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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 March 31, 1997 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 March 31, 1997--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
Ended
March 31,
1997 1996
Revenues:
Sales and other operating revenues..... $ 7,153 $ 6,482
Consumer excise taxes.................. 815 819
Other income........................... 106 103
Total revenues....................... 8,074 7,404
Costs and Expenses:
Purchased crude oil, natural gas,
petroleum products and merchandise... 4,035 3,457
Operating expenses..................... 1,045 958
Petroleum exploration expenses,
including exploratory dry holes...... 149 105
Selling and administrative expenses.... 409 444
Taxes other than income taxes.......... 1,023 1,001
Depreciation, depletion, amortization,
and retirements and abandonments..... 484 464
Interest expense:
Affiliates........................... 124 121
Other................................ 36 26
Total costs and expenses........... 7,305 6,576
Income before income taxes............... 769 828
Income taxes............................. 213 230
Net income............................... $ 556 $ 598
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Condensed Consolidated Statement of Financial Position
(millions of dollars)
March 31, Dec. 31,
1997 1996
ASSETS
Current Assets:
Cash ................................... $ 220 $ 222
Marketable securities--at cost.......... 777 767
Accounts and notes receivable (less
allowances of $15 at March 31, 1997,
and $14 at December 31, 1996)......... 4,246 3,899
Inventories............................. 1,019 820
Prepaid expenses and income taxes....... 632 653
Total current assets.................. 6,894 6,361
Investments and Other Assets:
Affiliates.............................. 1,538 1,464
Other................................... 1,440 1,376
2,978 2,840
Properties--at cost, less accumulated
depreciation, depletion and amorti-
zation of $24,519 at March 31, 1997,
and $24,151 at December 31, 1996 (The
successful efforts method of accounting
is followed for costs incurred in oil
and gas producing activities)........... 19,937 20,007
Total assets.......................... $29,809 $29,208
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Current portion of long-term obligations $ 265 $ 74
Short-term obligations.................. 719 442
Accounts payable........................ 2,253 2,663
Accrued liabilities..................... 1,016 916
Taxes payable (including income taxes).. 847 831
Total current liabilities............. 5,100 4,926
Long-Term Obligations:
Affiliates.............................. 4,645 4,731
Other debt.............................. 2,076 2,190
Capitalized Leases...................... 83 76
6,804 6,997
Deferred Credits and Other Non-Current
Liabilities:
Income taxes............................ 2,761 2,592
Other................................... 1,882 1,932
4,643 4,524
Minority Interest......................... 131 131
Shareholder's Equity...................... 13,131 12,630
Total liabilities and shareholder's
equity.............................. $29,809 $29,208
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Condensed Consolidated Statement of Cash Flows
(millions of dollars)
Three Months Ended
March 31,
1997 1996
Cash Flows from Operating Activities:
Net income................................... $ 556 $ 598
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, amortization,
and retirement and abandonments.......... 484 464
Other...................................... (783) (643)
Net cash provided by operating activities.. 257 419
Cash Flows from Investing Activities:
Capital expenditures......................... (715) (633)
Proceeds from dispositions of property and
other assets............................... 245 131
Net investments, advances and business
acquisitions............................... (128) (563)
Proceeds from sales of investments........... 34 -
Other........................................ 10 3
Net cash used in investing activities...... (554) (1,062)
Cash Flows from Financing Activities:
New long-term obligations.................... 130 16
Repayment of long-term obligations........... (102) (191)
Increase in short-term obligations........... 277 336
Net cash used in financing activities...... 305 161
Increase (decrease) in Cash and Marketable
Securities................................... 8 (482)
Cash and Marketable Securities-Beginning of
Period....................................... 989 1,000
Cash and Marketable Securities-End of Period... $ 997 $ 518
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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
Net income for the first quarter of 1997 amounted to $556 million
compared with $598 million for the first quarter of 1996. The
decrease in earnings for the first quarter of 1997 reflected
lower petroleum products earnings as a result of higher refining
maintenance costs and lower throughput. Chemical earnings
declined reflecting lower margins compared with high prior-year
levels. Partly offsetting were higher exploration and production
("E&P") earnings, primarily attributable to higher energy prices.
Sales and other operating revenues totaled $7.2 billion for the
first quarter of 1997, 10 percent higher than the $6.5 billion
reported in the corresponding 1996 period. Natural gas, crude oil
and refined products revenues increased 27 percent, 17 percent
and six percent, respectively, primarily reflecting higher
prices.
Purchases of crude oil, natural gas, petroleum products and
merchandise totaled $4 billion for the first three months of
1997, 17 percent higher than 1996's first three months. The
increase was primarily attributable to higher crude oil purchase
prices.
Operating expenses of $1 billion increased nine percent over
first-quarter 1996, reflecting higher refining maintenance
expenses and an increase in U.S. production costs. Exploration
costs of $149 million increased 42 percent over the first-quarter
of 1996, mainly due to higher dry hole costs overseas.
Outlook
The Company and the oil industry 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. Amoco's
future performance is expected to continue to be impacted by
ongoing cost reduction programs; the divestment of marginal
properties and underperforming assets; application of new
technologies; and new governmental regulations.
Amoco's exploration efforts will continue to target those areas
that offer the most potential. Amoco will pursue areas that
capitalize on its natural gas resources and continue to expand
internationally. Amoco's worldwide barrel-oil-equivalent
production is expected to increase from 1996 levels over the next
five years, with the largest increases expected to occur in the
later years. Production in 1997 is expected to increase, with
incremental production anticipated from the Gulf of Mexico, and
production from Venezuela, Colombia and Bolivia.
In the petroleum products sector, Amoco does not anticipate a
significant improvement in U.S. industry refining margins in the
near term. Amoco will continue to pursue additional cost
reduction programs and improved asset utilization. Amoco's
marketing strategy will continue to emphasize brand product
quality and growth in its position as a convenience retailer.
Strategic alliances with such companies as McDonald's Corporation
and Femsa in Mexico are expected to be expanded.
In the chemical sector, Amoco's overall strategy is to manage its
portfolio to optimize the quality of its businesses through
acquisitions, divestments and selectively investing in local
market growth for existing businesses. While current industry
excess PTA capacity is putting downside pressure on margins, long-
term worldwide growth is expected to be 8 percent. PX long-term
annual growth is expected to be 6 percent. In order to meet
expected growth in PTA and paraxylene, the Company's chemical
segment is expanding its wholly owned and joint-ventures
operations.
Liquidity and Capital Resources
Cash flows from operating activities amounted to $257 million in
the first three months of 1997 compared with $419 million in the
comparable 1996 period. Working capital totaled $1,794 million at
March 31, 1997, compared with $1,435 million at year-end 1996.
The Company's current ratio was 1.35 to 1 at March 31, 1997 and
1.29 to 1 at year-end 1996. 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 18.7 percent at March 31, 1997, compared with
17.4 percent at year-end 1996. Including debt with affiliates,
the ratio was 36.7 percent at March 31, 1997, and 36.8 percent at
year-end 1996. The ratio of earnings to fixed charges on public
obligations was 13.2 to 1 for 1997's first three months compared
with 14.2 to 1 for the year ended December 31, 1996.
The Company believes that its strong financial position will
permit the financing of business needs and opportunities as they
arise. It is anticipated that ongoing operations will be financed
primarily by internally generated funds. Short-term obligations,
such as commercial paper borrowings, give the Company the
flexibility to meet short-term working capital and other
temporary requirements. At March 31, 1997, bank lines of credit
available to support commercial paper borrowings amounted to $500
million, all of which were supported by commitment fees.
The Company also may utilize its favorable access to long-term
debt markets to finance profitable growth opportunities. A $500
million shelf registration statement in debt securities remains
on file with the Securities and Exchange Commission ("SEC") to
permit ready access to capital markets.
In 1995, 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. In early 1997, the $100
million remaining under this registration was issued. Amoco
Corporation and Amoco Company guarantee the securities issued
under this registration statement.
Capital and exploration expenditures for the first three months
of 1997 totaled $864 million compared with $738 million for the
similar 1996 period. Approximately 75 percent of the 1997
expenditures was spent in E&P operations. In April 1997, the
Company pre-funded $307 million of expenditures related to the
operatorship and 50 percent ownership in a Bolivian oil and gas
company, Empresa Petrolera Chaco.
Investments in affiliates totaled $1,538 million at March 31,
1997. The investments reflect the Company's remaining interest in
certain European chemical operations, of which 95 percent
ownership was transferred to Amoco Corporation in 1994. Also
reflected were the Company's purchases of Amoco Corporation's
common stock.
Altura Energy Ltd. ("Altura") began operations March 1, 1997.
Altura, a limited partnership formed by Amoco and Shell Oil
Company, combined the two companies' E&P assets in the Permian
Basin area of west Texas and southeast New Mexico. Amoco has a
64 percent interest.
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.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995.
Statements in this report that are not historical facts,
including statements under the heading of "Outlook" and other
statements about industry and company growth, estimates of
expenditures and savings, and other trend projections are forward
looking statements. The statements are based on current
expectations and involve risk and uncertainties. Actual future
results or trends may differ materially depending on a variety of
factors. These include specific factors identified in the
discussion accompanying such forward looking statements, industry
product supply and pricing, political stability and economic
growth in relevant areas of the world, the Company's successful
execution of its internal performance plans, successful
partnering, actions of competitors, natural disasters and other
changes to business conditions.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the description of the challenge by the
Internal Revenue Service of certain foreign income taxes as
credits against Amoco's U.S. taxes that otherwise would have been
payable for the years 1980 through 1992 in Part I, Item 3 of the
Company's Form 10-K.
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 in 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.
Item 5. Other Information
Shown below is summarized financial information of
the Company's indirectly wholly owned subsidiary,
Amoco Argentina.
Three Months
Ended
March 31,
1997 1996
(millions of dollars)
Revenues........................ $ 85 $ 75
Net income...................... $ 32 $ 27
March 31 Dec. 31,
1997 1996
(millions of dollars)
Current assets.................. $ 322 $ 251
Total assets.................... $ 699 $ 613
Current liabilities............. $ 96 $ 87
Non-current liabilities......... $ 282 $ 237
Shareholder's equity............ $ 321 $ 289
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 March 31, 1997.
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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: May 13, 1997
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)
Three
Months
Ended Year Ended December 31,
March 31,
1997 1996 1995 1994 1993 1992
Determination of Income:
Consolidated earnings
before income taxes
and minority interest... $ 771 $3,351 $2,425 $2,688 $2,427 $1,823
Fixed charges expensed by
consolidated companies.. 59 251 233 140 193 238
Adjustments for certain
companies accounted for
by the equity method... 3 76 10 7 9 18
Adjusted earnings plus
fixed charges........... $ 833 $3,678 $2,668 $2,835 $2,629 $2,079
Determination of Fixed Charges:
Consolidated interest on
indebtedness (including
interest capitalized)... $ 40 $ 164 $ 152 $ 127 $ 162 $ 219
Consolidated rental
expense representative
of an interest factor... 21 88 71 7 31 20
Adjustments for certain
companies accounted for
by the equity method.... 2 8 6 5 6 12
Total fixed charges...... $ 63 $ 260 $ 229 $ 139 $ 199 $ 251
Ratio of earnings to
fixed charges........... 13.2* 14.2* 11.6* 20.4 13.2 8.3
*Based on public debt obligations. Including debt with affiliates, the
ratio would have been 5.1 as of March 31, 1997, 5.5 as of December 31,
1996, and 4.4 as of December 31, 1995.
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Condensed Statement of Income and the Condensed 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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