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 June 30, 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 June 30, 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 Six Months
Ended Ended
June 30, June 30,
1997 1996 1997 1996
Revenues:
Sales and other operating revenues $ 6,862 $ 7,098 $14,015 $13,580
Consumer excise taxes............. 868 844 1,683 1,663
Other income...................... 96 84 202 187
Total revenues.................. 7,826 8,026 15,900 15,430
Costs and Expenses:
Purchased crude oil, natural
gas, petroleum products and
merchandise..................... 3,785 4,028 7,820 7,485
Operating expenses................ 1,053 1,070 2,098 2,028
Petroleum exploration expenses,
including exploratory dry holes. 118 108 267 213
Selling and administrative
expenses........................ 449 492 858 936
Taxes other than income taxes..... 1,038 1,019 2,061 2,020
Depreciation, depletion, amorti-
zation, and retirements
and abandonments................ 452 480 936 944
Interest expense:
Affiliates...................... 127 124 251 245
Other........................... 55 15 91 41
Total costs and expenses...... 7,077 7,336 14,382 13,912
Income before income taxes.......... 749 690 1,518 1,518
Income taxes........................ 203 180 416 410
Net income.......................... $ 546 $ 510 $ 1,102 $ 1,108
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Condensed Consolidated Statement of Financial Position
(millions of dollars)
June 30, Dec. 31,
1997 1996
ASSETS
Current Assets:
Cash ......................................... $ 200 $ 222
Marketable securities--at cost................ 388 767
Accounts and notes receivable (less
allowances of $16 at June 30, 1997,
and $14 at December 31, 1996)............... 4,543 3,899
Inventories................................... 976 820
Prepaid expenses and income taxes............. 789 653
Total current assets........................ 6,896 6,361
Investments and Other Assets:
Affiliates.................................... 1,485 1,464
Other......................................... 1,978 1,376
3,463 2,840
Properties--at cost, less accumulated
depreciation, depletion and amortization of
$24,783 at June 30, 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). 20,636 20,007
Total assets........................... $30,995 $29,208
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Current portion of long-term obligations...... $ 97 $ 74
Short-term obligations........................ 899 442
Accounts payable.............................. 2,264 2,663
Accrued liabilities........................... 1,007 916
Taxes payable (including income taxes)........ 705 831
Total current liabilities................... 4,972 4,926
Long-Term Obligations:
Affiliates.................................... 4,803 4,731
Other debt.................................... 2,519 2,190
Capitalized Leases............................ 89 76
7,411 6,997
Deferred Credits and Other Non-Current Liabilities:
Income taxes.................................. 2,793 2,592
Other......................................... 1,853 1,932
4,646 4,524
Minority Interest............................... 427 131
Shareholder's Equity............................ 13,539 12,630
Total liabilities and shareholder's equity.. $30,995 $29,208
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Condensed Consolidated Statement of Cash Flows
(millions of dollars)
Six Months Ended
June 30,
1997 1996
Cash Flows from Operating Activities:
Net income................................... $ 1,102 $ 1,108
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, amortization,
and retirements and abandonments......... 936 944
Other...................................... (1,453) (894)
Net cash provided by operating activities.. 585 1,158
Cash Flows from Investing Activities:
Capital expenditures......................... (1,411) (1,434)
Proceeds from dispositions of property and
other assets............................... 205 166
Net investments, advances and business
acquisitions............................... (516) (596)
Proceeds from sales of investments........... 34 -
Other........................................ 13 (4)
Net cash used in investing activities...... (1,675) (1,868)
Cash Flows from Financing Activities:
New long-term obligations.................... 555 91
Repayment of long-term obligations........... (190) (235)
Dividends paid............................... (133) -
Increase in short-term obligations........... 457 478
Net cash used in financing activities...... 689 334
Decrease in Cash and Marketable Securities..... (401) (376)
Cash and Marketable Securities-Beginning of
Period....................................... 989 1,000
Cash and Marketable Securities-End of Period... $ 588 $ 624
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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 second quarter of 1997 amounted to $546
million compared with $510 million for the second quarter of
1996. The increase for the second quarter of 1997 reflected
higher refining margins and increased volumes in petroleum
products and most chemical product lines. Partially offsetting
were lower worldwide crude oil prices and lower U.S. crude oil
and natural gas production.
Net income for the first six months of 1997 totaled $1,102
million about the same as the comparable 1996 period. Favorably
affecting 1997 results were higher energy prices earlier in the
year and improved petroleum products operations. Offsetting were
lower chemical earnings compared with 1996, mainly as a result of
lower paraxylene margins.
Sales and other operating revenues totaled $6.9 billion for the
second quarter of 1997, three percent lower than the $7.1 billion
reported in the corresponding 1996 period. Crude oil and refined
product revenues decreased ten percent and four percent,
respectively, for the quarter, mainly reflecting lower prices.
Year-to-date sales and other operating revenue increased three
percent, primarily resulting from higher prices for natural gas,
crude oil and refined products.
Purchases of crude oil, natural gas, petroleum products and
merchandise totaled $3.8 billion for the second quarter of 1997,
six percent lower than the comparable quarter for 1996. The
decrease is primarily due to lower crude oil purchase prices and
volumes. Purchases of crude oil, natural gas, petroleum products
and merchandise for the first six months of 1997 were $7.8
billion compared with $7.5 billion for 1996, primarily
attributable to higher refined products volumes.
Operating expenses for the first six months of 1997 totaled $2.1
billion compared with $2 billion for 1996, reflecting higher
refining maintenance expenses in the first quarter and higher
U.S. production costs.
Exploration expenses for the first six months of 1997 totaled
$267 million compared with $213 million for 1996, as a result of
higher dry hole costs overseas.
Selling and administration expenses for the second quarter of
1997 were $449 million compared with $492 million for the similar
1996 period. Year-to-date selling and administration expenses
were $858 million for 1997 compared to $936 million for 1996.
Reflected in year-to-date 1997 results were favorable before-tax
currency effects of $2 million compared with unfavorable before-
tax currency effects of $15 million for the comparable 1996
period.
Interest expense other than affiliates totaled $55 million and
$91 million for the second quarter and six months of 1997,
respectively, compared with $15 million and $41 million for the
comparable 1996 periods. Included in the second quarter of 1996
was lower interest expense on tax obligations.
Outlook
The Company and the petroleum 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 non-strategic
assets; application of new technologies; and new governmental
regulations.
The Company will pursue areas that capitalize on its natural gas
resources and continue to expand internationally. As announced in
June, Amoco plans to divest a number of its oil and gas
properties and royalty interests in the United States as part of
a major refocusing of its U.S. exploration and production
business. The properties account for about 10 percent of U.S. net
production. The proceeds from the divestments will be used to
fund growth opportunities in and outside North America and for
general corporate purposes.
Amoco's worldwide barrel-oil-equivalent production is expected to
increase from 1996 levels by 25 percent over the next five years,
with the largest increases expected to occur in the later years.
Production in 1997 is expected to decrease slightly from year-end
1996, with incremental production from the Gulf of Mexico, and
production from Venezuela, Colombia and Bolivia, being offset by
normal field declines and dispositions.
In petroleum products, 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 continue.
In chemicals, Amoco's overall strategy is to manage its portfolio
to optimize the quality of its businesses through acquisitions
and divestments, and selectively invest in local market growth
for existing businesses. While current industry excess purified
terephthalic acid ("PTA") capacity is putting downside pressure
on margins, long-term worldwide growth is expected to be eight
percent. Paraxylene ("PX") long-term annual growth is expected to
be seven percent. In order to meet expected growth in PTA and PX,
the Company is expanding its wholly owned and joint-ventures
operations.
Liquidity and Capital Resources
Cash flows from operating activities amounted to $585 million in
the first half of 1997 compared with $1,158 million in the
comparable 1996 period. Working capital totaled $1,924 million at
June 30, 1997, compared with $1,435 million at year-end 1996. The
Company's current ratio was 1.39 to 1 at June 30, 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.
Long-term receivables and other assets at June 30, 1997 included
$280 million in restricted cash and investments committed to the
operatorship of a Bolivian oil and gas company, Empresa Petrolera
Chaco. Amoco completed the agreement for operatorship and 50
percent ownership of Empresa Petrolera Chaco in April 1997.
The Company's ratio of debt to debt-plus-equity on public
obligations was 20.1 percent at June 30, 1997, compared with 17.4
percent at year-end 1996. Including debt with affiliates, the
ratio was 37.3 percent at June 30, 1997, and 36.8 percent at year-
end 1996. The ratio of earnings to fixed charges on public
obligations was 11.5 to 1 for 1997's first six 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 June 30, 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 and other
business needs. In early August 1997, the Company issued $300
million in 10-year, 6.5% guaranteed notes from a $500 million
Securities and Exchange Commission ("SEC") shelf registration
statement.
Capital and exploration expenditures for the first six months of
1997 totaled $1,678 million compared with $1,647 million for the
similar 1996 period. Excluded from this amount were expenditures
related to Empresa Petrolera Chaco. The capital and exploration
expenditures for the first six months of 1996 exclude the
purchase of Albemarle Corporation's alpha-olefins, poly alpha
olefins and synthetic alcohol businesses for $535 million.
Investments in affiliates totaled $1,485 million at June 30,
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 purchases of Amoco Corporation's common stock, in
connection with Amoco's two-year $2 billion common stock
repurchase program.
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.
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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 1996 Form 10-K.
Twelve 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 $7.5
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 for the Company's
indirectly wholly owned subsidiary, Amoco Argentina.
Three Months Six Months
Ended Ended
June 30, June 30,
1997 1996 1997 1996
(millions of dollars)
Revenues............. $ 68 $ 79 $ 153 $ 154
Net income........... $ 24 $ 29 $ 56 $ 56
June 30 Dec. 31,
1997 1996
(millions of dollars)
Current assets............... $ 61 $ 251
Total assets................. $ 458 $ 613
Current liabilities.......... $ 106 $ 87
Non-current liabilities...... $ 280 $ 237
Shareholder's equity......... $ 72 $ 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 June 30, 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: August 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)
Six
Months
Ended Year Ended December 31,
June 30,
1997 1996 1995 1994 1993 1992
Determination of Income:
Consolidated earnings
before income taxes
and minority interest... $1,520 $3,351 $2,425 $2,688 $2,427 $1,823
Fixed charges expensed by
consolidated companies.. 133 251 233 140 193 238
Adjustments for certain
companies accounted for
by the equity method... (4) 76 10 7 9 18
Adjusted earnings plus
fixed charges........... $1,649 $3,678 $2,668 $2,835 $2,629 $2,079
Determination of Fixed Charges:
Consolidated interest on
indebtedness (including
interest capitalized)... $ 96 $ 164 $ 152 $ 127 $ 162 $ 219
Consolidated rental
expense representative
of an interest factor... 43 88 71 7 31 20
Adjustments for certain
companies accounted for
by the equity method.... 4 8 6 5 6 12
Total fixed charges...... $ 143 $ 260 $ 229 $ 139 $ 199 $ 251
Ratio of earnings to
fixed charges........... 11.5* 14.2* 11.6* 20.4 13.2 8.3
*Based on public debt obligations. Including debt with affiliates, the
ratio would have been 4.8 as of June 30, 1997, 5.5 as of December 31,
1996, and 4.4 as of December 31, 1995.
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<TABLE> <S> <C>
<ARTICLE> 5
<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>
<CIK> 0000766916
<NAME> AMOCO COMPANY
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<SECURITIES> 388
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0
0
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</TABLE>
