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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 quarterly period ended September 30, 1996 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 1-8888
AMOCO COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 36-3353184
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 EAST RANDOLPH DRIVE, CHICAGO, ILLINOIS 60601
(Address of principal executive offices) (Zip Code)
312-856-6111
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address, and former fiscal year, if
changed since last report)
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
Number of shares outstanding as of September 30, 1996--100.
Registrant meets the conditions set forth in General
Instructions H(1)(a) and (b) of Form 10-Q and is therefore
filing this form with reduced disclosure format.
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PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income
(millions of dollars)
Three Months Nine Months
Ended Ended
September 30, September 30,
1996 1995 1996 1995
Revenues:
Sales and other operating revenues $ 7,149 $ 6,076 $20,729 $18,154
Consumer excise taxes............. 868 859 2,531 2,502
Other income...................... 255 127 442 340
Total revenues................ 8,272 7,062 23,702 20,996
Costs and Expenses:
Purchased crude oil, natural
gas, petroleum products and
merchandise..................... 4,157 3,097 11,642 9,495
Operating expenses................ 1,029 988 3,057 2,955
Petroleum exploration expenses,
including exploratory dry holes. 148 105 361 307
Selling and administrative
expenses........................ 433 402 1,369 1,274
Taxes other than income taxes..... 1,068 1,023 3,088 2,986
Depreciation, depletion, amorti-
zation, and retirements and
abandonments.................... 498 455 1,442 1,347
Interest expense:
Affiliates...................... 131 126 376 374
Other........................... 16 42 57 138
Total costs and expenses...... 7,480 6,238 21,392 18,876
Income before income taxes.......... 792 824 2,310 2,120
Income taxes........................ 226 218 636 566
Net income.......................... $ 566 $ 606 $ 1,674 $ 1,554
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Condensed Consolidated Statement of Financial Position
(millions of dollars)
Sept. 30, Dec. 31,
1996 1995
ASSETS
Current Assets:
Cash ................................... $ 138 $ 145
Marketable securities--at cost.......... 626 855
Accounts and notes receivable (less
allowances of $13 at September 30, 1996
and $12 at December 31, 1995)......... 3,048 2,744
Inventories............................. 894 870
Prepaid expenses and income taxes....... 747 689
Total current assets.................. 5,453 5,303
Investments and Other Assets:
Affiliates.............................. 1,427 1,428
Other................................... 1,301 1,063
2,728 2,491
Properties--at cost, less accumulated
depreciation, depletion and amorti-
zation of $24,065 at September 30, 1996,
and $23,337 at December 31, 1995 (the
successful efforts method of accounting
is followed for costs incurred in oil
and gas producing activities)........... 19,534 18,532
Total assets.......................... $27,715 $26,326
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Current portion of long-term obligations $ 15 $ 196
Short-term obligations.................. 465 266
Accounts payable........................ 2,067 2,496
Accrued liabilities..................... 931 948
Taxes payable (including income taxes).. 706 672
Total current liabilities............. 4,184 4,578
Long-Term Debt:
Affiliates.............................. 4,568 4,608
Other debt.............................. 2,212 2,177
6,780 6,785
Deferred Credits and Other Non-Current
Liabilities:
Income taxes............................ 2,635 2,502
Other................................... 1,889 1,895
4,524 4,397
Minority Interest......................... 124 110
Shareholder's Equity...................... 12,103 10,456
Total liabilities and shareholder's
equity.............................. $27,715 $26,326
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Condensed Consolidated Statement of Cash Flows
(millions of dollars)
Nine Months Ended
September 30,
1996 1995
Cash Flows from Operating Activities:
Net income................................... $ 1,674 $ 1,554
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, amortization,
and retirement and abandonments.......... 1,442 1,347
Other...................................... (1,071) (799)
Net cash provided by operating activities.. 2,045 2,102
Cash Flows from Investing Activities:
Capital expenditures......................... (2,293) (1,964)
Proceeds from dispositions of property and
other assets............................... 586 111
Net investments, advances and business
acquisitions............................... (619) (765)
Other........................................ (2) 9
Net cash used in investing activities...... (2,328) (2,609)
Cash Flows from Financing Activities:
New long-term obligations.................... 85 230
Repayment of long-term obligations........... (237) (112)
Distributions to Amoco Corporation........... - (332)
Increase in short-term obligations........... 199 55
Net cash provided by (used in) financing
activities................................. 47 (159)
Decrease in Cash and Marketable
Securities................................... (236) (666)
Cash and Marketable Securities-Beginning of
Period....................................... 1,000 1,238
Cash and Marketable Securities-End of Period... $ 764 $ 572
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Basis of Financial Statement Preparation
Amoco Company (the "Company") is a wholly owned subsidiary
of Amoco Corporation, an Indiana corporation ("Amoco"), and
is the holding company for substantially all petroleum and
chemical operations except Amoco Canada Petroleum Company
Ltd. ("Amoco Canada") and selected other activities. Amoco
guarantees the public debt obligations of the Company. The
Company and Amoco guarantee the public notes and debentures
of Amoco Canada and Amoco Argentina Oil Company ("Amoco
Argentina").
The condensed financial statements contained herein are
unaudited and have been prepared from the books and records
of the Company. In the opinion of management, the financial
statements reflect all adjustments, consisting of only
normal recurring adjustments, necessary for a fair statement
of the results for the interim periods. The condensed
financial statements have been prepared in accordance with
the instructions to Form 10-Q and, therefore, do not include
all information and notes necessary for a complete
presentation of results of operations, financial position
and cash flows in conformity with generally accepted
accounting principles.
Item 2. Management's Narrative Analysis of Results of
Operations
Results of Operations
The Company earned $1,674 million for the first nine months
of 1996 compared with $1,554 million for the first nine
months of 1995. Included in the results for the first nine
months of 1996 was a gain of $97 million on the sale of
Amoco's polystyrene foam products business. Excluding this
gain, earnings totaled $1,577 million, a slight increase
from 1995. The increase in earnings reflected strong
exploration and production ("E&P") earnings, primarily
resulting from higher energy prices and production volumes,
offset by lower chemical and petroleum products margins.
Earnings for the third quarter of 1996 were $566 million.
Benefiting earnings was the previously mentioned gain on the
sale of Amoco's polystyrene foam products business.
Excluding this gain, earnings totaled $469 million, a
decline of 23 percent from 1995's third quarter net income
of $606 million. Continued weakness in petroleum products
and chemical margins more than offset higher energy prices
and production volumes during the quarter.
Sales and other operating revenues totaled $20.7 billion for
the first nine months of 1996 and $7.1 billion for the third
quarter of 1996, approximately 14 percent and 18 percent
higher, respectively, than the corresponding 1995 periods.
The increase in both periods was primarily attributable to
higher crude oil, natural gas, and refined product prices
and volumes. Chemical revenues for both the nine months and
third quarter increased slightly compared with the similar
1995 periods, as acquisitions and volume increases offset
lower prices.
The increase in other income for both year-to-date and third
quarter 1996 mainly reflected the gain on the sale of the
polystyrene foam products business.
Purchases of crude oil, natural gas, petroleum products and
merchandise totaled $11.6 billion for the first nine months
of 1996, 23 percent higher than the first nine months of
1995. For the third quarter of 1996, purchases of crude oil,
natural gas, petroleum products and merchandise totaled $4.2
billion, 34 percent higher than the third quarter of 1995.
The increase for both periods reflected higher prices and
volumes for crude oil and natural gas and increased prices
for refined products.
Petroleum exploration expense increased $54 million and $43
million, respectively, in the first nine months and third
quarter of 1996 compared with 1995, primarily reflecting
higher dry hole expenses overseas.
Interest expense for the first nine months and third quarter
of 1996 decreased primarily as a result of lower interest
relating to revised estimates of tax obligations.
Outlook
The Company will continue to be affected by the
volatility of crude oil and natural gas prices. Also
affecting chemicals and petroleum products activities is the
overall industry product supply and demand balance. The
Company's future performance is expected to continue to be
impacted by savings associated with changes in its
organizational structure; ongoing cost reduction programs;
the divestment of marginal properties and underperforming
assets; application of new technologies; and new
governmental regulations.
The Company's exploration efforts will target those areas
that offer the most potential. The Company will also
continue to capitalize on its natural gas resources. In
the third quarter, a contract was signed to supply
Ecopetrol with up to 100 million cubic feet of natural
gas daily from Amoco's Opon field in Colombia. The
Company's E&P barrel-oil-equivalent production in the
United States is expected to remain approximately at 1995
levels. Overseas, the Liuhua oil field in the South China
Sea came onstream in late March and should benefit 1996
crude oil production by an average of over 20,000 barrels
per day. Overseas natural gas production is expected to
increase in 1996 compared to 1995.
In the petroleum products sector, the Company anticipates
weak refining margins in the near term. The Company's
marketing strategy will continue to emphasize brand product
quality and improve its position as a convenience retailer.
The Company will continue to pursue additional cost
reduction programs and improved asset utilization. As
recently announced, Amoco is selling its Central Europe
marketing sites as part of its refocused strategy to grow
retail marketing operations primarily in the Americas. The
sites being sold include four existing outlets and fourteen
others that are currently under construction in Poland,
Romania and Bulgaria.
In the chemical sector, while the near-term industry outlook
remains soft for commodity chemicals, the Company expects
long-term annual worldwide volume growth to exceed three
percent, with a higher increase anticipated in the Asia-
Pacific region. PTA average annual growth is expected to be
eight percent over the next decade, with the largest demand
increase expected to be in the Asia-Pacific region, while
worldwide PX demand is expected to grow about six percent
per year. In order to meet expected growth in PTA and PX
demand, the Company's chemical segment is expanding its
wholly owned and joint-venture operations.
During the third quarter, Amoco announced an expansion of
purified isophthalic acid (PIA) capacity at its Joliet,
Ill., facility from the current 93,000 tons per year to
200,000 tons per year. Operations are expected to begin in
first quarter 1998. Sale of Amoco Foam Products Company
("Amoco Foam") to a unit of Tenneco Inc. was also completed.
Huntsman Chemical Corporation has signed an agreement to
purchase Amoco's polystyrene assets.
The Company will continue to evaluate and divest marginal
properties and underperforming assets. The Company also
continues to seek attractive opportunities worldwide and is
constantly reviewing strategic alternatives. Amoco and Shell
Oil Company signed a letter of intent to form a limited
partnership combining exploration and production assets in
the greater Permian Basin area of west Texas and southeast
New Mexico. Amoco will have a 65 percent interest in the
joint venture, which is expected to produce approximately
210,000 gross barrels per day of crude oil and 250 million
gross cubic feet per day of natural gas. Final agreement is
contingent on the successful completion of ongoing
discussions regarding design, management and operation of
the company. Start up of the partnership is expected in the
fourth quarter of 1996 or early 1997.
Liquidity and Capital Resources
Cash flows from operating activities amounted to $2,045
million in the first nine months of 1996 compared with
$2,102 million in the comparable 1995 period. Working
capital totaled $1,269 million at September 30, 1996,
compared with $725 million at year-end 1995. The Company's
current ratio was 1.30 to 1 at September 30, 1996 and 1.16
to 1 at year-end 1995. As a matter of policy, the Company
practices asset and liability management techniques that are
designed to minimize its investment in non-cash working
capital. This does not impair operating flexibility since
the Company has ready access to both short- and long-term
debt markets.
The Company's ratio of debt to debt-plus-equity on public
obligations was 18.1 percent at September 30, 1996, compared
with 20 percent at year-end 1995. Including debt with
affiliates, the ratio was 37.3 percent at September 30,
1996, and 40.7 percent at year-end 1995. The ratio of
earnings to fixed charges on public obligations was 13.5 to
1 for 1996's first nine months compared with 11.6 to 1 for
the year ended December 31, 1995.
The Company believes that its strong financial position will
permit the financing of business needs and opportunities as
they arise. To maintain flexibility, a shelf registration
statement for $500 million in debt securities remains on
file with the Securities and Exchange Commission ("SEC") to
permit ready access to capital markets. Amoco Argentina, an
indirect wholly owned subsidiary of the Company, filed a
shelf registration with the SEC for $200 million in debt
securities, of which $100 million in debt securities were
subsequently issued. Amoco Corporation and Amoco Company
guarantee the securities issued under this registration
statement.
Proceeds from dispositions of property and other assets
included $310 million received from the sale of Amoco Foam
to a unit of Tenneco Inc.
On March 1, 1996, Albemarle Corporation's ("Albemarle")
alpha-olefins, poly alpha olefins and synthetics alcohol
businesses were purchased for approximately $500 million.
The purchase involved about 550 employees and assets in
Texas and Belgium.
Capital and exploration expenditures, excluding the
Albemarle acquisition, totaled $2,654 million for the first
nine months of 1996 compared with $2,271 million spent
during the same period of 1995. The increase over the first
nine months of 1995 reflected planned increases in spending
in growth areas. Approximately 67 percent of the $2,654
million spent to date has occurred in exploration and
production operations.
The Company has provided in its accounts for the reasonably
estimable future costs of probable environmental remediation
obligations relating to various oil and gas operations,
refineries, marketing sites and chemical locations,
including multiparty sites at which the Company and certain
of its subsidiaries have been identified as potentially
responsible parties by the U.S. Environmental Protection
Agency. Such estimated costs will be refined over time as
remedial requirements and regulations become better defined.
However, any additional environmental costs cannot be
reasonably estimated at this time due to uncertainty of
timing, the magnitude of contamination, future technology,
regulatory changes and other factors. Although future costs
could have a significant effect on the results of operations
in any one period, they are not expected to be material in
relation to the Company's liquidity or consolidated
financial position. In total, the accrued liability
represents a reasonable best estimate of the Company's
remediation liability.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the description of the challenge by the
Internal Revenue Service ("IRS") of certain foreign income
taxes as credits against Amoco's U.S. taxes that would
otherwise have been payable for the years 1980 through 1989
in Part I, Item 3 of Amoco's 1995 Form 10-K and Part II,
Item 1 of Amoco's Forms 10-Q for the quarters ended March
31, 1996, and June 30, 1996. The IRS filed a Notice of
Appeal of the decision in the U.S. Tax Court on October 9,
1996. The case will be sent to the United States Court of
Appeals for the Seventh Circuit. Amoco believes that the
foreign income taxes have been reflected properly in its
U.S. federal tax returns. Consequently, this dispute is not
expected to have a material adverse effect on the liquidity,
results of operations or the consolidated financial position
of Amoco.
Thirteen proceedings instituted by governmental authorities
are pending or known to be contemplated against the Company
and certain of its subsidiaries under federal, state or
local environmental laws, each of which could result in
monetary sanctions in excess of $100,000. No individual
proceeding is, nor are the proceedings as a group, expected
to have a material adverse effect on the Company's
liquidity, consolidated financial position or results of
operations. The Company estimates that in the aggregate the
monetary sanctions reasonably likely to be imposed from
these proceedings amount to approximately $7.6 million.
The Company has various other suits and claims pending
against it among which are several class actions for
substantial monetary damages which in the Company's opinion
are not meritorious. While it is impossible to estimate with
certainty the ultimate legal and financial liability with
respect to these other suits and claims, the Company
believes that, while the aggregate amount could be
significant, it will not be material in relation to its
liquidity or its consolidated financial position.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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Item 5. Other Information
Shown below is summarized financial information for the
Company's indirectly wholly owned subsidiary Amoco
Argentina.
Three Months Nine months
Ended Ended
September 30, September 30,
1996 1995 1996 1995
(millions of dollars)
Revenues................ $ 90 $ 67 $ 244 $ 189
Net income.............. $ 34 $ 20 $ 90 $ 64
Sept. 30, Dec. 31,
1996 1995
(millions of dollars)
Current assets.................. $125 $ 73
Total assets.................... $527 $389
Current liabilities............. $ 78 $ 49
Non-current liabilities......... $198 $113
Shareholder's equity............ $251 $227
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number
12 Statement Setting Forth Computation of Ratio
of Earnings to Fixed Charges.
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter
ended September 30, 1996.
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Signature
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.
Amoco Company
(Registrant)
Date: November 12, 1996
Judith G. Boynton
Judith G. Boynton
Vice President and Controller
(Duly Authorized and Chief
Accounting Officer)
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EXHIBIT 12
AMOCO COMPANY
STATEMENT SETTING FORTH COMPUTATION OF RATIO OF
EARNINGS TO FIXED CHARGES
(millions of dollars, except ratios)
Nine
Months
Ended Year Ended December 31,
Sept. 30,
1996 1995 1994 1993 1992 1991
Determination of Income:
Consolidated earnings
before income taxes
and minority interest... $2,314 $2,425 $2,688 $2,427 $1,823 $2,093
Fixed charges expensed by
consolidated companies.. 183 233 140 193 238 231
Adjustments for certain
companies accounted for
by the equity method... 32 10 7 9 18 12
Adjusted earnings plus
fixed charges........... $2,529 $2,668 $2,835 $2,629 $2,079 $2,336
Determination of Fixed Charges:
Consolidated interest on
indebtedness (including
interest capitalized)... $ 117 $ 152 $ 127 $ 162 $ 219 $ 216
Consolidated rental
expense representative
of an interest factor... 66 71 7 31 20 22
Adjustments for certain
companies accounted for
by the equity method.... 5 6 5 6 12 17
Total fixed charges...... $ 188 $ 229 $ 139 $ 199 $ 251 $ 255
Ratio of earnings to
fixed charges........... 13.5* 11.6* 20.4* 13.2 8.3 9.2
*Based on public debt obligations. Including debt with affiliates, the
ratio would have been 5.2 as of September 30, 1996, 4.4 as of December
31, 1995, and 13.0 as of December 31, 1994.
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<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Statement of Income and the Condensed Consolidated
Statement of Financial Position and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
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<NAME> AMOCO COMPANY
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0
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