SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
-----------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-720
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PHILLIPS PETROLEUM COMPANY
(Exact name of registrant as specified in its charter)
Delaware 73-0400345
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Phillips Building, Bartlesville, Oklahoma 74004
(Address of principal executive offices) (Zip Code)
918-661-6600
(Registrant's telephone number, including area code)
---------------
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
----- -----
The registrant has 262,153,555 shares of common stock, $1.25 par value,
outstanding at July 31, 1995.
<PAGE>
PART I. FINANCIAL INFORMATION
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Consolidated Statement of Income Phillips Petroleum Company
Millions of Dollars
---------------------------------
Three Months Six Months
Ended Ended
June 30 June 30
---------------------------------
1995 1994* 1995 1994*
---------------------------------
Revenues
Sales and other operating revenues $3,591 2,995 6,678 5,879
Equity in earnings of affiliated
companies 39 22 68 39
Other revenues 6 11 14 34
---------------------------------------------------------------------
Total Revenues 3,636 3,028 6,760 5,952
---------------------------------------------------------------------
Costs and Expenses
Purchased crude oil and products 2,270 1,849 4,121 3,535
Production and operating expenses 531 510 1,007 1,026
Exploration expenses 46 54 89 99
Selling, general and
administrative expenses 107 116 221 226
Depreciation, depletion and
amortization 281 201 492 405
Taxes other than income taxes 69 60 139 131
Interest and expense on
indebtedness 68 69 136 145
Preferred dividend requirements
of subsidiary 8 8 16 16
---------------------------------------------------------------------
Total Costs and Expenses 3,380 2,867 6,221 5,583
---------------------------------------------------------------------
Income before income taxes and
subsidiary stock transaction 256 161 539 369
Gain on subsidiary stock
transaction - - - 20
---------------------------------------------------------------------
Income before income taxes 256 161 539 389
Provision for income taxes 143 85 315 186
---------------------------------------------------------------------
Net Income 113 76 224 203
=====================================================================
Per Share of Common Stock
Net Income $ .42 .29 .85 .78
Dividends Paid $ .305 .28 .585 .56
---------------------------------------------------------------------
Average Common Shares Outstanding
(in thousands) 262,028 261,527 261,852 261,477
---------------------------------------------------------------------
See Notes to Financial Statements.
*Certain amounts have been reclassified to conform to current
presentation.
1
<PAGE>
-----------------------------------------------------------------
Consolidated Balance Sheet Phillips Petroleum Company
Millions of Dollars
-------------------------
June 30 December 31
1995 1994*
-------------------------
Assets
Cash and cash equivalents $ 122 193
Accounts and notes receivable (less
allowances: 1995--$20; 1994--$20) 1,567 1,462
Inventories 560 527
Deferred income taxes 204 203
Prepaid expenses and other current
assets 101 97
-----------------------------------------------------------------
Total Current Assets 2,554 2,482
Investments and long-term receivables 795 708
Properties, plants and equipment (net) 8,176 8,042
Deferred income taxes 115 122
Deferred charges 95 99
-----------------------------------------------------------------
Total $11,735 11,453
=================================================================
Liabilities
Accounts payable $ 1,375 1,371
Long-term debt due within one year 28 18
Accrued income and other taxes 1,021 847
Other accruals 253 285
-----------------------------------------------------------------
Total Current Liabilities 2,677 2,521
Long-term debt 2,977 3,106
Accrued dismantlement, removal and
environmental costs 595 564
Deferred income taxes 985 961
Employee benefit obligations 447 341
Other liabilities and deferred credits 612 656
-----------------------------------------------------------------
Total Liabilities 8,293 8,149
-----------------------------------------------------------------
Preferred Stock of Subsidiary and Other
Minority Interests 350 351
-----------------------------------------------------------------
Stockholders' Equity
Common stock--500,000,000 shares
authorized at $1.25 par value
Issued (277,180,511 shares)
Par value 346 346
Capital in excess of par 1,010 996
Treasury stock (at cost:
1995--15,044,018 shares;
1994--15,542,074 shares) (830) (859)
Foreign currency translation adjustments 49 16
Unearned employee compensation--Long-
Term Stock Savings Plan (LTSSP) (433) (451)
Retained earnings 2,950 2,905
-----------------------------------------------------------------
Total Stockholders' Equity 3,092 2,953
-----------------------------------------------------------------
Total $11,735 11,453
=================================================================
See Notes to Financial Statements.
*Certain amounts have been reclassified to conform to current
presentation.
2
<PAGE>
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Consolidated Statement of Phillips Petroleum Company
Cash Flows
Millions of Dollars
-------------------
Six Months Ended
June 30
-------------------
1995 1994*
-------------------
Cash Flows from Operating Activities
Net income $ 224 203
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 492 405
Dry hole costs and leasehold impairment 29 46
Deferred taxes (24) 13
Increase in accounts and notes
receivable (83) (176)
Increase in inventories (28) (7)
Decrease in prepaid expenses and
other current assets - 24
Decrease in accounts payable (2) (2)
Increase (decrease) in taxes and
other accruals 120 (41)
Other 25 (49)
-----------------------------------------------------------------
Net Cash Provided by Operating Activities 753 416
-----------------------------------------------------------------
Cash Flows from Investing Activities
Capital expenditures and investments,
including dry hole costs (549) (496)
Proceeds from asset dispositions 27 84
Other investments (7) (8)
-----------------------------------------------------------------
Net Cash Used for Investing Activities (529) (420)
-----------------------------------------------------------------
Cash Flows from Financing Activities
Issuance of debt 329 1,038
Repayment of debt (446) (854)
Issuance of company stock 6 4
Purchase of company stock - (1)
Dividends paid (153) (146)
Other (31) (28)
-----------------------------------------------------------------
Net Cash Provided by (Used for) Financing
Activities (295) 13
-----------------------------------------------------------------
Increase (Decrease) in Cash and Cash
Equivalents (71) 9
Cash and cash equivalents at beginning
of period 193 119
-----------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 122 128
=================================================================
See Notes to Financial Statements.
*Certain amounts have been reclassified to conform to current
presentation.
3
<PAGE>
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Notes to Financial Statements Phillips Petroleum Company
Note 1--Interim Financial Information
The financial information for the interim periods presented in
the financial statements included in this report is unaudited and
includes all known accruals and adjustments which Phillips
Petroleum Company (hereinafter referred to as "Phillips" or "the
company") considers necessary for a fair presentation of the
consolidated financial position of the company and its results of
operations and cash flows for such periods. All such adjustments
are of a normal and recurring nature, except as described in
Note 2.
Note 2--Accounting Change
Effective April 1, 1995, the company adopted Financial Accounting
Standards Board (FASB) Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," which resulted in a before-tax addition of
$95 million to depreciation, depletion and amortization expense
in second quarter 1995. After-tax, the additional charge was
$49 million, $.19 per share.
Under the new Statement, the company now evaluates impairment of
exploration and production assets on a field-by-field basis
rather than using one worldwide cost center for its proved
properties. On this basis, certain fields in North America and
Norway are deemed to be impaired because they are not expected to
recover their entire carrying value through future cash flows.
In addition to the change in grouping of proved properties,
certain idle buildings and land in the company's Corporate and
Chemicals segments are also deemed to be impaired under Statement
No. 121, as the company currently has no plans to use those
assets in future operations.
The before-tax charges for the above items by segment were E&P,
$78 million; Corporate, $13 million; and Chemicals, $4 million.
The after-tax charges were $39 million, $7 million, and
$3 million, respectively. The fair values of the impaired E&P
assets were determined by using the present value of expected
future cash flows. The fair values of the impaired Corporate and
Chemicals assets were determined based on information about sales
and purchases of similar assets.
Note 3--Non-Mineral Operating Leases
In the second quarter of 1995, the company extended the lease
terms on its two liquefied natural gas tankers for an additional
two years. Had the new terms been in effect at December 31,
4
<PAGE>
1994, the company's future minimum lease payments due under
non-cancelable operating leases would have increased by
$12 million, $23 million and $10 million for the years 1998, 1999
and the remaining years, respectively. The company's 70 percent
share of the guaranteed residual value is now $196 million.
Note 4--Inventories
Inventories consisted of the following:
Millions of Dollars
-----------------------
June 30 December 31
1995 1994
-----------------------
Crude oil and petroleum products $186 228
Chemical products 281 204
Materials, supplies and other 93 95
-----------------------------------------------------------------
$560 527
=================================================================
Note 5--Properties, Plants and Equipment
Properties, plants and equipment (net) included the following:
Millions of Dollars
-----------------------
June 30 December 31
1995 1994
-----------------------
Properties, plants and equipment
(at cost) $18,887 18,293
Less accumulated depreciation,
depletion and amortization 10,711 10,251
-----------------------------------------------------------------
$ 8,176 8,042
=================================================================
Note 6--Debt
The company's wholly owned subsidiary, Phillips Petroleum Company
Norway, has a revolving credit facility with a group of
international banks for $500 million, $100 million of which was
outstanding at June 30, 1995.
No amounts were outstanding under Phillips' $250 million
commercial paper program at June 30, 1995. In early August, the
company replaced its commercial paper program, which was
supported by a direct-pay irrevocable bank letter of credit, with
a $250 million commercial paper program supported by a portion of
the company's unused revolving lines of credit equal to
100 percent of the commercial paper outstanding. To facilitate
the change in programs and to maintain liquidity for other uses,
the company increased its revolving bank credit facility from
$800 million to $1,100 million, effective August 4, 1995. At
June 30, 1995, no portion of the existing $800 million facility
was outstanding.
5
<PAGE>
Note 7--Income Taxes
The company's effective tax rates for the three- and six-month
periods ended June 30, 1995, were 56 and 58 percent,
respectively, compared with 53 and 48 percent for each of the
same periods a year ago. The higher 1995 effective tax rates
reflect lower tax credits for fuel produced from non-conventional
sources. The reduction in credits resulted from an exchange, in
late 1994, of a variable interest in the net proceeds from
production of certain coal-seam gas properties generating the
credits. The increase in the rate for the six-month period was
also due to a greater proportion of foreign income taxed at
higher rates than domestic income, and other miscellaneous tax
adjustments.
Note 8--Contingent Liabilities
Environmental--The company is subject to federal, state and local
environmental laws and regulations. These may result in
obligations to remove or mitigate the effects on the environment
of the placement, storage, disposal or release of certain
chemical, mineral and petroleum substances at various sites. The
company is currently participating in environmental assessments
and cleanup under these laws at federal Superfund and comparable
state sites. In the future, the company may be involved in
additional environmental assessments, cleanups and proceedings.
HCC Litigation--During the second quarter of 1995, seven
claimants received jury verdicts totaling less than $400,000 for
compensatory damages for injuries received in the October 23,
1989, explosion and fire at the Phillips 66 Company's Houston
Chemical Complex. No amount was awarded for punitive damages.
Appeals may be taken by some claimants. There remain
approximately 11 untried cases, primarily alleging psychological
injury. The company believes that it has adequately provided for
all remaining claims arising from this incident.
Other Legal Proceedings--The company is a party to a number of
other legal proceedings pending in various courts or agencies for
which, in some instances, no provision has been made.
Other Contingencies--The company has contingent liabilities
resulting from throughput agreements with pipeline and processing
companies in which it holds stock interests. Under these
agreements, Phillips may be required to provide any such company
with additional funds through advances against future charges for
the shipping or processing of petroleum liquids, natural gas and
refined products.
In the case of all known contingencies, the company accrues a
charge for a loss when it is probable and the amount is
reasonably estimable. These accruals are not discounted for
6
<PAGE>
delays in future payment and are not reduced for potential
insurance recoveries. Based on currently available information,
the company believes that it is remote that future costs related
to known contingent liability exposures will exceed current
accruals by an amount that would have a material adverse impact
on the company's financial statements.
As facts concerning contingencies become known to the company,
the company reassesses its position both with respect to accrued
liabilities and other potential exposures. Estimates that are
particularly sensitive to future change include contingent
liabilities recorded for environmental remediation, tax and legal
matters. Estimated future environmental remediation costs are
subject to change due to such factors as the unknown magnitude of
cleanup costs, the unknown time and extent of such remedial
actions that may be required, and the determination of the
company's liability in proportion to other responsible parties.
Estimated future costs related to tax and legal matters are
subject to change as events evolve and as additional information
becomes available during the administrative and litigation
process.
Note 9--Cash Flow Information
Cash payments and noncash investing and financing activities for
the six-month periods ended June 30 were as follows:
Millions of Dollars
-------------------
1995 1994
-------------------
Cash payments
Interest
Debt $112 118
Taxes and other 7 27
-----------------------------------------------------------------
$119 145
=================================================================
Income taxes $210 241
Noncash investing and financing activities
Treasury stock awards issued (canceled)
under incentive compensation plans $ 6 (3)
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7
<PAGE>
-----------------------------------------------------------------
Management's Discussion And Analysis Phillips Petroleum Company
RESULTS OF OPERATIONS
Consolidated Results
A summary of the company's net income, by business segment and
consolidated, follows:
Millions of Dollars
-------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
------------------ ----------------
Exploration and Production
(E&P)
United States $ 42 61 102 127
Foreign 32 15 73 34
-----------------------------------------------------------------
74 76 175 161
Gas Gathering, Processing
and Marketing (GPM) (3) (2) (8) 2
Refining, Marketing and
Transportation (RM&T) 12 31 7 68
Chemicals 112 45 208 119
Corporate and Other (82) (74) (158) (147)
-----------------------------------------------------------------
Net Income $113 76 224 203
=================================================================
Operating revenues increased 20 percent and 14 percent for the
second quarter and first six months of 1995, respectively,
compared with the corresponding periods in 1994. In both
periods, operating revenues increased on higher sales prices for
most key products. Crude oil sales prices moved up through the
first five months of 1995 on political uncertainties and a
balancing of global supply and demand. Crude prices declined
late in the second quarter on the prospects of increasing global
supplies. Automotive gasoline prices were higher than a year
ago, generally tracking the increase in crude oil feedstock
costs. The company's key chemicals and plastics products sales
prices were higher than a year ago, as a result of stronger
demand. In addition to higher prices, petroleum products sales
volumes were higher than last year, on increased buy/sell
activity utilized to more cost effectively deliver products to
market outlets. Negatively affecting both 1995 periods compared
with 1994 were lower U.S. natural gas sales prices, which were
down due to a moderation in demand relative to increasing
industry supplies.
Equity in earnings from affiliated companies increased over
70 percent for the second quarter and six-months ended June 30,
1995, compared with the same periods in the prior year. Higher
ethylene and propylene margins at the company's 50 percent owned
Sweeny Olefins Limited Partnership (SOLP) were primarily
responsible for the increase from a year ago.
8
<PAGE>
Purchase costs were 23 percent and 17 percent higher in the
second quarter and six months ended June 30, 1995, respectively,
than in the corresponding periods of 1994. Higher crude oil
feedstock costs for the company's refineries, due to higher crude
oil prices, and higher petroleum products purchases, due to
increased buy/sell activity, contributed to the higher purchase
costs in both periods.
After adjusting for special items, primarily work force reduction
charges, production and operating costs were down slightly for
the second quarter and the first six months of 1995, compared
with the same periods last year, reflecting the company's
continued emphasis on cost control and best in class performance.
Exploration expenses were lower for the second quarter and six
months, compared with the same periods in 1994, because the
earlier periods include higher dry hole charges, primarily in the
Gulf of Mexico.
Selling, general and administrative (SG&A) expenses were down
8 percent for the second quarter of 1995, compared with the
second quarter of 1994, due to lower corporate overhead costs.
For the six-month period, after adjusting for special items, SG&A
expenses were mostly unchanged, as generally lower costs were
offset by higher environmental accruals.
DD&A increased substantially for the second quarter and six
months compared with a year ago, due to the adoption of FASB
Statement No. 121. Also contributing to the higher DD&A was the
effect of the offshore China E&P production project coming online
in late 1994. These items were partially offset by lower DD&A
from the company's United Kingdom and U.S. E&P operations.
Taxes other than income taxes were $9 million and $8 million
higher in the second quarter and first six months of 1995,
respectively, when compared with 1994, primarily because of a
favorable production tax settlement in the second quarter of
1994, and higher emission taxes in Norway in 1995.
Consolidated net income for the three-month period ended June 30,
1995, increased 49 percent over the corresponding period in 1994.
For the six-month period ended June 30, 1995, consolidated net
income increased $21 million, compared with the same period a
year ago.
9
<PAGE>
Earnings included the following special items on an after-tax
basis:
Millions of Dollars
-------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
------------------ ----------------
Property impairments $(49) - (49) -
Gain on subsidiary stock
transaction - - - 20
Work force reduction
charges (8) - (13) (5)
Foreign currency gains - 1 1 1
Pending claims and
settlements - 14 - 17
Other items (8) 1 (14) 1
-----------------------------------------------------------------
Total special items $(65) 16 (75) 34
=================================================================
Before special items, net operating income was $178 million for
the second quarter of 1995, compared with $60 million in the
second quarter of 1994. For the six-month period ending June 30,
net operating income was $299 million in 1995, compared with
$169 million in 1994.
The second quarter's net operating income of $178 million was the
highest since the fourth quarter of 1990. The 197 percent
improvement over the second quarter of 1994 is attributable to
substantially higher chemicals margins, particularly for ethylene
and polyethylene, higher crude oil sales prices, higher volumes
for crude oil and natural gas, and lower controllable costs. The
company's refineries ran at capacity, but higher feedstock costs
could not be fully recovered in the distillates market.
10
<PAGE>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
Phillips at a Glance 1995 1994 1995 1994
------------------ ----------------
U.S. crude oil
production (MBD) 80 92 82 92
Worldwide crude oil
production (MBD) 222 206 224 206
U.S. natural gas
production (MMCFD) 1,066 1,004 1,080 1,040
Worldwide natural gas
production (MMCFD) 1,479 1,356 1,527 1,420
Worldwide natural gas
liquids production (MBD) 157 163 159 163
Liquefied natural gas
sales (MMCFD) 98 98 114 106
Refinery utilization
rate (%) 104 103 102 97
U.S. automotive gasoline
sales (MBD) 334 310 323 296
U.S. distillates
sales(MBD) 137 130 134 126
Worldwide petroleum
products sales (MBD) 704 674 694 678
Natural gas liquids
processed (MBD) 189 186 203 197
Ethylene production
(MMlbs)* 625 585 1,259 1,241
Polyethylene
production (MMlbs)* 474 452 914 920
-----------------------------------------------------------------
*Includes equity in affiliates.
11
<PAGE>
Segment Results
E&P Millions of Dollars
-------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
------------------ ----------------
Reported net income $ 74 76 175 161
Less special items (47) 6 (56) 10
-----------------------------------------------------------------
Net operating income $121 70 231 151
=================================================================
The E&P segment's net operating income in the second quarter of
1995 increased $51 million--73 percent--over the same quarter a
year ago. E&P's net operating earnings were also improved over
last year for the six-month period, increasing 53 percent. Higher
crude oil revenues, particularly in the six-month period,
contributed to the improved results. Phillips' average realized
worldwide crude oil sales price increased for the first five
months of 1995, before declining slightly in June. Prices
declined late in the quarter on the prospect of increasing
supplies.
Lower costs continue to positively impact E&P net operating
income, with lifting costs, exploration expenses and depreciation,
depletion and amortization (DD&A) all down for both the quarter
and six months compared with 1994.
U.S. natural gas prices remained low in the second quarter,
leading to lower natural gas revenues than last year for both the
second quarter and the six-month period. A moderation in demand
relative to increasing industry supply continued to hold prices
down. Increased natural gas production volumes mitigated the
lower sales prices to some extent.
Sales prices, exploration expenses and operating statistics for
worldwide E&P were:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
------------------ ----------------
Average Sales Prices
Crude oil (per barrel)
United States $15.87 13.83 15.43 12.43
Foreign 18.45 15.85 17.69 14.79
Worldwide 17.58 14.96 16.88 13.79
Natural gas--lease (per
thousand cubic feet)
United States 1.36 1.78* 1.34 1.85*
Foreign 2.51 2.26 2.46 2.28
Worldwide 1.79 1.96* 1.77 2.02*
-----------------------------------------------------------------
*Restated.
12
<PAGE>
Millions of Dollars
-------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
------------------ ----------------
Worldwide Exploration
Expenses
Geological and geophysical $32 26 58 50
Leasehold impairment 7 7 16 12
Dry holes 6 19 13 34
Lease rentals 1 2 2 3
-----------------------------------------------------------------
$46 54 89 99
=================================================================
Thousands of Barrels Daily
-------------------------------------
Operating Statistics
Crude Oil Produced
United States 80 92 82 92
Norway 100 81 99 81
United Kingdom 3 5 4 5
Nigeria 24 23 23 24
China 10 - 11 -
Canada 5 5 5 4
-----------------------------------------------------------------
222 206 224 206
=================================================================
Natural Gas Liquids Produced
United States 5 6 5 5
Norway 8 7 9 8
Other areas 1 1 1 1
-----------------------------------------------------------------
14 14 15 14
=================================================================
Millions of Cubic Feet Daily
-------------------------------------
Natural Gas Produced
United States (less gas
equivalent of liquids
shown above) 1,066 1,004 1,080 1,040
Norway* 310 255 313 259
United Kingdom* 38 50 75 72
Canada 65 47 59 49
-----------------------------------------------------------------
1,479 1,356 1,527 1,420
=================================================================
*Dry basis.
Liquefied Natural Gas
Sales 98 98 114 106
-----------------------------------------------------------------
13
<PAGE>
U.S. E&P Millions of Dollars
-------- -------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
------------------ ----------------
Reported net income $ 42 61 102 127
Less special items (33) 5 (37) 9
-----------------------------------------------------------------
Net operating income $ 75 56 139 118
=================================================================
Net operating income from the company's U.S. E&P operations
increased 34 percent for the three-month period ended June 30,
1995, compared with the same period in 1994. Lower lifting
costs, exploration expenses and DD&A, along with improved natural
gas liquids and liquefied natural gas revenues contributed to the
improved results. Crude oil revenues were flat, as the benefit
of higher average sales prices was offset by lower sales volumes.
For the six-month period ended June 30, 1995, net operating
income increased 18 percent compared with the corresponding
period in 1994. In addition to the benefits discussed in the
second quarter results, the six-month period benefitted from
higher crude oil revenues, as higher average sales prices more
than offset the effect of lower sales volumes. Low natural gas
prices continued to hamper results for both the second quarter
and six-month period. The average natural gas price was
24 percent and 28 percent lower for the second quarter and first
six months, respectively, than the comparable periods in 1994.
U.S. crude oil production was lower in both the second quarter
and first six months of 1995, compared with the same periods in
1994. Normal field declines, lower production from Point
Arguello and asset sales were partially offset by increased
production in the Gulf of Mexico from South Marsh Island 146/147
and Ship Shoal 149. U.S. natural gas production was higher in
both the second quarter and first six months of 1995, primarily
due to increased production from the San Juan basin.
Special items in the second quarter of 1995 represented property
impairments on an after-tax basis of $33 million. In addition,
the six-month period included work force reduction charges.
Special items in the second quarter of 1994 consisted primarily
of favorable settlements related to the company's Alaska
operations. In addition, the six-month period ended June 30,
1994, also included a favorable settlement related to a net
profits interest, partially offset by a contingency accrual.
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<PAGE>
Foreign E&P Millions of Dollars
----------- -------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
------------------ ----------------
Reported net income $ 32 15 73 34
Less special items (14) 1 (19) 1
-----------------------------------------------------------------
Net operating income $ 46 14 92 33
=================================================================
Net operating income from the company's foreign E&P operations
showed substantial improvement when compared with 1994, more than
tripling for the second quarter and increasing 179 percent for
the six-month period. Higher crude oil revenues were primarily
responsible for the improved results, as both sales volumes and
prices were higher than the comparable periods in 1994.
Foreign crude oil production was higher in both the second
quarter and first six months of 1995, compared with the same
periods in 1994. The increase is attributable to continued
higher production from Norway and new production from offshore
China. Foreign natural gas production was higher in both the
second quarter and first six months of 1995, primarily due to
higher production in Norway.
Special items in the second quarter of 1995 primarily included
property impairments on an after-tax basis of $6 million and work
force reduction charges of $7 million after-tax. The six-month
period also included a tax contingency accrual. Special items
for both the second quarter and six-month period in 1994
consisted of foreign currency gains.
GPM Millions of Dollars
-------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
------------------ ----------------
Reported net income (loss) $(3) (2) (8) 2
Less preferred dividend
requirements of Phillips
Gas Company (8) (8) (16) (16)
-----------------------------------------------------------------
Net operating income $ 5 6 8 18
=================================================================
The company's GPM operations are conducted primarily through GPM
Gas Corporation, a wholly owned subsidiary of Phillips Gas
Company. The effect of Phillips Gas Company's preferred dividend
requirements has been excluded in determining GPM's net operating
income.
15
<PAGE>
Sales prices and operating statistics for GPM were:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
------------------ ----------------
Average Sales Prices
U.S. residue gas (per
thousand cubic feet) $ 1.48 1.83 1.44 1.97
U.S. natural gas liquids
(per barrel--
unfractionated) 10.23 9.37 10.15 9.17
-----------------------------------------------------------------
Millions of Cubic Feet Daily
-------------------------------------
Operating Statistics
Natural Gas Purchases
Outside Phillips 1,246 1,148 1,238 1,139
Phillips 197 203 198 206
-----------------------------------------------------------------
1,443 1,351 1,436 1,345
=================================================================
Raw Gas Throughput 1,624 1,493 1,603 1,493
-----------------------------------------------------------------
Residue Gas Sales
Outside Phillips 830 854 848 857
Phillips 190 88 168 86
-----------------------------------------------------------------
1,020 942 1,016 943
=================================================================
Thousands of Barrels Daily
-------------------------------------
Natural Gas Liquids Net
Production
From Phillips E&P
leasehold gas 19 21 20 22
From gas purchased
outside Phillips 124 128 124 127
-----------------------------------------------------------------
143 149 144 149
=================================================================
GPM's net operating income decreased slightly for the second
quarter of 1995 and 56 percent for the six months, compared with
the corresponding periods in 1994. Low residue gas sales prices
continued to negatively impact earnings. The average realized
sales price was 19 percent lower for the second quarter and
27 percent lower for the six-month period relative to a year ago.
High storage levels and lower seasonal demand kept sales prices
lower than 1994. Higher natural gas liquids prices--9 percent
and 11 percent higher than 1994 for the second quarter and
six-month period, respectively--partially offset the lower
residue gas prices. NGL prices increased as a result of higher
demand for NGL feedstocks for production of petrochemicals.
16
<PAGE>
RM&T Millions of Dollars
-------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
------------------ ----------------
Reported net income $12 31 7 68
Less special item (1) - (1) -
-----------------------------------------------------------------
Net operating income $13 31 8 68
=================================================================
Sales prices and operating statistics for RM&T were:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
------------------ ----------------
Average Sales Prices
(per gallon)
Automotive gasoline $.65 .57 .60 .54
Distillates .52 .50 .50 .50
Propane .36 .35 .36 .35
-----------------------------------------------------------------
Operating Statistics
Refinery crude oil
capacity utilization 104% 103 102 97
-----------------------------------------------------------------
Thousands of Barrels Daily
-------------------------------------
Crude Oil Refined 333 331 327 309
-----------------------------------------------------------------
Petroleum Products Outside
Sales
United States
Automotive gasoline 328 288 318 273
Aviation fuels 29 32 30 32
Distillates 137 130 134 126
Propane 11 9 24 24
Other products 21 20 19 18
-----------------------------------------------------------------
526 479 525 473
Foreign 50 52 50 57
-----------------------------------------------------------------
576 531 575 530
=================================================================
The company's refineries continued to run consistently in the
second quarter, ending the quarter with a refinery crude oil
capacity utilization rate of 104 percent. However, crude oil
feedstock costs were 15 percent higher than the second quarter a
year ago. Phillips' average realized wholesale automotive
gasoline price kept pace, increasing 14 percent, but the
company's distillates sales price rose only 4 percent. As a
result, distillates margins were lower than those in the second
quarter last year, contributing to 58 percent lower earnings in
RM&T.
17
<PAGE>
The company's refineries ran at capacity for the first six months
of 1995, compared with a 97 percent crude oil capacity
utilization rate in the first six months of 1994. For the six-
month period, crude oil feedstock costs were 22 percent higher
than the first six months of 1994. Phillips' average realized
wholesale automotive gasoline price increased 11 percent and the
company's distillates price was flat. This combination of
feedstock costs increasing at a higher rate than selling prices
led to lower gasoline and distillates margins, resulting in a
significant drop in net operating income.
The special item for the second quarter of 1995 represented work
force reduction charges.
Chemicals Millions of Dollars
-------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
------------------ ----------------
Reported net income $112 45 208 119
Less special items (8) 6 (8) 27
-----------------------------------------------------------------
Net operating income $120 39 216 92
=================================================================
Operating statistics for Chemicals were:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
------------------ ----------------
Millions of Pounds,
Except as Indicated
-------------------------------------
Operating Statistics
Production*
Ethylene 625 585 1,259 1,241
Polyethylene 474 452 914 920
Propylene 109 97 219 180
Polypropylene 114 125 219 225
Paraxylene 169 119 258 253
Cyclohexane (millions
of gallons) 20 57 47 101
-----------------------------------------------------------------
*Includes equity in affiliates.
18
<PAGE>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
------------------ ----------------
Thousands of Barrels Daily
-------------------------------------
U.S. Petroleum Products
Outside Sales
Automotive gasoline 6 22 5 23
Liquefied petroleum gas 82 84 76 83
Other products 40 37 38 42
-----------------------------------------------------------------
128 143 119 148
=================================================================
Natural Gas Liquids
Processed 189 186 203 197
-----------------------------------------------------------------
Natural Gas Liquids
Processing Capacity 227 227 227 227
-----------------------------------------------------------------
The company's Chemicals segment net operating income continued to
improve, reaching $120 million in the second quarter of 1995, a
208 percent increase over 1994's $39 million. For the six-month
period ending June 30, 1995, Chemicals' net operating income was
$216 million, a 135 percent increase over the comparable period
in 1994. Both the second quarter and six-month period benefited
from substantially higher margins, particularly for ethylene and
polyethylene, and lower operating expenses.
Industry demand for ethylene remained strong in the second
quarter, allowing for higher margins than a year ago. Industry
supply moved into balance with demand during the quarter,
resulting in adequate, but not excessive industry inventory.
Phillips' ethylene production in the second quarter was 7 percent
higher than the same period last year, as the SOLP ethylene unit
performed particularly well following a first quarter turnaround.
Propylene remained in tight supply during the second quarter, but
industry imports into the U.S. market brought the industry into a
supply/demand balance. Paraxylene production increased
42 percent in the second quarter of 1995, compared with the
second quarter of 1994, due to the first quarter completion of
the initial paraxylene expansion at the company's Puerto Rico
Core facilities.
Although demand in the polyethylene plastics market began to
soften during the second quarter, margins remained steady through
most of the quarter. Late in the quarter, margins lowered in
response to the softening in demand. Overall, Phillips'
polyethylene margins were much better in the second quarter than
a year ago, leading to improved financial results. Polyethylene
production was 5 percent higher in this year's second quarter
compared with last year's. Demand for polypropylene remained
high during the quarter. Availability of propylene, a key
feedstock, continued to be tight, which limited production of
polypropylene.
19
<PAGE>
Special items in the second quarter of 1995 included property
impairments of $3 million on an after-tax basis and an income tax
adjustment. Special items for the second quarter of 1994
included a favorable adjustment to a 1993 accrual for the
abandonment of a pipeline and a favorable settlement related to
the company's aromatics operations. In addition to the above
items, the first six months of 1994 included an after-tax gain of
$20 million from a subsidiary stock transaction.
Corporate and Other Millions of Dollars
-------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
------------------ ----------------
Reported Corporate and
Other $(82) (74) (158) (147)
Less special items (9) 4 (10) (3)
-----------------------------------------------------------------
Adjusted Corporate and
Other $(73) (78) (148) (144)
=================================================================
Adjusted Corporate and Other includes:
Corporate general and
administrative expenses $(31) (36) (59) (61)
Net interest (43) (45) (87) (94)
Other 1 3 (2) 11
-----------------------------------------------------------------
Adjusted Corporate and
Other $(73) (78) (148) (144)
=================================================================
Corporate general and administrative expenses for the second
quarter decreased $5 million compared with the corresponding
period in 1994, due to generally lower costs. For the six-month
period ended June 30, 1995, Corporate general and administrative
expenses declined slightly.
Net interest represents interest income and expense, net of
capitalized interest. Net interest for both the second quarter
and six-month period declined relative to 1994, due primarily to
higher capitalized interest associated with the J-Block
development in the U.K. sector of the North Sea.
Other consists primarily of the company's insurance operations,
along with income tax and other items that are not directly
associated with the operating segments on a stand-alone basis.
Other was down in the second quarter and year-to-date periods due
primarily to higher contingency accruals in 1995.
Special items in the second quarter of 1995 included property
impairments on an after-tax basis of $7 million. In addition,
the six-month period included work force reduction charges.
20
<PAGE>
Special items in the second quarter of 1994 included the interest
applicable to favorable resolutions of various legal issues. In
addition, the six-month period included an asset sale, a work
force reduction charge and a contingency accrual.
CAPITAL RESOURCES AND LIQUIDITY
Financial Indicators
Millions of Dollars
-----------------------------
At At At
June 30 December 31 June 30
1995 1994 1994
-----------------------------
Current ratio 1.0 1.0 1.0
Long-term debt $2,977 3,106 3,387
Preferred stock of subsidiary $ 345 345 345
Stockholders' equity $3,092 2,953 2,787
Percent of long-term debt
to capital* 46% 49 52
Percent of floating-rate debt
to total debt 20% 23 29
-----------------------------------------------------------------
*Capital includes long-term debt, preferred stock of subsidiary
and stockholders' equity.
Cash from operations increased $337 million, 81 percent, during
the first six months of 1995, compared with the same period in
1994. This increase can be attributed in part to a $21 million
increase in net income and $40 million generated from the net
sales of credit card receivables during the first six months of
1995. During the same period in 1994, a $79 million tax payment
for a previously recorded accrual and $45 million in payments for
previously recorded contingencies reduced cash, also contributing
significantly to the variation in cash from operating activities
between the two periods.
On April 10, 1995, Phillips' Board of Directors approved a
9 percent increase in the quarterly common stock dividend rate,
raising the per share dividend to $.305 effective June 1, 1995.
During the first quarter of 1995, the company and a bank-
sponsored entity entered into a one-year agreement which provides
for the revolving sale of receivables generated by credit card
sales and includes four one-year renewal options. The agreement
limits the amount of receivables which may be sold and
outstanding to $115 million, of which $40 million was outstanding
at June 30, 1995.
At June 30, 1995, no amounts were outstanding under Phillips'
$250 million commercial paper program. In early August, the
company replaced its commercial paper program, which was
supported by a direct-pay irrevocable bank letter of credit, with
a $250 million commercial paper program supported by a portion of
the company's unused revolving lines of credit equal to
21
<PAGE>
100 percent of the commercial paper outstanding. To facilitate
the change in programs and to maintain liquidity for other uses,
the company increased its revolving bank credit facility from
$800 million to $1,100 million, effective August 4, 1995. No
portion of the existing $800 million facility was outstanding at
June 30, 1995.
SOLP owns and operates a 1.5 billion-pound-per-year ethylene
plant located adjacent to the company's Sweeny, Texas, refinery.
During second quarter 1995, Phillips' management approved funding
for three new furnaces for the facility, increasing SOLP's annual
capacity to 1.9 billion pounds when completed in 1996.
The company's U.S. E&P operations conducted sales of non-
strategic assets in June and July of this year. The sales are
scheduled to close in third quarter 1995, producing proceeds of
approximately $24 million. These property dispositions are not
expected to have a material impact on reserves, production or
associated earnings.
Capital Expenditures and Investments
Millions of Dollars
-------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
------------------ ----------------
E&P $176 201 323 359
GPM 43 22 72 44
RM&T 36 21 58 34
Chemicals 34 29 76 50
Corporate and Other 12 6 20 9
-----------------------------------------------------------------
$301 279 549 496
=================================================================
United States $191 186 343 316
Foreign 110 93 206 180
-----------------------------------------------------------------
$301 279 549 496
=================================================================
The company's wholly owned subsidiary, GPM Gas Corporation,
continues to pursue its previously announced acquisition of
certain Enron Corp. gathering facilities located in the Texas and
Oklahoma Panhandles. However, an amendment was signed in June
1995, reducing the scope of the acquisition. As revised, it now
includes approximately 3,200 miles of gathering line and
22 compressor stations. The acquisition is anticipated to be
completed in about six months, pending governmental approval.
22
<PAGE>
Contingencies
Legal and Tax Matters
The Internal Revenue Service has appealed the U.S. Tax Court's
rulings related to the company's sales of liquefied natural gas
in Japan. The Tax Court's rulings supported the company's
position that more than 50 percent of the income at issue was
from a foreign source. Oral argument on the appeal will be heard
by the U.S. Court of Appeals for the Tenth Circuit on
September 26, 1995. Though a final, favorable outcome of this
litigation would have a material, positive effect on Phillips'
net income and cash position, and an unfavorable result could
have a material impact on cash flows in a particular quarter, it
remains too early to determine the outcome or the final financial
effect.
Phillips accrues for contingencies when a loss is probable and
the amounts can be reasonably estimated. Based on currently
available information, the company believes that it is remote
that future costs related to known contingent liability exposures
will exceed current accruals by an amount that would have a
material adverse impact on the company's financial statements.
Environmental
Most aspects of the businesses in which the company engages are
subject to various federal, state, local and foreign
environmental laws and regulations. Similar to other companies
in the petroleum and chemical industries, the company incurs
costs for preventive and corrective actions at facilities and
waste disposal sites.
Phillips may be obligated to take remedial action as the result
of the enactment of laws, such as the federal Superfund law, the
issuance of new regulations, or as a result of leaks and spills.
In addition, an obligation may arise when a facility is closed or
sold. Most of the expenditures to fulfill these obligations
relate to facilities and sites where past operations followed
practices and procedures that were considered appropriate under
regulations, if any, existing at the time, but may now require
investigatory or remedial work to adequately protect the
environment or address new regulatory requirements.
At year-end 1994, Phillips reported 56 sites where it had
information indicating that it might have been identified as a
Potentially Responsible Party (PRP). Since then, 15 of these
sites were resolved through consent decrees, deposits into trust
funds or otherwise. Seven sites were added during the six-month
period. Of the 48 sites remaining at June 30, 1995, the company
believes it has a legal defense or its records indicate no
involvement for 16 sites. At seven other sites, present
information indicates that it is probable that the company's
exposure is less than $100,000 per site. At 11 sites, Phillips
23
<PAGE>
has had no communication or activity with government agencies or
other PRPs in more than two years. Of the 14 remaining sites,
the company has provided for any probable costs that can be
reasonably estimated.
Phillips does not consider the number of sites at which it has
been designated potentially responsible by state or federal
agencies as a relevant measure of liability. Some companies may
be involved in few sites but have much larger liabilities than
companies involved in many more sites. Although liability of
those potentially responsible is generally joint and several for
federal sites and frequently so for state sites, the company is
usually but one of many companies cited at a particular site. It
has, to date, been successful in sharing cleanup costs with other
financially sound companies. Many of the sites at which the
company is potentially responsible are still under investigation
by the Environmental Protection Agency (EPA) or the state
agencies concerned. Prior to actual cleanup, those potentially
responsible normally assess site conditions, apportion
responsibility and determine the appropriate remediation. In
some instances, Phillips may have no liability or attain a
settlement of liability. Actual cleanup costs generally occur
after the parties obtain EPA or equivalent state agency approval.
At June 30, 1995, accruals of $7 million had been made for the
company's unresolved PRP sites. In addition, the company has
accrued $97 million for other planned remediation activities,
including resolved state, PRP, and other federal sites, as well
as sites where no claims have been asserted, and $14 million for
other environmental contingent liabilities, for total
environmental accruals of $118 million. No one site represents
more than 10 percent of the total.
After an assessment of environmental exposures for cleanup and
other costs, the company makes accruals on an undiscounted basis
for planned investigation and remediation activities for sites
where it is probable that future costs will be incurred and these
costs can be reasonably estimated. These accruals have not been
reduced for possible insurance recoveries. Based on currently
available information, the company believes that it is remote
that future costs related to known contingent liability exposures
will exceed current accruals by an amount that would have a
material adverse impact on the company's financial statements.
OUTLOOK
Late in the second quarter, the company's Puerto Rico Core
facility began producing cyclohexane using the Aromax catalytic
reforming technology. This facility now produces cyclohexane at
a rate of approximately 9,000 barrels a day, compared with 7,000
barrels a day realized during the first six months of 1994.
24
<PAGE>
Higher than expected well flow rates, lower than anticipated
water production and completion of the development wells ahead of
schedule have resulted in better than expected production rates
from the Xijiang field in the China Sea. Production was
initially projected to peak at 66,000 gross barrels of crude oil
per day in 1996, but in May 1995, the daily production rate hit
approximately 73,500 gross barrels per day. However, in mid-June,
Xijiang production was shut in due to pipeline damage, believed
to have been caused by a fishing vessel. Although repairs were
completed in early July, production continues to be shut in due
to equipment failure. The company anticipates resuming
production during August of this year. Prior to shutting in
production, Phillips' share of the average daily production rate
reached approximately 19,200 net barrels per day.
Discussions continue with Phillips' co-venturer in the Sunfish
prospect regarding the transfer of the co-venturer's lease
interests in the South Cook Inlet to the company. The next
exploration well is now scheduled for 1996.
Net volumes from the Point Arguello field offshore California
averaged approximately 10,400 barrels of oil per day during the
second quarter of 1995, compared with an average of approximately
13,700 barrels of oil per day during the fourth quarter of 1994.
The decline in production is related to increasing water
production from the reservoir and the deferral of certain
projects. Phillips and the operator are evaluating recent
production data and methods to possibly reestablish production at
previous levels.
Phillips' average worldwide crude oil sales price realized during
the first six months of 1995 increased 22 percent over the same
period last year; however, prices declined late in the second
quarter. Worldwide crude oil prices for the remainder of 1995
will depend upon market reaction to changing political and
economic environments, which continue to remain uncertain.
Realized worldwide natural gas sales prices for the first six
months of 1995 were 12 percent lower than the same period last
year, and in the near term, are not expected to show significant
improvement due to high storage levels and plentiful gas
supplies. However, during the winter months, demand generally
increases, resulting in some price improvement.
Chemicals margins began to tighten during the latter part of the
second quarter, in response to a slowing of industry demand. The
company anticipates that demand will continue to soften in the
third quarter, leading to declining margins.
Phillips' results for the first six months of 1995 reflect the
benefit of the company's ongoing efforts to contain costs.
Controllable costs are lower in 1995, even though production
levels are higher. Plans for process improvements are currently
being developed which are expected to further reduce costs across
all the company's business lines.
25
<PAGE>
To meet its liquidity requirements, including funding its capital
program, the company will look primarily to cash generated from
operations and financing.
26
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The following is a description of a legal proceeding involving
governmental authorities under federal, state and local laws
regulating the discharge of materials into the environment.
While it is not possible to predict the outcome of the
proceeding, if it was decided adversely to the company, there
would be no material adverse impact on the company's financial
statements. Nevertheless, such proceedings are reported pursuant
to the Securities and Exchange Commission's regulations.
On May 4, 1995, the Texas Natural Resource Conservation
Commission (TNRCC) issued a Notice of Violation (NOV) to Phillips
Petroleum Company for its Sweeny, Texas, refinery. The complaint
alleges violations of Texas' State Water pollution standards with
respect to the handling of waste water at the Sweeny refinery
prior to the start-up of a new waste water treatment plant in
1993. The NOV seeks a penalty in excess of $100,000. A draft
order was received with the NOV, asking that negotiations take
place after a technical arbitration panel issued its draft
report. The draft and final reports have been issued by the
panel, and the company is currently in settlement negotiations
with the TNRCC. Phillips believes that the settlement will
include a cash penalty of less than $100,000 and a component
referred to as a "supplemental environmental project" which would
be undertaken by the company in lieu of any further cash penalty.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The company held its annual stockholders' meeting on May 8, 1995.
A brief description of each proposal and the voting results
follow:
A company proposal to elect fourteen directors.
For Against & Withheld
----------------------------------
W. W. Allen 221,493,383 4,469,877
Norman R. Augustine 222,088,969 3,874,291
George B. Beitzel 221,432,963 4,530,297
David L. Boren 221,690,819 4,272,441
C. L. Bowerman 221,567,461 4,395,799
Robert E. Chappell, Jr. 222,109,063 3,854,197
Lawrence S. Eagleburger 221,571,527 4,391,733
James B. Edwards 221,856,144 4,107,116
Larry D. Horner 221,977,064 3,986,196
J. J. Mulva 221,051,147 4,912,113
Randall L. Tobias 222,133,587 3,829,673
Victoria J. Tschinkel 221,857,911 4,105,349
Kathryn C. Turner 221,644,891 4,318,369
J. L. Whitmire 221,210,915 4,752,345
27
<PAGE>
A company proposal to approve the designation of Ernst &
Young LLP as independent auditors for 1995.
For 222,139,237
Against 2,907,977
Abstentions 916,043
Not Voted 3
A shareholder proposal sponsored by the Franciscan Health
System of the Sisters of St. Francis of Philadelphia and
co-sponsored by The General Board of Church and Society of the
United Methodist Church, to sign and implement the CERES
Principles, a set of environmental principals put forth by the
Coalition for Environmentally Responsible Economies.
For 23,657,374
Against 175,363,291
Abstentions 11,403,109
Not Voted 15,539,486
A shareholder proposal sponsored by the College Retirement
Equities Fund to require the company's board to adopt a policy to
seek shareholder approval, under certain circumstances, prior to
issuing preferred stock.
For 93,056,549
Against 112,808,687
Abstentions 4,524,641
Not Voted 15,573,383
All fourteen directors were elected, the independent public
accountants proposed by the company were approved, the Ceres
Principles were rejected, and the preferred stock proposal was
rejected.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
--------
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
Reports on Form 8-K
-------------------
During the three months ended June 30, 1995, the company has not
filed any reports on Form 8-K.
28
<PAGE>
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.
PHILLIPS PETROLEUM COMPANY
/s/ L. F. Francis
----------------------------------
L. F. Francis
Controller and General Tax Officer
(Chief Accounting and Duly
Authorized Officer)
August 11, 1995
29
<PAGE>
Exhibit 12
PHILLIPS PETROLEUM COMPANY AND CONSOLIDATED SUBSIDIARIES
TOTAL ENTERPRISE
Computation of Ratio of Earnings to Fixed Charges
Millions of Dollars
------------------------
Six Months Ended June 30
1995 1994*
------------------------
(Unaudited)
Earnings Available for Fixed Charges
Income before income taxes $539 389
Distributions in excess of equity in earnings
of less-than-fifty-percent-owned companies 4 1
Fixed charges, excluding capitalized
interest and the portion of the
preferred dividend requirements of a
subsidiary not previously deducted
from income** 183 187
----------------------------------------------------------------------------
$726 577
============================================================================
Fixed Charges
Interest and expense on indebtedness,
excluding capitalized interest $146 151
Capitalized interest 13 5
Preferred dividend requirements of
a subsidiary 38 31
One-third of rental expense, net of
subleasing income, for operating leases 16 15
----------------------------------------------------------------------------
$213 202
============================================================================
Ratio of Earnings to Fixed Charges 3.4 2.9
----------------------------------------------------------------------------
*Restated.
**Includes amortization of capitalized interest totaling approximately
$5 million in 1995 and 1994.
Earnings available for fixed charges include, if any, the company's equity
in losses of companies owned less than fifty percent and having debt for
which the company is contingently liable. Fixed charges include the
company's proportionate share, if any, of interest relating to the
contingent debt.
In 1990 and 1988, respectively, the company guaranteed a $400 million bank
loan and $250 million of notes payable for the Long-Term Stock Savings Plan
(LTSSP), an employee benefit plan. In 1994, the notes payable were
refinanced with a $131 million term loan, and the $400 million loan was
amended. Consolidated interest expense included $2 million of interest
attributable to the LTSSP borrowings for the first six months of 1995, while
interest related to LTSSP borrowings during the same period in 1994 was
minimal.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of Phillips Petroleum Company as of June 30, 1995,
and the related consolidated statement of income for the six month period
ending June 30, 1995, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 122
<SECURITIES> 0
<RECEIVABLES> 1,587
<ALLOWANCES> 20
<INVENTORY> 560
<CURRENT-ASSETS> 2,554
<PP&E> 18,887
<DEPRECIATION> 10,711
<TOTAL-ASSETS> 11,735
<CURRENT-LIABILITIES> 2,677
<BONDS> 2,977
<COMMON> 526
0
0
<OTHER-SE> 2,566
<TOTAL-LIABILITY-AND-EQUITY> 11,735
<SALES> 6,678
<TOTAL-REVENUES> 6,760
<CGS> 5,709<F1>
<TOTAL-COSTS> 6,069<F2>
<OTHER-EXPENSES> 16<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 136
<INCOME-PRETAX> 539
<INCOME-TAX> 315
<INCOME-CONTINUING> 224
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 224
<EPS-PRIMARY> .85
<EPS-DILUTED> .85
<FN>
<F1>Purchased crude oil and products + Production and operating expenses +
Exploration expenses + Depreciation, depletion and amortization.
<F2>CGS + Selling, general and administrative expenses + Taxes other than
income taxes.
<F3>Preferred dividend requirements of subsidiary.
</FN>
</TABLE>
