================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997 Commission file number 1-27
TEXACO INC.
(Exact name of the registrant as specified in its charter)
Delaware 74-1383447
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2000 Westchester Avenue
White Plains, New York 10650
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 253-4000
Texaco Inc. (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, and
(2) HAS BEEN subject to such filing requirements for the past 90 days.
As of April 30, 1997, there were outstanding 263,634,553 shares of Texaco
Inc. Common Stock - par value $6.25.
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<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
TEXACO INC. AND SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
--------------------------------------------------
(Millions of dollars, except per share amounts)
(Unaudited)
----------------------
For the three months
ended March 31,
----------------------
1997 1996
---- ----
<S> <C> <C>
REVENUES
Sales and services $11,813 $10,059
Equity in income of affiliates,
interest, asset sales and other 216 212
------- -------
12,029 10,271
------- -------
DEDUCTIONS
Purchases and other costs 9,298 7,782
Operating expenses 716 684
Selling, general and administrative expenses 397 400
Maintenance and repairs 87 88
Exploratory expenses 99 69
Depreciation, depletion and amortization 385 350
Interest expense 101 113
Taxes other than income taxes 139 105
Minority interest 21 16
------- -------
11,243 9,607
------- -------
Income before income taxes 786 664
Provision for (benefit from) income taxes (194) 278
------- -------
NET INCOME $ 980 $ 386
======= =======
Preferred stock dividend requirements $ 14 $ 15
------- -------
Net income available for common stock $ 966 $ 371
======= =======
Per common share (dollars)
Net income $ 3.72 $ 1.42
Cash dividends paid $ .85 $ .80
Average number of common shares outstanding
for computation of earnings per share (thousands) 260,071 260,654
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
- 1 -
<PAGE>
<TABLE>
<CAPTION>
TEXACO INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
------------------------------------------
(Millions of dollars)
March 31, December 31,
1997 1996
---------- ------------
(Unaudited)
-----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 619 $ 511
Short-term investments - at fair value 18 41
Accounts and notes receivable, less allowance for doubtful
accounts of $34 million in 1997 and 1996 4,674 5,195
Inventories 1,677 1,460
Deferred income taxes and other current assets 373 458
------- -------
Total current assets 7,361 7,665
Investments and Advances 5,301 4,996
Properties, Plant and Equipment - at cost 34,166 33,988
Less - accumulated depreciation, depletion and amortization 20,764 20,577
------- -------
Net properties, plant and equipment 13,402 13,411
Deferred Charges 944 891
------- -------
Total $27,008 $26,963
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 466 $ 465
Accounts payable and accrued liabilities
Trade liabilities 2,936 3,472
Accrued liabilities 1,167 1,333
Estimated income and other taxes 1,173 914
------- -------
Total current liabilities 5,742 6,184
Long-Term Debt and Capital Lease Obligations 5,029 5,125
Deferred Income Taxes 769 795
Employee Retirement Benefits 1,225 1,236
Deferred Credits and Other Noncurrent Liabilities 2,512 2,593
Minority Interest in Subsidiary Companies 669 658
------- -------
Total 15,946 16,591
Stockholders' Equity
Market Auction Preferred Shares 300 300
ESOP Convertible Preferred Stock 471 474
Unearned employee compensation and benefit plan trust (377) (378)
Common stock (authorized: 350,000,000 shares, $6.25 par
value; 274,293,417 shares issued) 1,714 1,714
Paid-in capital in excess of par value 630 630
Retained earnings 9,048 8,292
Currency translation adjustment (95) (65)
Unrealized net gain on investments 22 33
------- -------
11,713 11,000
Less - Common stock held in treasury, at cost 651 628
------- -------
Total stockholders' equity 11,062 10,372
------- -------
Total $27,008 $26,963
======= =======
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
TEXACO INC. AND SUBSIDIARY COMPANIES
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
--------------------------------------------------
(Millions of dollars)
(Unaudited)
------------------------
For the three months
ended March 31,
------------------------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 980 $ 386
Reconciliation to net cash provided by (used in)
operating activities
Receivable for refund of IRS deposits (700) -
Depreciation, depletion and amortization 385 350
Deferred income taxes 100 20
Exploratory expenses 99 69
Minority interest in net income 21 16
Dividends from affiliates, less than equity
in income (40) (59)
Gains on asset sales (19) (29)
Changes in operating working capital 257 196
Other - net (49) (61)
----- -----
Net cash provided by operating activities 1,034 888
INVESTING ACTIVITIES
Capital and exploratory expenditures (678) (613)
Proceeds from sale of discontinued operations - 344
Proceeds from sales of assets 140 78
Sale of leasehold interests - 69
Purchases of investment instruments (349) (507)
Sales/maturities of investment instruments 389 554
Other - net (57) (4)
----- -----
Net cash used in investing activities (555) (79)
FINANCING ACTIVITIES
Borrowings having original terms in excess
of three months
Proceeds 150 58
Repayments (75) (53)
Net decrease in other borrowings (174) (599)
Purchases of common stock (31) (22)
Dividends paid to the company's stockholders
Common (221) (208)
Preferred (4) (5)
Dividends paid to minority shareholders (10) (10)
----- -----
Net cash used in financing activities (365) (839)
CASH AND CASH EQUIVALENTS
Effect of exchange rate changes (6) (3)
----- -----
Increase (decrease) during period 108 (33)
Beginning of year 511 501
----- -----
End of period $ 619 $ 468
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-3-
<PAGE>
TEXACO INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 1. Discontinued Operations
- -------------------------------
On February 29, 1996, Texaco completed the disposition of its operations
classified as discontinued operations by completing the sale of its worldwide
lubricant additives business to Ethyl Corporation for $136 million in cash and a
three-year note with a face amount of $60 million.
Revenues for the discontinued operations totaled $33 million for the first two
months of 1996, representing activities through the sale date.
Discontinued operations had no significant impact on first quarter 1996 results.
Note 2. Inventories
- -------------------
The inventories of Texaco Inc. and consolidated subsidiary companies were as
follows:
<TABLE>
<CAPTION>
As of
--------------------------------------
March 31, December 31,
1997 1996
---- ----
(Unaudited)
(Millions of dollars)
<S> <C> <C>
Crude oil $ 499 $ 296
Petroleum products and petrochemicals 910 904
Other merchandise 51 58
Materials and supplies 217 202
------ ------
Total $1,677 $1,460
====== ======
</TABLE>
Note 3. Contingent Liabilities
- ------------------------------
Information relative to commitments and contingent liabilities of Texaco Inc.
and subsidiary companies is presented in Notes 14 and 16, pages 63-64 and 67,
respectively, of Texaco Inc.'s 1996 Annual Report to Stockholders. With respect
to the Internal Revenue Service (IRS) claims discussed in Note 16, page 67, of
Texaco Inc.'s 1996 Annual Report to Stockholders, on April 21, 1997 the U.S.
Supreme Court decided not to review the decisions of the U.S. Court of Appeals
for the Fifth Circuit and the U.S. Tax Court in the so-called "Aramco Advantage"
case.
As a result of this decision by the Supreme Court, Texaco recognized an
after-tax earnings benefit of $488 million in the first quarter 1997,
representing the expected refund of the balance of deposits made to the IRS in
previous years for potential tax claims and accrued interest. The expected
refund, including interest, exceeds $700 million. A significant portion of the
refund is expected to be received in 1997.
----------
- 4 -
<PAGE>
In the company's opinion, while it is impossible to ascertain the ultimate legal
and financial liability with respect to contingent liabilities and commitments,
including lawsuits, claims, guarantees, taxes and regulations, the aggregate
amount of such liability in excess of financial reserves is not anticipated to
be materially important in relation to the consolidated financial position or
results of operations of Texaco Inc. and its subsidiaries.
Note 4. Caltex Group of Companies
- ---------------------------------
Summarized unaudited financial information for the Caltex Group of Companies,
owned 50% by Texaco and 50% by Chevron Corporation, is presented below and is
reflected on a 100% Caltex Group basis:
<TABLE>
<CAPTION>
For the three months
ended March 31,
--------------------
1997 1996
---- ----
(Millions of dollars)
<S> <C> <C>
Gross revenues $4,694 $4,161
Income before income taxes $ 320 $ 314
Net income $ 186 $ 195
</TABLE>
On April 2, 1996, Caltex Petroleum Corporation ("Caltex") completed the sale of
its 50% interest in Nippon Petroleum Refining Company, Limited to its partner
Nippon Oil Company for approximately $2 billion. Caltex' net income for the
second quarter of 1996 included a gain of $621 million associated with this
sale.
Effective April 1, 1997, Caltex' 40% interest in its Bahrain refining joint
venture (Bapco) was sold to the Government of the State of Bahrain at
approximately net book value.
* * * * * * * * * * *
In the determination of preliminary and unaudited financial statements for the
three-month periods ended March 31, 1997 and 1996, Texaco's accounting policies
have been applied on a basis consistent with the application of such policies in
Texaco's financial statements issued in its 1996 Annual Report to Stockholders.
In the opinion of Texaco, all adjustments and disclosures necessary to present
fairly the results of operations for such periods have been made. These
adjustments include normal recurring adjustments. The information is subject to
year-end audit by independent public accountants. Texaco makes no forecasts or
representations with respect to the level of net income for the year 1997.
- 5 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Total net income for the first quarter of 1997 was $980 million, or $3.72 per
share, including a $488 million benefit associated with the resolution of the
"Aramco Advantage" case. Net income for the first quarter of 1996 was $386
million, or $1.42 per share. Net income for the first quarter of 1997 before
special items was $492 million, or $1.84 per share.
In the first quarter of 1997:
o Net income before special items increased 27 percent -
representing the 11th consecutive quarter that net income exceeded
previous years' levels.
o Worldwide daily production rose 4 percent.
o Capital and exploratory expenditures grew 25 percent to $799
million.
o Total debt to total borrowed and invested capital was 32 percent,
at the low end of our target range.
o Expenses continue to be managed at levels less than inflation.
The company's upstream business had another strong quarter, as higher commodity
prices were enhanced by increased daily crude oil and natural gas production. In
the downstream business, earnings continued to grow in the company's expanding
Latin American marketing operations and margins in Europe improved over last
year's depressed levels. However, earnings in the Caltex operating areas were
lower, and U.S. downstream results were level with last year.
During the first quarter, the company increased capital and exploratory
spending, focusing on upstream growth opportunities in the U.S., as appraisal
and development work continued in the Gulf of Mexico. After some unexpected
operating delays, first oil flowed from the U.K. North Sea Captain field in
March and production is increasing rapidly. Also, government approval was
secured for developing the U.K. Galley field, and the company announced natural
gas discoveries in Australia and Thailand.
The company moved forward in March with the signing of a memorandum of
understanding with Shell Oil Company to combine major elements of its U.S.
downstream operations, and the company completed the sale of its remaining
chemical business.
On April 21, 1997, Texaco was notified that the United States Supreme Court
decided not to review the favorable decisions of the United States Court of
Appeals for the Fifth Circuit and the United States Tax Court in the "Aramco
Advantage" case. This decision by the Supreme Court, affirming Texaco's
position, resulted in an earnings benefit of $488 million, or $1.88 per share.
This benefit represents the after-tax effect of the expected refund of payments,
with associated interest, made to the Internal Revenue Service in previous years
for potential tax claims. The total refund from the IRS, including interest,
will exceed $700 million. A significant portion of this amount is expected to be
received in 1997.
- 6 -
<PAGE>
OPERATING EARNINGS
PETROLEUM AND NATURAL GAS
EXPLORATION AND PRODUCTION
United States
First quarter 1997 earnings were $311 million, compared with $267 million for
the first quarter of 1996. The 16-percent earnings improvement was due to higher
prices and continuing success in enhancing production from existing fields,
particularly in the Gulf of Mexico and Louisiana.
Texaco's average realized crude oil price for the first quarter 1997 was $19.62,
an increase of $3.11 per barrel over 1996. The average realized natural gas
price for the first quarter of 1997 was $2.66 per thousand cubic feet (MCF),
an increase of $.51 per MCF over 1996. A price spike late in 1996,
attributed to lean stock levels at a time of seasonally strong demand,
extended into January 1997. Prices retreated in February and March, due to
abnormally mild weather and increasing worldwide supplies.
Partially offsetting the favorable factors were lower gas trading results and
higher exploratory expenses. Exploratory expenses before taxes in the first
quarter of 1997 were $42 million versus $23 million in the first quarter of
1996. This sharp increase is attributed to higher seismic and exploratory
drilling activity of promising prospects, mostly in the Gulf of Mexico.
International
First quarter 1997 earnings were $156 million, as compared with $130 million for
the first quarter of 1996. The 20-percent improvement in earnings included the
effects of higher crude oil prices, up 8 percent, and increased liquids and
natural gas production.
Total daily production increased 9 percent as a result of new production in the
Wafra field in the Partitioned Neutral Zone between Saudi Arabia and Kuwait, in
the Bagre field offshore Angola, and in the Danish North Sea coming onstream
late in 1996. Additionally, natural gas production benefited from a full
quarter's operations at the Dolphin field in Trinidad. These production
increases, as well as continued field development programs, more than offset the
impact of maturing fields. Higher exploratory expenses associated with Texaco's
aggressive exploration program, as well as lower gas trading results in the
U.K., partially offset these favorable results.
Operating results for the first quarter 1997 included a non-cash currency
benefit of $19 million due to the weakening of the Pound Sterling versus the
U.S. dollar relating to deferred income taxes, compared with a benefit of $4
million for the first quarter 1996.
MANUFACTURING, MARKETING AND DISTRIBUTION
United States
First quarter 1997 earnings were $6 million, compared with $4 million for the
first quarter of 1996. Earnings in 1997 reflected improved refining results due
to increased throughput and higher wholesale product prices. This improvement
was somewhat reduced by the impact of refinery fires late in 1996 and early 1997
that resulted in property damage and adversely affected product yields in the
first quarter. The refining system returned to normal operations by the middle
of March.
Improved refining earnings were largely offset by lower West Coast marketing
margins due to intense competition in the marketplace. Results in the
distribution and transportation business and chemicals were also lower than the
first quarter of 1996.
- 7 -
<PAGE>
International
First quarter 1997 earnings were $104 million, compared to $92 million for the
first quarter of 1996. The earnings were driven by improved results in Europe
and Latin America. Caltex' results were below the first quarter of last year,
but reflect a significant improvement over the latter half of 1996.
Higher refining earnings in Europe and Latin America in the first quarter of
1997 were primarily due to the improved recovery of crude costs in the U.K. and
Panama. Marketing margins in Latin America also improved in the first quarter
1997 versus the same quarter in 1996 due to higher prices.
Caltex' improved operating margins in Korea were more than offset by unfavorable
refining margins in Thailand, and higher currency losses of $26 million, mostly
from the significant weakening of the Korean Won.
Refined product sales decreased due to Caltex' April 1, 1996, sale of its
interest in refining operations in Japan and reduced purchase/sale activity to
balance the system.
Operating results for the first quarter 1997 included a non-cash currency
benefit of $5 million due to the weakening of the Pound Sterling versus the U.S.
dollar relating to deferred income taxes, compared with a benefit of $4 million
for the first quarter of 1996.
NONPETROLEUM
Nonpetroleum earnings for the first quarter of 1997 were $12 million, compared
with $2 million in the first quarter of 1996.
CORPORATE/NONOPERATING
Corporate and nonoperating earnings for the first quarter of 1997 were $391
million as compared with charges of $109 million for the first quarter of 1996.
Corporate and nonoperating results for the first quarter of 1997 included a $488
million benefit associated with the resolution of the "Aramco Advantage" case.
Excluding this benefit, the comparative improvement of $12 million was primarily
attributable to reduced interest expense due to lower debt levels and slightly
lower interest rates.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Texaco's cash, cash equivalents and short-term investments totaled $637 million
at March 31, 1997, as compared with $552 million at year-end 1996. Cash provided
by operating activities of $1.0 billion for the first quarter of 1997 supported
outlays of $678 million for the company's capital and exploration program and
$235 million in dividend payments to common, preferred and minority
shareholders.
At March 31, 1997, Texaco's ratio of total debt to total borrowed and invested
capital was 31.9%, as compared with 33.6% at year-end 1996. This improvement
reflected strong operating results, the favorable resolution of the "Aramco
Advantage" case and a reduction in debt to $5.5 billion from $5.6 billion at
year-end 1996. At March 31, 1997, Texaco's long-term debt included $922 million
of debt scheduled to mature within one year, which the company has both the
intent and the ability to refinance on a long-term basis. The company maintained
a revolving credit facility with commitments of $1.5 billion, which was unused
at both March 31, 1997 and at year-end 1996.
During the first quarter of 1997, the company issued $150 million of 7.09%
noncallable Notes due 2007. Proceeds from this offering will be used for working
capital, retirement of existing debt and other general corporate purposes.
As of March 31, 1997, $194 million has been expended under the $500 million
common stock repurchase program announced in 1995, of which $31 million was
expended during the first quarter of 1997. The company will continue
repurchasing shares from time to time based on market conditions.
- 8 -
<PAGE>
On March 21, 1997, Texaco exercised an option to terminate a lease arrangement
and obtained ownership of the assets used in its propylene oxide/methyl tertiary
butyl ether (PO/MTBE) business. Concurrent with this transaction, Texaco sold
the PO/MTBE business to a Huntsman Corporation affiliate for cash and preferred
stock. The cash proceeds of $512 million were used to substantially offset the
cost of exercising the option. The preferred stock, with a stated value of $65
million, is mandatorily redeemable in eleven years.
On April 21, 1997, the United States Supreme Court decided not to review the
decisions of the U.S. Court of Appeals for the Fifth Circuit and the U.S. Tax
Court in the so-called "Aramco Advantage" case. In previous years, Texaco made
payments, with associated interest, to the IRS for potential tax claims. As a
result of the Supreme Court action, Texaco expects a refund in excess of $700
million, which represents the remaining balance of these deposits and accrued
interest. A significant portion of the refund is expected to be received in
1997.
During April 1997, the company finalized the sale of a 15% interest in its U.K.
North Sea Captain Field to an affiliate of Korea Petroleum Development
Corporation for approximately $210 million. Of this total amount, installments
of $20 million and $25 million were received during the first quarter of 1996
and 1997, respectively. Also during April 1997, the company sold its interests
in certain producing operations in Canada for approximately $80 million.
On May 1, 1997, the company completed the previously announced sale of its
credit card services unit, including its portfolio of proprietary credit card
accounts receivable, to Associates First Capital Corporation, an indirect
majority-owned subsidiary of the Ford Motor Company. As a result of this sale,
Texaco received cash proceeds of approximately $300 million for its proprietary
credit card accounts receivables and associated processing assets.
During the second quarter of 1997, Texaco expects to repurchase certain
equipment leasehold interests in conjunction with a sale/leaseback arrangement
for somewhat less than the proceeds received. Through March 31, 1997, Texaco has
received $509 million for those leasehold interests.
The company considers its financial position sufficient to meet its anticipated
future financial requirements.
EMPLOYEE SEVERANCE PROGRAM
- --------------------------
On October 30, 1996, Texaco announced a companywide realignment designed to
enhance the company's ability to grow existing and new businesses. This
realignment, coupled with other organizational enhancements such as the
consolidation of operations, is designed to stimulate growth and improve
efficiencies in both support and operating functions. However, it is expected
that some overlapping activities will be eliminated resulting in the reduction
of some 750 employees worldwide by the end of 1997. An after-tax provision of
$56 million was recorded in the fourth quarter of 1996 to cover the costs of
employee separations, including employees of affiliates. Through March 31, 1997,
approximately 350 employees have been terminated with a related commitment to
severance payments of $15 million after-tax. Of this commitment, payments of $10
million have been made and charged against the reserve as of March 31, 1997.
NEW ACCOUNTING STANDARD
- -----------------------
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) 128, Earnings per Share. Under SFAS
128, companies currently required to report primary and fully diluted
earnings per share (EPS), will instead report basic and diluted EPS,
respectively. Currently, primary EPS considers the average number of common
shares outstanding and the potential dilution that would result if
conversion rights associated with certain outstanding securities were
exercised. Fully diluted EPS considers all potentially dilutive securities.
Basic EPS, which will replace primary EPS, does not consider any potential
dilution. Diluted EPS is essentially similar to fully diluted EPS.
Texaco must adopt SFAS 128 for its fiscal year 1997 financial statements and, at
that time, restate the per share amounts of prior periods. Amounts to be
reported as basic and diluted EPS in accordance with the new Statement will not
differ significantly from previously reported primary and fully diluted EPS.
- 9 -
<PAGE>
CAPITAL AND EXPLORATORY EXPENDITURES
- ------------------------------------
Capital and exploratory expenditures, including equity in such expenditures of
affiliates, were $799 million for the first quarter of 1997 as compared with
$641 million for the same period of 1996.
In the U.S., Texaco's aggressive 1997 exploration and development drilling
program is focused on strategic opportunities onshore and offshore. Offshore
development continued in the deepwater Gulf of Mexico where Texaco holds a
strong lease-acreage position. Platform construction and development drilling is
underway in the Petronius and Arnold fields while delineation drilling continues
in the Fuji and Gemini prospects. Texaco also continues an aggressive drilling
and development program in traditional offshore shelf areas and onshore.
Expenditures in 1997 reflect enhanced oil recovery projects using advanced
thermal and CO2 techniques to increase production and lower per-barrel operating
expenses. Thermal steam-flooding has been particularly successful at Kern River
in Bakersfield, California.
Internationally, higher expenditures reflect development work in the U.K. North
Sea, including the Erskine and Galley fields and drilling and development
expenditures for the Mariner project. Development work was completed in the
Captain field which came onstream late in the first quarter of 1997.
Additionally, exploration and development work continued in Nigeria, China,
Indonesia, and the Partitioned Neutral Zone.
Downstream expenditures in the U.S. declined somewhat, reflecting the completion
of refinery upgrades. Internationally, expenditures increased due to marketing
expenditures in the Pacific Rim by Texaco's affiliate, Caltex Petroleum
Corporation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
Reference is made to the discussion of Contingent Liabilities in Note 3 to the
Consolidated Financial Statements of this Form 10-Q and to Item 3 of Texaco
Inc.'s 1996 Annual Report on Form 10-K, which are incorporated herein by
reference.
- 10 -
<PAGE>
Item 5. Other Information
- -------------------------
<TABLE>
<CAPTION>
(Unaudited)
-----------------------
For the three months
ended March 31,
-----------------------
1997 1996
---- ----
(Millions of dollars)
<S> <C> <C>
FUNCTIONAL NET INCOME
- ---------------------
Operating earnings
Petroleum and natural gas
Exploration and production
United States $311 $ 267
International 156 130
---- ----
Total 467 397
---- ----
Manufacturing, marketing and distribution
United States 6 4
International 104 92
---- ----
Total 110 96
---- ----
Total petroleum and natural gas 577 493
Nonpetroleum 12 2
---- ----
Total operating earnings 589 495
Corporate/Nonoperating 391 (109)
---- ----
Total net income $980 $386
==== ====
CAPITAL AND EXPLORATORY EXPENDITURES - INCLUDING
- ------------------------------------------------
EQUITY IN AFFILIATES
--------------------
Exploration and production
United States $352 $266
International 282 207
---- ----
Total 634 473
---- ----
Manufacturing, marketing and distribution
United States 60 77
International 101 87
---- ----
Total 161 164
---- ----
Other 4 4
---- ----
Total, including equity in affiliates $799 $641
==== ====
</TABLE>
- 11 -
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
--------------------
For the three months
ended March 31,
--------------------
1997 1996
---- ----
<S> <C> <C>
OPERATING DATA - INCLUDING INTERESTS
- ------------------------------------
IN AFFILIATES
-------------
Exploration and Production
- --------------------------
United States
- -------------
Net production of crude oil and natural
gas liquids (000 BPD) 384 382
Net production of natural gas - available
for sale (000 MCFPD) 1,656 1,648
Total net production (000 BOEPD) 660 657
Natural gas sales (000 MCFPD) 3,841 3,235
Natural gas liquids sales - (including
purchased LPGs) (000 BPD) 203 245
Average U.S. crude (per bbl) $19.62 $16.51
Average U.S. natural gas (per mcf) $ 2.66 $ 2.15
Average WTI (Spot) (per bbl) $22.76 $19.75
Average Kern (Spot) (per bbl) $15.98 $14.90
International
- -------------
Net production of crude oil and natural
gas liquids (000 BPD)
Europe 114 119
Indonesia 140 137
Partitioned Neutral Zone 90 72
Other 69 62
------ ------
Total 413 390
Net production of natural gas - available
for sale (000 MCFPD)
Europe 241 205
Colombia 132 115
Other 102 53
------ ------
Total 475 373
Total net production (000 BOEPD) 492 452
Natural gas sales (000 MCFPD) 620 475
Natural gas liquids sales - (including
purchased LPGs) (000 BPD) 83 116
Average International crude (per bbl) $19.48 $18.02
Average U.K. natural gas (per mcf) $ 2.85 $ 2.63
Average Colombia natural gas (per mcf) $ 1.05 $ .94
</TABLE>
- 12 -
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
--------------------
For the three months
ended March 31,
--------------------
1997 1996
---- ----
OPERATING DATA - INCLUDING INTERESTS
- ------------------------------------
IN AFFILIATES
-------------
<S> <C> <C>
Manufacturing, Marketing and Distribution
- -----------------------------------------
United States
- -------------
Refinery input (000 BPD)
Subsidiary 409 395
Affiliate - Star Enterprise 336 316
----- -----
Total 745 711
Refined product sales (000 BPD)
Gasolines 497 476
Avjets 89 131
Middle Distillates 214 219
Residuals 85 61
Other 121 134
----- -----
Total 1,006 1,021
International
- -------------
Refinery input (000 BPD)
Europe 348 334
Affiliate - Caltex 407 499
Latin America/West Africa 62 59
----- -----
Total 817 892
Refined product sales (000 BPD)
Europe 467 475
Affiliate - Caltex 586 712
Latin America/West Africa 366 389
Other 43 71
----- -----
Total 1,462 1,647
</TABLE>
- 13 -
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
-- (11) Computation of Earnings Per Share of Common Stock of Texaco Inc.
and Subsidiary Companies.
-- (12) Computation of Ratio of Earnings to Fixed Charges of Texaco on a
Total Enterprise Basis.
-- (20) Copy of Texaco Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1996 (including portions of Texaco
Inc.'s Annual Report to Stockholders for the year 1996), as
previously filed by the Registrant with the Securities and
Exchange Commission, File No. 1-27.
-- (27) Financial Data Schedule.
(b) Reports on Form 8-K:
During the first quarter of 1997, the Registrant filed a Current Report on
Form 8-K for the following events:
1. January 7, 1997 (date of earliest event reported: December 24, 1996)
Item 5. Other Events -- reported that Texaco announced that it had
reached an agreement to sell its propylene oxide/methyl tertiary butyl
ether (PO/MTBE) business to Huntsman Corporation. Texaco appended as
an exhibit thereto a copy of the Press Release entitled "Texaco Sells
PO/MTBE Business to Huntsman Corporation," dated December 24, 1996.
2. January 23, 1997 (date of earliest event reported: January 23, 1997)
Item 5. Other Events -- reported that Texaco issued an Earnings Press
Release for the fourth quarter and year 1996. Texaco appended as an
exhibit thereto a copy of the Press Release entitled "Texaco Reports
Results for the Fourth Quarter and Year 1996," dated January 23, 1997.
3. January 29, 1997 (date of earliest event reported: January 27, 1997)
Item 5. Other Events -- provided a description of an Officer's
Certificate executed by Texaco Capital Inc. which established the
terms and provisions of a $150 million series of securities designated
"7.09% Guaranteed Notes Due 2007." Texaco appended as an exhibit
thereto a copy of the Press Release entitled "Texaco Announces Public
Issuance of $150 Million in 10-Year Debt Securities," dated January
27, 1997.
4. March 19, 1997 (date of earliest event reported: March 18, 1997)
Item 5. Other Events -- reported that Texaco announced that it and
Shell Oil Company signed a memorandum of understanding to combine the
major elements of their midwestern and western U.S. refining and
marketing activities and their total U.S. transportation, trading and
lubricants businesses and that the two companies and Saudi Refining
Inc. (SRI), have made significant progress in discussions toward a
separate memorandum of understanding to combine Star Enterprise (a
50/50 joint venture between SRI and Texaco in the eastern U.S) with
Shell's eastern U.S. refining and marketing business. Texaco appended
as an exhibit thereto a copy of the Press Release entitled "Shell And
Texaco Sign Memorandum Of Understanding To Combine U.S. Refining,
Marketing, Transportation, Trading And Lubricants Operations," dated
March 18, 1997.
- 14 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Texaco Inc.
----------------------
(Registrant)
By: R.C. Oelkers
----------------------
(Comptroller)
By: R.E. Koch
----------------------
(Assistant Secretary)
Date: May 12, 1997
------------
- 15 -
EXHIBIT 11
<TABLE>
<CAPTION>
TEXACO INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
--------------------------------------------------
(Millions of dollars, except per share amounts)
(Unaudited)
--------------------
For the three months
ended March 31,
--------------------
1997 1996
---- ----
<S> <C> <C>
Primary Net Income Per Common Share
- -----------------------------------
Net income $ 980 $ 386
Less: Preferred stock dividend requirements (14) (15)
------- -------
Primary net income available for common stock $ 966 $ 371
======= =======
Average number of primary common shares outstanding
for computation of earnings per share (thousands) 260,071 260,654
------- -------
Primary net income per common share $ 3.72 $ 1.42
======= =======
Fully Diluted Net Income Per Common Share
- -----------------------------------------
Net income $ 980 $ 386
Less: Preferred stock dividend requirements of non-dilutive
and anti-dilutive issues and adjustments to net income
associated with dilutive securities (5) (6)
------- -------
Fully diluted net income $ 975 $ 380
======= =======
Average number of primary common shares outstanding
for computation of earnings per share (thousands) 260,071 260,654
Additional shares outstanding assuming full conversion of dilutive
convertible securities into common stock, (thousands):
Convertible debentures 144 147
Convertible Preferred Stock
Series B ESOP 9,227 9,526
Series F ESOP 571 623
Other 226 158
------- -------
Average number of fully diluted common shares outstanding
for computation of earnings per share (thousands) 270,239 271,108
======= =======
Fully diluted net income per common share $ 3.61 $ 1.40
======= =======
</TABLE>
EXHIBIT 12
<TABLE>
<CAPTION>
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
OF TEXACO ON A TOTAL ENTERPRISE BASIS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
FOR EACH OF THE FIVE YEARS ENDED DECEMBER 31, 1996 (a)
------------------------------------------------------
(Millions of dollars)
For the Three
Months Ended Years Ended December 31,
March 31, 1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations, before provision or
benefit for income taxes and cumulative effect of
accounting changes effective 1-1-92 and 1-1-95.......... $ 851 $3,450 $1,201 $1,409 $1,392 $1,707
Dividends from less than 50% owned companies
more or (less) than equity in net income................ (3) (4) 1 (1) (8) (9)
Minority interest in net income............................ 21 72 54 44 17 18
Previously capitalized interest charged to
income during the period................................ 10 27 33 29 33 30
------ ------ ------ ------ ------ ------
Total earnings..................................... 879 3,545 1,289 1,481 1,434 1,746
------ ------ ------ ------ ------ ------
Fixed charges Items charged to income:
Interest charges...................................... 129 551 614 594 546 551
Interest factor attributable to operating
lease rentals.................................... 32 129 110 118 91 94
Preferred stock dividends of subsidiaries
guaranteed by Texaco Inc......................... 10 35 36 31 4 -
------ ------ ------ ------ ------ ------
Total items charged to income...................... 171 715 760 743 641 645
Interest capitalized.................................... 5 16 28 21 57 109
Interest on ESOP debt guaranteed by Texaco Inc.......... 2 10 14 14 14 18
------ ------ ------ ------ ------ ------
Total fixed charges................................ 178 741 802 778 712 772
------ ------ ------ ------ ------ ------
Earnings available for payment of fixed charges............ $1,051 $4,260 $2,049 $2,224 $2,075 $2,391
(Total earnings + Total items charged to income) ====== ====== ====== ====== ====== ======
Ratio of earnings to fixed charges of Texaco
on a total enterprise basis............................. 5.90 5.75 2.55 2.86 2.91 3.10
====== ====== ====== ====== ====== ======
<FN>
(a) Excludes discontinued operations.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
TEXACO INC.'S FIRST QUARTER 1997 FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<CASH> 619
<SECURITIES> 18
<RECEIVABLES> 4,708
<ALLOWANCES> 34
<INVENTORY> 1,677
<CURRENT-ASSETS> 7,361
<PP&E> 34,166
<DEPRECIATION> 20,764
<TOTAL-ASSETS> 27,008
<CURRENT-LIABILITIES> 5,742
<BONDS> 5,029
0
628
<COMMON> 1,459
<OTHER-SE> 8,975
<TOTAL-LIABILITY-AND-EQUITY> 27,008
<SALES> 11,813
<TOTAL-REVENUES> 12,029
<CGS> 9,298
<TOTAL-COSTS> 10,014
<OTHER-EXPENSES> 1,128
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101
<INCOME-PRETAX> 786
<INCOME-TAX> (194)
<INCOME-CONTINUING> 980
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 980
<EPS-PRIMARY> 3.72
<EPS-DILUTED> 3.61
</TABLE>
