- ---
Total 616 608 677 617
=== === === ===
Barrels of oil equivalent 367 335 369 322
=== === === ===
</TABLE>
9
<PAGE> 11
PART I - FINANCIAL INFORMATION (CONT'D.)
RESULTS OF OPERATIONS (CONTINUED)
On a barrel of oil equivalent basis, the Corporation's oil and
gas production increased by 10% in the third quarter and 15% in the
first nine months of 2000 compared with the corresponding periods of
1999. The increase in United Kingdom crude oil production in the third
quarter and first nine months of 2000 principally reflects production
from new fields. Production commenced from the South Arne Field in
Denmark in the third quarter of 1999 and was temporarily interrupted in
the second quarter of 2000. Production from South Arne resumed in the
third quarter. Increased natural gas production principally from new
fields in the United Kingdom, Denmark and Thailand offset lower
production from natural decline in the United States.
Depreciation, depletion, and amortization charges relating to
exploration and production activities were higher in the third quarter
and first nine months of 2000 compared with the corresponding periods
of 1999. The increases reflect higher production volumes and
development drilling. Production expenses were also higher in the third
quarter and first nine months of 2000 because of increased production
volumes and higher workover costs. Exploration expenses were higher in
the third quarter and nine months of 2000 reflecting increased activity
in the Gulf of Mexico and international exploration areas outside of
the North Sea. General and administrative expenses relating to
exploration and production activities were lower, primarily as a result
of cost reductions in the United Kingdom. Marketing expenses increased
as a result of providing a reserve of $10 million for receivables in
the United Kingdom.
The effective income tax rate on exploration and production
earnings in the first nine months of 2000 was 42%. This rate compares
to an effective rate of 46% in the first nine months of 1999.
In the third quarter of 1999, exploration and production
earnings included net nonrecurring expenses of $29 million, principally
reflecting losses on foreign currency translation. In the first nine
months of 1999 nonrecurring expense of $12 million resulted primarily
from charges for the renegotiation and termination of long-term
contracts on drilling rigs and related service vessels, partially
offset by gains on foreign currency translation. Pre-tax foreign
currency gains or losses are included in non-operating income on the
income statement.
Crude oil and natural gas selling prices continue to be
volatile. Exploration and production earnings would be adversely
affected by lower selling prices in the future.
10
<PAGE> 12
PART I - FINANCIAL INFORMATION (CONT'D.)
RESULTS OF OPERATIONS (CONTINUED)
Refining, Marketing and Shipping
Operating earnings for refining, marketing and shipping
activities amounted to $62 million and $174 million in the third
quarter and first nine months of 2000, compared with $22 million and
$94 million in the corresponding periods of 1999. The Corporation's
downstream operations include its 50% equity share of HOVENSA, a
refining joint venture.
HOVENSA
The Corporation's share of HOVENSA's income was $24 million in
the third quarter of 2000 compared with $7 million in the third quarter
of 1999. The Corporation's share of HOVENSA's income in the first nine
months of 2000 was $76 million compared with $24 million in 1999.
Refined product margins improved in the third quarter and first nine
months of 2000, principally reflecting higher selling prices for
gasoline and distillates. Throughout most of 1999 refined product
margins were weak. The Corporation's share of HOVENSA's refining runs
amounted to 209,000 barrels per day in the first nine months of 2000
compared with 214,000 barrels per day in the first nine months of 1999.
Income taxes on HOVENSA's results are offset by available loss
carryforwards.
Operating earnings from refining, marketing and shipping
activities in the first nine months of 2000 and 1999 also include
interest income of $38 million and $35 million, respectively, on the
note received from PDVSA V.I. in connection with the formation of the
joint venture.
Retail, energy marketing and other
Results from retail gasoline operations were slightly higher
in the third quarter but lower in the first nine months of 2000,
compared with the corresponding periods of 1999. Selling prices did not
generally keep pace with rising product costs. Results of energy
marketing activities were comparable in the third quarter of each year
but higher in the first nine months of 2000 due to a period of cold
weather in the Corporation's marketing area. Total refined product
sales volumes amounted to 98 million barrels in the first nine months
of 2000 compared with 93 million barrels in the first nine months of
1999.
Marketing expenses increased in the third quarter and first
nine months of 2000, reflecting expanded retail operations. Other
operating expenses were higher in the third quarter of 2000 compared to
the same period of 1999 because of higher operating expenses on company
owned vessels chartered to third parties. These costs are more than
offset by higher operating revenues.
11
<PAGE> 13
PART I - FINANCIAL INFORMATION (CONT'D.)
RESULTS OF OPERATIONS (CONTINUED)
The Corporation has a 50% voting interest in a consolidated
partnership that trades energy commodities. The Corporation also
periodically takes forward positions on energy contracts in addition to
its hedging program. The Corporation's results from trading activities,
including its share of the earnings of the trading partnership which
was profitable in 2000 and 1999, amounted to a loss of $5 million in
the first nine months of 2000 compared with income of $28 million in
the first nine months of 1999. Expenses of the trading partnership are
included in marketing expenses, including in the third quarter of 2000,
a provision of $5 million after-tax for a potential loss on a
receivable from a counterparty.
The results of refining, marketing and shipping activities
will continue to be volatile, reflecting competitive industry
conditions and supply and demand factors, including the effects of
weather.
Corporate
Corporate administrative expenses of $32 million for the first
nine months of 2000 exceeded the comparable 1999 period by $6 million.
Administrative expenses for the two periods were comparable; however,
operating earnings of an insurance subsidiary and dividends from
reinsurers were lower by $12 million pre-tax ($8 million after-tax).
Consolidated Operating Revenues
Sales and other operating revenues increased by approximately
57% in the third quarter and 74% in the first nine months of 2000
compared with the corresponding periods of 1999. The increases were
primarily due to higher crude oil and refined product selling prices
and sales volumes. The Corporation's cost of products sold also
increased as a result of higher prices for purchased products.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities, including changes
in operating assets and liabilities, amounted to $1,431 million in the
first nine months of 2000 compared with $444 million in the first nine
months of 1999. Excluding changes in operating assets and liabilities,
the increase was $858 million and was mainly due to improved operating
results. The sales of the southeast pipeline operations, Gulf Coast
terminals, certain retail sites and natural gas properties in
California generated proceeds of $394 million in the first nine months
of 1999.
12
<PAGE> 14
PART I - FINANCIAL INFORMATION (CONT'D.)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Total debt was $1,999 million at September 30, 2000 compared
with $2,310 million at December 31, 1999. The debt to capitalization
ratio decreased to 36% at September 30 compared with 43% at year-end.
At September 30, 2000, the Corporation had $2 billion of additional
borrowing capacity available under its revolving credit agreements and
additional unused lines of credit under uncommitted arrangements with
banks of $369 million.
The Corporation's Board of Directors approved a $300 million
stock repurchase program in March 2000. Through September 30, 2000,
2,957,000 shares have been repurchased for approximately $188 million.
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 production and the related
gains or losses are an integral part of the Corporation's selling
prices. At September 30, 2000, the Corporation had open hedge positions
equal to 35% of its estimated worldwide crude oil production over the
next twelve months and approximately 11% of its production for the
succeeding twelve months. As market conditions change, the Corporation
will adjust its hedge positions.
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. The Corporation estimates that at September 30,
2000, the value at risk was $25 million ($13 million at December 31,
1999) related to hedging activities and $18 million ($6 million at
December 31, 1999) on trading activities.
The Corporation reduces its exposure to fluctuating foreign
exchange rates by using forward contracts to fix the exchange rate on a
portion of the currency required in its North Sea operations. At
September 30, 2000, the Corporation had $645 million of foreign
currency exchange contracts outstanding. In addition, the Corporation
uses interest-rate swaps to balance its exposure to interest rates. At
September 30, the Corporation had substantially all fixed-rate debt and
had $225 million of notional value, interest-rate swaps that increased
its percentage of floating-rate debt to 12%.
At September 30, 2000, the Corporation had a remaining reserve
of $22 million for the decline in market value of drilling service
fixed-price contracts. During the first nine months of 2000, $33
million of contract payments reduced the reserve.
In May, the Corporation acquired the 51% of The Meadville
Corporation's outstanding stock that it did not already own for
approximately $168 million in cash, deferred payments and preferred
stock. The purchase includes 178 Merit retail gasoline stations located
in the northeastern United States.
13
<PAGE> 15
PART I - FINANCIAL INFORMATION (CONT'D.)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
In April, the Corporation reached an agreement with the
Algerian National Oil Company to form a joint venture, 49% owned by the
Corporation, to redevelop three Algerian oil fields. The fields
currently produce 30,000 barrels of crude oil per day and the joint
venture plans to increase their production. The Corporation will
invest $55 million in 2000 and up to $500 million over the next five
years for new wells, workovers of existing wells and water injection
and gas compression facilities. A significant portion of the $500
million will be funded by the cash flows from these fields.
In July, the Corporation announced an agreement to acquire an
additional 2.08% interest in three fields in Azerbaijan. The total
purchase price is $150 million in cash and notes. The purchase is
subject to the consent of the government of Azerbaijan and to
preemption rights of co-venturers in the fields. The Corporation
currently owns a 1.68% interest in these fields.
In October, the Corporation announced that it was exploring a
potential joint venture with a company that owns and operates 120
gasoline stations and convenience stores and 21 travel centers.
Capital expenditures in the first nine months of 2000 amounted
to $610 million compared with $617 million in the first nine months of
1999. Capital expenditures for exploration and production activities
were $492 million in the first nine months of 2000 and $560 million in
the first nine months of 1999. For the remainder of 2000, capital
expenditures, excluding acquisitions, are expected to be approximately
$400 million and will be financed by internally generated funds.
FORWARD LOOKING INFORMATION
Certain sections of Management's Discussion and Analysis of
Results of Operations and Financial Condition, including references to
the Corporation's future results of operations and financial position,
contain forward-looking information. These disclosures are based on the
Corporation's current assessments and reasonable assumptions about the
future. Actual results may differ from these disclosures because of
changes in market conditions, government actions and other factors.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
The Registrant filed no report on Form 8-K during the three
months ended September 30, 2000. On October 25, 2000, the
Registrant filed a Form 8-K including its third quarter
earnings release and information related to its earnings
teleconference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERADA HESS CORPORATION
(REGISTRANT)
By s/s John B. Hess
------------------------------
JOHN B. HESS
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
By s/s John Y. Schreyer
------------------------------
JOHN Y. SCHREYER
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Date: November 3, 2000
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