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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission file number 1-27
T e x a c o I n c .
(Exact name of registrant as specified in its charter)
Delaware 74-1383447
(State or other jurisdiction of incorporation (I.R.S. Employer
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
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Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
------------------- -------------------
<S> <C>
Common Stock, par value $6.25 New York Stock Exchange
Chicago Stock Exchange
The Stock Exchange, London
Antwerp and Brussels Exchanges
Swiss Stock Exchange
Rights to Purchase Series D Junior Participating Preferred Stock New York Stock Exchange
Cumulative Adjustable Rate Monthly Income Preferred Shares, Series B* New York Stock Exchange
6 7/8% Cumulative Guaranteed Monthly Income Preferred Shares, Series A* New York Stock Exchange
8 1/2% Notes, due February 15, 2003** New York Stock Exchange
8 5/8% Debentures, due June 30, 2010** New York Stock Exchange
8.65% Notes, due January 30, 1998** New York Stock Exchange
9% Notes, due November 15, 1997** New York Stock Exchange
9% Notes, due December 15, 1999** New York Stock Exchange
9 3/4% Debentures, due March 15, 2020** New York Stock Exchange
Extendible Notes, due June 1, 1999 (8 1/2% to June 1, 1998)** New York Stock Exchange
Extendible Notes, due March 1, 2000 (9.45% to March 1, 2000)** New York Stock Exchange
<FN>
___________________
* Issued by Texaco Capital LLC and the payments of dividends and payments on liquidation or redemption are
guaranteed by Texaco Inc.
** Issued by Texaco Capital Inc. and unconditionally guaranteed by Texaco Inc.
</FN>
</TABLE>
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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
and (2) has been subject to such filing requirements for the past 90 days.
No disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is contained herein, and will not be contained to the best of the Registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
The aggregate market value of the voting stock of Texaco Inc. held by
non-affiliates at the close of business on February 28, 1997, based on the New
York Stock Exchange composite sales price, was approximately $26,050,000,000.
The market value of the voting stock of Series B ESOP Convertible Preferred
Stock held in the Employees Thrift Plan of Texaco Inc. at the close of business
on February 28, 1997, totaled approximately $910,893,000. The market value of
the voting stock of Series F ESOP Convertible Preferred Stock held in the
Employees Savings Plan of Texaco Inc. at the close of business on February 28,
1997, totaled approximately $56,446,000.
As of February 28, 1997, there were 263,651,162 outstanding shares of
Texaco Inc. Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
(to the extent indicated herein)
<TABLE>
<CAPTION>
Part of
Form 10-K
---------
<S> <C>
Texaco Inc. Annual Report to Stockholders for the year 1996................................. I, II
Proxy Statement of Texaco Inc. relating to the 1997 Annual Meeting of Stockholders.......... III
</TABLE>
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
------------------------------------------------
Texaco Inc.
Texaco Inc. Year 1996 Texaco Inc.
Year 1996 Annual Report March 27, 1997
Form 10-K Item Form 10-K To Stockholders Proxy Statement
- -------------- --------- --------------- ---------------
PART I
<S> <C> <C> <C>
1. and 2. Business and Properties
Development and Description of Business................... 1 33-34 --
Certain Factors Which May Affect Business................. 2-4 -- --
Worldwide Operations...................................... 5 12-24, 41 and 67-68 --
Supplementary Exploration and Production Information...... 6-8 71-74 and 78 --
3. Legal Proceedings......................................... 9-10 67 --
4. Submission of Matters to a Vote of Security Holders....... 10 -- --
Executive Officers of Texaco Inc................................. 11 -- --
PART II
5. Market for the Registrant's Common Equity
and Related Stockholder Matters......................... 12 82 --
6. Selected Financial Data................................... 12 81 --
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 12 26-40 --
8. Financial Statements and Supplementary Data
-- Financial Statements....................... 12 41-68 --
-- Report of Independent Public Accountants... 12 70 --
-- Oil and Gas Information.................... 12 71-79 --
-- Selected Quarterly Financial Data.......... 12 80 --
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure................... 12 -- --
PART III
10. Directors and Executive Officers of the Registrant............. 13 -- 3-12
11. Executive Compensation......................................... 13 -- 6-7, 31-35 and 37
12. Security Ownership of Certain Beneficial Owners
and Management............................................... 13 -- 2 and 8
13. Certain Relationships and Related Transactions................. 13 -- --
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 14-16 -- --
</TABLE>
<PAGE>
PART I
TEXACO INC.
Items 1 and 2. Business and Properties
DEVELOPMENT AND DESCRIPTION OF BUSINESS
Texaco Inc. was incorporated in Delaware on August 26, 1926, as The
Texas Corporation. Its name was changed in 1941 to The Texas Company and in 1959
to Texaco Inc. It is the successor of a corporation incorporated in Texas in
1902. As used herein and within the portions of the documents incorporated by
reference, the term Texaco Inc. refers solely to Texaco Inc., a Delaware
corporation. The use of such terms as "Texaco," "company," "division,"
"organization," "unit," "we," "us," "our" and "its," when referring either to
Texaco Inc. and its consolidated subsidiaries or to subsidiaries and affiliates
either individually or collectively, is for convenience only and is not intended
to describe legal relationships.
Texaco Inc. and its subsidiary companies, together with affiliates
owned 50% or less, represent a vertically integrated enterprise principally
engaged in the worldwide exploration for and production, transportation,
refining and marketing of crude oil, natural gas and petroleum products.
Research Expenditures
Worldwide expenditures of Texaco Inc. and subsidiary companies for
research, development and technical support for continuing operations amounted
to approximately $139 million in 1996, $154 million in 1995, and $175 million in
1994. These expenditures exclude amounts applicable to discontinued operations
of approximately $6 million in 1996, $14 million in 1995 and $20 million in
1994.
Environmental Expenditures
Information regarding capital environmental expenditures of Texaco Inc.
and subsidiary companies, including equity in affiliates, during 1996, and
projections for 1997 and 1998, for air, water and solid waste pollution
abatement, and related environmental projects and facilities, is incorporated
herein by reference from pages 33 and 34 of Texaco Inc.'s 1996 Annual Report to
Stockholders.
Employees
The number of employees of Texaco Inc. and subsidiary companies engaged in
continuing operations as of December 31, 1996 and 1995 totaled 28,957 and
28,247, respectively.
The 1995 total excludes approximately 300 employees involved in supporting
discontinued operations sold during 1996.
1
<PAGE>
CERTAIN FACTORS WHICH MAY AFFECT BUSINESS
In recent years, a number of changes affecting the petroleum industry have
occurred both in the United States and abroad. In the United States and other
countries in which Texaco operates, various laws and regulations are either now
in force, in standby status or under consideration, dealing with such matters as
production restrictions, import and export controls, price controls, crude oil
and refined product allocations, refined product specifications, environmental,
health and safety regulations, retroactive and prospective tax increases,
cancellation of contract rights, expropriation of property, divestiture of
certain operations, foreign exchange rate changes and restrictions as to
convertibility of currencies, tariffs and other international trade
restrictions. The industry may also be affected by strikes and other industrial
disputes.
A number of legislative proposals are currently under consideration by the
U.S. Congress and various State legislatures. Although it is not possible at
this time to predict the ultimate form that any such proposals might take, or
the likelihood of their enactment, such legislation, if passed, could adversely
affect the petroleum industry and Texaco.
In addition, operations and investments in some foreign areas are subject
to political and business risks. The nature of these risks varies from country
to country and from time to time. The overall effect of the foregoing on Texaco
cannot be predicted with any certainty.
Industry Review of 1996
<TABLE>
<CAPTION>
WORLD PETROLEUM DEMAND
(MILLIONS OF BARRELS A DAY)
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
INDUSTRIAL NATIONS 41.2 40.3 40.0
DEVELOPING NATIONS 24.9 23.7 22.6
FORMER SOVIET BLOC 5.7 6.1 6.2
--- --- ---
TOTAL 71.8 70.1 68.8
</TABLE>
The world economy grew at a strong 3.8% rate in 1996. However, growth
patterns were mixed among regions. Economic expansion in the industrialized
world as a whole was relatively modest. While the pivotal U.S. economy enjoyed
another year of steady advance, the adoption of fiscal austerity measures in
Western Europe led to a slowing of economic expansion. A large increase in
governmental spending in the first quarter boosted Japanese GDP growth in 1996,
but the recovery has yet to become deep-rooted. On the other hand, economic
expansion in the developing world was generally robust, particularly in the
Pacific Rim countries. One major disappointment in 1996 was the failure of the
former Soviet bloc to turn around. Although some of the former Eastern European
"satellite" countries enjoyed relatively strong growth, the Russian economy
registered another decline, pulling down the region as a whole.
World demand for petroleum products continued to attain new highs in 1996,
spurred by the global economic expansion and cold winter conditions early in the
year. Oil consumption averaged 71.8 million barrels per day (BPD), an increase
of 1.7 million BPD from the 1995 level. Growth in the industrialized nations
rose sharply, up 900,000 BPD, boosted by the very cold winter weather across the
Northern Hemisphere. In the developing countries, buoyant economic conditions,
particularly in the Pacific Rim region, led to a robust increase of 1.2 million
BPD in oil consumption. However, the contraction in the Russian economy offset
gains in several Eastern European countries, leading to an overall 400,000 BPD
demand decline for the former Soviet bloc.
Crude oil supplies also rose sharply during the year. However, very
ambitious gains that had been expected from non-OPEC sources did not materialize
fully. In the North Sea, for example, extended field maintenance during the
summer, underperformance by several old fields and delayed projects limited
production increases. Even with these constraints, output from the North Sea
contributed significantly to non-OPEC's near 1 million BPD gain from the 1995
level.
2
<PAGE>
Latin America also posted significant increases, resulting from higher
output levels from Argentina, Brazil, Colombia and Mexico. Likewise, there were
significant gains from countries such as Angola, Australia and Canada, but these
were partially offset by production losses from the former Soviet Union and the
United States.
The step-up in world oil demand and lower than anticipated non-OPEC output
combined to boost world requirements for OPEC oil during 1996, the first
substantial output gain for the organization in several years. Crude oil
production averaged 25.9 million BPD, a 900,000 BPD increase over its
year-earlier level. Cash strapped countries such as Nigeria and Venezuela
substantially exceeded OPEC quotas and accounted for more than half of this
increase. Iraqi exports remained embargoed until near year-end, when agreement
was reached allowing so-called "oil-for-food" flows under U.N. Resolution 986.
World petroleum prices were surprisingly strong throughout 1996. Special
factors, such as exceptionally cold weather early in 1996, the absence of Iraqi
exports and the delayed start-up of new North Sea production, had a major
impact. At the same time, crude oil and petroleum product stocks were lean by
historical standards, thus contributing to price strength and volatility. The
spot price of U.S. benchmark West Texas Intermediate (WTI) averaged $22.16 per
barrel, which was $3.73 per barrel higher than the previous year and a level not
seen since the Gulf War.
Refiners' margins during 1996 were higher than 1995's very depressed levels
in key U.S. and European markets. Despite the run-up in underlying crude oil
costs, special factors contributed to strong light-end product prices. For
instance, the extreme cold winter within the Atlantic basin boosted heating oil
prices and delayed the refinery switchover to gasoline, leading to low stock
levels prior to the summer driving season. In addition, on the U.S. West Coast,
refinery outages and dislocations resulting from the introduction of CARB
reformulated gasoline also pushed up margins during the spring and summer.
Marketing margins, however, decreased relative to 1995 due to intense
competitive pressures and oversupply in the marketplace, especially in the U.S.,
the United Kingdom and the Asia-Pacific area.
Near-Term Outlook
<TABLE>
<CAPTION>
NEAR-TERM WORLD SUPPLY/DEMAND BALANCE
(MILLIONS OF BARRELS A DAY)
1997 1996
---- ----
<S> <C> <C>
DEMAND 73.8 71.8
SUPPLY
NON-OPEC CRUDE 38.3 37.1
OPEC CRUDE 26.7 25.9
OTHER LIQUIDS 9.3 9.0
---- ----
TOTAL SUPPLY 74.3 72.0
---- ----
STOCK CHANGE 0.5 0.2
</TABLE>
World economic growth is projected to remain strong in 1997, as continued
powerful expansion in the developing world and modest increases in the
industrialized nations are reinforced by an anticipated turnaround in the former
Soviet bloc. The United States is forecast to continue to enjoy modest growth in
1997, and economic expansion in Western Europe is expected to pick up. In Japan,
growth should weaken somewhat from the artificially high rate created by the
stimulative government spending in 1996. Within the developing world, expansion
in Asia may also moderate somewhat, but will remain relatively strong. The
former Soviet bloc as a whole is anticipated to register positive GDP growth for
the first time in eight years, as the Russian economy shows signs of turning
around.
Strong economic conditions should result in one of the highest rates of
growth for world oil consumption witnessed over the last two decades. World
demand is projected to average 73.8 million BPD, a 2.0 million BPD, or 2.8%
increase over 1996 levels. Growth in the industrialized nations is expected to
slow to 500,000 BPD in 1997, as normal winter conditions are projected. In the
developing countries, demand is expected to rise by 1.4 million BPD, fueled by
the ongoing economic expansion. Also, in the former Soviet bloc, demand is
expected to rise by 100,000 BPD from the 1996 level, as consumption rises in
Central Europe.
3
<PAGE>
Despite the strength in demand, anticipated increases in non-OPEC and OPEC
production may actually run ahead of consumption, causing the global
supply/demand balance to loosen and prices to weaken. Non-OPEC crude oil
production has been on an uptrend over the last few years and, despite the
somewhat disappointing performance in 1996, output in 1997 is expected to climb
to 38.3 million BPD, a dramatic 1.2 million BPD gain. As in the past, the North
Sea will be the major contributor, followed by Brazil, Mexico, Australia, India,
Angola and some other African nations. By year-end, output from Colombia's giant
Cusiana/Cupiagua fields is expected to rise significantly as the Ocensa pipeline
nears completion. Even output from the former Soviet Union may increase after
many years of decline. Among the major producers, only the United States will
continue to slip, and very slowly, as declining production from Prudhoe Bay and
other North Slope fields is offset by new flows from the Gulf of Mexico.
OPEC production is also expected to rise in 1997, given the resumption in
Iraqi oil exports. The agreed partial lifting of the U.N. embargo will likely
add about 600,000 BPD to the market. In addition, ongoing capacity expansions in
Venezuela, Algeria and Nigeria may translate into a further increase in OPEC
production. This could occur at a time when market fundamentals point toward
weaker crude oil and product prices.
U.S. natural gas consumption in 1996 rose to over 22 trillion cubic feet
(TCF), up 0.6 TCF from the prior-year level. The extreme cold weather and
growing industrial usage boosted demand to a level that has not been experienced
since the early 1970's. In 1997, demand should continue to grow, despite the
assumption of more normal winter conditions.
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Forward-Looking Statements
Part I of this Form 10-K may contain forward-looking statements that are
based on current expectations, estimates and projections about the industries in
which Texaco operates, management's beliefs and assumptions made by management.
Words such as "expects," "anticipates," "intends," "plans," "believes,"
"estimates," variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, and are subject to the safe harbors created thereby. These
statements are based on a number of assumptions that could ultimately prove
inaccurate and, therefore, there can be no assurance that they will prove to be
accurate. Factors which could affect performance include estimation of reserves,
inaccurate seismic data, mechanical failures, unilateral cancellation of
concessions by host governments, decreased demand for motor fuels, natural gas
and other products, above-average temperatures, pipeline failures, oil spills,
increasing price and product competition, higher or lower costs and expenses,
domestic and foreign governmental and public policy changes including
environmental regulations, the outcome of pending and future litigation and
governmental proceedings and continued availability of financing. These are
representative of factors which could affect the outcome of the forward-looking
statements. In addition, such statements could be affected by general industry
and market conditions and growth rates, general domestic and international
economic conditions including interest rate and currency exchange rate
fluctuations and other factors. Texaco undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise.
4
<PAGE>
WORLDWIDE OPERATIONS
Texaco owns, leases, or has interests in extensive production,
manufacturing, marketing, transportation and other facilities throughout the
world. A description of the company's worldwide operations appears on pages 12
through 24, and information regarding sales to significant affiliates and
geographical financial data appear on pages 41 and 67-68, respectively, of
Texaco Inc.'s 1996 Annual Report to Stockholders, applicable portions of which
are incorporated herein by reference. Except as indicated under Items 1, 2, 3,
5, 6, 7, 8 and 14, no other data and information appearing in the 1996 Annual
Report to Stockholders are deemed to be filed as part of this Annual Report on
Form 10-K.
In 1993, Texaco announced its intention to dispose of substantially all of
its worldwide chemical operations, including its lubricant additives business,
and entered into a memorandum of understanding with an affiliate of the Jon M.
Huntsman Group of Companies for the sale of Texaco Chemical Company and related
international chemical operations. On April 21, 1994, Texaco received from
Huntsman Corporation $850 million, consisting of $650 million in cash and an
11-year subordinated note with a face amount of $200 million, which was prepaid
in January, 1996.
On February 29, 1996, Texaco completed the disposition of its worldwide
chemical operations by completing the sale of its worldwide lubricant additives
business, which included manufacturing facilities, as well as sales and
marketing offices in various locations in the U.S. and abroad to Ethyl
Corporation, a fuel and lubricant additives manufacturer. Ethyl purchased this
business for $196 million, comprised of $136 million in cash and a three year
note of $60 million.
On March 21, 1997, Texaco completed the sale of its propylene oxide/methyl
tertiary butyl ether (PO/MTBE) business to a subsidiary of Huntsman Corporation,
for approximately $600 million.
On March 18, 1997, 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. The new company will continue
to market gasoline under both the Texaco and Shell brands through the thousands
of independent wholesalers and retailers.
Under the terms of the memorandum of understanding, Texaco and Shell will
form a limited liability company comprising their midwestern and western
refining and marketing activities and nationwide transportation and lubricants
businesses. Shell will own 56 percent and Texaco 44 percent of the new company,
which is expected to be formed as soon as practical following regulatory review
and the signing of definitive agreements.
The two companies also announced that they 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. An agreement could be reached in the second quarter of 1997.
On March 1, 1995, Texaco completed the sale of more than 300 scattered
producing fields to Apache Corporation. The sale included properties located in
the Permian Basin of Texas, offshore Gulf of Mexico, onshore Louisiana, East and
South Texas, the Rocky Mountains and the Mid-Continent area of the United Sates.
5
<PAGE>
SUPPLEMENTARY EXPLORATION AND PRODUCTION INFORMATION
The following information concerns the oil and gas exploration, development
and producing activities of Texaco Inc. and consolidated subsidiaries, as well
as Texaco's equity in P.T. Caltex Pacific Indonesia (CPI), a 50%-owned affiliate
operating in Other Eastern Hemisphere:
Estimates of Total Proved Net Oil and Gas Reserve Data Provided to Other
Governmental Bodies and Availability of Oil and Gas
Information concerning estimates of total proved net oil and gas reserve
data provided to other governmental bodies and availability of oil and gas is
incorporated herein by reference from pages 71 to 74 of Texaco Inc.'s 1996
Annual Report to Stockholders.
Average Sales Prices and Production Costs--Per Unit
Information concerning average sales prices and production costs on a per
unit basis is incorporated herein by reference from page 78 of Texaco Inc.'s
1996 Annual Report to Stockholders.
6
<PAGE>
<TABLE>
<CAPTION>
Oil and Gas Acreage
As of December 31, 1996
-----------------------
Thousands of acres Gross Net
------------------ ----- ---
<S> <C> <C>
Producing
Texaco Inc. and Consolidated Subsidiaries
United States................................................ 3,147 1,835
Other Western Hemisphere ................................... 518 169
Europe ..................................................... 122 29
Other Eastern Hemisphere ................................... 794 199
------ ------
Total Texaco Inc. and Consolidated Subsidiaries.......... 4,581 2,232
Equity in an Affiliate-Other Eastern Hemisphere................... 206 103
------ ------
Total worldwide ......................................... 4,787 2,335
------ ------
Undeveloped
Texaco Inc. and Consolidated Subsidiaries
United States................................................ 7,042 5,235
Other Western Hemisphere ................................... 3,800 3,062
Europe ..................................................... 7,066 2,831
Other Eastern Hemisphere..................................... 59,755 31,104
------ ------
Total Texaco Inc. and Consolidated Subsidiaries.......... 77,663 42,232
Equity in an Affiliate-Other Eastern Hemisphere................... 2,240 1,120
------ ------
Total worldwide............................. 79,903 43,352
------ ------
Total Oil and Gas Acreage....................... 84,690 45,687
====== ======
</TABLE>
<TABLE>
<CAPTION>
Number of Wells Capable of Producing*
As of December 31, 1996
-----------------------
Oil wells Gross Net
--------- ----- ---
<S> <C> <C>
Texaco Inc. and Consolidated Subsidiaries
United States................................................ 29,439 14,377
Other Western Hemisphere ................................... 1,912 227
Europe ..................................................... 238 61
Other Eastern Hemisphere ................................... 1,574 558
------ ------
Total Texaco Inc. and Consolidated Subsidiaries.......... 33,163 15,223
Equity in an Affiliate-Other Eastern Hemisphere................... 4,334 2,167
------ ------
Total worldwide**........................... 37,497 17,390
====== ======
Gas wells
Texaco Inc. and Consolidated Subsidiaries
United States................................................ 6,838 3,119
Other Western Hemisphere ................................... 273 69
Europe ..................................................... 44 10
Other Eastern Hemisphere ................................... 22 7
------ ------
Total Texaco Inc. and Consolidated Subsidiaries.......... 7,177 3,205
Equity in an Affiliate-Other Eastern Hemisphere................... 32 16
------ ------
Total worldwide** .......................... 7,209 3,221
====== ======
<FN>
_______________
* Producible well counts include active wells and wells temporarily shut-in.
Consistent with general industry practice, injection or service wells and
wells shut-in that have been identified for plugging and abandonment have
been excluded from the number of wells capable of producing.
** Includes 98 gross and 36 net multiple completion oil wells and 5 gross and 3
net multiple completion gas wells.
</FN>
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Oil, Gas and Dry Wells Completed For the years ended December 31,
- -------------------------------- ------------------------------------------------------------
1996 1995 1994
---- ---- ----
Oil Gas Dry Oil Gas Dry Oil Gas Dry
--- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net exploratory wells*
Texaco Inc. and Consolidated Subsidiaries
United States................................. 29 28 29 12 15 14 16 23 17
Other Western Hemisphere...................... -- 3 1 -- 2 1 -- -- 1
Europe....................................... 3 -- 1 14 1 3 -- -- 2
Other Eastern Hemisphere...................... 1 2 2 1 -- 5 2 -- 11
Total Texaco Inc. and Consolidated
Subsidiaries.............................. 33 33 33 27 18 23 18 23 31
--- --- -- --- -- -- --- -- --
Equity in an Affiliate
Other Eastern Hemisphere...................... -- -- -- -- -- -- -- -- 1
--- --- -- --- -- -- --- -- --
Total worldwide........................... 33 33 33 27 18 23 18 23 32
=== === == === == == === == ==
Net development wells
Texaco Inc. and Consolidated Subsidiaries
United States................................. 283 191 44 291 91 19 244 82 7
Other Western Hemisphere...................... 33 8 -- 8 1 -- 5 5 1
Europe....................................... 1 -- 1 2 1 -- 7 2 --
Other Eastern Hemisphere...................... 44 -- 1 23 -- 1 13 -- --
--- --- -- --- -- -- --- -- --
Total Texaco Inc. and Consolidated
Subsidiaries.............................. 361 199 46 324 93 20 269 89 8
Equity in an Affiliate
Other Eastern Hemisphere...................... 259 1 -- 135 -- -- 98 -- --
--- --- -- --- -- -- --- -- --
Total worldwide........................... 620 200 46 459 93 20 367 89 8
=== === == === == == === == ==
<FN>
_____________
*Exploratory wells which identify oil and gas reserves, but have not resulted in
recording of proved reserves pending further evaluation, are not considered
completed wells. Reserves which are identified by such wells are included in
Texaco's proved reserves when sufficient information is available to make that
determination. This is particularly applicable to deep exploratory areas which
may require extended time periods to assess, such as the U.K. sector of the
North Sea and in the deepwater U.S. Gulf of Mexico.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Additional Well Data As of December 31, 1996
----------------------------------------------------------
Wells in the Pressure Maintenance
process of ------------------------------------
drilling Projects in
------------ Installations the process of
Gross Net in operation being installed
----- --- ------------ ---------------
<S> <C> <C> <C> <C>
Texaco Inc. and Consolidated Subsidiaries
United States................................... 103 67 250 --
Other Western Hemisphere........................ 2 1 13 --
Europe.......................................... 35 17 8 --
Other Eastern Hemisphere........................ 22 7 5 1
--- --- --- ---
Total Texaco Inc. and Consolidated
Subsidiaries................................ 162 92 276 1
Equity in an Affiliate
Other Eastern Hemisphere........................ 7 4 6 --
--- --- --- ---
Total worldwide............................. 169 96 282 1
=== === === ===
</TABLE>
8
<PAGE>
Item 3. Legal Proceedings
Litigation--Information relative to legal proceedings pending against
Texaco Inc. and subsidiary companies is presented in Note 16, Contingent
Liabilities, on page 67 of Texaco Inc.'s 1996 Annual Report to Stockholders,
which note is incorporated herein by reference.
Two purported stockholder derivative suits are pending against Texaco Inc.,
as nominal defendant, its directors, and certain current and former officers and
employees alleging among other things that the directors breached their
fiduciary duties to the corporation and its stockholders by failing to oversee
Texaco's compliance with the employment discrimination laws and with the
discovery obligations in a discrimination case. The cases, titled Kaplan v.
Beck, et al. and Citron v. Murphy, et al., seek money damages on behalf of
Texaco Inc., attorneys fees, and injunctive relief. The cases are pending in
federal court in White Plains, N.Y.
As of December 31, 1996, Texaco Inc. and its subsidiaries were parties to
various proceedings instituted or contemplated by governmental authorities
arising under the provisions of applicable laws or regulations relating to the
discharge of materials into the environment or otherwise relating to the
protection of the environment, none of which is material to the business or
financial condition of the company. The following is a brief description of
pending proceedings and a settled proceeding which, because of the amounts
involved, require disclosure under applicable Securities and Exchange Commission
regulations.
On June 9, 1992, an administrative complaint was served on Texaco
Chemical Company ("TCC")* by the U.S. Environmental Protection Agency
("EPA"), Region VI, alleging certain violations of the State
Implementation Plan at TCC's Port Neches, Texas chemical plant. The EPA
is seeking civil penalties of $149,000. Texaco Inc. is contesting
liability.
On December 28, 1992, an administrative complaint was served on
TCC by the EPA, Region VI, alleging hazardous waste, PCB, release
notification and reporting violations at TCC's Port Neches chemical
plant. The EPA is seeking civil penalties of $3.8 million and corrective
action. Texaco Inc. is contesting liability. The EPA and the company
agreed to consolidate this complaint with the above-referenced June 9,
1992 complaint, and the consolidated matter is pending before an EPA
administrative law judge.
On May 23, 1994, the EPA, Region VII, instituted an administrative
proceeding alleging that on 12 occasions pipelines owned by Texaco
Trading and Transportation Inc. ("TTTI"), a wholly-owned subsidiary of
the registrant, released oil into surface waters in violation of the
Federal Clean Water Act. The agency is seeking a penalty of $10,000 for
each release. TTTI is contesting liability.
On February 22, 1996, the Los Angeles Air Quality Management
District ("AQMD") issued a notice of violation to Texaco Refining and
Marketing Inc. ("TRMI"), a wholly-owned subsidiary of the registrant, in
connection with refrigerant use and maintenance at TRMI's Los Angeles
refinery. AQMD penalties for violation of certain air regulations may
exceed $100,000.
_________________
* Texaco Chemical Company was sold on April 21, 1994 to Huntsman Corporation
and, by agreement, Texaco Inc. retains obligations applicable to events
occurring prior to the closing date.
9
<PAGE>
The U.S. Department of Justice has filed suit againt TTTI in
connection with spills along Texaco Pipeline Inc. systems in Kansas in
1991. The suit seeks civil penalties of approximately $4,200,000 and
injunctive relief. TTTI has not been served with the complaint, and
the parties continue to discuss this matter.
On June 6, 1995, the Delaware Department of Natural Resources and
Environmental Control ("DNREC") informally cited Star Enterprise's
Delaware City refinery for emitting nitrogen oxide in quantities exceeding
the refinery's permit levels in 1993 and 1994. Star Enterprise and DNREC
settled the matter on March 6, 1996 for $175,000.
Additionally, Texaco Inc., on behalf of its subsidiaries and affiliates,
agreed in 1992 to participate in the EPA's Toxic Substances Control Act ("TSCA")
Section 8(e) Compliance Audit Program. There were 125 participants in the
program. As a participant, Texaco agreed to audit its files for materials which
under current EPA guidelines would be subject to reporting under Section 8(e) of
TSCA and to pay stipulated penalties for each such report submitted under this
program. On December 17, 1996, an Administrative Order on Consent between the
EPA and Texaco was finalized, and Texaco paid $237,000 to finalize its
participation in the program.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
----------
10
<PAGE>
Executive Officers of Texaco Inc.
The executive and other elected officers of Texaco Inc. as of March 27,
1997 are:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Peter I. Bijur.................. 54 Chairman of the Board and Chief Executive Officer
Allen J. Krowe.................. 64 Vice Chairman
C. Robert Black................. 61 Senior Vice President
Patrick J. Lynch................ 59 Senior Vice President and Chief Financial Officer
William K. Tell, Jr............. 63 Senior Vice President
Glenn F. Tilton ................ 48 Senior Vice President
Stephen M. Turner............... 58 Senior Vice President and General Counsel
Richard F. Brenner.............. 57 Vice President
Clarence P. Cazalot, Jr......... 46 Vice President
Eugene G. Celentano............. 58 Vice President
David C. Crikelair.............. 49 Vice President
Carl B. Davidson................ 63 Vice President and Secretary
Claire S. Farley................ 38 Vice President
James R. Metzger................ 49 Vice President
Robert C. Oelkers............... 52 Vice President and Comptroller
Elizabeth P. Smith.............. 47 Vice President
Robert A. Solberg............... 51 Vice President
Michael N. Ambler .............. 60 General Tax Counsel
James F. Link................... 52 Treasurer
</TABLE>
For more than five years, each of the above listed officers of Texaco Inc.,
except for Mr. Richard F. Brenner, has been actively engaged in the business of
Texaco Inc. or one of its subsidiary or affiliated companies.
Effective April 1, 1996, Mr. Brenner joined Texaco as President of the
company's Human Resources Division and as a Texaco Inc. Vice President. Prior to
joining Texaco, Mr. Brenner was Vice President, Global Human Resources for
AT&T/NCR, at that time a computer subsidiary of AT&T. Mr. Brenner joined the
computer firm Teradata Corporation in 1991 as Vice President, Human Resources.
Teradata was acquired by NCR later that same year.
There are no family relationships among any of the officers of Texaco Inc.
11
<PAGE>
PART II
The following information, contained in Texaco Inc.'s 1996 Annual Report to
Stockholders, is incorporated herein by reference. The page references indicated
are to the actual and complete paper document version of Texaco Inc.'s 1996
Annual Report to Stockholders, as provided to stockholders:
<TABLE>
<CAPTION>
Texaco Inc.
Year 1996
Annual Report
to Stockholders
Form 10-K Item Page Reference
- -------------- --------------
<S> <C>
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 82 (a)
Item 6. Selected Financial Data
Five-Year Comparison of Selected Financial Data 81
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 26-40
Item 8. Financial Statements and Supplementary Data
Statement of Consolidated Income 41
Consolidated Balance Sheet 42
Statement of Consolidated Cash Flows 43
Statement of Consolidated Stockholders' Equity 44-45
Notes to Consolidated Financial Statements 46-68
Report of Independent Public Accountants 70
Supplemental Information on Oil and Gas Producing Activities 71-79
Selected Quarterly Financial Data 80
--------------
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure Not applicable.
<FN>
(a) Only the data and information provided under the caption "Common Stock
Market and Dividend Information" is deemed to be filed as part of this
Annual Report on Form 10-K.
</FN>
</TABLE>
12
<PAGE>
PART III
The following information, contained in Texaco Inc.'s Proxy Statement dated
March 27, 1997, relating to the 1997 Annual Meeting of Stockholders, is
incorporated herein by reference. Except as indicated under Items 10, 11, 12 and
13, no other data and information appearing in the Proxy Statement dated March
27, 1997 are deemed to be filed as part of this Annual Report on Form 10-K. The
page references indicated are to the actual and complete paper document version
of Texaco Inc.'s 1997 Proxy Statement, as provided to stockholders:
<TABLE>
<CAPTION>
Texaco Inc.
March 27, 1997
Proxy Statement
Form 10-K Item Page Reference
- -------------- --------------
<S> <C>
Item 10. Directors and Executive Officers of the Registrant
--The Board of Directors
Governance, Committees, Qualifications and Nomination
of Directors, Compensation of Directors and Litigation 3-7
--Security Ownership of Directors and Management 8
--Item 1--Election of Directors 9-12
Item 11. Executive Compensation
--The Board of Directors
Compensation of Directors 6-7
--Summary Compensation Table 31
--Option Grants in 1996 32-34
--Aggregated Option Exercises in 1996 and Year-End Option Values 35
--Retirement Plan 37
Item 12. Security Ownership of Certain Beneficial Owners and Management
--Voting of Shares 2
--Security Ownership of Directors and Management 8
Item 13. Certain Relationships and Related Transactions None
</TABLE>
13
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
The following information, contained in Texaco Inc.'s 1996 Annual Report to
Stockholders, is incorporated herein by reference. The page references indicated
are to the actual and complete paper document version of Texaco Inc.'s 1996
Annual Report to Stockholders, as provided to stockholders:
(a) The following documents are filed as part of this report:
<TABLE>
<CAPTION>
Texaco Inc.
Year 1996
Annual Report
To Stockholders
Page Reference
---------------
<S> <C>
1. Financial Statements (incorporated by reference from the indicated
pages of Texaco Inc.'s 1996 Annual Report to Stockholders):
Statement of Consolidated Income for the three years
ended December 31, 1996 .................................................... 41
Consolidated Balance Sheet at December 31, 1996 and 1995...................... 42
Statement of Consolidated Cash Flows for the three years
ended December 31, 1996 .................................................... 43
Statement of Consolidated Stockholders' Equity
for the three years ended December 31, 1996................................. 44-45
Notes to Consolidated Financial Statements.................................... 46-68
Report of Independent Public Accountants...................................... 70
2. Financial Statement Schedules
Caltex Group of Companies Combined Financial Statements, the
investments in which are accounted for on the equity method and are
filed as part of this report.
</TABLE>
Financial statements and schedules of certain affiliated companies have
been omitted in accordance with the provisions of Rule 3.09 of Regulation S-X.
Financial Statement Schedules are omitted as permitted under Rule 4.03 and
Rule 5.04 of Regulation S-X.
3. Exhibits
-- (3.1) Copy of Restated Certificate of Incorporation
of Texaco Inc., as amended to and including November
9, 1994, including Certificate of Designations,
Preferences and Rights of Series B ESOP Convertible
Preferred Stock, Series D Junior Participating
Preferred Stock, Series F ESOP Convertible Preferred
Stock and Series G, H, I and J Market Auction
Preferred Shares, filed as Exhibit 3.1 to Texaco
Inc.'s Annual Report on Form 10-K for 1994 dated
March 27, 1995, incorporated herein by reference,
SEC File No. 1-27.
-- (3.2) Copy of By-Laws of Texaco Inc., as amended to and
including January 24, 1997.
-- (4) Instruments defining the rights of holders of long-
term debt of Texaco Inc. and its subsidiary
companies are not being filed, since the total
amount of securities authorized under each of such
instruments does not exceed 10 percent of the total
assets of Texaco Inc. and its subsidiary companies
on a consolidated basis. Texaco Inc. agrees to
furnish a copy of any instrument to the Securities
and Exchange Commission upon request.
-- (10(iii)(a)) Texaco Inc.'s Stock Incentive Plan, incorporated
herein by reference to pages A-1 through A-8 of
Texaco Inc.'s proxy statement dated April 5, 1993,
SEC File No. 1-27.
-- (10(iii)(b)) Texaco Inc.'s Stock Incentive Plan, incorporated
herein by reference to pages IV-1 through IV-5
of Texaco Inc.'s proxy statement dated April 10,
1989 and to Exhibit A of Texaco Inc.'s proxy
statement dated March 29, 1991, SEC File No. 1-27.
14
<PAGE>
-- (10(iii)(c)) Texaco Inc.'s Incentive Bonus Plan, incorporated
herein by reference to page IV-5 of Texaco Inc.'s
proxy statement dated April 10, 1989, SEC File No.
1-27.
-- (10(iii)(d)) Description of Texaco Inc.'s Supplemental
Pension Benefits Plan, incorporated herein by
reference to pages 8 and 9 of Texaco Inc.'s proxy
statement dated March 17, 1981, SEC File No. 1-27.
-- (10(iii)(e)) Description of Texaco Inc.'s Revised Supplemental
Pension Benefits Plan, incorporated herein by
reference to pages 24 through 27 of Texaco Inc.'s
proxy statement dated March 9, 1978, SEC File
No. 1-27.
--(10(iii)(f)) Description of Texaco Inc.'s Revised Incentive
Compensation Plan, incorporated herein by reference
to pages 10 and 11 of Texaco Inc.'s proxy statement
dated March 13, 1969, SEC File No. 1-27.
-- (11) Computation of Earnings Per Share of Common Stock of
Texaco Inc. and Subsidiary Companies.
-- (12.1) Computation of Ratio of Earnings to Fixed Charges of
Texaco on a Total Enterprise Basis.
-- (12.2) Definitions of Selected Financial Ratios.
-- (13) Copy of those portions of Texaco Inc.'s 1996 Annual
Report to Stockholders that are incorporated herein
by reference into this Annual Report on Form 10-K.
-- (21) Listing of significant Texaco Inc. subsidiary
companies and the name of the state or other
jurisdiction in which each subsidiary was organized.
-- (23) Consent of Arthur Andersen LLP.
-- (24) Powers of Attorney for the Directors and certain
Officers of Texaco Inc. authorizing, among other
things, the signing of Texaco Inc.'s Annual Report
on Form 10-K on their behalf.
-- (27) Financial Data Schedule.
15
<PAGE>
(b) -- Reports on Form 8-K.
During the fourth quarter of 1996, Texaco Inc. filed Current
Reports on Form 8-K relating to the following events:
1. October 21, 1996 (date of earliest event reported: October 21,
1996)
Item 5. Other Events--reported that Texaco issued an
Earnings Press Release for the third quarter and first
nine months of 1996. Texaco appended as an exhibit thereto
a copy of the Press Release entitled "Texaco Reports
Results for the Third Quarter and Nine Months 1996" dated
October 21, 1996.
2. November 22, 1996 (date of earliest event reported: November
14, 1996)
Item 5. Other Events--(1) reported that Texaco reached an
Agreement in Principle to settle a purported class action
filed against Texaco in 1994 for allegedly discriminating
against salaried African-American employees, principally
with respect to promotions. Texaco appended as an exhibit
thereto a copy of the Press Release entitled "Texaco
Announces Settlement in Class Action Lawsuit" dated
November 15, 1996, and (2) reported that a second
purported derivative action was filed against Texaco, as
nominal defendent, its directors and certain current and
former officers and employees.
Subsequent to the fourth quarter of 1996, Texaco Inc. filed a
Current Report on Form 8-K relating to the following event:
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.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the Town of
Harrison, State of New York, on the 27th day of March, 1997.
TEXACO INC.
(Registrant)
Carl B. Davidson
By ........................................
(Carl B. Davidson)
Vice President and Secretary
Attest:
R. E. Koch
By .......................................
(R. E. Koch)
Assistant Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the date indicated.
Peter I. Bijur ..........Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
Patrick J. Lynch .......Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
Robert C. Oelkers ......Vice President and Comptroller
(Principal Accounting Officer)
Directors:
Robert A. Beck Allen J. Krowe
Peter I. Bijur Thomas S. Murphy
John Brademas Charles H. Price, II
Willard C. Butcher Robin B. Smith
Edmund M. Carpenter William C. Steere, Jr.
Michael C. Hawley Thomas A. Vanderslice
Franklyn G. Jenifer William Wrigley
R. E. Koch
By .......................................
(R. E. Koch)
Attorney-in-fact for the above-named
officers and directors
March 27, 1997
17
<PAGE>
CALTEX GROUP OF COMPANIES
COMBINED FINANCIAL STATEMENTS
December 31, 1996
<PAGE>
CALTEX GROUP OF COMPANIES
COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
General Information 1-2
Report of Independent Auditors 3
Combined Balance Sheet 4-5
Combined Statement of Income 6
Combined Statement of Stockholders' Equity 7
Combined Statement of Cash Flows 8
Notes to Combined Financial Statements 9-19
<FN>
Note: Financial statement schedules are omitted as permitted by Rule 4.03 and Rule 5.04 of Regulation S-X.
</FN>
</TABLE>
<PAGE>
CALTEX GROUP OF COMPANIES
GENERAL INFORMATION
The Caltex Group of Companies (Group) is jointly owned 50% each by Chevron
Corporation and Texaco Inc. and was created in 1936 by its two owners to
produce, transport, refine and market crude oil and petroleum products. The
Group is comprised of the following companies:
o Caltex Petroleum Corporation, a company incorporated in Delaware that,
through its many subsidiaries and affiliates, conducts refining,
transporting, and marketing activities in the Eastern Hemisphere;
o P. T. Caltex Pacific Indonesia, an exploration and production company
incorporated and operating in Indonesia; and,
o American Overseas Petroleum Limited, a company incorporated in the
Bahamas, that, through its subsidiary, provides services for and manages
certain exploration and production operations in Indonesia in which
Chevron and Texaco have interests, but not necessarily jointly or in the
same properties.
A brief description of each company's operations and the Group's
environmental activities follows:
Caltex Petroleum Corporation (Caltex)
- -------------------------------------
Through its subsidiaries and affiliates, Caltex operates in approximately
60 countries with some of the highest economic and petroleum growth rates in the
world, principally in Africa, Asia, the Middle East, New Zealand and Australia.
At year end 1996, Caltex had over 7,000 employees, of which about 3% were
located in the United States.
The majority of refining and certain marketing operations are conducted
through joint ventures. Caltex has equity interests in 14 refineries in 11
countries and its share of refinery inputs approximated 743,000 barrels per day
in 1996. Caltex continues to improve its refineries with investments designed to
provide higher yields and meet environmental regulations. Construction of the
new 130,000 barrels per day refinery in Thailand was completed and operations
began in July, 1996. In Korea, a new crude unit with a capacity of 220,000
barrels per day and a 70,000 barrel per day diesel desulfurizer were completed
during the fourth quarter of 1996 bringing total refining capacity at LG-Caltex
to 600,000 barrels per day. Caltex companies sold approximately 1.4 million
barrels per day of crude and petroleum products in 1996.
Caltex continues to place emphasis on high-growth markets and is moving
towards a better strategic balance in its refining capacity. During 1996, Caltex
sold its 50 percent interest in Nippon Petroleum Refining Company, Limited for
approximately $2 billion, and it continues to actively manage the performance of
its refining assets.
Caltex introduced a new corporate and retail identity in 1996 and
accelerated its downstream marketing activities. New and refurbished service
stations are being introduced across the Asia-Pacific region, Africa and the
Middle East, where there are more than 4,100 Caltex-branded service stations.
Caltex affiliates operate another 3,800 sites under other names. Underperforming
stations with poor prospects for improvement are being eliminated. New Caltex
Star Mart convenience stores anchor many high-volume station locations. Many
stations also include new ancillary revenue centers such as quick-service
restaurants, auto lube bays and brushless car washes. Caltex had an average
17.4% market share in its principal operating areas in 1996.
In addition to the retail initiatives, the company has created specialized
business units that are helping Caltex operating companies position for larger
shares of the high-growth markets for lubricating oils and greases, aviation
fuels, and liquefied petroleum gas. Caltex conducts international crude oil and
petroleum product logistics and trading operations from a subsidiary in
Singapore. The company has an interest in a fleet of vessels and owns or has
equity interests in numerous pipelines, terminals and depots. Caltex is also
active in the petrochemical business, particularly in Japan and South Korea.
1
<PAGE>
CALTEX GROUP OF COMPANIES
GENERAL INFORMATION
P. T. Caltex Pacific Indonesia (CPI)
- ------------------------------------
CPI holds a Production Sharing Contract in Central Sumatra for which the
Indonesian government has granted an extension to the year 2021. CPI also acts
as operator in Sumatra for four other petroleum contract areas, with 32 fields,
which are jointly held by Chevron and Texaco. Exploration is pursued through an
area comprising 2.4 million acres with production established in the giant Minas
and Duri fields. Gross production from fields operated by CPI for 1996 was over
753,000 barrels a day. CPI entitlements are sold to its stockholders, who use
them in their systems or sell them to third parties. At year end 1996, CPI had
approximately 6,100 employees, all located in Indonesia.
American Overseas Petroleum Limited (AOPL)
- ------------------------------------------
In addition to providing services to CPI, AOPL, through its subsidiary
Amoseas Indonesia Inc., manages selective contract areas for Texaco's and
Chevron's undivided interests in Indonesia, excluding Sumatra. At year end, AOPL
had approximated 245 employees, of which 7% were located in the United States.
Environmental Activities
- ------------------------
The Group's activities are subject to various environmental, health and
safety regulations in each of the countries in which it operates. Such
regulations vary significantly in degree of scope, standards and enforcement.
The Group's policy is to comply with all applicable environmental, health and
safety laws and regulations as well as its own internal policies. The Group has
an active program to ensure that its environmental standards are maintained,
which includes closely monitoring applicable statutory and regulatory
requirements, as well as enforcement policies in each of the countries in which
it operates, and conducting periodic environmental compliance audits.
The environmental guidelines and definitions promulgated by the American
Petroleum Institute provide the basis for reporting the Group's expenditures.
For the year ended December 31, 1996, the Group, including its equity share of
affiliates, incurred total costs of approximately $225 million, including
capital costs of $156 million and nonremediation related operating expenses of
$69 million. The major component of the Group's expenditures is for the
prevention of air pollution. As of December 31, 1996, the Group had accrued $96
million for various known remediation activities, including $74 million relating
to the future cost of restoring and abandoning existing oil and gas properties.
Based upon existing statutory and regulatory requirements, investment and
operating plans, and known exposures, the Group believes that future
environmental expenditures will not materially affect its liquidity, financial
position or results of operations.
2
<PAGE>
KPMG Peat marwich LLP
200 Crescent Court Telephone 214 754 2000 Telefax 214 754 2297
Suite 300
Dallas, TX 75201-1885
Report of Independent Auditors
------------------------------
To the Stockholders
The Caltex Group of Companies:
We have audited the accompanying combined balance sheets of the Caltex
Group of Companies as of December 31, 1996 and 1995, and the related combined
statements of income, stockholder's equity, and cash flows for each of the years
in the three-year period ended December 31, 1996. These combined financial
statements are the responsibility of the Group's management. Our responsibility
is to express an opinion on these combined financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of the Caltex
Group of Companies as of December 31, 1996 and 1995 and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Dallas, Texas
February 10, 1997
3
<PAGE>
<TABLE>
<CAPTION>
CALTEX GROUP OF COMPANIES
COMBINED BALANCE SHEET
ASSETS
As of December 31
----------------------
(Millions of dollars)
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents, including time deposits of
$21 in 1996 and $60 in 1995 $ 206 $ 166
Accounts and notes receivable, less allowance for doubtful accounts of $18
in 1996 and $11 in 1995:
Trade 864 1,002
Affiliates 452 210
Other 318 238
-------- -------
1,634 1,450
Inventories:
Crude oil 159 130
Petroleum products 503 516
Materials and supplies 53 61
-------- -------
715 707
Deferred income taxes 10 -
-------- -------
Total current assets 2,565 2,323
Investments and advances:
Equity in affiliates 1,842 3,163
Miscellaneous investments and long-term receivables,
less allowance of $8 in 1995 269 207
-------- -------
Total investments and advances 2,111 3,370
Property, plant, and equipment, at cost:
Producing 3,721 3,485
Refining 1,550 1,468
Marketing 2,451 2,160
Other 8 9
-------- -------
7,730 7,122
Accumulated depreciation, depletion and amortization (3,217) (2,868)
-------- -------
Net property, plant and equipment 4,513 4,254
Prepaid and deferred charges 206 170
-------- -------
Total assets $ 9,395 $10,117
======== =======
<FN>
See accompanying notes to combined financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CALTEX GROUP OF COMPANIES
COMBINED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
As of December 31
------------------------
(Millions of dollars)
1996 1995
---- ----
<S> <C> <C>
Current liabilities:
Short-term debt $ 1,246 $ 1,665
Accounts payable:
Trade and other 1,236 1,165
Stockholders 176 90
Affiliates 84 74
-------- -------
1,496 1,329
Accrued liabilities 148 127
Estimated income taxes 109 102
-------- -------
Total current liabilities 2,999 3,223
Long-term debt 713 628
Employee benefit plans 107 98
Deferred credits and other non-current liabilities 949 864
Deferred income taxes 249 209
Minority interest in subsidiary companies 122 136
-------- -------
Total 5,139 5,158
Stockholders' equity:
Common stock 355 355
Capital in excess of par value 2 2
Retained earnings 3,910 4,187
Currency translation adjustment (36) 350
Unrealized holding gain on investments 25 65
-------- -------
Total stockholders' equity 4,256 4,959
-------- -------
Total liabilities and stockholders' equity $ 9,395 $10,117
======== =======
<FN>
See accompanying notes to combined financial statements.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
CALTEX GROUP OF COMPANIES
COMBINED STATEMENT OF INCOME
Year ended December 31
----------------------------------------
(Millions of dollars)
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Sales and other operating revenues(1) $ 16,895 $ 15,067 $ 14,751
Gain on sale of investment in affiliate 1,132 - -
Equity in net income of affiliates 51 425 263
Dividends, interest and other income 88 130 134
--------- --------- --------
Total revenues 18,166 15,622 15,148
Costs and deductions:
Cost of sales and operating expenses(2) 14,774 13,045 12,801
Selling, general and administrative expenses 532 620 568
Depreciation, depletion and amortization 407 361 331
Maintenance and repairs 134 104 160
Foreign exchange, net 6 (37) 73
Interest expense 140 159 101
Minority interest (2) 4 3
--------- --------- --------
Total costs and deductions 15,991 14,256 14,037
--------- --------- --------
Income before income taxes 2,175 1,366 1,111
Provision for income taxes 982 467 422
--------- --------- --------
Net income $ 1,193 $ 899 $ 689
========= ========= ========
(1) Includes sales to:
Stockholders $1,711 $1,376 $1,250
Affiliates 2,841 1,524 1,044
(2) Includes purchases from:
Stockholders $2,634 $1,834 $1,662
Affiliates 1,297 1,638 1,587
<FN>
See accompanying notes to combined financial statements.
</FN>
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
CALTEX GROUP OF COMPANIES
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
(Millions of dollars)
1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Common stock and capital in excess of par value $ 357 $ 357 $ 357
======== ======== =======
Retained earnings:
Balance at beginning of year $ 4,187 $ 3,898 $ 3,688
Net income 1,193 899 689
Cash dividends (1,470) (610) (479)
-------- -------- -------
Balance at end of year $ 3,910 $ 4,187 $ 3,898
======== ======== =======
Currency translation adjustment:
Balance at beginning of year $ 350 $ 399 $ 250
Sale of investment in affiliate (240) - -
Other changes during the year (146) (49) 149
-------- -------- -------
Balance at end of year $ (36) $ 350 $ 399
======== ======== =======
Unrealized holding gain on investments:
Balance at beginning of year $ 65 $ 79 $ 70
Change during the year (40) (14) 9
-------- -------- -------
Balance at end of year $ 25 $ 65 $ 79
======== ======== =======
Total stockholders' equity - end of year $ 4,256 $ 4,959 $ 4,733
======== ======== =======
<FN>
See accompanying notes to combined financial statements.
</FN>
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
CALTEX GROUP OF COMPANIES
COMBINED STATEMENT OF CASH FLOWS
Year ended December 31
--------------------------------------
(Millions of dollars)
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating activities:
Net income $ 1,193 $ 899 $ 689
Reconciliation to net cash provided by operating activities:
Depreciation, depletion and amortization 407 361 331
Dividends more (less) than equity in affiliate income 38 (349) (220)
Net losses (gains) on asset sales 10 11 (17)
Deferred income taxes 36 18 (45)
Prepaid charges and deferred credits 38 69 115
Changes in operating working capital (7) (27) 58
Gain on sale of investment in affiliate (1,132) - -
Other (12) 66 77
------- ------- ------
Net cash provided by operating activities 571 1,048 988
Investing activities:
Capital expenditures (741) (663) (837)
Investments in and advances to affiliates (30) (150) (131)
Net (purchases) sales of investment instruments (55) (7) 14
Proceeds from sale of investment in affiliate 1,984 - -
Proceeds from asset sales 95 46 37
------- ------- ------
Net cash provided by (used for) investing activities 1,253 (774) (917)
Financing activities:
Debt with terms in excess of three months :
Borrowings 1,112 1,063 1,257
Repayments (1,351) (1,093) (880)
Net (decrease) increase in other debt (53) 275 135
Dividends paid, including minority interest (1,490) (617) (482)
------- ------- ------
Net cash (used for) provided by financing activities (1,782) (372) 30
Effect of exchange rate changes on cash and cash equivalents (2) 13 (16)
------- ------- ------
Cash and cash equivalents:
Net change during the year 40 (85) 85
Beginning of year balance 166 251 166
------- ------- ------
End of year balance $ 206 $ 166 $ 251
======= ======= ======
<FN>
See accompanying notes to combined financial statements.
</FN>
</TABLE>
8
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 1 - Summary of significant accounting policies
Principles of combination -- The combined financial statements of the Caltex
Group of Companies (Group) include the accounts of Caltex Petroleum Corporation
and subsidiaries, American Overseas Petroleum Limited and subsidiary, and P.T.
Caltex Pacific Indonesia. Intercompany transactions and balances have been
eliminated. Subsidiaries include companies owned directly or indirectly more
than 50 percent except cases in which control does not rest with the Group.
Chevron Corporation and Texaco Inc. (stockholders), through subsidiary
companies, each own 50% of the outstanding common shares of the Group companies.
The Group is primarily engaged in exploring, producing, refining, transporting
and marketing crude oil and petroleum products in the Asia-Pacific and
East-of-Suez Regions. The Group's accounting policies are in accordance with
United States generally accepted accounting principles.
Translation of foreign currencies -- The U.S. dollar is the functional currency
for all principal subsidiary and most affiliate operations. Affiliates in Japan
and Korea use the local currency as the functional currency.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates.
Inventories -- Crude oil and petroleum product inventories are stated at cost,
primarily determined using the last-in, first-out (LIFO) method. Costs include
applicable acquisition and refining costs, duties, import taxes, freight, etc.
Materials and supplies are stated at average cost. Inventories are valued at the
lower of cost or current market.
Investments and advances -- Investments in affiliates in which the Group has an
ownership of 20% to 50% are accounted for by the equity method (including
majority owned investments where control does not rest with the Group). The
Group's share of earnings or losses of these companies is included in current
results, and the recorded investments reflect the underlying equity in each
company. Investments in other affiliates are carried at cost and dividends are
reported as income.
Property, plant and equipment -- Exploration and production activities are
accounted for under the successful efforts method. Depreciation, depletion and
amortization expenses for capitalized costs relating to producing properties,
including intangible development costs, are determined using the
unit-of-production method.
All other assets are depreciated by class on a straight-line basis using
rates based upon the estimated useful life of each class of asset.
Maintenance and repairs necessary to maintain facilities in operating
condition are charged to income as incurred. Additions and improvements that
materially extend the life of assets are capitalized. Upon disposal of assets,
any net gain or loss is included in income.
Derivative financial instruments -- Gains and losses on hedges of existing
assets or liabilities are included in the carrying value of those assets and
liabilities, and are ultimately recognized in income as part of the carrying
value. Gains and losses related to qualifying hedges of firm commitments or
anticipated transactions are also deferred and recognized in income or included
in the carrying value when the underlying hedged transaction occurs. If the
derivative instrument ceases to be a hedge, the related gains and losses are
recognized currently in income. Gains and losses on derivative contracts that do
not qualify as hedges are recognized currently in other income.
9
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 1 - Summary of significant accounting policies - continued
Environmental matters -- The Group's environmental policies encompass the
existing laws in each country in which the Group operates and the Group's own
internal standards. Expenditures that create future benefits or contribute to
future revenue generation are capitalized. Future remediation costs are accrued
based on estimates of known environmental exposure even if uncertainties exist
about the ultimate cost of the remediation. Such accruals are based on the best
available undiscounted estimates using data primarily developed by third party
experts. Costs of environmental compliance for past and ongoing operations,
including maintenance and monitoring, are expensed as incurred. Recoveries from
third parties are recorded as assets when realizable.
Reclassifications -- Certain amounts for preceding periods have been
reclassified to conform with the current year's presentation.
Note 2 - Change in accounting principles
During 1995, the Group adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" which establishes guidelines for recognizing and
measuring impairment of long-lived assets. Adoption of this standard did not
impact the combined financial statements of the Group.
Note 3 - Inventories
The excess of current cost over the reported value of inventory maintained
on the LIFO basis was approximately $125 million and $52 million at December 31,
1996 and 1995, respectively.
During the periods presented, inventory quantities valued on the LIFO
basis were reduced at certain locations. The inventory reductions, net of market
valuation adjustments, increased net income by approximately $4 million in 1996,
and decreased net income by $1 million in 1995 and $8 million in 1994.
Certain inventories were previously recorded at market, which was lower
than the LIFO carrying value. Earnings of $29 million, $25 million and $30
million, net of inventory volume reductions, were recorded in 1996, 1995 and
1994, respectively, reflecting improved market values over previous years. As of
December 31, 1996 substantially all inventories were recorded at cost.
Note 4 - Equity in affiliates
Investments in affiliates at equity include the following:
<TABLE>
<CAPTION>
As of December 31
----------------------
(Millions of dollars)
Equity % 1996 1995
-------- ---- ----
<S> <C> <C> <C>
Nippon Petroleum Refining Company, Limited - $ - $1,132
Koa Oil Company, Limited 50% 364 427
LG-Caltex Oil Corporation (formerly
Honam Oil Refinery, Limited) 50% 739 762
Australian Petroleum Pty. Limited 50% 336 412
Star Petroleum Refining Company, Ltd. 64% 287 327
All other Various 116 103
------- ------
$ 1,842 $3,163
======= ======
</TABLE>
10
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 4 - Equity in affiliates - continued
Effective April 1, 1996, the Group sold its 50% investment in Nippon
Petroleum Refining Company, Limited (NPRC) to its partner, Nippon Oil Company,
Limited (NOC) for yen 200 billion (approximately $2 billion) in cash. The
Group's net income in 1996 includes a net after-tax gain of approximately $620
million related to this sale. The combined statement of income includes Group
product sales to NOC of approximately $ .5 billion, $2.1 billion, and $2.0
billion in 1996 (first quarter only), 1995 and 1994, respectively.
Effective May 1995, Caltex Australia Limited (CAL), a subsidiary of the
Group, combined its petroleum refining and marketing operations with those of
Ampol Limited to form Australian Petroleum Pty. Limited (APPL) which owns and
manages the combined refining and marketing operations. CAL contributed net
assets at their carrying value of $419 million for its 50% equity interest in
APPL and no gain or loss was recognized. The carrying value of CAL's investment
in APPL in excess of its proportionate share of APPL's net equity is being
amortized over approximately 20 years.
The remaining interest in Star Petroleum Refining Company, Ltd. (SPRC) is
owned by a Thailand governmental entity. Provisions in the SPRC shareholders
agreement limit the Group's control and mandate reduction in ownership to a
minority position by the year 2000.
Shown below is summarized financial information for these affiliates (in
millions of dollars):
<TABLE>
<CAPTION>
100% Equity Share
---------------------- -----------------
1996 1995 1996 1995
--------- --------- -------- ------
<S> <C> <C> <C> <C>
Current assets $ 6,128 $ 7,125 $ 3,075 $ 3,556
Other assets 7,303 10,415 3,836 5,368
Current liabilities 5,191 5,608 2,618 2,804
Other liabilities 4,768 5,865 2,533 3,039
Net worth 3,472 6,067 1,760 3,081
</TABLE>
<TABLE>
<CAPTION>
100% Equity Share
---------------------------- ---------------------
1996 1995 1994 1996 1995 1994
-------- -------- --------- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $15,436 $15,396 $10,886 $7,751 $7,674 $5,418
Operating income 749 955 770 364 472 381
Net income 133 859 526 51 425 263
</TABLE>
Cash dividends received from these affiliates were $89 million, $76
million, and $43 million in 1996, 1995 and 1994, respectively.
During 1995, an affiliate sold certain property required by the local
government. The Group's share (approximately $171 million) of the resulting gain
was included in the Group's 1995 net income.
Retained earnings as of December 31, 1996 and 1995, includes $1.0 billion
and $1.7 billion, respectively, representing the Group's share of undistributed
earnings of affiliates at equity.
11
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 5 - Short-term debt
Short-term debt consists primarily of demand and promissory notes,
acceptance credits, overdrafts and the current portion of long-term debt. The
weighted average interest rates on short-term financing as of December 31, 1996,
and 1995 were 7.5% and 7.0%, respectively.
Unutilized lines of credit available for short-term financing totaled $727
million as of December 31, 1996.
Note 6 - Long-term debt
Long-term debt, with related interest rates for 1996 and 1995, are as
follows:
<TABLE>
<CAPTION>
As of December 31
-----------------------
(Millions of dollars)
1996 1995
---- ----
<S> <C> <C>
U.S. dollar debt:
Variable interest rate term loans $ 294 $ 243
Fixed interest rate term loans
with 6.25% and 6.7% average rates 110 58
Australian dollar debt:
Variable interest rate term loan - 50
Promissory notes payable with
6.73% and 7.6% average rate 20 19
Fixed interest rate loans with
11.2% rate due 2001-2002 224 230
New Zealand dollar debt:
Variable interest rate term loans 46 13
Fixed interest rate loan with
8.09% rate due 2000 7 -
Other 12 15
------ -----
$ 713 $ 628
====== =====
</TABLE>
As of December 31, 1996 and 1995, $20 million and $19 million,
respectively, of short-term debt was classified as long-term debt. Settlement of
these obligations is not expected to require the use of working capital in 1997
as the Group has both the intent and ability to refinance this debt on a
long-term basis. These borrowings were fully covered by long-term committed
credit facilities with major banks.
Aggregate maturities of long-term debt for the next five years are as
follows (in millions of dollars): 1997 - $23 (included in short-term debt); 1998
- - $52; 1999 - $110; 2000 - $105; 2001 - $151; 2002 and thereafter - $295.
Note 7 - Operating leases
The Group has operating leases involving various marketing assets for
which net rental expense was $92 million, $91 million, and $121 million in 1996,
1995 and 1994, respectively.
Future net minimum rental commitments under operating leases having
non-cancelable terms in excess of one year are as follows (in millions of
dollars): 1997 - $35; 1998 - $35; 1999 - $35; 2000 - $37; 2001 - $38; 2002 and
thereafter - $73.
12
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 8 - Employee benefit plans
The Group has various retirement plans. Generally, these plans provide
defined benefits based on final or final average pay. The benefit levels,
vesting terms and funding practices vary among plans.
The funded status of retirement plans, primarily foreign and inclusive of
affiliates at equity, is as follows:
<TABLE>
<CAPTION>
As of December 31
-----------------------------------------
(Millions of dollars)
Assets Exceed Accumulated
Accumulated Benefits
Funding Status Benefits Exceed Assets
-------------- ----------------- ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Actuarial present value :
Vested benefit obligation $ 203 $ 186 $ 88 $ 215
Accumulated benefit obligation 224 208 113 251
Projected benefit obligation 387 362 136 308
Amount of assets available for benefits :
Funded assets at fair value $ 348 $ 341 $ 51 $ 123
Net pension (asset) liability recorded (3) (23) 67 146
----- ------ ------ ------
Total assets $ 345 $ 318 $ 118 $ 269
===== ====== ====== ======
Assets less than projected benefit obligation $ (42) $ (44) $ (18) $ (39)
Consisting of:
Unrecognized transition net assets
(liabilities) - 13 ( 9) (5)
Unrecognized net losses (26) (38) ( 6) (30)
Unrecognized prior service costs (16) (19) ( 3) (4)
Weighted average rate assumptions:
Discount rate 10.9% 10.5% 5.6% 5.1%
Rate of increase in compensation 8.6% 8.2% 3.3% 3.1%
Expected return on plan assets 11.0% 10.1% 4.5% 4.5%
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------
(Millions of dollars)
Components of Pension Expense 1996 1995 1994
----------------------------- ---- ---- ----
<S> <C> <C> <C>
Cost of benefits earned during the year $ 26 $ 32 $ 27
Interest cost on projected benefit obligation 46 55 55
Actual return on plan assets (40) (47) (23)
Net amortization and deferral 10 12 (16)
----- ------ ------
Total $ 42 $ 52 $ 43
===== ====== ======
</TABLE>
13
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 9 - Commitments and contingencies
On January 25, 1990, Caltex Petroleum Corporation and certain of its
subsidiaries were named as defendants, along with privately held Philippine
ferry and shipping companies and the shipping company's insurer, in a lawsuit
filed in Houston, Texas State Court. After removal to Federal District Court in
Houston, the litigation's disposition turned on questions of federal court
jurisdiction and whether the case should be dismissed for forum non conveniens.
The plaintiffs' petition purported to be a class action on behalf of at least
3,350 parties, who were either survivors of, or next of kin of persons deceased
in a collision in Philippine waters on December 20, 1987. One vessel involved in
the collision was carrying Group products in connection with a freight contract.
Although the Group had no direct or indirect ownership in or operational
responsibility for either vessel, various theories of liability were alleged
against the Group. No specific monetary recovery was sought although the
petition contained a variety of demands for various categories of compensatory
as well as punitive damages. Consequently, no reasonable estimate of damages
involved or being sought can be made. The Federal District Court in March 1992,
dismissed the case for forum non conveniens. Subsequent to that dismissal, but
consistent with its terms, cases were filed against the Group entities in the
Philippine courts (over and above those previously filed there subsequent to the
collision, all of which are in various stages of litigation and are being
vigorously resisted). The plaintiffs also filed another lawsuit, alleging the
same causes of action as in the Texas litigation, in Louisiana State Court in
New Orleans. The Group removed that case to Federal District Court in New
Orleans from which it was remanded back to Louisiana State Court. The Group then
sought injunctive and other relief from the Federal District Court in Houston in
order to ensure that Court's previous dismissal would be given proper effect. On
having its request for relief denied, the Group then filed an expedited appeal
to the U. S. Fifth Circuit Court of Appeals. The case was argued in the Fifth
Circuit in October of 1994. The court, in January of 1996, affirmed the Federal
District Court's refusal to enjoin the plaintiffs' proceeding with their
Louisiana lawsuit. The Group sought and obtained en banc reconsideration of the
case by the entire Fifth Circuit Court of Appeals. The en banc Court issued an
opinion in which they were evenly divided (8-8) on the merits of the Group's
position. That opinion served to uphold the District Court's refusal to grant
the Group the relief it sought. The Group is now filing a petition for a writ of
certiorari with the U.S. Supreme Court. The Group's management intends to
continue to contest the case (and companion litigation in the Philippines)
vigorously on various procedural and substantive grounds.
The Group may be subject to loss contingencies pursuant to environmental
laws and regulations in each of the countries in which it operates that, in the
future, may require the Group to take action to correct or remediate the effects
on the environment of prior disposal or release of petroleum substances by the
Group. The amount of such future cost is indeterminable due to such factors as
the nature of the new regulations, the unknown magnitude of any possible
contamination, the unknown timing and extent of the corrective actions that may
be required, and the extent to which such costs are recoverable from third
parties.
The Group is also involved in certain other litigation and U.S. Internal
Revenue Service tax audits in which claims can be made for substantial amounts,
and which may require cash deposits until such claims are resolved.
In the Group's opinion, while it is impossible to ascertain the ultimate
legal and financial liability, if any, with respect to the above mentioned and
other contingent liabilities, the aggregate amount that may arise from such
liabilities is not anticipated to be material in relation to the Group's
combined financial position or liquidity.
In April 1994, a Group subsidiary entered into a contractual commitment,
effective October 1996, for a period of eleven years, to purchase petroleum
products in conjunction with the financing of a refinery owned by an affiliate
which commenced operation in 1996. Total future estimated commitments (in
billions of dollars) for the Group under this and other similar contracts, based
on current pricing and projected growth rates, are: 1997 - $1.1, 1998 - $1.1,
1999 - $1.2, 2000 - $1.2, 2001 - $1.2, and 2002 to expiration of contracts -
$6.4. Purchases (in billions of dollars) under this and other similar contracts
were $0.8, $0.5, and $0.5 in 1996, 1995 and 1994, respectively.
14
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 9 - Commitments and contingencies - continued
The Group is contingently liable for sponsor support funding for both
construction completion (maximum $192 million) and post-completion loan
repayments (maximum $304 million) in connection with an affiliate's project
finance obligations. While the project is operational, construction completion
as defined includes achieving extended continuous operation and satisfying
certain financial conditions, which will only be met by the middle of 1997 at
the earliest. The post-completion support declines progressively as the related
long-term loans are repaid (final payment due 2010). As of December 31, 1996,
there have been no calls made by lenders on either type of sponsor support.
However, the Group has provided short-term extended trade credit on commercial
terms related to crude supply of approximately $61 million to the affiliate as
of December 31, 1996. The Group does not expect that any required sponsor
support will have a material impact on its combined financial position.
The Group had commitments of $5 million and $12 million as of December 31,
1996 and 1995, respectively, in the form of letters of credit which have been
issued on behalf of Group companies to facilitate either the Group's or other
parties' ability to trade in the normal course of business.
Note 10 - Financial Instruments
Certain Group companies are parties to financial instruments with
off-balance sheet credit and market risk, principally interest rate risk. The
Group's outstanding commitments for interest rate swaps and foreign currency
contractual amounts are:
<TABLE>
<CAPTION>
As of December 31
-----------------------
(Millions of dollars)
1996 1995
---- ----
<S> <C> <C>
Interest rate swaps - Pay Fixed, Receive Floating $ 460 $ 485
Interest rate swaps - Pay Floating, Receive Fixed 265 230
Commitments to purchase foreign currencies 417 439
Commitments to sell foreign currencies 11 2,001
</TABLE>
The Group enters into interest rate swaps in managing its interest rate
risk, and their effects are recognized in the statement of income at the same
time as the interest expense on the debt to which they relate. The swap
contracts have remaining maturities of up to nine years. Unrealized gains and
losses on contracts outstanding at year-end 1996 and 1995 were not material.
The Group enters into forward exchange contracts to hedge against some of
its foreign currency exposure stemming from existing liabilities and firm
commitments. Contracts to purchase foreign currencies (principally Australian
and Singapore dollars) hedging existing liabilities have maturities of up to six
years. As of December 31, 1995, contracts to sell foreign currencies primarily
reflected a hedge of the agreed proceeds of yen 200 billion (approximately $2
billion) relating to the April 1, 1996 sale of the Group's interest in NPRC. The
estimated realized gain on this hedge, which was included in the sales proceeds
received on April 1, 1996, was approximately $121 million. Unrealized gains and
losses applicable to all other outstanding forward exchange contracts at
December 31, 1996 and 1995 were not material.
The Group's activities in commodity-based derivative contracts, that must
be settled in cash, are not material. Unrealized gains and losses on
commodity-based derivative contracts outstanding as of December 1996 and 1995
were not material.
15
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 10 - Financial instruments - continued
The Group's long-term debt of $713 million and $628 million as of December
31, 1996 and 1995, respectively, had fair values of $756 million and $639
million as of December 31, 1996 and 1995, respectively. The fair value estimates
were based on the present value of expected cash flows discounted at current
market rates for similar obligations. The reported amounts of financial
instruments such as cash and cash equivalents, notes and accounts receivable,
and all current liabilities approximate fair value because of their short
maturities.
The Group had investments in debt securities available-for-sale at
amortized costs of $70 million and $65 million at December 31, 1996 and 1995,
respectively, and investments in debt securities held to maturity at amortized
costs of $7 million and $14 million as of December 31, 1996 and 1995,
respectively. The fair value of these securities at December 31, 1996 and 1995
approximates amortized costs. As of December 31, 1996 and 1995, investments in
debt securities available-for-sale had maturities less than ten years and
investments in debt securities held to maturity had maturities less than one
year. As of December 31, 1996 and 1995, the Group's carrying amount for
investments in affiliates accounted for at equity included $25 million and $65
million, respectively, for after tax unrealized net gains on investments held by
these companies.
The Group is exposed to credit risks in the event of non-performance by
counterparties to financial instruments. For financial instruments with
institutions, the Group does not expect any counterparty to fail to meet its
obligations given the high credit ratings. Other financial instruments exposed
to credit risk consist primarily of trade receivables. These receivables are
dispersed among the countries in which the Group operates, thus limiting
concentration of such risk.
The Group performs ongoing credit evaluations of its customers and
generally does not require collateral. Letters of credit are the principal
security obtained to support lines of credit when the financial strength of a
customer is not considered sufficient. Credit losses have historically been
within management's expectations.
Note 11 - Taxes
Taxes charged to income consist of the following:
<TABLE>
<CAPTION>
Year ended December 31
---------------------------------------
(Millions of dollars)
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Taxes other than income taxes (International):
Duties, import and excise taxes $ 1,349 $ 1,660 $2,384
Other 18 29 32
------- ------- ------
Total taxes other than income taxes $ 1,367 $ 1,689 $2,416
======= ======= ======
Income taxes:
U.S. taxes :
Current $ 455 $ 24 $ 23
Deferred 19 (23) (3)
------- ------- ------
Total U.S. 474 1 20
------- ------- ------
International taxes:
Current 491 425 444
Deferred 17 41 (42)
------- ------- ------
Total International 508 466 402
------- ------- ------
Total provision for income taxes $ 982 $ 467 $ 422
======= ======= ======
</TABLE>
16
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 11 - Taxes - continued
Income taxes have been computed on an individual company basis at rates in
effect in the various countries of operation. The effective tax rate differs
from the "expected" tax rate (U.S. Federal corporate tax rate) as follows:
<TABLE>
<CAPTION>
Year ended December 31
-----------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax rate 35.0% 35.0% 35.0%
Effect of recording equity in net income
of affiliates on an after tax basis (0.7) (10.9) (8.3)
Effect of dividends received from
subsidiaries and affiliates (0.5) 2.9 4.4
Income subject to foreign taxes in excess
of U.S. statutory tax rate 8.1 8.3 6.9
Effect of sale of investment in affiliate 3.6 - -
Other (0.3) (1.1) -
------ ------ ------
Effective tax rate 45.2% 34.2% 38.0%
====== ======= =======
</TABLE>
Deferred income taxes are provided in each tax jurisdiction for temporary
differences between the financial reporting and the tax basis of assets and
liabilities. Temporary differences and tax loss carryforwards which give rise to
deferred tax liabilities (assets) are as follows:
<TABLE>
<CAPTION>
As of December 31
-----------------------
(Millions of dollars)
1996 1995
---- ----
<S> <C> <C>
Depreciation $ 337 $ 306
Miscellaneous 28 56
----- ------
Deferred tax liabilities 365 362
----- ------
Investment allowances (73) (62)
Retirement benefits (28) (29)
Tax loss carryforwards (10) (24)
Miscellaneous (25) (47)
----- ------
Deferred tax assets (136) (162)
Valuation allowance 10 17
----- ------
Net deferred taxes $ 239 $ 217
===== ======
</TABLE>
17
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 11 - Taxes - continued
Deferred taxes are classified on the combined balance sheet as current
assets of $10 million and noncurrent liabilities of $249 million as of December
31, 1996, and as current liabilities of $8 million and noncurrent liabilities of
$209 million as of December 31, 1995.
A valuation allowance has been established to adjust recorded deferred tax
assets to amounts where recoverability is more likely than not. Net income
increased by $7 million in 1996, and decreased in 1995 and 1994 by $8 million
and $3 million, respectively, for changes in the deferred tax asset valuation
allowance.
Undistributed earnings of subsidiaries and affiliates, for which no U.S.
deferred income tax provision has been made, approximated $3.0 billion as of
December 31, 1996 and $3.7 billion as of December 31, 1995. Such earnings have
been or are intended to be indefinitely reinvested, and become taxable in the
U.S. only upon remittance as dividends. It is not practical to estimate the
amount of tax that may be payable on the eventual remittance of such earnings.
Upon remittance, certain foreign countries impose withholding taxes which,
subject to certain limitations, are available for use as tax credits against the
U.S. tax liability.
Note 12 - Combined statement of cash flows
For purposes of the combined statement of cash flows, all highly liquid
debt instruments with original maturities of three months or less are considered
cash equivalents.
Changes in operating working capital consist of the following:
<TABLE>
<CAPTION>
Year ended December 31
---------------------------------
(Millions of dollars)
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Accounts and notes receivable $(235) $ 42 $ (97)
Inventories (16) (89) (37)
Accounts payable 210 15 152
Accrued liabilities 18 31 16
Estimated income taxes 16 (26) 24
----- ------ ------
Total $ (7) $ (27) $ 58
===== ====== ======
</TABLE>
Net cash provided by operating activities includes the following cash
payments for interest and income taxes:
<TABLE>
<CAPTION>
Year ended December 31
---------------------------------
(Millions of dollars)
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Interest paid (net of capitalized interest) $ 137 $ 144 $ 94
Income taxes paid 865 466 444
</TABLE>
During 1995, Caltex Australia Limited exchanged, in a non-cash investing
transaction, its petroleum refining and marketing net assets of $419 million for
an investment in Australian Petroleum Pty. Limited, an affiliate of the Group.
No significant non-cash investing or financing transactions occurred in either
1996 or 1994 .
Net cash provided by operating activities in 1996 includes income tax
payments relating to the sale of an investment in an affiliate. Proceeds from
this sale are included in net cash provided by investing activities.
18
<PAGE>
CALTEX GROUP OF COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 13 - Other
During 1996, Caltex Trading and Transport Corporation, a subsidiary of the
Group, entered into an agreement with its partner, the Government of the State
of Bahrain, ceding the Group's throughput rights in its Bahrain refining joint
venture (Bapco) in exchange for recovery of costs. Subsequent to year end, a
Memorandum of Understanding was signed whereby the Group's 40% interest in Bapco
and related assets will be sold to the Government effective April 1, 1997 at
approximately net book value. While negotiations are still in progress, the
Group believes that the sale will not have a material impact on the Group's
combined financial position or results of operations.
Note 14 - Oil and gas exploration, development and producing activities
The financial statements of Chevron Corporation and Texaco Inc. contain
required supplementary information on oil and gas producing activities,
including disclosures on affiliates at equity. Accordingly, such disclosures are
not presented herein.
19
<PAGE>
APPENDIX
DESCRIPTION OF GRAPHIC/IMAGE/ILLUSTRATION MATERIAL INCLUDED IN EXHIBIT 13 -
TEXACO INC.'S 1996 ANNUAL REPORT TO STOCKHOLDERS.
The following information is depicted in graphic/image/illustration form in
Texaco Inc.'s 1996 Annual Report to Stockholders filed as Exhibit 13 to Texaco
Inc.'s 1996 Annual Report on Form 10-K and all page references included in the
following descriptions are to the actual and complete paper format version of
Texaco Inc.'s 1996 Annual Report to Stockholders as provided to Texaco Inc.'s
stockholders:
This Appendix is separated into two parts. Part A (Items A1-A19) describes the
graphic/image/illustration material contained in the portion of Texaco Inc.'s
1996 Annual Report to Stockholders which is incorporated by reference into
Texaco Inc.'s 1996 Annual Report on Form 10-K, in response to Form 10-K Items l
and 2 - Business and Properties. Part B (Items B1-B20 describes the graphic
material contained in the portion of Texaco Inc.'s 1996 Annual Report to
Stockholders which is incorporated by reference into Texaco Inc.'s 1996 Annual
Report on Form 10-K, in response to Form 10-K Item 7 - Management's Discussion
and Analysis of Financial Condition and Results of Operations.
PART A
- ------
A1. The first item is a bar graph located on the lower left margin of page
12. The bar graph is entitled "Exploration and Production - Total
Operating Earnings" and is reflected in millions of dollars. The Y axis
depicts dollars in millions from $0 to $1,800 with $300 increments. The
X axis depicts the years 1994, 1995 and 1996. Each year's bar graph is
segmented into 2 colors representing operating earnings in the United
States (blue) and International (yellow). The operating earnings, in
millions of dollars are depicted as follows:
<TABLE>
<CAPTION>
United States International Total
------------- ------------- -----
<S> <C> <C> <C> <C>
1994 $ 414 $253 $ 667
1995 $ 293 $340 $ 633
1996 $1,123 $478 $1,601
</TABLE>
A2. The second item is a map illustration located on the bottom left of
page 13. The map illustration is entitled, "Major Projects Onshore
Louisiana and Gulf of Mexico." The map depicts the locations and names
of various Texaco upstream projects in this area of the United States.
- 1 -
<PAGE>
A3. The third item is a bar graph located on the upper right margin of page
13. The bar graph is entitled, "Lease Operating Expenses - U.S." and
is reflected in cost per barrel of oil extracted. The Y axis depicts
dollars from $0 to $5 with $1 increments. The X axis depicts the years
1994, 1995 and 1996. The lease operating expenses are depicted as
follows:
<TABLE>
<S> <C>
1994 $4.29 per barrel of oil extracted
1995 $4.01 per barrel of oil extracted
1996 $3.96 per barrel of oil extracted
</TABLE>
A4. The fourth item is a bar graph located on the lower left margin of page
14. The bar graph is entitled "Net Production of Crude Oil - Kern
River" and is reflected in thousands of barrels a day. The Y axis
depicts thousands of barrels from 0 to 100 with increments of 20. The X
axis depicts the years 1994, 1995 and 1996.
The net production is depicted as follows:
<TABLE>
<S> <C>
1994 81 Thousand barrels a day
1995 85 Thousand barrels a day
1996 94 Thousand barrels a day
</TABLE>
A5. The fifth item is a map illustration located on the bottom left of page
15. The map illustration is entitled "Major projects in the North Sea."
The map depicts the locations of various Texaco upstream projects in
the North Sea area.
A6. The sixth item is a bar graph located on the upper right margin of page
15. The bar graph is entitled "Net Production of Crude Oil and Natural
Gas Liquids - PNZ" and is reflected in thousands of barrels a day. The
Y axis depicts thousands of barrels from 0 to 100 with increments of
20. The X axis depicts the years 1994, 1995 and 1996. The net
production is depicted as follows:
<TABLE>
<S> <C>
1994 42 Thousand barrels a day
1995 59 Thousand barrels a day
1996 76 Thousand barrels a day
</TABLE>
A7. The seventh item is a pie chart located on the upper left margin of
page 16. The pie chart is entitled "1996 Capital and Exploratory
Expenditures - Upstream." The pie chart is segmented into 2 colors
depicting 1996 upstream capital and exploratory expenditures for the
U. S. (blue) and International (red) and are shown as a percentage of
the total. The legend to the pie chart lists geographically the
corresponding dollar amounts in millions. The dollar amounts and
percentages are as follows:
<TABLE>
<CAPTION>
Millions of
Dollars Percent
------------- -------
<S> <C> <C>
United States $1,243 52%
International $1,135 48%
------
Total $2,378
</TABLE>
Below the pie chart a footnote appears which states "Includes Equity in
Affiliates."
- 2 -
<PAGE>
A8. The eighth item is a pie chart located on the lower left margin of page
16. The pie chart is entitled "1997 Planned Capital and Exploratory
Expenditures - Upstream." The pie chart is segmented into 2 colors
depicting the planned 1997 upstream capital and exploratory expenditure
for the U. S. (blue) and International (red) and are shown as a
percentage of the total. The legend to the pie chart lists
geographically the corresponding dollar amounts in millions. The dollar
amounts and percentages are as follows:
<TABLE>
<CAPTION>
Millions of
Dollars Percent
--------------- -------
<S> <C> <C>
United States $1,400 48%
International $1,500 52%
------
Total $2,900
</TABLE>
Below the pie chart a footnote appears which states "Includes Equity in
Affiliates."
A9. The ninth item is a map illustration located on the bottom right of
page 16. The map illustration is entitled "Major Projects in Colombia,
Trinidad and Venezuela." The map depicts the location of a major Texaco
upstream project in each of those three countries.
A10. The tenth item is a bar graph located on the upper right margin of page
17. The bar graph is entitled "Net Production of Natural Gas Available
for Sale - Latin America" and is reflected in millions of cubic feet a
day. The Y axis depicts millions of cubic feet a day from 0 to 200 with
increments of 50. The X axis depicts the years 1994, 1995 and 1996. The
net production is depicted as follows:
<TABLE>
<S> <C>
1994 117 Million cubic feet a day
1995 127 Million cubic feet a day
1996 158 Million cubic feet a day
</TABLE>
A11. The eleventh item is a bar graph located on the lower left margin of
page 18. The bar graph is entitled "Manufacturing, Marketing and
Distribution - Total Operating Earnings" and is reflected in millions
of dollars. The Y axis depicts millions of dollars from $0 to $800 with
increments of $200. The X axis depicts the years 1994, 1995 and 1996.
Each year's graph is segmented into 2 colors representing operating
earnings in the United States (blue) and International (yellow). The
operating earnings, in millions of dollars, is depicted as follows:
<TABLE>
<CAPTION>
United States International Total
------------- ------------- -----
<S> <C> <C> <C>
1994 $257 $360 $617
1995 $121 $365 $486
1996 $207 $450 $657
</TABLE>
- 3 -
<PAGE>
A12. The twelfth item is a map illustration located on the bottom left of
page 19. The map illustration is entitled "U. S. Refineries - Texaco
and Star Enterprise." The map depicts the location of refineries
owned by Texaco (red) and Star Enterprise (yellow), a joint venture
partnership in which Texaco holds a 50% interest. There are 4 Texaco
refineries and 3 Star Enterprise refineries in the U. S. depicted as
follows:
<TABLE>
<CAPTION>
Texaco Star Enterprise
Refineries Refineries
---------- ----------
<S> <C>
Anacortes, WA Delaware City, DE
Bakersfield, CA Convent, LA
Los Angeles, CA Port Arthur, TX
El Dorado, KS
</TABLE>
A13. The thirteenth item is a bar graph located on the upper right margin of
page 19. The bar graph is entitled "Branded Gasoline Sales - U. S." and
is reflected in thousands of barrels a day. The Y axis depicts
thousands of barrels from 0 to 600 with increments of 100. The X axis
depicts the years 1994, 1995 and 1996. The sales are depicted as
follows:
<TABLE>
<S> <C>
1994 547 Thousand barrels a day
1995 545 Thousand barrels a day
1996 563 Thousand barrels a day
</TABLE>
Below the graph a footnote appears which states "Includes Star
Enterprise on a 100% basis."
A14. The fourteenth item is a pie chart located on the upper left margin of
page 20. The pie chart is entitled "1996 Capital Expenditures -
Downstream." The pie chart is segmented into 2 colors depicting 1996
downstream capital expenditures for the U. S. (blue) and International
(red) and are shown as a percentage of the total. The legend to the pie
chart lists geographically the corresponding dollar amounts in
millions. The dollar amounts and percentages are as follows:
<TABLE>
<CAPTION>
Millions of
Dollars Percent
-------- -------
<S> <C> <C>
United States $ 360 35%
International $ 658 65%
--------
Total $ 1,018
</TABLE>
Below the pie chart a footnote appears which states "Includes Equity in
Affiliates."
A15. The fifteenth item is a pie chart located on the lower left margin of
page 20. The pie chart is entitled "1997 Planned Capital Expenditures -
Downstream." The pie chart is segmented into 2 colors depicting the
planned 1997 downstream capital expenditures for the U. S. (blue) and
International (red) and are shown as a percentage of the total. The
legend to the pie chart lists geographically the corresponding dollar
amounts in millions.
The dollar amounts and percentages are as follows:
- 4 -
<PAGE>
<TABLE>
<CAPTION>
Millions of
Dollars Percent
-------- -------
<S> <C> <C>
United States $ 500 33%
International $1,000 67%
------
Total $1,500
</TABLE>
Below the pie chart a footnote appears which states "Includes Equity in
Affiliates."
A16. The sixteenth item is a bar graph located on the upper right margin of
page 21. The bar graph is entitled "Refined Product Sales - Latin
America" and is reflected in thousands of barrels a day. The Y axis
depicts thousands of barrels from 0 to 400 with increments of 100. The
X axis depicts the years 1994, 1995 and 1996.
The sales are depicted as follows:
<TABLE>
<S> <C>
1994 312 Thousand barrels a day
1995 346 Thousand barrels a day
1996 376 Thousand barrels a day
</TABLE>
A17. The seventeenth item is a bar graph located on the lower left margin of
page 22. The bar graph is entitled "Revenues from Licensed Gasification
Technology" and is reflected in millions of dollars. The Y axis depicts
millions of dollars from $0 to $40 with increments of $10. The X axis
depicts the years 1994, 1995 and 1996.
The revenues are depicted as follows:
<TABLE>
<S> <C>
1994 $14.2 Million
1995 $ 9.2 Million
1996 $30.3 Million
</TABLE>
A18. The eighteenth item is a line graph located on the lower right margin
of page 23. The line graph is entitled "Lost-Time Incidence Rate - U.S.
and Worldwide" and is reflected in number of incidents per 200,000
hours worked. The Y axis depicts the number of incidents per 200,000
hours worked from 0.0 to 0.8 with increments of 0.2. The X axis depicts
the years 1994, 1995 and 1996. Each year has 2 sets of line points
plotted representing United States (blue) and Worldwide (red). The
incidences per 200,000 hours worked are depicted as follows:
<TABLE>
<CAPTION>
United States Worldwide
------------- ---------
<S> <C> <C> <C>
1994 0.75 0.74
1995 0.59 0.58
1996 0.58 0.55
</TABLE>
- 5 -
<PAGE>
A19. The nineteenth item is a bar graph located on the lower left margin of
page 24. The bar graph is entitled "TRMI/Star Enterprise - TRI Releases
to the Environment" and is reflected in million pounds per year. The Y
axis depicts millions of pounds from 0 to 4 with increments of 1. The X
axis depicts the years 1994, 1995 and 1996. The amount of TRI releases
to the environment are depicted as follows:
<TABLE>
<S> <C>
1993 3.96 Million pounds per year
1994 3.01 Million pounds per year
1995 2.32 Million pounds per year
</TABLE>
Below the graph a footnote appears which states "1996 figures will be
reported to the EPA later in 1997."
PART B
- ------
B1. The first graph is located on the upper left margin of page 26. The bar
graph is entitled "Returns on Average Stockholders' Equity" and is
reflected in percentages. The Y axis depicts percentages from 0% to 25%
with 5% increments. The X axis depicts the years 1994, 1995 and 1996. Each
year has 2 bar graphs, one next to the other, representing rates of return
based on net income excluding special items (yellow) and rates of return
based on net income as reported (blue). The returns are depicted as
follows:
<TABLE>
<CAPTION>
Excluding
Special Items As Reported
------------- -----------
<S> <C> <C>
1994 9.2% 9.8%
1995 11.9% 7.5%
1996 16.8% 20.4%
</TABLE>
Below the graph a footnote appears which states "Returns exclude the 1995
cumulative effect of accounting change and discontinued operations."
B2. The second graph is located on the lower left margin of page 26. The bar
graph is entitled "Returns on Average Capital Employed" and is shown in
percentages. The Y axis depicts percentages from 0% to 16% with 4%
increments. The X axis depicts the years 1994, 1995 and 1996. Each year
has 2 bar graphs, one next to the other, representing rates of return
based on net income excluding special items (yellow) and rates of return
based on net income as reported (blue). The returns are depicted as
follows:
<TABLE>
<CAPTION>
Excluding
Special Items As Reported
------------- -----------
<S> <C> <C>
1994 7.7% 8.0%
1995 9.5% 6.9%
1996 12.8% 14.9%
</TABLE>
Below the graph a footnote appears which states "Returns exclude the 1995
cumulative effect of accounting change and discontinued operations."
- 6 -
<PAGE>
B3. The third graph is located on the upper right margin of page 27. The bar
graph is entitled "Revenues" and is reflected in billions of dollars. The
Y axis depicts dollars in billions from $0 to $50 with $10 increments. The
X axis depicts the years 1994, 1995 and 1996. Each years' bar graph is
segmented into 5 colors representing the sources of revenues from refined
products (blue), crude oil (green), natural gas (red), natural gas liquids
(yellow) and other revenues (including equity and services) (gray). The
revenues, in billions of dollars, for each year and segment are depicted
as follows:
<TABLE>
<CAPTION>
Natural Other Revenues
Refined Crude Natural Gas (Including Equity
Products Oil Gas Liquids and Services) Total
----------- ------- --------- ---------- ---------------------- -------
<S> <C> <C> <C> <C> <C> <C>
1994 $17.9 $ 9.8 $2.4 $1.3 $2.0 $33.4
1995 $19.4 $11.4 $2.3 $1.6 $2.1 $36.8
1996 $23.0 $15.4 $3.1 $1.9 $2.1 $45.5
</TABLE>
B4. The fourth graph is located on the lower right margin of page 27. The bar
graph is entitled "Costs and Expenses" and is reflected in billions of
dollars. The Y axis depicts dollars in billions from $0 to $50 with $10
increments. The X axis depicts the years 1994, 1995 and 1996. Each years'
bar graph is segmented into 2 colors representing purchases and other
costs (blue) and expenses (yellow). Purchases and other costs and
expenses, in billions of dollars, for each year and segment are depicted
as follows:
<TABLE>
<CAPTION>
Purchases and
Other Costs Expenses Total
------------------- ------------- -------
<S> <C> <C> <C>
1994 $23.9 $8.2 $32.1
1995 $27.2 $8.5 $35.7
1996 $34.6 $7.8 $42.4
</TABLE>
B5. The fifth graph is located on the upper right margin of page 29. The bar
graph is entitled "Exploration and Production - Total Operating Earnings"
and is reflected in millions of dollars. The Y axis depicts dollars in
millions from $0 to $1800 with $300 increments. The X axis depicts the
years 1994, 1995 and 1996. Each years' bar graph is segmented into 2
colors representing total operating earnings in the United States (blue)
and International (yellow). The total exploration and production operating
earnings, in millions of dollars, are depicted as follows:
<TABLE>
<CAPTION>
United States International Total
------------------ ---------------- --------
<S> <C> <C> <C>
1994 $ 414 $253 $ 667
1995 $ 293 $340 $ 633
1996 $1,123 $478 $ 1,601
</TABLE>
- 7 -
<PAGE>
B6. The sixth graph is located on the lower right margin of page 29. The line
graph is entitled "Average U.S. Natural Gas Selling Price-Per Quarter" and
is shown in dollars per thousand cubic feet (MCF) by quarter for the years
1994, 1995 and 1996. The X axis depicts the calendar quarters for the
years 1994, 1995 and 1996. The Y axis depicts dollars per thousand cubic
feet from $1.00 to $3.00 with $0.50 increments. The selling prices per
quarter are depicted as follows:
<TABLE>
<S> <C>
First Quarter 1994 $2.15 Per MCF
Second Quarter 1994 $1.99 Per MCF
Third Quarter 1994 $1.80 Per MCF
Fourth Quarter 1994 $1.75 Per MCF
First Quarter 1995 $1.60 Per MCF
Second Quarter 1995 $1.67 Per MCF
Third Quarter 1995 $1.52 Per MCF
Fourth Quarter 1995 $1.81 Per MCF
First Quarter 1996 $2.11 Per MCF
Second Quarter 1996 $2.07 Per MCF
Third Quarter 1996 $2.02 Per MCF
Fourth Quarter 1996 $2.54 Per MCF
</TABLE>
B7. The seventh graph is located on the upper left margin of page 30. The line
graph is entitled "Average Crude Oil Selling Prices-Per Quarter" and is
shown in dollars per barrel by quarter for the years 1994, 1995 and 1996.
The X axis depicts the calendar quarters for 1994, 1995 and 1996. The Y
axis depicts dollars per barrel from $10 to $22 with $2 increments. Each
quarter has 2 sets of points plotted represented by a blue line and a red
line graph. The blue line represents average crude oil selling prices per
barrel in the United States and the red line represents average
International crude oil selling prices per barrel. The selling prices per
quarters are depicted as follows:
<TABLE>
<CAPTION>
United States International
---------------------- ----------------------
<S> <C> <C>
First Quarter 1994 $11.02 per barrel $13.12 per barrel
Second Quarter 1994 $13.45 per barrel $14.57 per barrel
Third Quarter 1994 $14.82 per barrel $16.02 per barrel
Fourth Quarter 1994 $14.45 per barrel $15.58 per barrel
First Quarter 1995 $14.85 per barrel $16.38 per barrel
Second Quarter 1995 $15.85 per barrel $17.30 per barrel
Third Quarter 1995 $14.88 per barrel $15.45 per barrel
Fourth Quarter 1995 $14.89 per barrel $16.17 per barrel
First Quarter 1996 $16.51 per barrel $18.02 per barrel
Second Quarter 1996 $17.30 per barrel $18.41 per barrel
Third Quarter 1996 $17.93 per barrel $19.43 per barrel
Fourth Quarter 1996 $20.00 per barrel $21.96 per barrel
</TABLE>
- 8 -
B8. The eighth graph is located on the lower left margin of page 30. The bar
graph is entitled "Manufacturing, Marketing and Distribution - Total
Operating Earnings" and is reflected in millions of dollars. The Y axis
depicts dollars in millions from $0 to $800 with $200 increments. The X
axis depicts the years 1994, 1995 and 1996. Each years' bar graph is
segmented into 2 colors representing total operating earnings in the
United States (blue) and International (yellow). The total manufacturing,
marketing and distribution operating earnings, in millions of dollars, are
depicted as follows:
<TABLE>
<CAPTION>
United States International Total
------------------- ---------------- ------
<S> <C> <C> <C>
1994 $257 $360 $617
1995 $121 $365 $486
1996 $207 $450 $657
</TABLE>
B9. The ninth graph is located on the upper right margin of page 31. The
bar graph is entitled "Refined Product Sales - U.S. by Principal
Products" and is reflected in thousands of barrels a day. The Y axis
depicts thousands of barrels from 0 to 1,200 with 200 increments. The Y
axis depicts the years 1994, 1995 and 1996. Each years' bar graph is
segmented into 5 colors representing sales of gasolines (blue), middle
distillates (yellow), avjets (green), residuals (gray) and other
(orange). U. S. refined product sales, in thousands of barrels a day,
for each year and segment, are depicted as follows:
<TABLE>
<CAPTION>
Middle
Gasolines Distillates Avjets Residuals Other Total
------------- ------------ -------- ------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1994 443 182 88 51 118 882
1995 449 196 99 51 139 934
1996 499 216 123 67 131 1,036
</TABLE>
Below the graph a footnote appears which states "Includes equity in an
affiliate."
B10. The tenth graph is located on the lower right margin of page 31. The
bar graph is entitled "Refinery Input - U. S." and is shown in
thousands of barrels a day. The Y axis depicts thousands of barrels
from 0 to 1,000 with 200 increments. The X axis depicts the years 1994,
1995 and 1996. The refinery input is depicted as follows:
<TABLE>
<S> <C>
1994 673 Thousand barrels a day
1995 693 Thousand barrels a day
1996 724 Thousand barrels a day
</TABLE>
Below the graph a footnote appears which states "Includes equity in an
affiliate."
- 9 -
<PAGE>
B11. The eleventh graph is located on the upper right margin of page 33. The
bar graph is entitled "Environmental Cash Expenditures." The Y axis
depicts dollars in millions from $0 to $1200 with $200 increments. The
X axis depicts the years 1994, 1995 and 1996. Each years' bar graph is
segmented into 2 colors representing capital expenditures (blue) and
other (yellow). Environmental cash expenditures, in millions of
dollars, for each year and segment are depicted as follows:
<TABLE>
<CAPTION>
Capital
Expenditures Other Total
----------------- ------- -------
<S> <C> <C> <C>
1994 $350 $640 $990
1995 $275 $660 $935
1996 $19 $612 $803
</TABLE>
Below the graph a footnote appears which states "Includes equity in
affiliates."
B12. The twelfth graph is located on the lower right margin of page 33. The
bar graph is entitled "Environmental Cash Expenditures by Geographic
Location." The Y axis depicts dollars in millions from $0 to $1200 with
$200 increments. The X axis depicts the years 1994, 1995 and 1996. Each
years' bar graph is segmented into 2 colors representing cash
expenditures in the United States (blue) and International (yellow).
Environmental cash expenditures, in millions of dollars, for each year
and segment are depicted as follows:
<TABLE>
<CAPTION>
United States International Total
------------------- ---------------- ------
<S> <C> <C> <C>
1994 $752 $238 $990
1995 $762 $173 $935
1996 $618 $185 $803
</TABLE>
Below the graph a footnote appears which states "Includes equity in
affiliates."
- 10 -
<PAGE>
B13. The thirteenth graph is located on the upper left margin of page 34.
The pie chart is entitled "1996 Sources of Cash and Cash Equivalents"
and each source is shown as a percentage of the total. The pie chart is
segmented with 4 colors depicting the 1996 sources of cash and cash
equivalents. The four sources are operations (blue), asset sales
(orange), borrowings (green) and other sources (red). The legend to the
pie chart lists each source as well as corresponding dollar amounts in
billions. The dollar amounts and percentages are as follows:
<TABLE>
<CAPTION>
1996 Sources of Cash Billions of
and Cash Equivalents Dollars Percent
---------------------------- ------------- -----------
<S> <C> <C>
Operations $3.8 75%
Asset Sales $0.5 10%
Borrowings $0.3 6%
Other Services $0.4 9%
-----
Total $5.0
</TABLE>
B14. The fourteenth graph is located on the lower left margin of page 34.
The pie chart is entitled "1996 Uses of Cash and Cash Equivalents" and
each use is shown as a percentage of the total. The pie chart is
segmented with 4 colors depicting the 1996 uses of cash and cash
equivalents. The four uses are capital and exploratory (capex) (blue),
dividends (orange), repayment of borrowings (green) and other uses
(red). The legend to the pie chart lists each use as well as
corresponding dollar amounts in billions. The dollar amounts and
percentages are as follows:
<TABLE>
<CAPTION>
1996 Uses of Cash Billions of
and Cash Equivalents Dollars Percent
----------------------------- ------------- ----------
<S> <C> <C>
Capex $2.9 58%
Dividends $1.0 20%
Repayment of Borrowings $0.9 19%
Other Uses $0.2 3%
-----
Total $5.0
</TABLE>
B15. The fifteenth graph is located on the upper right margin of page 35.
The bar graph is entitled "Total Debt to Total Borrowed and Invested
Capital." The Y axis depicts percentages from 20% to 40% with 5%
increments. The X axis depicts the years 1994, 1995 and 1996. The
percentages are depicted as follows:
<TABLE>
<S> <C>
1994 38.5%
1995 38.0%
1996 33.6%
</TABLE>
- 11 -
<PAGE>
B16. The sixteenth graph is located on the lower right margin of page 35.
The bar graph is entitled "Total Production and Reserve Additions" and
is reflected in millions of barrels of oil equivalent. The Y axis
depicts barrels of oil equivalent, in millions, from 0 to 600 with 100
increments. The X axis depicts the years 1994, 1995 and 1996. Each year
has 2 bar graphs, one a single bar (green) representing total
production, the other bar depicts reserve additions and is segmented
into 2 colors representing extensions, discoveries and other additions
(blue) and revisions (yellow). The production and reserve additions, in
million barrels of oil equivalent, for each year and segment are
depicted as follows:
<TABLE>
<CAPTION>
Reserve Additions
---------------------------------------------------------------------------
Extensions,
Total Discoveries and Total Reserve
Production Other Additions Revisions Additions
-------------- ------------------ ------------- -----------------
<S> <C> <C> <C> <C>
1994 427 369 103 472
1995 418 398 141 539
1996 433 427 61 488
</TABLE>
Below the graph a footnote appears which states "Includes equity in an
affiliate."
B17. The seventeenth graph is located on the upper left margin of page 36.
The bar graph is entitled "Capital and Exploratory Expenditures -
Geographical" and is reflected in billions of dollars. The Y axis
depicts dollars in billions from $0 to $4 with $1 increments. The X
axis depicts the years 1994, 1995 and 1996. Each year's bar graph is
segmented into 2 colors, representing the expenditures in the United
States (blue) and International (yellow).
Capital and exploratory expenditures, in billions of dollars, for each
year and geographical location are depicted as follows:
<TABLE>
<CAPTION>
United States International Total
------------------- --------------- ------
<S> <C> <C> <C>
1994 $1.2 $1.5 $2.7
1995 $1.4 $1.7 $3.1
1996 $1.6 $1.8 $3.4
</TABLE>
Below the graph a footnote appears which states "Includes equity in
affiliates."
B18. The eighteenth graph is located on the lower left margin of page 36.
The bar graph is entitled "Capital and Exploratory Expenditures -
Functional" and is reflected in billions of dollars. The Y axis depicts
dollars in billions from $0 to $4 with $1 increments. The X axis
depicts the years 1994, 1995 and 1996. Each year's bar graph is
segmented into 2 colors, representing the expenditures relating to
exploration and production (blue) and manufacturing, marketing,
distribution and other (yellow). Capital and exploratory expenditures,
in billions of dollars, for each year and function are depicted as
follows:
- 12 -
<PAGE>
<TABLE>
<CAPTION>
Exploration Manufacturing,
and Marketing,
Production Distribution and Other Total
-------------- ---------------------- -------
<S> <C> <C> <C>
1994 $1.5 $1.2 $2.7
1995 $1.9 $1.2 $3.1
1996 $2.4 $1.0 $3.4
</TABLE>
Below the graph a footnote appears which states "Includes equity in
affiliates."
B19. The nineteenth graph is located on the upper right margin of page 39.
The bar graph is entitled "Real GDP Growth - Worldwide." The Y axis
depicts percentages from 3.0% to 4.0% with 0.2% increments. The X axis
depicts the years 1994, 1995 and 1996. The growth, in percentages, for
each year is as follows:
<TABLE>
<CAPTION>
Real GDP Growth
Worldwide
------------------
<S> <C>
1994 3.6%
1995 3.5%
1996 3.8%
</TABLE>
B20. The twentieth graph is located on the lower right margin of page 39.
The line graph is entitled "Average West Texas Intermediate Spot Prices
- Per Quarter" and is shown in dollars per barrel by quarter for the
years 1994, 1995 and 1996. The Y axis depicts the dollars per barrel
from $10 to $30 with $5 increments. The X axis depicts the calendar
quarters for the years 1994, 1995 and 1996. The spot prices per quarter
are depicted as follows:
<TABLE>
<S> <C>
First Quarter 1994 $14.84 per barrel
Second Quarter 1994 $17.81 per barrel
Third Quarter 1994 $18.49 per barrel
Fourth Quarter 1994 $17.66 per barrel
First Quarter 1995 $18.37 per barrel
Second Quarter 1995 $19.35 per barrel
Third Quarter 1995 $17.85 per barrel
Fourth Quarter 1995 $18.15 per barrel
First Quarter 1996 $19.74 per barrel
Second Quarter 1996 $21.73 per barrel
Third Quarter 1996 $22.42 per barrel
Fourth Quarter 1996 $24.67 per barrel
</TABLE>
- 13 -
FDeB:bbm
PR/96append
<PAGE>
INDEX TO EXHIBITS
The exhibits designated by an asterisk are incorporated herein by reference
to documents previously filed by Texaco Inc. with the Securities and Exchange
Commission, SEC File No. 1-27.
Exhibits
--------
<TABLE>
<S> <C>
(3.1) Copy of Restated Certificate of Incorporation of Texaco Inc., as
amended to and including November 9, 1994, including Certificate
of Designations, Preferences and Rights of Series B ESOP
Convertible Preferred Stock, Series D Junior Participating
Preferred Stock, Series F ESOP Convertible Preferred Stock and
Series G, H, I and J Market Auction Preferred Shares,
incorporated herein by reference to Texaco Inc.'s
Annual Report on Form 10-K for 1994 dated March 27, 1995. *
(3.2) Copy of By-Laws of Texaco Inc., as amended to and including
January 24, 1997.
(10(iii)(a)) Texaco Inc.'s Stock Incentive Plan, incorporated herein by reference to pages
A-1 through A-8 of Texaco Inc.'s proxy statement dated April 5, 1993. *
(10(iii)(b)) Texaco Inc.'s Stock Incentive Plan, incorporated herein by reference to pages
IV-1 through IV-5 of Texaco Inc.'s proxy statement dated April 10, 1989
and to Exhibit A of Texaco Inc.'s proxy statement dated March 29, 1991. *
(10(iii)(c)) Texaco Inc.'s Incentive Bonus Plan, incorporated herein by reference to page
IV-5 of Texaco Inc.'s proxy statement dated April 10, 1989. *
(10(iii)(d)) Description of Texaco Inc.'s Supplemental Pension Benefits Plan, incorporated
herein by reference to pages 8 and 9 of Texaco Inc.'s proxy statement dated March
17, 1981. *
(10(iii)(e)) Description of Texaco Inc.'s Revised Supplemental Pension Benefits
Plan, incorporated herein by reference to pages 24 through 27 of Texaco Inc.'s
proxy statement dated March 9, 1978. *
(10(iii)(f)) Description of Texaco Inc.'s Revised Incentive Compensation Plan,
incorporated herein by reference to pages 10 and 11 of Texaco Inc.'s proxy
statement dated March 13, 1969. *
(11) Computation of Earnings Per Share of Common Stock of Texaco Inc.
and Subsidiary Companies.
(12.1) Computation of Ratio of Earnings to Fixed Charges of Texaco on a
Total Enterprise Basis.
</TABLE>
<PAGE>
(12.2) Definitions of Selected Financial Ratios.
(13) Copy of those portions of Texaco Inc.'s 1996 Annual Report to
Stockholders that are incorporated herein by reference into this
Annual Report on Form 10-K.
(21) Listing of significant Texaco Inc. subsidiary companies and the
name of the state or other jurisdiction in which each subsidiary
was organized.
(23) Consent of Arthur Andersen LLP.
(24) Powers of Attorney for the Directors and certain Officers of
Texaco Inc. authorizing, among other things, the signing of
Texaco Inc.'s Annual Report on Form 10-K on their behalf.
(27) Financial Data Schedule.
EXHIBIT 3.2
BY-LAWS OF TEXACO INC.
A Delaware Corporation
ARTICLE I.
Stockholders.
SECTION 1. Annual Meeting. The annual meeting of stockholders shall be held
on the second Tuesday in May of each year at 10:00 A.M., or at such time of day
or on such other date in each calendar year as may be fixed by the Board of
Directors, for the election of directors and the transaction of any other
business as may properly come before the meeting.
SECTION 2. Stockholder Action; Special Meetings. Any action required or
permitted to be taken by the stockholders of the Company must be effected at a
duly called annual or special meeting of such holders and may not be effected by
any consent in writing by such holders. Except as otherwise required by law and
subject to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation, special
meetings of stockholders of the Company may be called only by the Board of
Directors pursuant to a resolution approved by a majority of the entire Board of
Directors.
SECTION 3. Notice of Meetings. Notice of each meeting of stockholders,
annual or special, stating the time and place, and, if a special meeting, the
purpose or purposes in general terms, shall be mailed no earlier than 60 days
and no later than 10 days prior to the meeting to each stockholder at the
stockholder's address as the same appears on the books of the Company.
SECTION 4. Place. Meetings of the stockholders shall be held at such place
or places as the Board of Directors may direct, the place to be specified in the
notice.
Section 5. Quorum. At any meeting of stockholders, the holders of a
majority of the voting shares issued and outstanding, being present in person or
represented by proxy, shall be a quorum for all purposes, except where otherwise
provided by statute.
SECTION 6. Adjournments. Any annual or special meeting of stockholders duly
and regularly called in accordance with these by-laws may adjourn one or more
times and no further notice of such adjourned meeting or meetings shall be
necessary. If at any annual or special meeting of stockholders a quorum shall
fail to attend in person or by proxy, a majority in interest of the stockholders
attending in person or by proxy may adjourn the meeting to another time, or to
another time and place, and there may be successive adjournments for like cause
and in like manner without further notice until a quorum shall attend. Any
business may be transacted at any such adjourned meeting or meetings which might
have been transacted at the meeting as originally called.
SECTION 7. Organization. The Chairman of the Board, or, in his absence, the
Vice Chairman, or, in their absence, the President, or, in their absence, one of
the Executive Vice Presidents, or, in their absence, one of the Senior Vice
Presidents, or, in their absence, a Vice President appointed by the
stockholders, shall call meetings of the stockholders to order and shall act as
chairman thereof. The Secretary of the Company, if present, shall act as
secretary of all meetings of the stockholders; and, in his absence, the
presiding officer may appoint a secretary.
SECTION 8. Voting. At each meeting of the stockholders, every stockholder
of record (at the closing of the transfer books if closed) shall be entitled to
vote in person or by proxy appointed by an instrument in writing subscribed by
such stockholder or by his duly authorized attorney and delivered to and filed
with the Secretary at the meeting; and each stockholder shall have one vote for
each share of stock standing in his name. Voting for directors, and upon any
question at any meeting, shall be by ballot, if demanded by any stockholder.
SECTION 9. Stockholder Proposals. Stockholders may present proper business
for stockholder action at an annual meeting by giving timely notice in writing
to the Secretary of their intention to bring such business before the meeting.
To be timely, a stockholder's notice must be delivered to, or mailed and
received at, the office of the Company in Harrison, New York, addressed to the
attention of the Secretary, not less than 60 days nor more than 90 days prior to
the first anniversary of the preceding year's annual meeting of stockholders;
provided, however, that if the date of the annual meeting is advanced more than
30 days prior to or delayed by more than 60 days after such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier than the
90th day prior to such annual meeting and not later than the close of business
on the later of the 60th day prior to such annual meeting or the 10th day
following the day on which public announcement of the date of such meeting is
first made. The stockholder's notice shall set forth (a) the name and address of
the stockholder proposing such business, (b) a brief description of the business
desired to be brought before the meeting and any material interest in such
business of such stockholder, and (c) the number of shares of the Company which
are beneficially owned by the stockholder. The chairman of the meeting may
refuse to permit any business to be brought before an annual meeting by a
stockholder without compliance with the procedure set forth in this Section 9.
* 1 *
<PAGE>
For purposes of this section, "public announcement" shall mean disclosure
in a press release reported by the Dow Jones News Service, Associated Press or a
comparable national news service or in a document publicly filed by the Company
with the Securities and Exchange Commission.
Notwithstanding the foregoing provisions of this by-law, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and the rules and regulations
thereunder with respect to matters set forth in this by-law. Nothing in this
by-law shall be deemed to affect any rights of stockholders to request inclusion
of proposals in the company's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
SECTION 10. List of Stockholders. The Secretary shall keep records from
which a list of stockholders can be compiled, and shall furnish such list upon
order of the Board of Directors.
ARTICLE II.
The Board of Directors.
SECTION 1. Number, Election and Terms. Except as otherwise fixed by or
pursuant to the provisions of Article IV of the Certificate of Incorporation
relating to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
additional directors under specified circumstances, the number of the directors
of the Company shall be fixed from time to time by the Board of Directors but
shall not be less than three. The directors, other than those who may be elected
by the holders of any class or series of stock having a preference over the
Common Stock as to dividends or upon liquidation, shall be classified, with
respect to the time for which they severally hold office, into three classes, as
nearly equal in number as possible, as determined by the Board of Directors, one
class to be originally elected for a term expiring at the annual meeting of
stockholders to be held in 1985, another class to be originally elected for a
term expiring at the annual meeting of stockholders to be held in 1986, and
another class to be originally elected for a term expiring at the annual meeting
of stockholders to be held in 1987, with each class to hold office until its
successor is elected and qualified. At each annual meeting of the stockholders
of the Company, the successors of the class of directors whose term expires at
that meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election.
SECTION 2. Newly Created Directorships and Vacancies. Except as otherwise
provided for or fixed by or pursuant to the provisions of Article IV of the
Certificate of Incorporation relating to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect directors under specified circumstances, newly created
directorships resulting from any increases in the number of directors or any
vacancies on the Board of Directors resulting from death, resignation or
disqualification, or other cause shall be filled by the affirmative vote of a
majority of the remaining directors then in office, even though less than a
quorum of the Board of Directors. Any director so elected shall stand for
election (for the balance of his term) at the next annual meeting of
stockholders, unless his term expires at such Annual Meeting. Any vacancy on the
Board of Directors resulting from removal by stockholder vote shall be filled
only by the vote of a majority of the voting power of all shares of the Company
entitled to vote generally in the election of Directors, voting together as a
single class. The affirmative vote of the holders of at least a majority of the
then outstanding shares of capital stock of the Company voting generally in the
election of Directors, voting together as a single class, shall be required to
repeal the foregoing provisions.
SECTION 3. Removal. Subject to the rights of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation to
elect Directors under specified circumstances, any director may be removed from
office, with or without cause, only by the affirmative vote of the holders of
66 2/3% of the combined voting power of the then outstanding shares of stoc
entitled to vote generally in the election of Directors, voting together as a
single class.
SECTION 4. Nominations. Subject to the rights of holders of any class or
series of stock having a preference over the Common Stock as to dividends or
upon liquidation, nominations for the election of Directors may be made by the
Board of Directors or a proxy committee appointed by the Board of Directors or
by any stockholder entitled to vote in the election of Directors generally.
However, any stockholder entitled to vote in the election of Directors generally
may nominate one or more persons for election as Directors at a meeting only if
written notice of such stockholder's intent to make such nomination or
nominations has been given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Company not later than (i) with
respect to an election to be held at an annual meeting of stockholders, 90 days
in advance of such meeting, and (ii) with respect to an election to be held at a
special meeting of stockholders for the election of Directors, the close of
business on the seventh day following the date on which notice of such meeting
is first given to stockholders. Each such notice shall set forth: (a) the name
and address of the stockholder who intends to make the nomination and of the
person or persons to be nominated; (b) a representation that the stockholder is
a holder of record of stock of the Company entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (c) a
* 2 *
<PAGE>
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had the
nominee been nominated, or intended to be nominated, by the Board of Directors;
and (e) the consent of each nominee to serve as a director of the Company if so
elected. The chairman of the meeting may refuse to acknowledge the nomination of
any person not made in compliance with the foregoing procedure.
SECTION 5. Organization Meeting of the Board. At the last regular meeting
of the Board of Directors prior to each annual meeting of stockholders, the
Board of Directors shall establish its organization, elect and appoint officers
and appoint committee members. Such action may also be taken at another place
and time fixed by written consent of the Directors.
SECTION 6. Regular Meetings. Regular meetings of the Board are fixed and
may be held without notice at the office of the Company in Harrison, New York on
the fourth Friday in each month at 9:00 A.M., or at such other time and place,
either within or without the State of Delaware, as the Board may provide by
resolution, without other notice than such resolution. If less than a quorum is
present at any meeting time and place, those present may adjourn from time to
time until a quorum shall be present, but if there shall be no quorum prior to
another regular meeting time, then such meetings of less than a quorum need not
be recorded.
SECTION 7. Special Meetings. Special meetings of the Board shall be held
whenever called by the Chairman of the Board, or, in his absence, by the Vice
Chairman of the Board, or, in their absence, by the President, or by one-third
of the Directors then in office. The person or persons authorized to call
special meetings of the Board may fix any place, either within or without the
State of Delaware, as the place for holding any special meeting. Unless
otherwise specified in the notice thereof, any business may be transacted at a
special meeting.
SECTION 8. Notice of Special Meetings. The Secretary shall mail to each
director notice of any special meeting at least two days before the meeting, or
shall telegraph or telephone such notice not later than the day before the
meeting. When all Directors are present, any business may be transacted without
any previous notice. Any director may waive notice of any meeting.
SECTION 9. Quorum. A majority of the total number of Directors, or half of
the total number when the number of Directors then in office is even, shall
constitute a quorum for the transaction of business, and a majority of those
present at the time and place of any regular or special meeting, although less
than a quorum, may adjourn the same from time to time, as provided in these
by-laws.
SECTION 10. Chairman. At all meetings of the Board, the Chairman of the
Board, or, in his absence, the Vice Chairman of the Board, or, in their absence,
the President, or, in their absence, a chairman chosen by the Directors present,
shall preside.
SECTION 11. Action without Meeting. A statement in writing, signed by all
members of the Board of Directors or the Executive Committee, shall be deemed to
be action by the Board or Committee, as the case may be, to the effect therein
expressed, and it shall be the duty of the Secretary to record such statement in
the minute books of the Company under its proper date.
ARTICLE III.
Executive Committee and Other Committees.
SECTION 1. Executive Committee. The Board of Directors shall appoint an
Executive Committee of seven or more members to serve during the pleasure of the
Board to consist of the Chairman of the Executive Committee, the Chairman of the
Board, the Vice Chairman of the Board, the President, and such additional
Directors as the Board may from time to time designate.
SECTION 2. The Chairman of the Executive Committee. The Chairman of the
Executive Committee shall be designated by the Board of Directors and shall be a
member of the Board and of the Executive Committee. He shall preside at meetings
of the Executive Committee, and shall do and perform such other things as may
from time to time by assigned to him by the Board of Directors.
SECTION 3. Vacancies. Vacancies in the Executive Committee shall be filled
by the Board.
SECTION 4. Executive Committee to Report. All action by the Executive
Committee shall be reported promptly to the Board and such action shall be
subject to review by the Board, provided that no rights of third parties shall
be affected by such review.
SECTION 5. Procedure. The Executive Committee, by a vote of a majority of
all of its members, shall fix its own times and places of meeting, shall
determine the number of its members constituting a quorum for the transaction of
business, and shall prescribe its own rules of procedure, no change in which
shall be made save by a majority vote of all of its members.
* 3 *
<PAGE>
SECTION 6. Powers. During the intervals between the meetings of the Board,
the Executive Committee shall possess and may exercise all the powers of the
Board in the management and direction of the business and affairs of the
Company, except those which by applicable statute are reserved to the Board of
Directors.
SECTION 7. Other Committees. From time to time the Board may appoint other
committees, and they shall have such powers as shall be specified in the
resolution of appointment.
ARTICLE IV.
Officers.
SECTION 1. Number. The Board of Directors shall elect the executive
officers of the Company which may include a Chairman of the Board, one or more
Vice Chairmen of the Board, a President, one or more Vice Presidents (one or
more of whom may be designated as Executive Vice Presidents or as Senior Vice
Presidents or by other designations), a General Counsel, a Secretary, a
Treasurer, a Comptroller, and a General Tax Counsel. A person may at the same
time hold, exercise and perform the powers and duties of more than one executive
officer position. In addition to the executive officers, the Board may appoint
one or more Assistant Secretaries, Assistant Treasurers and Assistant
Comptrollers and such other officers or agents as the Board may from time to
time deem necessary or desirable. All officers and agents shall perform the
duties and exercise the powers usually incident to the offices or positions held
by them, those prescribed by these by-laws, and those assigned to them from time
to time by the Board or by the Chief Executive Officer.
SECTION 2. The Chairman of the Board. The Chairman of the Board shall be a
member of the Board of Directors and of the Executive Committee. He shall
preside at meetings of the stockholders and of the Directors, and shall keep in
close touch with the administration of the affairs of the Company, shall advise
and counsel with the Vice Chairman of the Board and the President, and with
other executives of the Company and shall do and perform such other duties as
may from time to time be assigned to him by the Board of Directors or by the
Executive Committee.
SECTION 3. The Vice Chairman of the Board. The Vice Chairman of the Board
shall be a member of the Board of Directors and the Executive Committee. He
shall keep in close touch with the administration of the affairs of the Company,
shall advise and counsel with the Chairman of the Board and the President, and
with other executives of the Company, and shall do and perform such other duties
as may from time to time be assigned to him by the Board of Directors or the
Executive Committee.
SECTION 4. The President. The President shall be a member of the Board of
Directors and of the Executive Committee. He shall keep in close touch with the
administration of the affairs of the Company, shall advise and counsel with the
Chairman of the Board and the Vice Chairman of the Board and with other
executives of the Company, and shall do and perform such other duties as may
from time to time be assigned to him by the Board of Directors or the Executive
Committee. In the absence of the Chairman of the Board, he shall preside at
meetings of the stockholders and of the Directors.
SECTION 5. The Chief Executive Officer. Either the Chairman of the Board,
or the President, as the Board of Directors may designate, shall be the Chief
Executive Officer of the Company. The officer so designated shall have, in
addition to the powers and duties applicable to the office set forth in either
Section 2 or 4 of this Article IV, general active supervision over the business
and affairs of the Company and over its several officers, agents, and employees,
subject, however, to the direction and control of the Board or the Executive
Committee. The Chief Executive Officer shall see that all orders and resolutions
of the Board or the Executive Committee are carried into effect, and, in
general, shall perform all duties incident to the position of Chief Executive
Officer and such other duties as may from time to time be assigned by the Board
or the Executive Committee.
SECTION 6. The Executive Vice Presidents. The Executive Vice Presidents
shall keep in touch with the administration of the affairs of the Company, shall
advise and counsel with the Chairman of the Board, the Vice Chairman of the
Board and with the President and with other executives of the Company, and shall
do and perform such other duties as from time to time may be assigned to them by
the Board of Directors, the Executive Committee, the Chairman of the Board, the
Vice Chairman of the Board, or the President. In the absence of the Chairman of
the Board, the Vice Chairman of the Board and the President, the senior
Executive Vice President shall preside at meetings of the stockholders.
SECTION 7. The Senior Vice Presidents. Each Senior Vice President shall
have such powers as may be conferred upon him by the Board of Directors, and
shall perform such duties as from time to time may be assigned to him by the
Board of Directors, the Executive Committee, the Chairman of the Board, the Vice
Chairman of the Board, or the President.
SECTION 8. The Vice Presidents. Each Vice President shall have such powers
as may be conferred upon him by the Board of Directors, and shall perform such
duties as from time to time may be assigned to him by the Board of Directors,
the Executive Committee, the Chairman of the Board, the Vice Chairman of the
Board, or the President.
SECTION 9. The General Counsel. The General Counsel shall have charge of
all the legal affairs of the Company and shall exercise supervision over its
contract relations.
* 4 *
<PAGE>
SECTION 10. The Secretary. The Secretary shall keep the minutes of all
meetings of the stockholders and the Board of Directors in books provided for
the purpose. He shall attend to the giving and serving of all notices for the
Company. He shall sign with the Chairman of the Board, the Vice Chairman of the
Board, the President, and Executive Vice President, a Senior Vice President, or
a Vice President, such contracts as may require his signature, and shall in
proper cases affix the seal of the Company thereto. He shall have charge of the
certificate books and such other books and papers as the Board of Directors may
direct. He shall sign with the Chairman of the Board, the President, or a Vice
President certificates of stock, and he shall in general perform all the duties
incident to the Office of Secretary, subject to the control of the Board, and
shall perform such other duties as from time to time may be assigned to him by
the Board of Directors, the Executive Committee, the Chairman of the Board, the
Vice Chairman of the Board, or the President. Any Assistant Secretary may, in
his own name, perform any duty of the Secretary, when so requested by the
Secretary or in the absence of that officer, and may perform such duties as may
be prescribed by the Board. In the absence of the Secretary and of all Assistant
Secretaries, minutes of any meetings may be kept by a Secretary pro tem,
appointed for that purpose by the presiding officer.
SECTION 11. The Treasurer. The Treasurer shall have charge and custody of
and be responsible for all the funds and securities of the Company, and may
invest the same in any securities as may be permitted by law; designate
depositories in which all monies and other valuables to the credit of the
Company may be deposited; render to the Board, or any committee designated by
the Board, whenever the Board or such committee may require, an account of all
transactions as Treasurer; and in general perform all the duties of the office
of Treasurer and such other duties as from time to time may be assigned by the
Chairman of the Board, the Vice Chairman of the Board, the President, the
officer of the Company who may be designated Chief Financial Officer, and the
Board of Directors. In case one or more Assistant Treasurers be appointed, the
Treasurer may delegate to them the authority to perform such duties as the
Treasurer may determine.
SECTION 12. The Comptroller. The Comptroller shall be the principal
accounting officer of the corporation; shall have charge of the Company's books
of accounts, records and auditing, shall ensure that the necessary internal
controls exist within the Company to provide reasonable assurance that the
Company's assets are safeguarded and that financial records are maintained and
publicly disclosed in accordance with generally accepted accounting principles;
and in general perform all the duties incident to the office of Comptroller and
such other duties as from time to time may be assigned by the Chairman of the
Board, the Vice Chairman of the Board, the President, the officer of the Company
who may be designated Chief Financial Officer, and the Board of Directors. In
case one or more Assistant Comptrollers be appointed, the Comptroller may
delegate to them such duties as the Comptroller may determine.
SECTION 13. The General Tax Counsel. The General Tax Counsel shall have
charge of all the tax affairs of the Company.
SECTION 14. Tenure of Officers: Removal. All officers elected or appointed
by the Board shall hold office until their successor is elected or appointed and
qualified, or until their earlier resignation or removal. All such officers
shall be subject to removal, with or without cause, at any time by the
affirmative vote of a majority of the whole Board.
ARTICLE V.
Indemnification.
SECTION 1. Right to Indemnification. The Company shall indemnify, defend
and hold harmless any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, investigative or other, including
appeals, by reason of the fact that he is or was a director, officer or employee
of the Company, or is or was serving at the request of the Company as a
director, officer or employee of any corporation, partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in an official
capacity as a director, officer or employee or in any other capacity while
serving as a director, officer or employee, to the fullest extent authorized by
the Delaware General Corporation Law, as the same exists or may hereafter be
amended, (but, in the case of any such amendment, only to the extent that such
amendment permits the Company to provide broader indemnification rights than
said Law permitted the Company to provide prior to such amendment) against all
expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith;
provided, however, that except as provided in Section 2 hereof with respect to
proceedings seeking to enforce rights to indemnification, the Company shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if the proceeding (or
part thereof) was authorized by the Board of Directors of the Company.
The right to indemnification conferred in this Article shall be a contract
right and shall include the right to be paid by the Company expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that if required by law at the time of such payment, the payment of
such expenses incurred by a director or
* 5 *
<PAGE>
officer in his capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of such proceeding, shall be made only upon delivery to
the Company of an undertaking, by or on behalf of such director or officer to
repay all amounts so advanced if it should be determined ultimately that such
director or officer is not entitled to be indemnified under this Section or
otherwise.
"Employee." as used herein, includes both an active employee in the
Company's service as well as a retired employee who is or has been a party to a
written agreement under which he might be, or might have been obligated to
render services to the Company.
SECTION 2. Right of Claimant to Bring Suit. If a claim under Section 1 is
not paid in full by the Company within sixty days or, in cases of advances of
expenses, twenty days, after a written claim has been received by the Company,
the claimant may at any time thereafter bring suit against the Company to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking has been tendered to the
Company) that the claimant has not met the standards of conduct which make it
permissible under the Delaware General Corporation Law for the Company to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Company. Neither the failure of the Company (including
its Board of Directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Company (including its Board
of Directors, independent legal counsel or its stockholders) that the claimant
had not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that claimant had not met the applicable standard
of conduct. The Company shall be precluded from asserting in any judicial
proceeding commenced pursuant to this Article that the procedures and
presumptions of this Article are not valid, binding and enforceable and shall
stipulate in any such proceeding that the Company is bound by all the provisions
of this Article.
SECTION 3. Non-Exclusivity and Survival. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article (a) shall apply to acts or omissions
antedating the adoption of this by-law, (b) shall be severable, (c) shall not be
exclusive of other rights to which any director, officer or employee may now or
hereafter be entitled, (d) shall continue as to a person who has ceased to be
such director, officer or employee and (e) shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE VI.
Capital Stock.
SECTION 1. Form and Execution of Certificates. The certificates of shares
of the capital stock of the Company shall be in such form as shall be approved
by the Board. The certificates shall be signed by the Chairman of the Board, the
President, or a Vice President, and the Secretary or an Assistant Secretary.
Section 2. Certificates to be Entered. Certificates shall be consecutively
numbered, and the names of the owners, the number of shares and the date of
issue, shall be entered in the books of the Company.
SECTION 3. Old Certificates to be Canceled. Except in the case of lost or
destroyed certificates, and in that case only upon performance of such
conditions as the Board may prescribe, no new certificate shall be issued in
lieu of a former certificate until such former certificate shall have been
surrendered and canceled.
Section 4. Transfer of Shares. Shares shall be transferred only on the
books of the Company by a holder thereof in person or by his attorney appointed
in writing, upon the surrender and cancellation of certificates for a like
number of shares.
SECTION 5. Regulations. The Board may make such rules and regulations as it
may deem expedient concerning the issue, transfer and registration of
certificates of stock of the Company.
Section 6. Registrar. The Board may appoint a registrar of transfers and
may require all certificates to bear the signature of such registrar.
SECTION 7. Closing of Transfer Books. If deemed expedient by the Board, the
stock books and transfer books may be closed for the meetings of the
stockholders, or for other purposes, during such periods as from time to time
may be fixed by the Board, and during such periods no stock shall be
transferable on said books.
SECTION 8. Dates of Record. If deemed expedient by the Board, the Directors
may fix in advance, a date, not exceeding 60 days preceding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting or entitled to receive payment of any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of any such change,
conversion or exchange of capital stock, and in such case only such stockholders
* 6 *
<PAGE>
as shall be stockholders of record on the date so fixed shall be entitled to
such notice of, and to vote at, such meeting, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such rights, as
the case may be, notwithstanding any transfer of any stock on the books of the
Company after any such record date fixed as aforesaid.
SECTION 9. Rights to Purchase Securities. The Company shall not, without
either the prior approval of a majority of the total number of shares then
issued and outstanding and entitled to vote or the receipt by the Company of a
favorable opinion issued by a nationally recognized investment banking firm
designated by the Committee of Equity Security Holders of Texaco Inc. appointed
in the Company's jointly administered chapter 11 case in the United States
Bankruptcy Court for the Southern District of New York or its last chairman (or
his designee) to the effect that the proposed issuance is fair from a finance
point of view to the stockholders of the Company issue to its stockholders
generally (i) any warrant or other right to purchase any security of the
Company, any successor thereto or any other person or entity or (ii) any
security of the Company containing any such right to purchase, which warrant,
right or security (a) is exercisable, exchangeable or convertible, based or
conditioned in whole or in part on (I) a change of control of the Company or
(II) the owning or holding of any number or percentage of outstanding shares or
voting power or any offer to acquire any number of shares or percentage of
voting power by any entity, individual or group of entities and/or individuals
or (b) discriminates among holders of the same class of securities (or the class
of securities for which such warrant or right is exercisable or exchangeable) of
the Company or any successor thereto. The affirmative vote of the holders of at
least a majority of the then outstanding shares of capital stock of the Company
voting generally in the election of Directors, voting together as a single
class, shall be required to repeal the foregoing provisions.
ARTICLE VII
Fair Price.
A. Vote Required for Certain Business Combinations.
1. Higher Vote for Certain Business Combinations. In addition to any
affirmative vote required by law or the Certificate of Incorporation, and
except as otherwise expressly provided in Section B of this Article VII:
a. any merger or consolidation of the Company or any Subsidiary
(as hereinafter defined) with (i) any Interested Stockholder (as
hereinafter defined) or (ii) any other person (whether or not itself an
Interested Stockholder) which is, or after such merger or consolidation
would be, an Affiliate (as hereinafter defined) of an Interested
Stockholder; or
b. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
any Interested Stockholder or any Affiliate of any Interested
Stockholder of any assets of the Company or any Subsidiary having an
aggregate Fair Market Value of $100 million or more; or
c. the issuance or transfer by the Company or any Subsidiary (in
one transaction or a series of transactions) of any securities of the
Company or any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate Fair Market Value of $100 million or more; or
d. the adoption of any plan or proposal for the liquidation or
dissolution of the Company proposed by or on behalf of an Interested
Stockholder or any Affiliate of any Interested Stockholder; or
e. any reclassification of securities (including any reverse stock
split), or recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Stockholder) which has the effect, directly or indirectly,
of increasing the proportionate share of the outstanding shares of any
class of equity or convertible securities of the Company or any
Subsidiary which is directly or indirectly owned by any Interested
Stockholder or any Affiliate of any Interested Stockholder;
shall require the affirmative vote of the holders of at least 80% of the voting
power of the then outstanding shares of capital stock of the Company entitled to
vote generally in the election of Directors (the "Voting Stock"), voting
together as a single class (it being understood that for purposes of this
Article VII, each share of the Voting Stock shall have the number of votes
granted to it pursuant to Article IV of the Certificate of Incorporation). Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise.
2. Definition of "Business Combination". The term "Business
Combination" as used in this Article VII shall mean any transaction
which is referred to in any one or more of clauses (a) through (e) of
paragraph 1 of this Section A.
B. When Higher Vote is Not Required. The provisions of Section A of this
Article VII shall not be applicable to any particular Business Combination, and
such Business Combination shall require only such affirmative vote as is
required by law and any provision of the Certificate of Incorporation, if all of
the conditions specified in either of the following paragraphs 1 and 2 are met:
* 7 *
<PAGE>
1. Approval by Disinterested Directors. The Business Combination
shall have been approved by a majority of the Disinterested Directors (as
hereinafter defined).
2. Price and Procedure Requirements. All of the following conditions
shall have been met:
a. The aggregate amount of the cash to be received per share by
holders of Common Stock in such Business Combination shall be at least
equal to the higher of the following:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any shares of Common
Stock acquired by it (a) within the two-year period immediately
prior to the first publication announcement of the proposal of the
Business Combination (the "Announcement Date") or (b) in the
transaction in which it became an Interested Stockholder,
whichever is higher; and
(ii) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (such latter date is
referred to in this Article VII as the "Determination Date"),
whichever is higher.
b. The aggregate amount of the cash to be received per share by
holders of shares of any other class of outstanding Voting Stock
shall be at least equal to the highest of the following (it being
intended that the requirements of this paragraph 2b shall be required
to be met with respect to every class of outstanding Voting Stock,
whether or not the Interested Stockholder has previously acquired
any shares of a particular class of Voting Stock):
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any shares of such
class of Voting Stock acquired by it (a) within the two-year
period immediately prior to the Announcement Date or (b) in the
transaction in which it became an Interested Stockholder,
whichever is higher;
(ii) (if applicable) the highest preferential amount per share
to which the holders of shares of such class of Voting Stock are
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company; and
(iii) the Fair Market Value per share of such class of Voting
Stock on the Announcement Date or on the Determination Date,
whichever is higher.
c. The consideration to be received by holders of a particular
class of outstanding Voting Stock (including Common Stock) shall
be in cash. The price determined in accordance with paragraphs
2a and 2b of this Section B shall be subject to appropriate adjustment
in the event of any stock dividend, stock split, combination of shares
or similar event.
d. After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination:
(i) except as approved by a majority of the Disinterested Directors,
there shall have been no failure to declare and pay at the regular date
therefor any full quarterly dividends (whether or not cumulative) on
the outstanding Preferred Stock; (ii) there shall have been (a) no
reduction in the annual rate of dividends paid on the Common Stock
(except as necessary to reflect any subdivision of the Common Stock),
except as approved by a majority of the Disinterested Directors, and
(b) an increase in such annual rate of dividends as necessary to
reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which has
the effect of reducing the number of outstanding shares of the Common
Stock unless the failure so to increase such annual rate is approved by
a majority of the Disinterested Directors; and (iii) such Interested
Stockholder shall have not become the beneficial owner of any
additional shares of Voting Stock except as part of the transaction
which results in such Interested Stockholder becoming an Interested
Stockholder.
e. After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages
provided by the Company, whether in anticipation of or in connection
with such Business Combination or otherwise.
f. A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules or
regulations) shall be mailed to public stockholders of the Company at
least 30 days prior to the consummation of such Business Combination
(whether or not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions).
C. Vote Required for Certain Stock Repurchases. In addition to any other
requirement of the Certificate of Incorporation, the affirmative vote of the
holders of at least 50% of the Voting Stock (other than Voting Stock
beneficially owned by a Selling Stockholder (as hereinafter defined)), shall be
required before the Company purchases any outstanding shares of Common Stock at
a price above the Market Price (as hereinafter defined) from a person actually
known by the Company to be a Selling Stockholder, unless the purchase is made by
the Company (a) on the
* 8 *
<PAGE>
same terms and as a result of an offer made generally to all holders of Common
Stock or (b) pursuant to statutory appraisal rights.
D. Certain Definitions. For the purpose of this Article VII:
1. A "person" shall mean any individual, firm, corporation or
other entity.
2. "Interested Stockholder" shall mean any person (other than the
Company or any Subsidiary) who or which:
a. is the beneficial owner, directly or indirectly, of more
than 20% of the voting power of the outstanding Voting Stock; or
b. is an Affiliate of the Company and at any time within
the two-year period immediately prior to the date in question
was the beneficial owner, directly or indirectly, of 20% or more
of the voting power of the then outstanding Voting Stock; or
c. is an assignee of or has otherwise succeeded to any shares
of Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by
any Interested Stockholder, if such assignment or succession shall
have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning of
the Securities Act of 1933.
3. A person shall be a "beneficial owner" of any Voting Stock:
a. which such person or any of its Affiliates or Associates
(as hereinafter defined) beneficially owns directly or
indirectly; or
b. which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding; or
c. which are beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates
or Associates has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any
shares of Voting Stock.
4. For the purposes of determining whether a person is an
Interested Stockholder pursuant to paragraph 2 of this Section D,
the number of shares of Voting Stock deemed to be outstanding
shall include shares deemed owned through application of paragraph 3
of this Section D but shall not include any other shares which may
be issuable pursuant to any agreement, arrangement or understanding,
or upon exercise of conversion rights, warrants or options, or
otherwise.
5. "Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
January 1, 1988.
6. "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the
Company; provided, however, that for the purposes of the definition of
Interested Stockholder set forth in paragraph 2 of this Section D, the
term "Subsidiary" shall mean only a corporation of which a majority of
each class of equity security is owned, directly or indirectly, by the
Company.
7. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with the Interested Stockholder and was a
member of the Board of Directors prior to the time that the Interested
Stockholder became an Interested Stockholder, and any successor of a
Disinterested Director who is unaffiliated with the Interested
Stockholder and is recommended to succeed a Disinterested Director by a
majority of Disinterested Directors then on the Board of Directors.
8. "Fair Market Value" means (a) in the case of the stock, the
highest closing sale price during the 30-day period immediately
preceding the date in question of a share of such stock on the
Composite Tape for the New York Stock Exchange-Listed Stocks, or, if
such stock is not listed on such Exchange, on the principal United
States securities exchange registered under the Securities Exchange Act
of 1934 on which such stock is listed, or, if such stock is not listed
on any such exchange, the highest closing bid quotation with respect to
a share of such stock during the 30-day period preceding the date in
question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or if no such
quotations are available, the fair market value on the date in question
of a share of such stock as determined by the Board of Directors in
good faith; and (b) in the case of property other than cash or stock,
the fair market value of such property on the date in question as
determined by a majority of the Disinterested Directors.
9. "Selling Stockholder" means any person who or which is the
beneficial owner of in the aggregate more than 1% of the outstanding
shares of Common Stock and who or which has purchased or agreed to
purchase any of such shares within the most recent two-year period and
who sells or proposes to sell Common Stock in a transaction requiring
the affirmative vote provided for in Section C of this Article VII.
10. "Market Price" means the highest sale price on or during the
period of five trading days immediately preceding the date in question
of a share of such stock on the Composite Tape for New York Stock
Exchange-
* 9 *
<PAGE>
Listed Stock, or if such stock is not quoted on the Composite
Tape on the New York Stock Exchange, or, if such stock is not listed on
such Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such
stock is listed, or, if such stock is not listed on any such exchange,
the highest closing bid quotation with respect to a share of stock on
or during the period of five trading days immediately preceding the
date in question on the National Association of Securities Dealers,
Inc. Automated Quotations System or any system then in use, or if no
such quotations are available, the fair market value on the date in
question of a share of such stock as determined by a majority of the
Disinterested Directors.
E. Powers of the Board of Directors. A majority of the Directors shall have
the power and duty to determine for the purposes of this Article VII, on the
basis of information known to them after reasonable inquiry, (1) whether a
person is an Interested Stockholder, (2) the number of shares of Voting Stock
beneficially owned by any person, (3) whether a person is an Affiliate or
Associate of another, (4) whether the assets which are the subject of any
Business Combination have, or the consideration to be received for the issuance
or transfer of securities by the Company or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $100 million or more. A
majority of the Directors shall have the further power to interpret all of the
terms and provisions of this Article VII.
F. No Effect on Fiduciary Obligations of Interested Stockholders. Nothing
contained in this Article VII shall be construed to relieve any Interested
Stockholder from any fiduciary obligation imposed by law.
G. Amendment, Repeal, etc. Notwithstanding any other provisions of the
Certificate of Incorporation or these by-laws (and notwithstanding the fact that
a lesser percentage may be specified by law, the Certificate of Incorporation or
these by-laws) the affirmative vote of the holders of at least a majority of
then outstanding shares of capital stock of the Company voting generally in the
election of Directors, voting together as a single class shall be required to
repeal the foregoing provisions of this Article VII.
ARTICLE VIII.
Seal.
The seal of the Company shall be in circular form containing the name of
the Company around the margin, with a five pointed star in the center embodying
a capital "T".
ARTICLE IX.
By-Law Amendments.
Subject to the provisions of the Certificate of Incorporation, these
by-laws may be altered, amended or repealed at any regular meeting of the
stockholders (or at any special meeting thereof duly called for that purpose) by
a majority vote of the shares represented and entitled to vote at such meeting;
provided that in the notice of such special meeting notice of such purpose shall
be given. Subject to the laws of the State of Delaware, the Certificate of
Incorporation and these by-laws, the Board of Directors may by majority vote of
those present at any meeting at which a quorum is present amend these by-laws,
or enact such other by-laws as in their judgment may be advisable for the
regulation of the conduct of the affairs of the Company.
---------
I, .....Robert E. Koch......... Assistant Secretary of Texaco Inc.,
a Delaware corporation, do hereby certify that the above and foregoing is a
true and correct copy of the by-laws of said Company as amended to January 24,
1997 and now in effect.
Dated Harrison, N.Y March 27, 1997 .........R.E. Koch..........
Assistant Secretary
* 10 *
EXHIBIT 11
<TABLE>
<CAPTION>
TEXACO INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Millions of dollars, except per share amounts)
Primary Net Income Per Common Share 1996 1995 1994
- ----------------------------------- ---- ---- ----
<S> <C> <C> <C>
Net income from continuing operations, before
cumulative effect of accounting change $ 2,018 $ 728 $ 979
Net loss from discontinued operations -- -- (69)
Cumulative effect of accounting change -- (121) --
------- ------- -------
Net income 2,018 607 910
Less: Preferred stock dividend requirements (58) (60) (91)
------- ------- -------
Primary net income available for common stock $ 1,960 $ 547 $ 819
======= ======= =======
Average number of primary common shares outstanding
for computation of earnings per share (thousands) 260,717 259,983 258,813
======= ======= =======
Primary net income per common share $ 7.52 $ 2.10 $ 3.17
======= ======= =======
Fully Diluted Net Income Per Common Share
Net income $ 2,018 $ 607 $ 910
Less: Preferred stock dividend requirements of
non-dilutive and anti-dilutive issues and
adjustments to net income associated with
dilutive securities (24) (60) (90)
------- ------- -------
Fully diluted net income $ 1,994 $ 547 $ 820
======= ======= =======
Average number of primary common shares outstanding
for computation of earnings per share (thousands) 260,717 259,983 258,813
Additional shares outstanding assuming full conversion of
dilutive convertible securities into common stock (thousands):
Convertible debentures 145 147 148
Series B ESOP Convertible Preferred Stock 9,438 -- --
Other 612 408 69
------- ------- -------
Average number of fully diluted common
shares outstanding for computation of
earnings per share (thousands) 270,912 260,538 259,030
======= ======= =======
Fully diluted net income per common share $ 7.36 $ 2.10 $ 3.17
======= ======= =======
</TABLE>
EXHIBIT 12.1
<TABLE>
<CAPTION>
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
OF TEXACO ON A TOTAL ENTERPRISE BASIS (UNAUDITED)
FOR EACH OF THE FIVE YEARS ENDED DECEMBER 31, 1996 (a)
(in millions of dollars)
Years Ended December 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <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........ $4,215 $1,201 $1,409 $1,392 $1,707
Dividends from less than 50% owned companies
more or (less) than equity in net income.............. (4) 1 (1) (8) (9)
Minority interest in net income.......................... 72 54 44 17 18
Previously capitalized interest charged to
income during the period.............................. 27 33 29 33 30
------ ------ ------ ------ ------
Total earnings................................... 4,310 1,289 1,481 1,434 1,746
------ ------ ------ ------ ------
Fixed charges:
Items charged to income:
Interest charges.................................... 551 614 594 546 551
Interest factor attributable to operating
lease rentals.................................. 129 110 118 91 94
Preferred stock dividends of subsidiaries
guaranteed by Texaco Inc....................... 35 36 31 4 --
------ ------ ------ ------ ------
Total items charged to income.................... 715 760 743 641 645
Interest capitalized.................................. 16 28 21 57 109
Interest on ESOP debt guaranteed by Texaco Inc........ 10 14 14 14 18
------ ------ ------ ------ ------
Total fixed charges.............................. 741 802 778 712 772
------ ------ ------ ------ ------
Earnings available for payment of fixed charges.......... $5,025 $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........................... 6.79 2.55 2.86 2.91 3.10
====== ====== ====== ====== ======
<FN>
(a) Excludes discontinued operations.
</FN>
</TABLE>
EXHIBIT 12.2
DEFINITIONS OF SELECTED FINANCIAL RATIOS
CURRENT RATIO
Current assets divided by current liabilities.
RETURN ON AVERAGE STOCKHOLDERS' EQUITY
Net income divided by average stockholders' equity. Average
stockholders' equity is computed using the average of the monthly
stockholders' equity balances.
RETURN ON AVERAGE CAPITAL EMPLOYED
Net income plus minority interest plus after-tax interest expense
divided by average capital employed. Capital employed consists of
stockholders' equity, total debt and minority interest. Average capital
employed is computed on a four-quarter average basis.
TOTAL DEBT TO TOTAL BORROWED AND INVESTED CAPITAL
Total debt, including capital lease obligations, divided by total debt
plus minority interest liability and stockholders' equity.
EXHIBIT 13
EXPLORATION
AND PRODUCTION
ITEM A1
Exploration and
Production -- Total
Operating Earnings
MILLIONS OF DOLLARS
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A1.]
TEXACO'S UPSTREAM OPERATIONS form the foundation for our growth strategies as a
financially successful energy company in the 21st century. Our dynamic and
balanced asset portfolio is comprised of exploration and/or production (E&P)
activities in 25 countries on six continents.
As we align our worldwide E&P businesses to become more nimble and efficient,
our strategies remain constant: extract maximum value from our core producing
assets; leverage technology and alliances; and invest in growth opportunities to
increase shareholder value.
Between 1997 and 2001, Texaco plans to spend 65% of our $24.3 billion
capital and exploratory budget on upstream activities to grow production and
seize new opportunities.
Higher oil and natural gas prices, growth in worldwide production, and
rigorous expense control contributed to increased 1996 upstream performance.
Total upstream operating earnings increased 153% over the previous year, and
worldwide production rose 3% over 1995. We replaced worldwide combined liquids
and gas production at a rate of 113% and continued to grow our asset base for
the future.
Increased exploratory activity and lease acquisitions in 1996 raised our
per-barrel finding and development costs to $4.89. For the three-year period,
1994-1996, our costs were a competitive $3.89. We lowered 1996 lease operating
expenses per barrel of oil equivalent from $4.01 to $3.96.
To continue the strong 1996 performance of our upstream units and to drive
our growth strategies, we have reorganized our upstream operations and formed
the Worldwide Exploration and Production unit, effective January 1, 1997. With
four key units - Exploration, North America Production, International Production
and New Business Development - the global team is dedicated to identifying new
opportunities and squeezing more value out of our core assets through technology
and cost efficiencies.
PROFITABLE PRODUCTION LEADS U.S. UPSTREAM EARNINGS RECORDS
Texaco's U.S. upstream operations earned a record $1.1 billion, helped by strong
oil and gas prices, production growth and continuing expense control. Return on
capital employed rose from 15% in 1995 to 24% in 1996.
In the U.S., we produced 667,000 barrels of oil equivalent daily in 1996,
2.5% above 1995 levels. Our daily increase of 16,000 barrels of
Exploration and Production
12
<PAGE>
ITEM A2
Major projects onshore Louisiana & Gulf of Mexico
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A2.]
ITEM A3
Lease Operating
Expenses -- U.S.
COST PER BARREL OF OIL EXTRACTED
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A3.]
oil equivalent ranked among the best of our peer companies.
Higher oil prices and technology triggered an industry-wide increase in
upstream activity in 1996. Despite the rising cost of rig leases, fuel and
services, Texaco continued to contain costs through effective teamwork and
alliances. Since 1993, we have lowered our U.S. lease operating expenses by
$0.78 per barrel, exceeding our target of cutting $0.50 per barrel.
Texaco people understand our goals and strategies. Teamwork and technology
application, combined with swift execution of focused plans, contributed to
results such as those in our New Orleans-based Onshore Region. There, teams
added new value to some of our longest-producing assets by designing and
implementing a program to revitalize Texaco's fields in the coastal waters of
Louisiana. Additional capital, better technologies and our multi-year investment
commitment to revitalize properties in Louisiana have helped us pump more and
more oil out of these mature coastal fields.
Using 3-D seismic surveys and improved data-processing techniques, our
geoscientists found large, untapped reserves of hydrocarbons in several mature
fields in South Louisiana where we have well-established pipeline infrastructure
and gas gathering systems. In 1996, discovery of a new reservoir in our Lake
Barre field in Terrebonne Bay pushed Lake Barre's oil production to a 15-year
high.
For our Onshore Region, the aggregate success of its teams has turned what
was a marginal business in 1994 into a major earnings contributor.
DRILLING MORE AND DRILLING DEEPER
[Call-out language appears top of page.]
Our aggressive lease-acquisition
program in the deepwater
Gulf of Mexico increased our
acreage in this important area
of exploration.
Beyond the Continental Shelf in the Gulf of Mexico, we are appraising and
developing Petronius, Gemini and Fuji - three deepwater discoveries announced in
late 1995. We also moved from fifth to third place in deepwater lease-acreage
position versus our competitors. With the 1996 acquisition of 149 new leases in
water depths greater than 1,300 feet, we now have 271 exploratory leases and 87
undrilled prospects in the Gulf.
We expect to bring Texaco-operated Petronius (50% Texaco) onstream in early
1999, with peak daily production rates of up to 60,000 barrels of oil and 100
million cubic feet of natural gas, less than four years after the field's
initial discovery. Texaco teams, working side-by-side with our partner, Marathon
Oil, and contractors began constructing the 1,870-foot compliant tower for the
drilling and production platform in more than 1,700 feet of water. We expect
development work on another recent deepwater discovery, Arnold, to be completed
in 1998.
Our alliance strategy has helped us overcome a hurdle faced by many
competitors in the deepwater Gulf: a drilling rig shortage created by heavy
demand for this equipment.
Exploration and Production
13
<PAGE>
ITEM A4
Net Production of
Crude Oil -- Kern River
THOUSANDS OF BARRELS A DAY
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A4.]
Anticipating the tight market for drilling rigs, we contracted with Diamond
Offshore Drilling, Inc., to upgrade an existing semi-submersible drilling rig,
outfitting it for drilling in water depths of up to 4,500 feet. The contract
gives us exclusive use of the rig, rechristened Ocean Star, for three years. The
rig will begin drilling delineation wells on Texaco's Fuji prospect in early
1997 to determine the extent of the reserves. The Ocean Star will enable us to
continue exploration of other high-potential deepwater prospects through the end
of the century.
LEADING TECHNOLOGY ALLIANCES AND APPLICATIONS
[Call-out language appears top of this page.]
Our geoscientists, research
scientists and engineers partner
with operating units throughout
the company, applying
technology to business needs.
Technology alliances help us reduce costs and manage risk. As we share costs and
innovations with partners, our people focus on technology application.
Project DeepStar, for example, is helping the industry manage the risk and
minimize the costs of producing oil and gas in deep water. In 1992, Texaco led
DeepStar's formation as a technology consortium of oil and gas companies,
vendors, contractors and government agencies. DeepStar's mission is joint
technology development for producing hydrocarbon reserves in 3,000 to 6,000 feet
of water.
We are applying DeepStar advances in drilling, subsea completion and
production systems in developing prospects such as Gemini and Fuji - both in
water depths greater than 3,300 feet. Following successful tests on the Gemini
(60% Texaco) discovery well in 1996, we accelerated development plans, drawing
heavily on DeepStar solutions to the problem of pushing oil and gas up a steep,
underwater slope to existing production platforms in the Continental Shelf area.
We began delineation drilling on Gemini in late 1996.
Just as DeepStar finds solutions to industry-wide deepwater challenges, our
own Technology Division provides solutions when and where they are needed by our
operating units. Technology solutions are shared and integrated across
disciplines, across organizations and across the globe. For example, our
deepwater exploration and development teams in the Gulf of Mexico draw on the
technology and expertise of teams working in the U.K. North Sea and, in turn,
share DeepStar solutions with their Texaco colleagues in the U.K.
At our 100-year-old Kern River field in California, advances in steamflood
technology increased 1996 production to 94,000 barrels of oil a day, up nearly
15% in the last two years. And we continued to lower per-barrel operating
expenses. Kern River exchanges technology applications with our affiliate-owned
Duri field in Indonesia, where similar methods of enhanced oil recovery are
expected to increase total production to 330,000 barrels a day by 1999. Texaco's
share will be about 60,000 barrels daily.
We also apply upstream technologies in downstream units. Several years ago,
Texaco engineers at Kern River designed and patented a device called the
SpliTigatorTM to solve hydraulic problems in the field's steamflood operations.
This system delivers the optimal amounts of steam to move Kern's heavy oil
through the reservoir. In 1996, we applied this innovation to our Pembroke
refinery in Wales. Here, the SpliTigatorTM solved a problem in distributing the
flow of hydrogen and oil in the hydrotreater unit, thus avoiding costly
alternatives.
Exploration and Production
14
<PAGE>
FAST-TRACKING INTERNATIONAL
PRODUCTION
ITEM A5
Major projects in the North Sea
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A5.]
ITEM A6
Net Production of Crude
Oil and Natural
Gas Liquids -- PNZ
THOUSANDS OF BARRELS A DAY
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A6.]
To reach our near-term growth objectives of increasing global oil and gas
production by some 50% by 2001 and doubling Texaco's 1995 earnings by 2000, we
are extracting maximum value from current core producing assets such as those in
the North Sea, Indonesia and the Partitioned Neutral Zone (PNZ) between Saudi
Arabia and Kuwait. We also are accelerating development of new fields and
exercising continuous control over operating costs.
In the U.K. North Sea, we increased production up-time at our platforms,
improved maintenance practices and formed strategic alliances with contractors
and suppliers. As a result, we reduced per-barrel lifting costs from $7.70 in
1990 to $4.92 in 1996.
Cost efficiency and technology application drive our design of new projects
such as the Captain field. We have applied technologies such as electric
submersible pumps, horizontal drilling sections up to 6,000 feet, and a floating
production, storage and offloading vessel to drive down costs.
Captain, with its accelerated development program begun in late 1994, came
onstream in early 1997. We expect Captain to pump 60,000 barrels a day of total
new production. The return on investment is expected to be about 25%.
Other projects are bringing new and increased production onstream:
o In the North Sea, Texaco's 50%-owned Erskine field uses technology we
developed for producing natural gas under high-pressure/high-temperature
conditions in the Gulf of Mexico. Erskine is slated to be onstream in the fourth
quarter of 1997. We expect new total daily production of 85 million cubic feet
of gas and 22,000 barrels of condensate, increasing to 95 million cubic feet of
gas in 1998.
o An accelerated, phased revitalization program in the PNZ is raising
production (50% Texaco) in this core asset area. We expect the overall program
to increase total daily production of crude oil and natural gas liquids in the
PNZ to 300,000 barrels by 1999.
o In Indonesia, our 50%-owned affiliate P.T. Caltex Pacific Indonesia (CPI)
is using steamflood technology to increase the Duri field's total daily
production from 280,000 barrels in 1996 to an anticipated 330,000 barrels in
1999.
o In the South China Sea, the CACT operating consortium - the China
National Offshore Oil Company, Agip, Chevron and Texaco - raised 1996 production
to 99,000 barrels a day, of which Texaco's share is 16%. In 1996, CACT also had
a new oil discovery in the Huizhou area in the Pearl River Mouth Basin.
o Offshore Trinidad, we increased production and earnings in 1996. Coming
onstream in the first quarter, the Dolphin field (50% Texaco), with its seven
wells, was producing the daily contract rate of 87 million cubic feet of gas by
year-end. Dolphin has 892 billion cubic feet of gas reserves, and we plan to
Exploration and Production
15
<PAGE>
ITEM A7
1996 Capital and
Exploratory
Expenditures --
Upstream
MILLIONS OF DOLLARS
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A7.]
ITEM A8
1997 Planned Capital
and Exploratory
Expenditures --
Upstream
MILLIONS OF DOLLARS
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A8.]
ITEM A9
Major projects in Colombia, Trinidad and Venezula
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A9.]
produce at a total daily peak rate of 275 million cubic feet by 2003.
o Colombia's offshore Guajira gas fields (50% Texaco) also increased
earnings and were producing 385 million cubic feet per day by year-end. In
October, we completed construction of a second platform, Chuchupa-B, where we
will leverage our expertise in horizontal drilling. Our partnership with the
national oil company, Ecopetrol, produces 75% of Colombia's gas from the Guajira
fields, and the second platform at Chuchupa allows us to increase production to
meet growing demand.
o In West Africa, the addition of five new fields in Angola during 1996
brought total production from the offshore Angolan block that we operate (20%
Texaco) to 95,000 barrels a day, up from 59,000. During 1996, a horizontal
drilling program raised total daily production from our Nigerian interests (20%
Texaco) from 54,000 barrels to 69,000.
Our longer-term strategies for growth include accelerating the development
of discovered reserves in core areas, creating alliances and leveraging
technologies.
Offshore northwest Australia, Texaco is a partner in the planned
development of the giant Gorgon, Chrysaor and Dionysus gas fields, which are
among the world's most significant recent natural gas discoveries. The three
fields can supply a two-train liquefied natural gas (LNG) project to fuel the
rapidly growing natural gas market in the Pacific Rim. In 1997, we will study
and consider our options to join in the planned expansion of the Northwest Shelf
joint venture's existing LNG project or to develop a grassroots facility to
manufacture LNG from the three fields.
Our Mariner prospect in the U.K. North Sea contains reserves of heavy crude
oil, similar to Captain, and is part of Texaco's corporate-wide initiative to
commercialize our extensive reserves of heavy oil - crudes with high sulfur or
acid content or very high viscosity, which require enhancement in the refining
process.
In Venezuela, we are leveraging our heavy-oil expertise through a 20%
interest in a partnership with ARCO, Phillips Petroleum and Corpoven - a
subsidiary of the national oil company. In 1996, the partners agreed to pursue
the development of extra-heavy crude oil in the Hamaca region of Venezuela's
oil-rich Orinoco Belt. We anticipate initial production from the project in
1999. The partnership plans to transport Hamaca's production to a new upgrading
plant on Venezuela's Caribbean coast, where it will be processed into a lighter
crude and exported.
In Russia, the Timan Pechora Company (TPC), owned by Texaco, Amoco, Exxon
and Norsk Hydro, moved closer to approval of a production-sharing agreement to
develop reserves of the Timan Pechora Basin, about 1,100 miles northeast of
Moscow. In December, TPC signed a protocol with the Russian Federation in
advance of submitting a draft production-sharing agreement to national and local
governments for final approval. TPC has also agreed to a Russian participation
of 20%.
Exploration and Production
16
<PAGE>
INVESTING IN HIGH-IMPACT
EXPLORATION
ITEM A10
Net Production of
Natural Gas Available
for Sale -- Latin America
MILLIONS OF CUBIC FEET A DAY
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A10.]
[Call-out language appears top of this page]
Texaco's global upstream
portfolio -- backed by our strong
balance sheet, financial
flexibility and focused strategies --
drives our value growth.
Our new global exploration unit is drilling wells, assessing discoveries and
acquiring additional acreage in areas we believe hold the most potential for
high-impact discoveries.
Increasingly, our focus is outside the U.S. We are raising our expenditures
in exploration activities by almost $120 million in 1997 to $499 million, with
about 55% earmarked for the international arena. Our 1997 drilling program will
more than double the number of exploratory wells we drilled outside the U.S. in
1996. Highlights of our exploration program include:
o Appraisal of Arnold, our latest deepwater Gulf of Mexico discovery, which
would add to our success at Fuji, Gemini and Petronius.
o An extensive drilling program in China and Southeast Asia, where we have
acreage in the Gulf of Thailand and in Bohai Bay, offshore northeastern China.
We are delineating our early 1997 gas discovery in the Gulf of Thailand and
acquiring 3-D seismic data. Onshore China, we continue evaluating our holdings
in the Tarim and Sichuan Basins.
o Continued exploration in our core area of West Africa, where we are
delineating 1996 oil and gas discoveries in Namibia, Nigeria and Angola. We plan
to use 3-D visualization techniques and deepwater drilling in the nearly two
million acres we acquired offshore Nigeria and Namibia in 1996.
o Acceleration of our exploration program in Colombia and Trinidad, where
we plan to drill an exploratory well in the Middle Magdalena Valley of Colombia,
adjacent to recent discoveries. In Trinidad, we are exploring our existing
acreage and enhancing our position near our currently producing Dolphin gas
field.
o Evaluation of our acreage in the Atlantic Margin, west of Great Britain,
an area with significant oil and gas discoveries that could become a major
producing region.
Exploration and Production
17
<PAGE>
MARKETING, MANUFACTURING
AND DISTRIBUTION
ITEM A11
Manufacturing, Marketing
and Distribution -- Total
Operating Earnings
MILLIONS OF DOLLARS
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A11.]
TEXACO'S DOWNSTREAM BUSINESSES turned in mixed results in 1996, while our
midstream continued to make significant contributions. In 1997, we will redouble
our efforts to create our own profitability. To meet our value growth
objectives, we will pursue downstream alliances, become a low-cost refiner and
marketer and keep a tight grip on expense control.
In late 1996, we restructured our downstream and midstream organizations to
strengthen core businesses and to focus on growth opportunities. These realigned
organizations - Texaco International Marketing and Manufacturing and Global
Businesses - create value by forming alliances, leveraging our global brand and
investing in new projects. The new structure allows the units to share ideas,
technology and best practices in the execution of their strategies.
The Global Businesses unit will coordinate a range of Texaco's worldwide
operations, which include our U.S. Downstream Operations, Caltex and Worldwide
Lubricants. The unit's International Aviation Sales and Fuel and Marine
Marketing groups supply marine and aviation products to customers worldwide.
RISING PROFITS IN THE U.S. DOWNSTREAM
Higher crude oil prices provided a significant challenge to our downstream
business in 1996. But we achieved a 71% increase in 1996 domestic downstream
earnings as a result of improved profits from refining and pipeline operations
and increased sales of branded gasoline. Our U.S. operations, including our 50%
joint venture, Star Enterprise, posted net operating income of $207 million in
1996, compared with $121 million the previous year.
In line with our alliance strategy, we are discussing with Shell Oil
Company the formation of a venture that would operate a combination of both
companies' domestic downstream assets. The potential arrangement is a growth
opportunity that capitalizes on the strengths of each company and brings
significant prospects for improved efficiency and productivity. We hope to
conclude a letter of intent with Shell in the first quarter of 1997.
COMPETITIVE ADVANTAGE IN MANUFACTURING
With stronger U.S. refining margins during most of 1996, our California
refineries gained from the introduction of a new gasoline formulation that meets
California's 1996 specifications. Star Enterprise's refineries on the East and
Gulf
Marketing, Manufacturing and Distribution
18
<PAGE>
ITEM A12
U.S. Refineries - Texaco--Star Enterprise
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A12.]
ITEM A13
Branded Gasoline
Sales -- U.S.
THOUSANDS OF BARRELS A DAY
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A13.]
Coasts benefited from their ability to convert heavy crude oil into high-value
products, such as gasoline and diesel fuel.
Texaco's refineries have achieved gains from expense control, improved
efficiency and increased throughput. Our per-barrel operating expense fell 7.5%
between 1993 and year-end 1996. During 1996, Star's refineries identified more
than $60 million a year in permanent savings, which they expect to realize
beginning in 1997.
ADDING VALUE IN THE MIDSTREAM
Our midstream subsidiary, Texaco Trading and Transportation Inc. (TTTI),
transports and markets crude oil and refined products for Texaco and third-party
customers. Its 1996 net operating income rose 9% over 1995.
Over time, as U.S. onshore crude production declines, TTTI plans to move
increased volumes of imported crude, expand its activities in the deepwater Gulf
of Mexico, and establish new product pipeline systems.
TTTI is a partner in the Poseidon pipeline, one of the largest-capacity
pipelines built to transport crude production from recent subsalt and deepwater
discoveries in the Gulf. Scheduled for 1997 completion, Poseidon expands our
transportation systems in the Gulf, adds value to our deepwater acreage position
and offers growth opportunities through business with third-party producers.
TARGETING PREFERRED MARKETS
[Call-out language appears top of this page]
We believe that our downstream
strategies -- and the steps we have
taken to implement them -- will
achieve competitive returns on
our assets.
In the mature U.S. fuel market, total sales volumes of Texaco-branded gasoline
rose 3% in 1996. In Texaco's marketing areas in the West, Southwest and
Mid-Continent regions, sales increased 6.5% over 1995 levels. Sales revenues at
convenience stores in Texaco's marketing system climbed 15% during 1996.
Our U.S. strategy for increasing market share and earnings focuses on
expanding our retail system in preferred markets in high-growth areas. Typical
of this program are 63 new and rebuilt retail outlets, scheduled for completion
in 1997, in the growth area around Los Angeles. Each outlet features fueling
facilities, a large Star Mart(R) convenience store and one or more quick-service
restaurants.
Our Global Brand Initiative's goals for training in customer service
techniques and operating standards are paying off. The 1996 American consumer
satisfaction index, compiled by independent researchers, ranked Texaco number
one in customer satisfaction in the gasoline brand category.
Texaco's alliance strategy helped build downstream value growth in 1996. A
partnership among our retailers, wholesalers and Citibank is financing the
building and revamping of Texaco retail locations and truck stops. We formed a
joint venture with a Mid-Continent wholesaler to operate more cost-effectively
some 60 convenience stores and other retail locations. And Texaco and Star
continue to align the Texaco brand with such high-profile fast-food
Marketing, Manufacturing and Distribution
19
<PAGE>
ITEM A14
1996 Capital
Expenditures --
Downstream
MILLIONS OF DOLLARS
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A14.]
ITEM A15
1997 Planned Capital
Expenditures --
Downstream
MILLIONS OF DOLLARS
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A15.]
brands as Burger King(R), Taco Bell(R), and Subway(R) through retail site
development.
SETTING THE STANDARD IN LUBRICANTS
Texaco Lubricants Company adds value to the Texaco brand with quality products:
Havoline Formula3 motor oil, Ursa Premium TDX heavy-duty diesel oil, the
additives that distinguish CleanSystem3 gasolines, and new Havoline Extended
Life Anti-Freeze/Coolant(R).
During 1996, domestic sales of Texaco's extended-life coolant products for
automobiles and heavy-duty vehicles increased our share of the U.S. coolant
market to about 18%. These products - developed from original Texaco technology
by our Fuels and Lubricants Technology Department in partnership with our
lubricants businesses - have a useful life at least two to three times that of
conventional products.
Texaco's teams collaborated to gain approval for these coolants from the
worldwide auto industry and heavy-duty equipment manufacturers. Marketed as
Havoline DEX-COOL(R), the product is the factory-installed coolant in all new
General Motors automobiles and light trucks sold in the U.S.
INTERNATIONAL MANUFACTURING - MEETING GLOBAL CHALLENGES
In response to weak margins and oversupply in the international refining
industry, we are rationalizing our assets, striving for top-quartile performance
in operating efficiency, and creating alliances to increase financial returns.
Texaco has an equity interest in two European refineries - our wholly owned
Pembroke plant in Wales and the Nerefco refinery in Rotterdam, in which Texaco's
interest is 35%. We improved earnings in 1996 by better aligning our capacity
with market demand and by continuing to cut expenses. Pembroke's 1996 per-barrel
operating expense fell 15% against 1995 levels. Stronger margins in 1996 helped
raise combined earnings from our European refineries by about $60 million over
1995.
At Pembroke, our purchase of another company's 35% throughput entitlement
in the refinery's catalytic cracking complex will give us full control over the
crude slates we run at the plant, thus allowing greater flexibility in producing
reformulated gasoline for sale in the U.S. and Europe. The move also will prompt
the shut-down of a nearby refinery.
Meanwhile, we are balancing Pembroke's gasoline production with an increase
in Nerefco's production of middle distillates. During 1996, we accelerated plans
with our partner British Petroleum to consolidate processing at Nerefco's two
plants, Europoort and Pernis. Beginning in 1997, Pernis will phase out its
processing to become a storage and distribution terminal. A hydrotreater will be
built at Europoort to increase yields of aviation fuel and automotive diesel. It
is projected that the consolidation will result in reductions of 27% in
operating expenses and 55% in ongoing maintenance capital by 2000.
INTERNATIONAL MARKETING -- ALIGNED FOR GROWTH
Texaco markets refined products throughout Latin America and in regional markets
in Europe and West Africa. Through our Caltex affiliate, we are actively engaged
in the growth markets of Asia and the Pacific Rim.
With our newly aligned downstream business units, we can leverage one of
our most valuable assets - Texaco's brand. As part of our Global Brand
Initiative, new and rebuilt stations around the world are adopting the
distinctive "Star 21" design, state-of-the-art retail technology and uniform
operating standards.
Marketing, Manufacturing and Distribution
20
<PAGE>
ITEM A16
Refined Product Sales --
Latin America
THOUSANDS OF BARRELS A DAY
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A16.]
LATIN AMERICA CAPTURES SALES AND MARKET SHARE
Texaco has a significant marketing presence throughout Central and South America
and the Caribbean. At year-end 1996, sales in Latin America had increased 34%
since 1993, far exceeding the region's robust 17% demand growth during that
period. At the same time, operating expenses decreased by 6%.
Net operating income from marketing in Latin America increased 14% over
1995 and 90% since 1993. Our return on capital employed in the area is 22%. We
hold a strong retail market share in areas where we operate - as high as 26% in
the Caribbean and Central American regions.
The competitive Brazilian market represents our largest business in Latin
America. During 1996, we expanded our retail system with more than 100 new
service stations, capturing more than a full percentage point in additional
market share and raising gasoline volume at year-end more than 39% above the
1993 level. Earnings in Brazil have doubled since 1993.
We are the number-one lubricants marketer in most of the Latin American
countries where we operate, and our lubes business has given us access to new
fuel markets, such as Ecuador and Peru. We expect Texaco's sales in those
nations to grow to some seven million barrels a year by 2000.
CREATING OUR MARGINS IN EUROPE'S CHANGING MARKETS
To address the weakness in Europe's refined product markets, we are moving
quickly into new areas and leveraging our strength in lubricant sales. Our 50%
Scandinavian joint venture company, Hydro Texaco, with an 18% share in its
markets, is expanding into the neighboring Baltic countries. And we are
increasing our presence in Poland, where we constructed our first three service
stations in 1996 and added 20 new lubricants distributors.
In the U.K., our largest European market, a price war brought margins to a
historic low in 1996. To improve performance, we are reducing our retail
operating expenses, as well as overhead costs, and adding retail facilities in
preferred markets to grow volumes.
CALTEX -- A NEW RETAIL IMAGE
Caltex, our 50% joint venture with Chevron, operates in the expanding economies
of Asia, the Pacific Rim and southern Africa. Faced with weak refining profits
and increased competition in its Asian markets, Caltex is focusing on the
strengths of its marketing operations. Caltex continues to assess its asset
portfolio and reduce costs as it strives to become the preferred supplier in its
markets.
In 1996, Caltex sold its 50% interest in Japan's Nippon Petroleum Refining
Company, Limited, to Nippon Oil Company for $2 billion. And in early 1997,
Caltex announced plans to sell its 40% interest in its refinery in Bahrain.
Meanwhile, its recent refinery investments - such as its 64%-owned refinery in
Thailand, completed in 1996 - will supply refined products to meet the region's
demand growth for petroleum products.
During 1996, Caltex introduced a new retail image - including quick-service
restaurants and convenience stores at its outlets - to attract the growing
number of younger drivers and professionals such as truck and cab drivers. The
company is expanding its retail networks in Korea and the Philippines, where it
holds about a 30% market share, and is accelerating development of its
lubricants business in China, India, Indonesia and Vietnam.
Marketing, Manufacturing and Distribution
21
<PAGE>
GLOBAL GAS
AND POWER
ITEM A17
Revenues from Licensed
Gasificaiton Technology
MILLIONS OF DOLLARS
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A17.]
THE NEWLY FORMED Global Gas and Power unit will leverage our strength in natural
gas and our experience in private power generation to profit from the energy
value chain. It will benefit from U.S. deregulation and growing global demand
for clean power generation.
Our downstream gas activities support our U.S. daily production of 1.7 billion
cubic feet of natural gas and 81,000 barrels of natural gas liquids. Our gas
infrastructure and marketing services at the Gulf Coast Star Center and the
Henry Hub serve third-party producers. Earnings from our gas and liquids
businesses in 1996 increased over 1995.
Last year, we began work with our partner, MAPCO Inc., on the $300 million
Discovery Project, which will gather new gas production from the Gulf of Mexico.
The project includes a 150-mile pipeline and gathering system, a new onshore
processing plant, and an expanded fractionator, which will process natural gas
liquids.
Another profitable link in the energy value chain is Texaco's Ferndale
Storage Terminal in Washington state. With a 750,000-barrel capacity for
liquefied petroleum gas (LPG), it is the West Coast's only export terminal for
LPG and serves markets in Latin America and the Pacific Rim.
We continue to apply our power generation expertise and our proprietary
gasification technology to gain more value from our natural gas and liquids
reserves. We operate 11 cogeneration facilities in the U.S., producing more than
1,200 megawatts of electricity for Texaco's producing fields and refineries, as
well as low-cost power for sale to local utilities. These projects have reduced
emissions and lowered operating costs.
In 1996, Florida's Tampa Electric Company began operating a 250-megawatt
coal-based plant using our gasification technology. A new
gasification/cogeneration plant at our El Dorado, Kan., refinery converts
petroleum coke into electricity and steam, making the refinery energy
self-sufficient and significantly reducing the cost of handling coke. The plant
soon will convert refinery wastes and reduce waste-handling costs, as well.
In Thailand, we are working with partners to develop a 700-megawatt
gas-fired combined cycle private power facility, slated for start-up in 2000.
On the island of Java, we are helping our Indonesian affiliate build that
nation's growing geothermal energy industry by constructing power plants in
Darajat.
Global Gas and Power
22
<PAGE>
ENVIRONMENT, HEALTH
AND SAFETY
ITEM A18
Lost-Time Incidence Rate
- -- U.S. and Worldwide
NUMBER OF INCIDENTS PER
200,000 HOURS WORKED
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A18.]
TEXACO'S SUCCESS as a unique and growing company depends in substantial measure
on how well we meet our responsibility to protect the environment, health and
safety of our employees and the communities in which we operate. By integrating
sound EHS practices in our business operations, we gain a competitive advantage
and improve shareholder value.
We reinforce our focus through our committed management team and the development
and implementation of our Worldwide EHS Standards and Guidelines. We exercise
environmental and safety oversight of our operations through our three-tiered
EHS Auditing Program, which consultant Arthur D. Little, Inc., declared is
"among the leaders in the petroleum industry." Our Product Stewardship program
incorporates EHS concerns throughout the life cycle of our products. We identify
potential EHS risks and design our facilities and programs to minimize or
eliminate them. We train our employees and hold them accountable for sound EHS
practices. And we benchmark our activities against industry's best practices.
While we know there is more to do, we are achieving measurable progress.
o Putting safety first. The lost-time incidence rate for our worldwide
operations in 1996 was the lowest in company history and about 60% lower than it
was in 1992. Our 1996 rate of 0.55 lost-time incidents per 200,000 hours worked
is 7% better than our previous best performance in 1995. Still, we are not
satisfied.
In our drive for worker safety, we are building loss-prevention practices
into our operations. We have made safety a priority for all employees and
contractors. Our ongoing reliability initiative is helping to eliminate
operating incidents throughout the Texaco system.
o Reducing chemical releases. From 1989 through 1995, the last year for
which complete data is available, our refineries have reduced by more than 80%
the chemical releases reported to the U.S. Environmental Protection Agency (EPA)
under its Toxics Release Inventory (TRI) reporting requirement. We have achieved
most of these reductions by making refinery investments that improve product
yields and increase operating efficiencies.
o Cutting emissions. By applying innovative technologies, we are lowering
refinery emissions. Low NOx (nitrogen oxide) burners
Environment, Health and Safety
23
<PAGE>
ITEM A19
TRMI/Star Enterprise
TRI Releases to the
Environment
MILLION POUNDS PER YEAR
[GRAPHIC/IMAGE ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART A, ITEM A19.]
installed at our Pembroke refinery in Wales have reduced significantly emissions
of both sulfur dioxide and NOx. Similar emission-control devices are expected to
cut NOx emissions by more than 60% when installed at two of our cogeneration
facilities in California.
o Emergency preparedness. Our worldwide emphasis on spill prevention - in
oil production, transportation, manufacturing and marketing of refined products
- - has helped reduce the number and volume of leaks and spills. Between 1991 and
1996, incidents of leaks and spills were down 37%, and the volume of these leaks
and spills dropped 20%.
While prevention is our first priority, Texaco's worldwide emergency
response teams are prepared to react quickly when a spill or other incident
occurs. We are associated with more than 30 oil spill cooperatives, and we
maintain response teams worldwide. By regularly conducting regional drills, we
are well prepared to respond to an emergency. Within moments after the tanker
Sea Empress ran aground near Milford Haven, Wales, in February 1996, trained
Texaco employees were on the scene. Though the tanker was neither owned nor
operated by Texaco, its cargo of crude oil was en route to our Pembroke
refinery. Our rapid mobilization and ability to respond were reviewed favorably
by the U.K. government.
CONSERVING RESOURCES AND MINIMIZING WASTE
[Call-out language appears top of page]
In our producing fields
and at our refineries, environmental
initiatives are improving the
efficiency and cost-effectiveness
of our operations.
Many of our environmental initiatives also increase the profitability of our
operations. For example, we have made significant advances in managing the water
generated during crude oil production. Several of our locations - including
Caltex Pacific Indonesia's giant Minas field - have eliminated discharges of
produced water by re-injecting it into underground reservoirs. At our Kern River
field in Bakersfield, Calif., we have developed a project that reclaims millions
of gallons daily of fresh produced water, which we sell for agricultural
irrigation. The project makes wastewater disposal a profitable operation that is
good for the environment.
In the downstream, we have reduced disposal needs by designing processes to
convert refinery wastes, used motor oil and industrial oil into valuable
products. Low NOx emission-control devices being retrofitted in our California
cogeneration facilities are expected to eliminate waste acid at the source by
1999, thus avoiding the need for treatment or disposal of about 40,000 tons of
waste per year.
We have designed, built and seeded a 90-acre wetland that helps our El
Dorado, Kan., refinery meet its wastewater discharge limits, and provides a
habitat for more than 50 species of birds, mammals and reptiles.
For a copy of the 1996 Texaco Inc. Environment, Health and Safety Review,
please write to Texaco Inc., Investor Services, 2000 Westchester Avenue, White
Plains, NY 10650-0001.
Environment, Health and Safety
24
<PAGE>
FINANCIAL AND OPERATIONAL Texaco Inc.
INFORMATION and Subsidiary Companies
26 Management's Discussion and Analysis
41 Statement of Consolidated Income
42 Consolidated Balance Sheet
43 Statement of Consolidated Cash Flows
44 Statement of Consolidated Stockholders' Equity
Notes to Consolidated Financial Statements
46 Note 1. Description of Significant Accounting Policies
48 Note 2. Changes in Accounting Principles
48 Note 3. Discontinued Operations
49 Note 4. Inventories
49 Note 5. Investments and Advances
52 Note 6. Properties, Plant and Equipment
52 Note 7. Short-Term Debt, Long-Term Debt, Capital
Lease Obligations and Related Derivatives
54 Note 8. Lease Commitments and Rental Expense
55 Note 9. Preferred Stock and Rights
57 Note 10. Foreign Currency
58 Note 11. Taxes
59 Note 12. Employee Benefit Plans
62 Note 13. Stock Incentive Plan
63 Note 14. Other Financial Information and Commitments
64 Note 15. Financial Instruments
67 Note 16. Contingent Liabilities
67 Note 17. Financial Data by Geographic Area
69 Report of Management
70 Report of Independent Public Accountants
Supplemental Oil and Gas Information
71 Estimated Proved Reserves
75 Capitalized Costs
76 Costs Incurred
77 Results of Operations
78 Average Sales Prices and Production Costs - Per Unit
78 Standardized Measure of Discounted Future Net Cash Flows
79 Changes in the Standardized Measure of Discounted
Future Net Cash Flows
Selected Financial Data
80 Selected Quarterly Financial Data
81 Five-Year Comparison of Selected Financial Data
82 Investor Information
25
<PAGE>
MANAGEMENT'S DISCUSSION Texaco Inc.
AND ANALYSIS and Subsidiary Companies
ITEM B1
Returns on Average Stockholders' Equity
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B1.]
ITEM B2
Returns on Average Capital Employed
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B2.]
<TABLE>
<CAPTION>
Consolidated Highlights
(Millions of dollars, except per share and ratio data) 1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues from continuing operations $45,500 $36,787 $33,353
Net income from continuing operations
before cumulative effect of accounting change
Net income before special items $ 1,665 $ 1,152 $ 915
Special items 353 (424) 64
- ---------------------------------------------------------------------------------------------
2,018 728 979
Net loss on disposal of discontinued operations -- -- (69)
Cumulative effect of accounting change -- (121) --
- ---------------------------------------------------------------------------------------------
Net income $ 2,018 $ 607 $ 910
Stockholders' equity $10,372 $ 9,519 $ 9,749
Total assets $26,963 $24,937 $25,505
Total debt $ 5,590 $ 6,240 $ 6,481
Per common share (dollars)
Net income from continuing operations
before cumulative effect of accounting change
Net income before special items $ 6.17 $ 4.20 $ 3.19
Special items 1.35 (1.63) .24
- ---------------------------------------------------------------------------------------------
7.52 2.57 3.43
Net loss on disposal of discontinued operations -- -- (.26)
Cumulative effect of accounting change -- (.47) --
- ---------------------------------------------------------------------------------------------
Net income $ 7.52 $ 2.10 $ 3.17
Cash dividends $ 3.30 $ 3.20 $ 3.20
Current ratio 1.24 1.24 1.20
Return on average stockholders' equity* 20.4% 7.5% 9.8%
Return on average capital employed* 14.9% 6.9% 8.0%
Total debt to total borrowed and invested capital 33.6% 38.0% 38.5%
=============================================================================================
<FN>
* Returns exclude the 1995 cumulative effect of accounting change and
discontinued operations.
</FN>
</TABLE>
Consolidated worldwide net income for the year 1996 was $2,018 million, or $7.52
per common share, compared with $607 million, or $2.10 per common share for the
year 1995 and $910 million, or $3.17 per common share for the year 1994.
These results include special items, as well as discontinued chemical
operations, as noted. Results for 1995 reflect the adoption of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121). The
adoption of this Standard resulted in a non-cash after-tax charge of $639
million, and required the classification of a $121 million charge, previously
recorded in the first quarter of 1995, as a cumulative effect of an accounting
change.
Plan for Growth
Texaco's plan for growth, which was announced in July 1994, has continued to
show significant progress in attaining its primary objectives of increasing
earnings and stockholder value. By the end of 1996, the following achievements
were attained:
o Solid total return to shareholders of 30% in 1996, led by a sharp rise
in the market price of the company's common stock and higher dividends
o Significant growth in net income before special items to more than
$1.6 billion in 1996, 45% higher than 1995 and 82% higher than 1994
o Strong returns on stockholders' equity of 20.4% and capital employed
of 14.9% in 1996
o Capital expenditures of $3.4 billion in 1996, an increase of 10% over
1995
26
<PAGE>
ITEM B3
Revenues
BILLIONS OF DOLLARS
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B3.]
ITEM B4
Costs and Expenses
BILLIONS OF DOLLARS
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B4.]
o Higher net oil and gas production in 1996, to 1.1 million barrels of
oil equivalent per day, a 3% increase over 1995
o Realized cash proceeds of $2.4 billion since 1994 from sales of
nonstrategic assets
o Greater financial flexibility demonstrated by a lower leverage ratio
of 33.6%, down from 38.5% in 1994
o Increased additions to the oil and gas reserves base equal to 113% of
production at a competitive finding and development cost
In addition, the following actions are targeted for 1997 and beyond:
o An aggressive capital expenditure program of $4.5 billion for 1997, an
increase of more than 30% over 1996, the first year of a five year
$24.3 billion program
o Net oil and gas production is expected to increase by more than 50% by
the year 2001
o Ongoing negotiations with Shell Oil Company for a U.S. downstream
alliance with a letter of intent anticipated during 1997. The proposed
combination is expected to create a revitalized, dynamic, highly
competitive business with improved performance and growth
opportunities.
Results for Continuing Operations
The following analysis relates to Texaco's consolidated and functional results
for continuing operations.
Revenues
Consolidated worldwide revenues from continuing operations were $45.5 billion in
1996 as compared to $36.8 billion in 1995 and $33.4 billion in 1994. Revenues
for 1996 exceeded 1995 levels by 24%, two-thirds of which was attributable to
increased sales revenues as a result of higher prices for crude oil, refined
products and natural gas, which benefited results in the United States and
abroad. Higher sales revenues also reflected substantial growth in crude oil and
refined products sales volumes.
The increase in sales volumes included the impact of Texaco's aggressive
strategy of marketing purchased crude oil, effectively utilizing the company's
expansive trading and distribution network. Crude oil sales also reflected an
increase in crude oil and NGL production volumes during 1996. Producing
provinces in the Partitioned Neutral Zone, the U.S., Africa and China all
reflected improvements over prior year production levels. Refined product sales
also reflected significant increases with an improvement of 7% over 1995,
principally in U. S. and Latin American markets, including higher branded
gasoline sales. Natural gas sales in 1996 rose slightly over 1995 levels due to
higher production in the U.S. and the Dolphin field in Trinidad, which came
onstream during 1996.
Revenues in 1995 exceeded revenues in 1994 due to higher worldwide crude
oil and refined product prices and volumes. Lower natural gas prices in the U.S.
in 1995 more than offset the benefits to revenue related to higher natural gas
sales volumes in the U.S. and Europe. In addition, revenues for 1995 also
benefited from gains on asset sales.
Costs and Expenses
Purchases and other costs were $34.6 billion in 1996, $27.2 billion in 1995 and
$23.9 billion in 1994. The increase in 1996 is primarily the result of higher
worldwide prices and higher purchased volumes of crude oil and refined products,
as well as increased natural gas prices in the United States. The 1995 increase
in costs as compared to 1994 was due to higher worldwide prices for crude oil
and refined products, as well as increased purchased volumes of crude oil,
refined products and natural gas. Partially offsetting these increases were
lower natural gas prices in the U.S. during 1995 as compared to 1994.
Over the past three years, Texaco has continually focused on containing
expenses and improving operating efficiencies. These efficiencies are evident in
the decrease in Texaco's operating expenses, excluding special items, of 2.5%
during this three year period. This improvement has occurred notwithstanding the
adverse, though somewhat moderating impact of a 7% inflation increase during
this period. Operating expenses for the year 1996 versus 1995 reflected an
increase of 6%, excluding special items in both periods, due to generally
expanding operations. This increase reflects the company's aggressive
exploratory and production activity in worldwide upstream operations, higher
refinery utilization and increases in expenses associated with expanding
marketing activities. Expenses also rose due to higher utilities resulting from
increased fuel costs. Despite this increase in total operating expenses in 1996,
further evidence of Texaco's cost-containment initiatives is exhibited in the
less than 1% increase in Texaco's cash operating expenses on a per-barrel basis,
approximately one-third of the general rise in inflation.
Depreciation, depletion and amortization expenses decreased in 1996 as
compared to 1995 mainly due to the effects of the adoption of SFAS 121.
27
<PAGE>
Income Taxes
Income tax expense was $965 million in 1996, $258 million in 1995 and $225
million in 1994. The year 1996 continued the three-year trend of higher taxable
income from worldwide producing operations including the impact of international
operations which are generally subject to higher statutory rates. The years
1996, 1995 and 1994 also included tax benefits associated with sales of a
partial interest in a subsidiary of $188 million, $65 million and $189 million,
respectively. The year 1995 also included significant deferred tax benefit
effects from the adoption of SFAS 121.
<TABLE>
<CAPTION>
Net Income
(Millions of dollars) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income before special items and cumulative effect of accounting change $ 1,665 $ 1,152 $ 915
Special items:
Gains on major asset sales 194 232 23
Tax benefits on asset sales 188 65 189
U.S. and international tax issues 68 -- --
Employee separation costs (65) (56) (88)
Adoption of SFAS 121 -- (639) --
Other special items (32) (26) (60)
- ----------------------------------------------------------------------------------------------------------
Total special items 353 (424) 64
- ----------------------------------------------------------------------------------------------------------
Net income before cumulative effect of accounting change $ 2,018 $ 728 $ 979
==========================================================================================================
<FN>
Consolidated net income from continuing operations includes special items in
addition to net income directly related to the current production,
manufacturing, marketing and distribution of products and services of the
company. Results for 1995 included benefits of $75 million for insurance
recoveries, which were offset by charges to establish financial reserves for
associated environmental remediation and other matters.
</FN>
</TABLE>
The schedules presented below provide net income on a functional basis
before the cumulative effect of accounting change. Related explanations are
provided on the pages that follow.
<TABLE>
<CAPTION>
Net income before special items (Millions of dollars) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Exploration and Production
United States $ 1,123 $ 674 $ 438
International 451 343 269
- ----------------------------------------------------------------------------------------------------------
Total Exploration and Production 1,574 1,017 707
- ----------------------------------------------------------------------------------------------------------
Manufacturing, Marketing and Distribution
United States 233 141 281
International 252 358 375
- ----------------------------------------------------------------------------------------------------------
Total Manufacturing, Marketing and Distribution 485 499 656
- ----------------------------------------------------------------------------------------------------------
Total Petroleum and Natural Gas 2,059 1,516 1,363
- ----------------------------------------------------------------------------------------------------------
Nonpetroleum 16 32 (3)
Corporate/Nonoperating (410) (396) (445)
- ----------------------------------------------------------------------------------------------------------
Total $ 1,665 $ 1,152 $ 915
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Net income including special items (Millions of dollars) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Exploration and Production
United States $ 1,123 $ 293 $ 414
International 478 340 253
- ----------------------------------------------------------------------------------------------------------
Total Exploration and Production 1,601 633 667
- ----------------------------------------------------------------------------------------------------------
Manufacturing, Marketing and Distribution
United States 207 121 257
International 450 365 360
- ----------------------------------------------------------------------------------------------------------
Total Manufacturing, Marketing and Distribution 657 486 617
- ----------------------------------------------------------------------------------------------------------
Total Petroleum and Natural Gas 2,258 1,119 1,284
- ----------------------------------------------------------------------------------------------------------
Nonpetroleum 16 (28) (32)
Corporate/Nonoperating (256) (363) (273)
- ----------------------------------------------------------------------------------------------------------
Total $ 2,018 $ 728 $ 979
==========================================================================================================
<FN>
The Consolidated Financial Statements and related Notes should be read in
conjunction with this financial review.
</FN>
</TABLE>
28
<PAGE>
ITEM B5
Exploration and Production - Total Operating Earnings
MILLIONS OF DOLLARS
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B5.]
ITEM B6
Average U.S. Natural Gas Selling Price - Per Quarter
DOLLARS PER THOUSAND CUBIC FEET
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B6.]
Functional Analysis of Net Income
Worldwide net income from continuing operations is segregated between operating
and corporate/nonoperating in the following tables. Operating results are
further segregated functionally and geographically.
<TABLE>
<CAPTION>
Petroleum and Natural Gas
Exploration and Production
(Millions of dollars) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. operating earnings before special items $ 1,123 $ 674 $ 438
Special items -- (381) (24)
- ----------------------------------------------------------------------------------------------------------
Total U. S. 1,123 293 414
- ----------------------------------------------------------------------------------------------------------
International operating earnings before special items 451 343 269
Special items 27 (3) (16)
- ----------------------------------------------------------------------------------------------------------
Total International 478 340 253
- ----------------------------------------------------------------------------------------------------------
Worldwide exploration and production earnings $ 1,601 $ 633 $ 667
==========================================================================================================
<CAPTION>
Selected Operating Data
Net production of crude oil and NGL's (MBPD)
<S> <C> <C> <C>
U. S. 388 381 407
International 399 381 376
- ----------------------------------------------------------------------------------------------------------
Worldwide 787 762 783
==========================================================================================================
<CAPTION>
Net production of natural gas-available for sale (MMCFPD)
<S> <C> <C> <C>
U. S. 1,675 1,619 1,716
International 382 373 319
- ----------------------------------------------------------------------------------------------------------
Worldwide 2,057 1,992 2,035
==========================================================================================================
<CAPTION>
Natural gas sales (MMCFPD)
<S> <C> <C> <C>
U. S. 3,176 3,153 3,092
International 477 435 337
- ----------------------------------------------------------------------------------------------------------
Worldwide 3,653 3,588 3,429
==========================================================================================================
</TABLE>
U.S. Upstream operating earnings, before special items, were $1,123
million, $674 million and $438 million for the years 1996, 1995 and 1994,
respectively. Results for 1996 achieved record levels and were 67% higher than
1995.
Increased crude oil, natural gas liquids and natural gas production for
1996, which in total is 2.5% higher than 1995, reflects the company's success in
adding new production, most notably from the Gulf of Mexico, and enhancing
production from existing fields, primarily at the Kern River, California,
operations. This new production more than offsets declines from maturing fields
and non-core asset sales, and is in contrast to U.S. oil industry statistics
which indicate an overall decline in U. S. crude oil production. Slightly
offsetting the impact of improved production was an increase in 1996 exploratory
expenses of 63% reflecting higher activity on various new prospects.
Texaco's average crude oil price in 1996 was $17.93 per barrel, or $2.83
per barrel over the 1995 average price. These higher prices reflected increased
demand, combined with historically low inventory levels in 1996, as well as the
continued uncertainty in the market for most of the year regarding the possible
resumption of Iraqi crude sales. In 1995, Texaco's average crude price of $15.10
per barrel represented an increase of $1.67 per barrel from the 1994 price.
In 1996, Texaco's average natural gas price of $2.19 per MCF represents an
increase of $.54 per MCF from 1995. This higher average price was triggered by
an upward movement in prices that commenced toward the end of 1995 due to
unusually cold weather and led to an increase in industry demand to replenish
depleted natural gas storage. Texaco's average natural gas price of $1.65 per
MCF in 1995 was $.27 per MCF lower than 1994 and reflected a deterioration of
average natural gas prices that adversely affected operating earnings for both
1995 and 1994.
Total U.S. operating earnings were $1,123 million, $293 million and $414
million for the years 1996, 1995 and 1994, respectively. Included in total
operating earnings for 1995 were special items of $381 million, comprised of the
write-down of assets associated with the adoption of SFAS 121 of $493 million
and a gain of $125 million from the sale of non-core producing properties which
was partly offset by reserves for environmental remediation on these properties
of $13 million. Results for 1994 included special charges of $24 million related
to employee separations.
International Upstream operating earnings, before special items, were $451
million, $343 million and $269 million for the years 1996, 1995 and 1994,
respectively.
29
<PAGE>
ITEM B7
Average Crude Oil Selling Prices - Per Quarter
DOLLARS PER BARREL
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B7.]
ITEM B8
Manufacturing, Marketing and Distribution - Total Operating Earnings
MILLIONS OF DOLLARS
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B8.]
Operating results in 1996 benefited from higher crude oil prices. Texaco's
international average crude oil price of $19.55 per barrel in 1996 increased
$3.26 per barrel over the 1995 level and continued a two-year upward trend in
prices that also saw 1995 prices average $1.41 per barrel more than 1994 prices.
Crude oil production in 1996 increased primarily in Angola and the
Partitioned Neutral Zone, while natural gas production increased in Trinidad and
Colombia. In Angola, the production increase was the result of new offshore
fields, as well as the resumption of onshore production early in 1996.
Production increased in Trinidad and Colombia due to new fields and in the
Partitioned Neutral Zone due to continuing development programs that have
resulted in higher production levels starting in 1995. Lower production from
maturing fields in the United Kingdom and Australia during 1996, as well as
higher expenses associated with expanded exploration activities, partly offset
the overall production improvements. In 1995, North Sea crude oil production
slipped 3% from the high levels of 1994 mainly due to the natural decline in
maturing fields and temporary interruptions for planned work.
Operating results for all three periods included non-cash currency
translation impacts related to deferred income taxes due to the relationship of
the Pound Sterling to the U.S. dollar. Results for 1996 and 1994 included
charges of $38 million and $15 million, respectively, while 1995 included
benefits of $2 million.
Total international operating earnings were $478 million, $340 million and
$253 million for 1996, 1995 and 1994, respectively. Results for 1996 included a
special non-cash gain of $27 million related to a Danish deferred tax benefit.
Included in 1995 results was a special charge of $3 million related to the
write-down of assets associated with the adoption of SFAS 121. Results for 1994
included special charges related to asset write-downs of $8 million and an
additional charge of $8 million for employee separations.
<TABLE>
<CAPTION>
Manufacturing, Marketing and Distribution
(Millions of dollars) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. operating earnings before special items $ 233 $ 141 $ 281
Special items (26) (20) (24)
- ----------------------------------------------------------------------------------------------------------
Total U. S. 207 121 257
- ----------------------------------------------------------------------------------------------------------
International operating earnings before special items 252 358 375
Special items 198 7 (15)
- ----------------------------------------------------------------------------------------------------------
Total International 450 365 360
- ----------------------------------------------------------------------------------------------------------
Worldwide manufacturing, marketing and distribution earnings $ 657 $ 486 $ 617
==========================================================================================================
<CAPTION>
Selected Operating Data
Refinery input (MBPD)
<S> <C> <C> <C>
U. S. 724 693 673
International 762 788 780
- ----------------------------------------------------------------------------------------------------------
Worldwide 1,486 1,481 1,453
==========================================================================================================
<CAPTION>
Refined product sales (MBPD)
<S> <C> <C> <C>
U. S. 1,036 934 882
International 1,517 1,567 1,470
- ----------------------------------------------------------------------------------------------------------
Worldwide 2,553 2,501 2,352
==========================================================================================================
</TABLE>
U.S. Downstream operating earnings, before special items, were $233 million
for 1996, as compared with $141 million and $281 million for 1995 and 1994,
respectively. The year 1996 results, as compared with 1995, benefited primarily
from higher West Coast refinery margins that resulted from an increase in
product prices due to shortages brought about by regional refining problems and
new California gasoline formulation requirements during the first half of the
year. Improved refinery operations throughout most of the year and continued
cost containment efforts also contributed to the improved 1996 results. However,
during the fourth quarter of 1996, both refinery and marketing margins,
primarily on the West Coast, were depressed due to higher crude costs and
competitive pressures in the marketplace. Additionally, refinery fires at Los
Angeles in November and Convent, Louisiana, in December adversely impacted 1996
results due to property damage and earnings losses associated with lower yields.
Marketing margins for most refined products were lower in 1996 as compared with
1995; however, this was offset partially by the continued strength in gasoline
and diesel sales volumes, with Texaco branded gasoline sales up 3% versus 1995
levels. Additionally, 1996 results benefited from improved profits in the
distribution and transportation businesses.
Results in 1995 were lower than 1994 due to the impact of historically low
refining margins that prevailed throughout the U.S. during the first four months
of 1995. Rising crude costs could not be fully recovered through
30
<PAGE>
ITEM B9
Refined Product Sales - U.S. by Principal Products
THOUSANDS OF BARRELS A DAY
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B9.]
ITEM B10
Refinery Input - U.S.
THOUSANDS OF BARRELS A DAY
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B10.]
product prices which remained relatively flat due to a surplus of products in
the market. Operations on the East and Gulf Coasts also were impacted during
1995 by narrow light to heavy crude oil differentials that mitigated the
benefits of refinery upgrades, as well as storm-related downtime and scheduled
maintenance that impacted refinery performance. West Coast operations in 1995,
as compared with 1994, benefited from expense containment, greater energy
efficiency, improved refinery performance and higher sales volumes--all of which
lessened the impact of depressed refining margins.
Total U.S. operating earnings were $207 million, $121 million and $257
million for the years 1996, 1995 and 1994, respectively. The year 1996 included
special charges of $25 million related to the pending sale of Texaco's propylene
oxide/methyl tertiary butyl ether (PO/MTBE) manufacturing site in Texas and $1
million for employee separations. Earnings in 1995 included special charges of
$11 million for employee separations and $9 million related to the write-down of
assets associated with the adoption of SFAS 121. Results for 1994 included
special charges of $13 million related to asset write-downs and $11 million for
employee separations.
International Downstream operating earnings, before special items, were
$252 million, $358 million and $375 million for the years 1996, 1995 and 1994,
respectively. Results for 1996, as compared with 1995, reflect the impact of
lower margins in both the Europe and Caltex operating areas, partly offset by
higher Latin American results. Marketing margins in Europe were significantly
depressed from excess gasoline supply and a highly competitive market in the
U.K., although both these factors were partially offset by improved refining
operations and margins. In the Caltex operating markets, significantly lower
margins in Australia, Korea, Thailand and Japan, primarily due to higher crude
costs not fully recovered in the market, were somewhat offset by higher margins
in Bahrain and Singapore. In Latin America, improved results in Brazil from
increased volumes and higher product margins more than offset the impact of
scheduled maintenance at the Panama refinery.
Results for both 1995 and 1994 reflect the impact of depressed refining
margins, particularly in the U.K. These margins initially began to decline
during 1994 due to rising feedstock costs and oversupply conditions. Operating
earnings for 1994 were also negatively impacted by the Pembroke, Wales, refinery
fire. In 1995 and 1994, areas served by Caltex, including most Pacific Rim
countries and South Africa, were negatively impacted by lower refining margins.
The year 1995 results for Caltex also were impacted by favorable foreign tax
effects and both 1995 and 1994 results included benefits associated with
inventory valuations. Strong margins and higher product volumes in most Latin
America operating areas prevailed in both 1995 and 1994. However, downtime
resulting from a 1995 refinery upgrade project in Panama and the 1994 impact of
a fire at that plant lowered results for both years.
Operating results for all three periods included non-cash currency
translation impacts related to deferred income taxes due to the relationship of
the Pound Sterling to the U.S. dollar. Results for 1996 and 1994 included
charges of $20 million and $16 million, respectively, while 1995 included
benefits of $3 million.
Total international operating earnings were $450 million in 1996 compared
with $365 million and $360 million in 1995 and 1994, respectively. Results for
1996 included a special gain of $219 million relating to the sale by Caltex of
its interest in Nippon Petroleum Refining Company, Limited (NPRC). Results for
1995 included special charges of $31 million related to the write-down of assets
associated with the adoption of SFAS 121. The year 1995 also included a net
special gain of $80 million, principally related to the sale of land by a Caltex
affiliate in Japan, and special charges of $13 million from restructuring in
certain Caltex operations. Operating results for 1994 included a special gain of
$23 million related to the sale of an interest in a downstream joint venture in
Sweden, partly offset by special charges of $10 million related to the
write-down of assets. Additionally, results for 1996, 1995 and 1994 included
charges of $21 million, $29 million and $28 million, respectively, for employee
separations.
<TABLE>
<CAPTION>
Nonpetroleum
(Millions of dollars) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating earnings (losses) before special items $ 16 $ 32 $ (3)
Special items -- (60) (29)
- ----------------------------------------------------------------------------------------------------------
Total operating earnings (losses) $ 16 $ (28) $ (32)
==========================================================================================================
</TABLE>
Nonpetroleum operating earnings, before special items, were $16 million for 1996
and $32 million for 1995, as compared to a loss of $3 million in 1994. Operating
results for both 1996 and 1994 benefited from higher gasification licensing
revenues, while 1995 results mainly reflected improved loss experience of
insurance operations. Included in 1995 operating results was a special charge of
$87 million for the write-down of assets associated with the adoption of SFAS
121 and a special gain of $27 million from the sale of the company's interest in
Pekin Energy Company, a producer of ethanol. Results for 1994 included special
charges of $29 million in the insurance operations related to property damages
caused by fires at both the Pembroke, Wales, and the Panama refineries.
31
<PAGE>
<TABLE>
<CAPTION>
Corporate/Nonoperating
(Millions of dollars) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Corporate/nonoperating before special items $ (410) $ (396) $ (445)
Special items 154 33 172
- ----------------------------------------------------------------------------------------------------------
Total $ (256) $ (363) $ (273)
==========================================================================================================
</TABLE>
Corporate/nonoperating charges, before special items, were $410 million, $396
million and $445 million for the years 1996, 1995 and 1994, respectively. These
results include interest expense and general corporate expenses, as well as
interest income and other nonoperating income.
Results for 1996 reflect lower interest expense related to improved rates
and lower debt levels. The year 1995 results included gains of $25 million,
principally from the sales of equity securities held for investment by the
insurance operations. Gains on such sales of securities in 1994 were lower than
amounts realized in 1995. Additionally, 1995 results as compared to 1994
benefited from higher interest income and lower interest expense.
Corporate/nonoperating charges, including special items, were $256 million,
$363 million and $273 million for 1996, 1995 and 1994, respectively. Results for
all three years included special items related to the impact of current tax
benefits realized and deferred tax benefits realizable due to sales of interests
in a subsidiary. These benefits are realizable due to taxable gains on completed
and announced sales of assets and amounted to $188 million, $65 million and $189
million for 1996, 1995 and 1994, respectively. Results for 1996, 1995 and 1994
also included special charges related to employee separations that amounted to
$43 million, $16 million and $17 million, respectively. Additionally, results
for 1996 included a benefit of $41 million resulting from lower than anticipated
prior years' state tax exposures and charges of $32 million for additional
financial reserves for various litigation matters, while 1995 results included
special charges of $16 million related to the write-down of assets associated
with the adoption of SFAS 121.
Discontinued Chemical Operations
In 1993, Texaco announced its intention to dispose of substantially all of its
worldwide chemical operations, including its lubricant additives business.
Texaco has since accounted for these operations as discontinued operations.
In 1993, Texaco entered into a memorandum of understanding with an
affiliate of the Jon M. Huntsman Group of Companies for the sale of Texaco
Chemical Company and related international chemical operations. On April 21,
1994, Texaco received from Huntsman Corporation $850 million, consisting of $650
million in cash and an 11-year subordinated note with a face amount of $200
million. The note was prepaid in January 1996.
On February 29, 1996, Texaco completed the disposition of its discontinued
operations by completing the sale of its worldwide lubricant additives business,
which included manufacturing facilities, as well as sales and marketing offices
in various locations in the U.S. and abroad, to Ethyl Corporation, a fuel and
lubricant additives manufacturer. Ethyl purchased this business for $196
million, comprised of $136 million in cash and a three-year note of $60 million.
Financial information on discontinued chemical operations can be found in
Note 3 to the Consolidated Financial Statements on page 48 of this report.
Employee Severance Programs
On July 5, 1994, Texaco announced its plan for growth, which included a series
of steps to increase competitiveness and profitability as well as to reduce
overhead. This program was expected to result in the reduction of approximately
4,000 company employees worldwide by year-end 1996. An after-tax provision of
$144 million was made to cover the cost of employee separations. This program
has now been completed with reductions of about 4,400 employees worldwide. An
adjustment of $9 million after tax was recorded in the fourth quarter of 1996 to
increase reserves from previously estimated amounts. Charges against the reserve
related to severance have totaled $133 million after tax through the end of
1996.
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, rather than cut costs.
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 December 31, 1996, approximately 250 company employees have been
terminated
32
<PAGE>
ITEM B11
Environmental-Cash Expenditures
MILLIONS OF DOLLARS
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B11.]
ITEM B12
Environmental-Cash Expenditures by Geographic Location
MILLIONS OF DOLLARS
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B12.]
with a related commitment to severance payments of $11 million after-tax. Of
this commitment, payments of $4 million have been made and charged against the
reserve as of December 31, 1996.
Environmental Matters
Texaco continues to make substantial capital and operating expenditures for
environmental protection and to comply with federal, state and local
environmental, health and safety laws and regulations. Worldwide environmental
spending in 1996 totaled $795 million for Texaco and its consolidated
subsidiaries and its equity in affiliates. These expenditures relate to the
control and abatement of pollutants into the air and water and to the
appropriate recycling or disposal of wastes and also include costs associated
with remediation obligations at company operated sites, previously operated
sites and certain third-party sites.
The discussion that follows details environmental expenditures and reserve
information relative to Texaco and its equity in affiliates.
Capital Expenditures
In 1996, Texaco's capital environmental expenditures totaled $185 million, or
approximately 6.1% of Texaco's 1996 capital expenditure program, with $95
million expended in the United States. This compares with $275 million of
capital environmental expenditures for the year 1995, of which $169 million was
expended in the United States. This decrease is primarily attributable to lower
downstream expenditures in the United States, reflecting the completion in 1995
of a number of projects equipping refineries to make reformulated fuels and
low-sulfur diesel required by the 1990 Amendments to the Clean Air Act and to
conform to stricter California fuel standards.
Capital expenditures projected for the company for 1997 and 1998 total $219
million and $252 million, respectively, with approximately 54% slated for
operations in the United States.
Ongoing Activities
Texaco spent and expensed $451 million in 1996 associated with protecting the
environment in the company's ongoing operations, the manufacture of
cleaner-burning fuels and in the management of the company's environmental
programs. Of this amount, approximately 61% was related to air quality.
Remediation Costs and Superfund Sites
Expenditures in 1996 relating to remediation amounted to $111 million. The
company had financial reserves of $638 million at the end of 1996 for the
estimated future costs of its environmental remediation programs. These reserves
have been provided to the extent reasonably measurable, as it is not possible to
project overall costs or a range of costs beyond that disclosed, due to
uncertainty surrounding future developments in regulations and remediation
exposure.
Since the enactment of the Comprehensive Environmental Response,
Compensation and Liability Act (commonly referred to as Superfund), the
Environmental Protection Agency (EPA) and other regulatory agencies and groups
have identified Texaco as a potentially responsible party (PRP) for cleanup of
hazardous waste sites. Texaco has determined that it may have potential
exposure, though limited in certain cases, at about 216 multi-party hazardous
waste sites, of which 80 sites are on the EPA's National Priority List. Although
liability under Superfund is joint and several, the company is actively pursuing
and/or participating in the sharing of Superfund costs with other identified
PRP's on the basis of weight, volume and toxicity of the material contributed by
the PRP's. The above referenced expenditures in 1996 relating to remediation
include $12 million for multi-party waste sites. The financial reserves for
environmental remediation include $56 million related to multi-party waste
sites. This reserve is based on the company's analysis of the developments at
these sites for which costs can reasonably be estimated. However, there are
potential additional costs for waste sites for which a range of exposure cannot
reasonably be estimated until further information develops. In many cases, the
amounts and types of wastes are still under investigation by regulatory
agencies.
33
<PAGE>
ITEM B13
1996 Sources of Cash and Cash Equivalents
BILLIONS OF DOLLARS
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B13.]
ITEM B14
1996 Uses of Cash and Cash Equivalents
BILLIONS OF DOLLARS
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B14.]
Restoration and Abandonment
The company also provides financial reserves to cover the cost of restoration
and abandonment of its oil and gas producing properties. These reserves at
December 31, 1996, totaled $850 million. Expenditures in 1996 for restoration
and abandonment amounted to $48 million.
o o o o o o
In summary, Texaco makes every effort to remain in full compliance with
applicable governmental regulations. Changes in governmental regulations and/or
Texaco's re-evaluation of its environmental programs may result in additional
future costs to the company. It is assumed that any mandated future costs would
be recoverable in the marketplace, since all companies within the industry would
be facing similar requirements. However, it is not believed that such future
costs will be material to the company's financial position nor to its operating
results over any reasonable period of time.
<TABLE>
<CAPTION>
Liquidity and Capital Resources
(Millions of dollars, except ratio data) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current ratio 1.24 1.24 1.20
Total debt $ 5,590 $ 6,240 $ 6,481
Minority interest in subsidiary companies $ 658 $ 667 $ 610
Stockholders' equity $10,372 $ 9,519 $ 9,749
Total debt to total borrowed and invested capital 33.6% 38.0% 38.5%
==========================================================================================================
</TABLE>
Texaco's liquidity strategy is to rely on cash from operations, including
careful management of working capital to fund its cash requirements, including
its capital, exploratory and dividend programs. This is complemented by the
company's strong credit rating which allows ready access to global financial
markets and provides the flexibility to take advantage of growth opportunities
at low funding costs. Texaco also maintains a revolving credit facility which
supports the company's commercial paper program. The facility, with commitments
of $1.5 billion as of December 31, 1996 and $2.0 billion at year-end 1995,
remains unused. Further solidifying Texaco's strong liquidity position is the
company's debt profile. At year-end 1996, the company's debt had an average
maturity in excess of 12 years and a weighted average interest rate of 7.5%
including the effect of debt-related derivatives which is not significant. Also,
the contractual annual maturities of long-term debt have been balanced to avoid
disproportionate calls on cash in any one year.
Subsequent to December 31, 1996, Texaco 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.
The company's cash, cash equivalents and short-term investments totaled
$552 million at year-end 1996 and $536 million at year-end 1995. Texaco's total
cash provided by operating activities of $3.8 billion for the year 1996
reflected strong operational earnings and a net inflow of $375 million,
primarily comprised of a cash dividend from Caltex (related to the sale of
Caltex' interest in NPRC), proceeds from advanced payments on long-term natural
gas sales agreements and the collection of nonrecurring receivables (primarily
insurance recoveries relating to environmental matters), which were partially
offset by payments related to litigation and other matters.
Cash from operating activities was supplemented by proceeds from the sales
of discontinued operations and other nonstrategic assets and exceeded outlays of
$2.9 billion relative to the company's capital and exploratory program and $1.0
billion for payment of dividends to common, preferred and minority interest
shareholders and contributed to the reduction of debt and purchases of common
stock. As of December 31, 1996, $163 million has been expended under the $500
million common stock repurchase program announced in 1995. The company will
continue repurchasing shares from time to time based on market conditions. In
the third quarter of 1996, Texaco increased its quarterly dividend on its common
stock to 85 cents per share, from 80 cents per share, an increase of 6.25
percent.
During the first quarter of 1996, Texaco received $136 million in cash and
a three-year note with a face amount of $60 million from the sale of its
worldwide lubricant additives business to Ethyl Corporation and $208 million
from the prepayment of the note received as part of the consideration for the
1994 sale of its chemical operations to Huntsman Corporation. Also in 1996,
Texaco received $261 million from the sale of certain equipment leasehold
interests in conjunction with a sale/leaseback arrangement. In the aggregate,
through year-end 1996, Texaco has received $509 million for these leasehold
interests. The company expects to repurchase the total interests for somewhat
less than the proceeds received, after the related equipment is placed in
service.
In November 1996, Texaco reached an agreement in principle to settle a
purported class action filed against the company in 1994 for allegedly
discriminating against salaried African-American employees, principally with
respect to promotions. A definitive settlement agreement was filed with the
United States District Court for the
34
<PAGE>
ITEM B15
Total Debt to Total Borrowed and Invested Capital
PERCENT
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B15.]
ITEM B16
Total Production and Reserve Additions
MILLIONS OF BARRELS OF OIL EQUIVALENT
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B16.]
Southern District of New York in January 1997. As part of the settlement, in
1996, Texaco transferred $115 million into an escrow account which will be
released to the plaintiffs upon approval of the settlement by the court. The
$115 million payment is covered by litigation reserves and probable insurance
recoveries anticipated to be received during 1997.
The company expects to complete the previously announced 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 in 1997. Texaco has
agreed to sell its propylene oxide/methyl tertiary butyl ether (PO/MTBE)
business to a Huntsman Corporation affiliate for cash and preferred stock. Cash
proceeds at the closing will approximate $513 million, and will be used to
substantially offset the cost of purchasing assets in connection with the
termination of a related lease arrangement. Texaco will also receive preferred
stock with a stated value of $65 million, which is mandatorily redeemable in
eleven years. The company expects to complete this transaction in the first half
of 1997. In addition, Texaco is negotiating with Associates First Capital
Corporation, an indirect majority-owned subsidiary of the Ford Motor Company,
for the sale of the company's credit card services unit, including its portfolio
of proprietary credit card accounts receivable. As a result, Texaco would
receive cash proceeds of approximately $300 million for its proprietary credit
card accounts receivables and associated processing assets.
In October 1996, the United States Court of Appeals for the Fifth Circuit
(Fifth Circuit) affirmed the 1993 U.S. Tax Court (Tax Court) decision in the
so-called "Aramco Advantage" case and upheld Texaco's position in this dispute
with the IRS. The IRS has filed a petition for certiorari with the United States
Supreme Court, seeking review of the favorable decision by the Fifth Circuit. In
March 1988, prior to the commencement of the Tax Court action, Texaco, as a
condition of its emergence from Chapter 11 proceedings, made certain cash
deposits to the IRS (Deposit Fund) in contemplation of potential tax claims. A
portion of the Deposit Fund also will be applied to issues settled in the Tax
Court litigation years. After satisfaction of all liabilities associated with
settled issues, it is anticipated that in excess of $700 million will remain in
the Deposit Fund and continue to accrue interest. If the company ultimately
prevails on the appeal of the Aramco Advantage issue, the amount remaining in
the Deposit Fund will be refunded to the company, with interest. In the event
the Supreme Court denies certiorari, a significant portion of that amount is
expected to be received in 1997.
As a global petroleum company, Texaco is exposed to commodity price,
foreign exchange and interest rate risks. While these risks are primarily
managed by the careful structuring of transactions, the company also uses
certain derivative financial instruments as a cost-effective and efficient means
for managing its risks. Derivative usage is subject to the company's risk
management policies which prohibit speculative positions and restrict the amount
of exposure on all derivative transactions through dollar, term and volumetric
limits. The company's exposure in derivative transactions, in the aggregate, is
not material. For more information related to derivative transactions, refer to
Notes 7 and 15 to the Consolidated Financial Statements.
The company considers its financial position sufficient to meet its
anticipated future financial requirements.
Reserves
Texaco's worldwide net proved reserves at year-end 1996, including equity in P.
T. Caltex Pacific Indonesia (CPI), a 50% owned affiliate operating in Indonesia,
totaled 3.7 billion barrels of oil equivalent, of which 53% are located in the
United States. The worldwide reserves include 2.7 billion barrels of crude oil
and natural gas liquids, and 6.0 trillion cubic feet of natural gas.
On a worldwide basis, including equity reserves and excluding purchases and
sales, the company added new volumes to its reserve base equal to 113% of
combined liquids and gas production in 1996, 129% in 1995 and 111% in 1994.
During 1996, the company added new volumes to its reserve base equal to 83% of
combined liquids and gas production in the United States and 154% outside the
United States. The three-year worldwide reserve replacement average for
1994-1996 was 118% and the five-year replacement average for 1992-1996 was 112%.
Texaco's worldwide finding and development costs were $4.89 in 1996, $3.89
over the three-year period 1994-1996 and $4.04 over the five-year period
1992-1996.
See the "Supplemental Oil and Gas Information" section starting on page 71
for further information regarding Texaco's estimated proved reserves.
35
<PAGE>
ITEM B17
Capital and Exploratory Expenditures - Geographical
BILLIONS OF DOLLARS
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B17.]
ITEM B18
Capital and Exploratory Expenditures - Functional
BILLIONS OF DOLLARS
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B18.]
Capital and Exploratory Expenditures
Worldwide capital and exploratory expenditures for continuing operations,
including equity in such expenditures of affiliates, were $3.4 billion for the
year 1996, of which $1.8 billion, or 52% was spent in international areas and
$1.6 billion, or 48% was spent in the United States. Texaco continues to focus
on key upstream exploration and development projects which represented 69% of
total expenditures in 1996, as compared with 62% in 1995 and 58% in 1994. Solid
opportunities internationally and in the U.S., especially in the Gulf of Mexico
shelf and deepwater areas, have significant potential to build on Texaco's
earnings growth, increase return to shareholders and produce a highly
competitive return on capital employed. Utilizing the synergies of advanced
technologies such as 3-D and vertical cable seismic, subsea completions and
quadrilateral drilling, Texaco continues to add underground oil and gas reserves
at a significant pace. Recent successes of bringing to development many new
fields, enhanced recovery efforts at older fields and the increased focus of a
newly created worldwide exploration unit with the potential to contribute
significant discoveries, are expected to grow Texaco's production and reserves.
Continued downstream investments are carefully scrutinized with capital
allocated to those activities which will return favorable margins to Texaco.
Such projects include strategic refinery upgrades and selected worldwide
marketing initiatives which complement a cohesive investment program.
Exploration and Production
In the United States, capital and exploratory expenditures in 1996 focused on
key projects in the Gulf of Mexico in both the continental shelf and deepwater
areas. Investments reflect higher levels of rank wildcat drilling, continued
revitalization of existing fields and an aggressive Federal lease acquisition
program. Texaco brought into production the Shasta natural gas prospect in the
Gulf of Mexico, successfully demonstrating an assortment of emerging
technologies and innovative subsea development techniques. Appraisal wells also
confirmed the commerciality of the Gemini and Petronius prospects, two
significant 1995 deepwater discoveries. Facility design and construction for the
Petronius project, which will utilize a unique compliant tower design, began in
1996. Work also began on the Discovery project, a major natural gas gathering
and transmission pipeline and processing complex to be located onshore and
offshore South Louisiana. In early 1997, a 50% interest in this project was sold
to a third party. Additionally, Texaco continues to develop its heavy oil
reserves in California using efficient and cost effective enhanced recovery
techniques.
Internationally, upstream expenditures in 1996 increased over both 1995 and
1994. Development efforts continued in the North Sea, including the Erskine
field, in the Partitioned Neutral Zone between Kuwait and Saudi Arabia, as well
as for offshore projects in Australia and Nigeria. In addition, several new
fields were brought into production during 1996 in Angola, Colombia and
Trinidad. Also, the Captain field in the North Sea came onstream during the
first quarter of 1997. In Indonesia, Texaco, through its affiliate P.T. Caltex
Pacific Indonesia, continued the enhanced recovery programs at the vast Minas
and Duri fields. The year 1996 also reflected generally higher exploratory
activity both in the U.S.
and abroad.
Manufacturing, Marketing and Distribution
In the United States, refinery expenditures decreased as compared to 1995 and
1994 due to the completion of major refinery projects and upgrades for both
Texaco and its affiliate, Star Enterprise. Marketing expenditures increased due
to expanded joint marketing initiatives with quick service restaurants and lube
outlets, as well as strategic service station site acquisitions and alliances.
Also, construction continued on a strategic crude oil pipeline which will
service new deepwater and subsalt oil production from the central Gulf of
Mexico.
Internationally, overall downstream expenditures remained relatively
constant over the three-year period 1994-1996. The lower level of refinery
spending was primarily related to a refinery construction completion in Thailand
and an upgrade in Singapore by Caltex and refinery upgrade completions and
enhancements in Panama and the United Kingdom. Marketing investments increased,
particularly in Latin American growth markets and selected European locations,
as well as in high-growth areas of the Pacific Rim through Caltex.
36
<PAGE>
1997 Capital and Exploratory Expenditures
Texaco's capital and exploratory spending levels, including equity in such
expenditures of affiliates, are planned to approximate $4.5 billion during 1997,
an increase of more than 30% over 1996 spending levels. Approximately $2.6
billion, or 58% of Texaco's investment program, is targeted for international
areas and $1.9 billion, or 42%, for domestic initiatives. On a functional basis,
65% of the total program has been designated for upstream opportunities, 33% for
downstream and 2% for other activities.
The 1997 program supports the company's aggressive financial and
operational goals by investing in opportunities that will increase production
and reserves, leverage our world-class technologies and the Texaco brand name,
and support profitable strategic alliances. Expenditures in 1997 will maintain a
balance between growth and strategic opportunities, and core businesses. The
1997 spending budget is the first year of a five year $24.3 billion capital and
exploratory expenditures program.
Upstream investments will be directed to those opportunities that are
expected to significantly increase existing production levels and expand
Texaco's reserve base. In the deepwater U.S. Gulf of Mexico, the company will
nearly double expenditures from 1996 levels. Building upon recent exploration
successes and lease acquisitions, Texaco will maintain a solid rank wildcat
drilling program in 1997, and accelerate the delineation of new discoveries and
development efforts to bring discoveries onstream. Enhanced oil recovery
techniques in the Partitioned Neutral Zone, Indonesia and onshore U.S. will
increase oil and gas output from mature producing fields. Such techniques
involve the use of advanced technologies, including 3-D seismic, steamflooding
and carbon dioxide injection. Development projects will continue in the U.K.
North Sea, where Texaco's Captain field produced first oil in early 1997 and
where the Erskine field is expected to come onstream later in the year. Also,
appraisal work will continue in 1997 for the Galley and Mariner projects in the
North Sea. Participation in high-impact growth opportunities, including the
Karachaganak venture in Kazakstan and a joint agreement to study and pursue the
development of heavy crude oil in the Hamaca region of Venezuela, have the
potential to significantly contribute to Texaco's production and reserve base.
Additionally, exploration will continue in promising geological basins of West
Africa, China and Southeast Asia which have the potential of becoming new core
areas for the company.
In the downstream, expenditures will be directed primarily toward marketing
activities. Texaco will enhance retail positions in Latin America and Caltex'
operating areas throughout the Asia-Pacific region via new business ventures and
the improvement of existing operations in these rapidly growing economic arenas.
In the U.S., investments are targeted for core marketing areas in preferred
markets in support of the company's global brand initiative, and expanding
alliances with quick service restaurants and quick lubes. Also, expenditures are
scheduled for the company's refining operations at the Nerefco complex in the
Netherlands and the U.K. Pembroke plant, including the purchase of the remaining
outside interest in the plant's cracking complex.
Other investments include cogeneration and gasification projects primarily
in areas outside the United States.
37
<PAGE>
<TABLE>
<CAPTION>
Capital and Exploratory Expenditures
(Millions of dollars) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Texaco Inc. and subsidiary companies:
Exploration and production
United States
Exploratory expenses $ 153 $ 94 $ 130
Capital expenditures 1,085 806 659
International
Exploratory expenses 226 195 177
Capital expenditures 755 723 468
- ----------------------------------------------------------------------------------------------------------
Total exploration and production 2,219 1,818 1,434
- ----------------------------------------------------------------------------------------------------------
Manufacturing, marketing and distribution
United States
Manufacturing 94 154 164
Marketing 139 108 78
Distribution 31 43 29
International
Manufacturing 55 92 72
Marketing 299 219 209
Distribution 1 6 11
- ----------------------------------------------------------------------------------------------------------
Total manufacturing, marketing and distribution 619 622 563
- ----------------------------------------------------------------------------------------------------------
Other
United States 33 43 35
International 2 7 2
- ----------------------------------------------------------------------------------------------------------
Total other 35 50 37
- ----------------------------------------------------------------------------------------------------------
Total Texaco Inc. and subsidiary companies 2,873 2,490 2,034
- ----------------------------------------------------------------------------------------------------------
Equity in affiliates:
Exploration and production
United States 5 4 1
International 154 115 150
- ----------------------------------------------------------------------------------------------------------
Total exploration and production 159 119 151
- ----------------------------------------------------------------------------------------------------------
Manufacturing, marketing, distribution and other
United States
Manufacturing 40 88 95
Marketing 38 46 43
Distribution 18 14 14
International*
Manufacturing 67 165 235
Marketing 230 196 160
Distribution 6 9 6
Other--United States -- 1 3
- ----------------------------------------------------------------------------------------------------------
Total manufacturing, marketing, distribution and other 399 519 556
- ----------------------------------------------------------------------------------------------------------
Total equity in affiliates 558 638 707
- ----------------------------------------------------------------------------------------------------------
Total continuing operations 3,431 3,128 2,741
- ----------------------------------------------------------------------------------------------------------
Discontinued operations -- 2 22
- ----------------------------------------------------------------------------------------------------------
Total worldwide $ 3,431 $ 3,130 $ 2,763
==========================================================================================================
<FN>
* Excludes expenditures of Caltex' affiliated companies, principally in
Australia, Thailand, Korea and Japan.
</FN>
</TABLE>
Industry Review
Review of 1996
The world economy grew at a strong 3.8% rate in 1996. However, growth patterns
were mixed among regions. Economic expansion in the industrialized world as a
whole was relatively modest. While the pivotal U.S. economy enjoyed another year
of steady advance, the adoption of fiscal austerity measures in Western Europe
led to a slowing of economic expansion. A large increase in governmental
spending in the first quarter boosted Japanese GDP growth
38
<PAGE>
ITEM B19
Real GDP Growth - Worldwide
PERCENT
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B19.]
ITEM B20
Average West Texas Intermediate Spot Prices - Per Quarter
DOLLARS PER BARREL
[GRAPHIC/IMAGE/ILLUSTRATION MATERIAL APPEARS HERE.
SEE APPENDIX, PART B, ITEM B20.]
in 1996, but the recovery has yet to become deep-rooted. On the other hand,
economic expansion in the developing world was generally robust, particularly in
the Pacific Rim countries. One major disappointment in 1996 was the failure of
the former Soviet bloc to turn around. Although some of the former Eastern
European "satellite" countries enjoyed relatively strong growth, the Russian
economy registered another decline, pulling down the region as a whole.
World demand for petroleum products continued to attain new highs in 1996,
spurred by the global economic expansion and cold winter conditions early in the
year. Oil consumption averaged 71.8 million BPD, an increase of 1.7 million BPD
from the 1995 level. Growth in the industrialized nations rose sharply, up
900,000 BPD, boosted by the very cold winter weather across the Northern
Hemisphere. In the developing countries, buoyant economic conditions,
particularly in the Pacific Rim region, led to a robust increase of 1.2 million
BPD in oil consumption. However, the contraction in the Russian economy offset
gains in several Eastern European countries, leading to an overall 400,000 BPD
demand decline for the former Soviet bloc.
<TABLE>
<CAPTION>
World Petroleum Demand
(Millions of barrels a day) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Industrial nations 41.2 40.3 40.0
Developing nations 24.9 23.7 22.6
Former Soviet bloc 5.7 6.1 6.2
- ----------------------------------------------------------------------------------------------------------
Total 71.8 70.1 68.8
==========================================================================================================
</TABLE>
Crude oil supplies also rose sharply during the year. However, very
ambitious gains that had been expected from non-OPEC sources did not materialize
fully. In the North Sea, for example, extended field maintenance during the
summer, underperformance by several old fields and delayed projects limited
production increases. Even with these constraints, output from the North Sea
contributed significantly to non-OPEC's near 1 million BPD gain from the 1995
level.
Latin America also posted significant increases, resulting from higher
output levels from Argentina, Brazil, Colombia and Mexico. Likewise, there were
significant gains from countries such as Angola, Australia and Canada, but these
were partially offset by production losses from the former Soviet Union and the
United States.
The step-up in world oil demand and lower than anticipated non-OPEC output
combined to boost world requirements for OPEC oil during 1996, the first
substantial output gain for the organization in several years. Crude oil
production averaged 25.9 million BPD, a 900,000 BPD increase over its
year-earlier level. Cash-strapped countries such as Nigeria and Venezuela
substantially exceeded OPEC quotas and accounted for more than half of this
increase. Iraqi exports remained embargoed until near year-end, when agreement
was reached allowing so-called "oil-for-food" flows under U.N.
Resolution 986.
World petroleum prices were surprisingly strong throughout 1996. Special
factors, such as exceptionally cold weather early in 1996, the absence of Iraqi
exports and the delayed start-up of new North Sea production, had a major
impact. At the same time, crude oil and petroleum product stocks were lean by
historical standards, thus contributing to price strength and volatility. The
spot price of U.S. benchmark West Texas Intermediate (WTI) averaged $22.16 per
barrel, which was $3.73 per barrel higher than the previous year and a level not
seen since the Gulf War.
Refiners' margins during 1996 were higher than 1995's very depressed levels
in key U.S. and European markets. Despite the run-up in underlying crude oil
costs, special factors contributed to strong light-end product prices. For
instance, the extreme cold winter within the Atlantic basin boosted heating oil
prices and delayed the refinery switchover to gasoline, leading to low stock
levels prior to the summer driving season. In addition, on the U.S. West Coast,
refinery outages and dislocations resulting from the introduction of CARB
reformulated gasoline also pushed up margins during the spring and summer.
Marketing margins, however, decreased relative to 1995 due to intense
competitive pressures and oversupply in the marketplace, especially in the U.S.,
the United Kingdom and the Asia-Pacific area.
Near-Term Outlook
World economic growth is projected to remain strong in 1997, as continued
powerful expansion in the developing world and modest increases in the
industrialized nations are reinforced by an anticipated turnaround in the former
Soviet bloc. The United States is forecast to continue to enjoy modest growth in
1997, and economic expansion in Western Europe is expected to pick up. In Japan,
growth should weaken somewhat from the artificially high rate created by the
stimulative government spending in 1996. Within the developing world, expansion
in Asia may also moderate somewhat, but will remain relatively strong. The
former Soviet bloc as a whole is anticipated to register positive GDP growth for
the first time in eight years, as the Russian economy shows signs of turning
around.
39
<PAGE>
Strong economic conditions should result in one of the highest rates of
growth for world oil consumption witnessed over the last two decades. World
demand is projected to average 73.8 million BPD, a 2.0 million BPD, or 2.8%
increase over 1996 levels. Growth in the industrialized nations is expected to
slow to 500,000 BPD in 1997, as normal winter conditions are projected. In the
developing countries, demand is expected to rise by 1.4 million BPD, fueled by
the ongoing economic expansion. Also, in the former Soviet bloc, demand is
expected to rise by 100,000 BPD from the 1996 level, as consumption rises in
Central Europe.
<TABLE>
<CAPTION>
Near-Term World Supply/Demand Balance
(Millions of barrels a day) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Demand 73.8 71.8
Supply
Non-OPEC crude 38.3 37.1
OPEC crude 26.7 25.9
Other liquids 9.3 9.0
- --------------------------------------------------------------------------------
Total supply 74.3 72.0
- --------------------------------------------------------------------------------
Stock change 0.5 0.2
================================================================================
</TABLE>
Despite the strength in demand, anticipated increases in non-OPEC and OPEC
production may actually run ahead of consumption, causing the global
supply/demand balance to loosen and prices to weaken. Non-OPEC crude oil
production has been on an uptrend over the last few years and, despite the
somewhat disappointing performance in 1996, output in 1997 is expected to climb
to 38.3 million BPD, a dramatic 1.2 million BPD gain. As in the past, the North
Sea will be the major contributor, followed by Brazil, Mexico, Australia, India,
Angola and some other African nations. By year-end, output from Colombia's giant
Cusiana/Cupiagua fields is expected to rise significantly as the Ocensa pipeline
nears completion. Even output from the former Soviet Union may increase after
many years of decline. Among the major producers, only the United States will
continue to slip, and very slowly, as declining production from Prudhoe Bay and
other North Slope fields is offset by new flows from the Gulf of Mexico.
OPEC production is also expected to rise in 1997, given the resumption in
Iraqi oil exports. The agreed partial lifting of the U.N. embargo will likely
add about 600,000 BPD to the market. In addition, ongoing capacity expansions in
Venezuela, Algeria and Nigeria may translate into a further increase in OPEC
production. This could occur at a time when market fundamentals point toward
weaker crude oil and product prices.
U.S. natural gas consumption in 1996 rose to over 22 trillion cubic feet
(TCF), up 0.6 TCF from the prior-year level. The extreme cold weather and
growing industrial usage boosted demand to a level that has not been experienced
since the early 1970's. In 1997, demand should continue to grow, despite the
assumption of more normal winter conditions.
o o o o o o
Forward-Looking Statements
The Management's Discussion and Analysis and other sections of this Annual
Report may contain forward-looking statements that are based on current
expectations, estimates and projections about the industries in which Texaco
operates, management's beliefs and assumptions made by management. Words such as
"expects," "anticipates," "intends," "plans," "believes," "estimates,"
variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, and
are subject to the safe harbors created thereby. These statements are based on a
number of assumptions that could ultimately prove inaccurate and, therefore,
there can be no assurance that they will prove to be accurate. Factors which
could affect performance include estimation of reserves, inaccurate seismic
data, mechanical failures, unilateral cancellation of concessions by host
governments, decreased demand for motor fuels, natural gas and other products,
above-average temperatures, pipeline failures, oil spills, increasing price and
product competition, higher or lower costs and expenses, domestic and foreign
governmental and public policy changes including environmental regulations, the
outcome of pending and future litigation and governmental proceedings and
continued availability of financing. These are representative of factors which
could affect the outcome of the forward-looking statements. In addition, such
statements could be affected by general industry and market conditions and
growth rates, general domestic and international economic conditions including
interest rate and currency exchange rate fluctuations and other factors. Texaco
undertakes no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise.
40
<PAGE>
STATEMENT OF Texaco Inc.
CONSOLIDATED INCOME and Subsidiary Companies
<TABLE>
<CAPTION>
(Millions of dollars) For the years ended December 31 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Sales and services (includes transactions with significant affiliates of
$3,867 million in 1996, $3,146 million in 1995 and $2,561 million in 1994) $ 44,561 $ 35,551 $ 32,540
Equity in income of affiliates, interest, asset sales and other 939 1,236 813
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues 45,500 36,787 33,353
- ------------------------------------------------------------------------------------------------------------------------------------
Deductions
Purchases and other costs (includes transactions with significant affiliates of
$2,048 million in 1996, $1,733 million in 1995 and $1,679 million in 1994) 34,643 27,237 23,931
Operating expenses 2,978 2,907 3,069
Selling, general and administrative expenses 1,693 1,580 1,679
Maintenance and repairs 367 375 390
Exploratory expenses 379 289 307
Depreciation, depletion and amortization 1,455 2,385 1,735
Interest expense 434 483 498
Taxes other than income taxes 496 491 496
Minority interest 72 54 44
- ------------------------------------------------------------------------------------------------------------------------------------
42,517 35,801 32,149
- ------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes and
cumulative effect of accounting change 2,983 986 1,204
Provision for income taxes 965 258 225
- ------------------------------------------------------------------------------------------------------------------------------------
Net income from continuing operations before cumulative effect of accounting change 2,018 728 979
Net loss on disposal of discontinued operations -- -- (69)
Cumulative effect of accounting change -- (121) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income $ 2,018 $ 607 $ 910
====================================================================================================================================
Preferred stock dividend requirements $ 58 $ 60 $ 91
- ------------------------------------------------------------------------------------------------------------------------------------
Net income available for common stock $ 1,960 $ 547 $ 819
====================================================================================================================================
Net Income Per Common Share (dollars)
Net income (loss) before cumulative effect of accounting change
Continuing operations $ 7.52 $ 2.57 $3.43
Discontinued operations -- -- (.26)
Cumulative effect of accounting change -- (.47) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 7.52 $ 2.10 $3.17
====================================================================================================================================
Average Number of Common Shares Outstanding (for computation of earnings
per share) (thousands) 260,717 259,983 258,813
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
41
<PAGE>
CONSOLIDATED Texaco Inc.
BALANCE SHEET and Subsidiary Companies
<TABLE>
<CAPTION>
(Millions of dollars) As of December 31 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 511 $ 501
Short-term investments-at fair value 41 35
Accounts and notes receivable (includes receivables from significant
affiliates of $299 million in 1996 and $240 million in 1995), less allowance
for doubtful accounts of $34 million in 1996 and $28 million in 1995 5,195 4,177
Inventories 1,460 1,357
Net assets of discontinued operations (see Note 3) -- 164
Deferred income taxes and other current assets 458 224
- --------------------------------------------------------------------------------------------------------
Total current assets 7,665 6,458
Investments and Advances 4,996 5,278
Net Properties, Plant and Equipment 13,411 12,580
Deferred Charges 891 621
- --------------------------------------------------------------------------------------------------------
Total $ 26,963 $ 24,937
========================================================================================================
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable, commercial paper and current portion of long-term debt $ 465 $ 737
Accounts payable and accrued liabilities (includes payables to significant
affiliates of $144 million in 1996 and $123 million in 1995)
Trade liabilities 3,472 2,396
Accrued liabilities 1,333 1,381
Estimated income and other taxes 914 692
- --------------------------------------------------------------------------------------------------------
Total current liabilities 6,184 5,206
Long-Term Debt and Capital Lease Obligations 5,125 5,503
Deferred Income Taxes 795 634
Employee Retirement Benefits 1,236 1,138
Deferred Credits and Other Noncurrent Liabilities 2,593 2,270
Minority Interest in Subsidiary Companies 658 667
- --------------------------------------------------------------------------------------------------------
Total 16,591 15,418
Stockholders' Equity
Market Auction Preferred Shares 300 300
ESOP Convertible Preferred Stock 474 495
Unearned employee compensation and benefit plan trust (378) (437)
Common stock-274,293,417 shares issued 1,714 1,714
Paid-in capital in excess of par value 630 655
Retained earnings 8,292 7,186
Currency translation adjustment (65) 61
Unrealized net gain on investments 33 62
- --------------------------------------------------------------------------------------------------------
11,000 10,036
Less-Common stock held in treasury, at cost 628 517
- --------------------------------------------------------------------------------------------------------
Total stockholders' equity 10,372 9,519
- --------------------------------------------------------------------------------------------------------
Total $ 26,963 $ 24,937
========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
42
<PAGE>
STATEMENT OF Texaco Inc.
CONSOLIDATED CASH FLOWS and Subsidiary Companies
<TABLE>
<CAPTION>
(Millions of dollars) For the years ended December 31 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income $ 2,018 $ 607 $ 910
Reconciliation to net cash provided by (used in) operating activities
Cumulative effect of accounting change -- 121 --
Loss on disposal of discontinued operations -- -- 103
Depreciation, depletion and amortization 1,455 2,385 1,735
Deferred income taxes (20) (102) (213)
Exploratory expenses 379 289 307
Minority interest in net income 72 54 44
Dividends from affiliates, greater than (less than) equity in income 167 (103) (79)
Gains on asset sales (19) (320) (125)
Changes in operating working capital
Accounts and notes receivable (1,072) (766) 278
Inventories (104) (29) (60)
Accounts payable and accrued liabilities 716 (116) (350)
Other-mainly estimated income and other taxes 97 (44) 23
Other-net 73 146 286
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,762 2,122 2,859
Investing Activities
Capital and exploratory expenditures (2,897) (2,386) (2,050)
Proceeds from sale of discontinued operations, net of cash and cash equivalents sold 344 -- 645
Proceeds from sales of assets 125 1,150 328
Sale of leasehold interests 261 248 --
Purchases of investment instruments (1,668) (1,238) (693)
Sales/maturities of investment instruments 1,816 1,273 672
Other-net 70 12 (7)
- --------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (1,949) (941) (1,105)
Financing Activities
Borrowings having original terms in excess of three months
Proceeds 307 313 660
Repayments (802) (358) (707)
Net decrease in other borrowings (143) (137) (251)
Issuance of preferred stock by subsidiaries -- 65 112
Redemption of Series C Preferred Stock -- -- (267)
Purchases of common stock (159) (4) (381)
Dividends paid to the company's stockholders
Common (859) (832) (830)
Preferred (58) (60) (91)
Dividends paid to minority stockholders (87) (55) (87)
Other-net -- (2) (3)
- --------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (1,801) (1,070) (1,845)
Cash and Cash Equivalents
Effect of exchange rate changes (2) (14) 7
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) during year 10 97 (84)
Beginning of year 501 404 488
- --------------------------------------------------------------------------------------------------------------------
End of year $ 511 $ 501 $ 404
====================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
43
<PAGE>
STATEMENT OF CONSOLIDATED Texaco Inc.
STOCKHOLDERS' EQUITY and Subsidiary Companies
<TABLE>
<CAPTION>
Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
(Shares in thousands; amounts in millions of dollars) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Preferred Stock
par value $1; Shares authorized-30,000,000
Series B ESOP Convertible Preferred Stock-
liquidation value of $600 per share
Beginning of year 751 $ 450 780 $ 468 812 $ 487
Retirements (31) (18) (29) (18) (32) (19)
- ------------------------------------------------------------------------------------------------------------------------------------
End of year 720 432 751 450 780 468
- ------------------------------------------------------------------------------------------------------------------------------------
Series F ESOP Convertible Preferred Stock-
liquidation value of $737.50 per share
Beginning of year 60 45 63 47 66 49
Retirements (3) (3) (3) (2) (3) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
End of year 57 42 60 45 63 47
- ------------------------------------------------------------------------------------------------------------------------------------
Market Auction Preferred Shares (Series G, H, I and J)-
liquidation preference of $250,000 per share
Beginning and end of year 1 300 1 300 1 300
- ------------------------------------------------------------------------------------------------------------------------------------
Series C Variable Rate Cumulative Preferred Stock-
stated value of $50 per share
Beginning of year -- -- -- -- 5,334 267
Redemption -- -- -- -- (5,334) (267)
- ------------------------------------------------------------------------------------------------------------------------------------
End of year -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
Series E Variable Rate Cumulative Preferred Stock-
stated value of $100,000 per share
Beginning of year -- -- -- -- 4 381
Redemption -- -- -- -- (4) (381)
- ------------------------------------------------------------------------------------------------------------------------------------
End of year -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
Unearned Employee Compensation
(related to ESOP preferred stock and restricted stock awards)
Beginning of year (234) (282) (337)
Awards (22) (8) (5)
Amortization and other 81 56 60
- ------------------------------------------------------------------------------------------------------------------------------------
End of year (175) (234) (282)
- ------------------------------------------------------------------------------------------------------------------------------------
Benefit Plan Trust
(common stock)
Beginning of year 4,000 (203) -- --
Establishment -- -- 4,000 (203)
- ------------------------------------------------------------------------------------------------------------------------------------
End of year 4,000 (203) 4,000 (203)
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock
par value $6.25; Shares authorized-350,000,000
Issued 274,293 1,714 274,293 1,714 274,293 1,714
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Held in Treasury, at cost
Beginning of year 10,076 (517) 14,761 (753) 15,273 (776)
Purchases of common stock 1,757 (159) 51 (4) 6,107 (381)
Preferred stock exchange -- -- -- -- (6,107) 381
Other-mainly employee benefit plans (1,238) 48 (4,736) 240 (512) 23
- ------------------------------------------------------------------------------------------------------------------------------------
End of year 10,595 $ (628) 10,076 $ (517) 14,761 $ (753)
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
(Continued on next page)
44
<PAGE>
STATEMENT OF CONSOLIDATED Texaco Inc.
STOCKHOLDERS' EQUITY and Subsidiary Companies
<TABLE>
<CAPTION>
(Millions of dollars) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Paid-in-Capital in Excess of Par Value
Beginning of year $ 655 $ 654 $ 655
Issuance and redemption of preferred stock, treasury stock transactions
relating to investor services plan and employee compensation plans (25) 1 (1)
- ------------------------------------------------------------------------------------------------------------------------------------
End of year 630 655 654
- ------------------------------------------------------------------------------------------------------------------------------------
Retained Earnings
Balance at beginning of year 7,186 7,463 7,463
Add:
Net income 2,018 607 910
Tax benefit associated with dividends on unallocated ESOP Convertible Preferred Stock 5 8 11
Deduct: Dividends declared on
Common stock ($3.30 per share in 1996, $3.20 per share in 1995 and 1994) 859 832 830
Preferred stock
Series B ESOP Convertible Preferred Stock 42 43 45
Series F ESOP Convertible Preferred Stock 4 4 4
Market Auction Preferred Shares (Series G, H, I and J) 12 13 10
Series C Variable Rate Cumulative Preferred Stock -- -- 13
Series E Variable Rate Cumulative Preferred Stock -- -- 19
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 8,292 7,186 7,463
- ------------------------------------------------------------------------------------------------------------------------------------
Currency Translation Adjustment
Beginning of year 61 87 18
Change during year (126) (26) 69
- ------------------------------------------------------------------------------------------------------------------------------------
End of year (65) 61 87
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized Net Gain On Investments
Beginning of year 62 51 58
Change during year (29) 11 (7)
- ------------------------------------------------------------------------------------------------------------------------------------
End of year 33 62 51
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity
End of year (including preceding page) $ 10,372 $ 9,519 $ 9,749
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
45
<PAGE>
NOTES TO CONSOLIDATED Texaco Inc.
FINANCIAL STATEMENTS and Subsidiary Companies
1 Note One - Description of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements consist of the accounts of Texaco Inc. and
subsidiary companies owned directly or indirectly more than 50 percent.
Intercompany accounts and transactions are eliminated.
The U.S. Dollar is the functional currency of all the company's operations
and of a substantial portion of the operations of its affiliates accounted for
on the equity method. For these operations, translation effects and all gains
and losses from transactions not denominated in the functional currency are
included in income currently, except for certain hedging transactions. The
cumulative translation effects for the equity affiliates using functional
currencies other than the U.S. Dollar are included in the currency translation
adjustment in stockholders' equity.
Use of Estimates
The preparation of Texaco's consolidated financial statements in accordance with
generally accepted accounting principles requires the use of estimates and
management's judgment. While all available information has been considered,
actual amounts could differ from those reported as assets and liabilities and
related revenues, costs and expenses and the disclosed amounts of contingencies.
Cash Equivalents
Highly liquid investments with a maturity of three months or less when purchased
are generally considered to be cash equivalents.
Inventories
Virtually all inventories of crude oil, petroleum products and petrochemicals
are stated at cost, determined on the last-in, first-out (LIFO) method. Other
merchandise inventories are stated at cost, determined on the first-in,
first-out (FIFO) method. Materials and supplies are stated at average cost.
Inventories are valued at the lower of cost or market.
Investments and Advances
The equity method of accounting is used for investments in certain affiliates
owned 50 percent or less, including corporate joint-ventures and partnerships.
Under this method, equity in the pre-tax income or losses of partnerships and in
the net income or losses of corporate joint-venture companies is reflected
currently in Texaco's revenues, rather than when realized through dividends or
distributions. Investments in the entities accounted for on this method
generally reflect Texaco's equity in their underlying net assets.
The company's interest in the net income of affiliates accounted for at
cost is reflected in net income when realized through dividends.
Investments in debt securities and in equity securities with readily
determinable fair values are accounted for at fair value if classified as
available-for-sale.
Properties, Plant and Equipment and Depreciation, Depletion and Amortization
Texaco follows the "successful efforts" method of accounting for its oil and gas
exploration and producing operations.
Lease acquisition costs related to properties held for oil, gas and mineral
production are capitalized when incurred. Unproved properties with acquisition
costs which are individually significant are assessed on a property-by-property
basis, and a loss is recognized, by provision of a valuation allowance, when the
assessment indicates an impairment in value. Unproved properties with
acquisition costs which are not individually significant are generally
aggregated and the portion of such costs estimated to be nonproductive, based on
historical experience, is amortized on an average holding period basis.
Exploratory costs, excluding the costs of exploratory wells, are charged to
expense as incurred. Costs of drilling exploratory wells, including
stratigraphic test wells, are capitalized pending determination whether the
wells have found proved reserves which justify commercial development. If such
reserves are not found, the drilling costs are charged to exploratory expenses.
Intangible drilling costs applicable to productive wells and to development dry
holes, as well as tangible equipment costs and costs of injected carbon dioxide
related to the development of oil and gas reserves, are capitalized.
As discussed in Note 2, Texaco adopted SFAS 121 in 1995. Commencing in
1995, for purposes of determining and recognizing permanent impairment of
long-lived assets to be held and used, the applicable carrying value is tested
against the undiscounted projection of net future pre-tax cash flows. In the
case of productive oil and gas properties located in the United States, the test
is performed on an individual field basis, including related depreciable
investment. For similar properties located outside the United States,
46
<PAGE>
the test is performed on a field, concession or contract area basis, depending
on the circumstances. For other depreciable investments, the applicable grouping
of assets is based on the lowest practicable levels of identifiable cash flows,
consistent with the manner in which those assets are managed. If an impairment
exists, the carrying amount is adjusted to fair value.
Assets to be disposed of are generally accounted for at the lower of
amortized cost or fair value less cost to sell.
The costs of productive leaseholds and other capitalized costs related to
producing activities, including tangible and intangible costs, are amortized
principally by field on the unit-of-production basis by applying the ratio of
produced oil and gas to estimated recoverable proved oil and gas reserves.
Estimated future restoration and abandonment costs are taken into account in
determining amortization and depreciation rates.
Depreciation of properties, plant and equipment related to facilities other
than producing properties is provided generally on the group plan, using the
straight-line method, with depreciation rates based upon estimated useful life
applied to the cost of each class of property. Assets not on the group plan are
depreciated based on estimated useful lives using the straight-line method.
Capitalized nonmineral leases are amortized over the estimated useful life
of the asset or the lease term, as appropriate, using the straight-line method.
Periodic maintenance and repairs applicable to marine vessels and
manufacturing facilities are accounted for on the accrual basis. Normal
maintenance and repairs of all other properties, plant and equipment are charged
to expense as incurred. Renewals, betterments and major repairs that materially
extend the useful life of properties are capitalized and the assets replaced, if
any, are retired.
When capital assets representing complete units of property are disposed
of, the difference between the disposal proceeds and net book value is credited
or charged to income. When miscellaneous business properties are disposed of,
the difference between asset cost and salvage value is charged or credited to
accumulated depreciation.
Environmental Expenditures
When remediation of a property is probable and the related costs can be
reasonably estimated, environmentally-related remediation costs are expensed and
recorded as liabilities. If recoveries of environmental costs from third parties
are probable, a receivable is recorded. Other environmental expenditures,
principally maintenance or preventive in nature, are recorded when expended and
are expensed or capitalized as appropriate.
Deferred Income Taxes
Deferred income taxes are determined utilizing a liability approach. The income
statement effect is derived from changes in deferred income taxes on the balance
sheet. This approach gives consideration to the future tax consequences
associated with differences between financial accounting and tax bases of assets
and liabilities. These differences relate to items such as depreciable and
depletable properties, exploratory and intangible drilling costs, nonproductive
leases, merchandise inventories and certain liabilities. This approach gives
immediate effect to changes in income tax laws upon enactment.
Provision is not made for possible income taxes payable upon distribution
of accumulated earnings of foreign subsidiary companies and affiliated corporate
joint-venture companies when such earnings are deemed to be permanently
reinvested.
Net Income Per Common Share
Primary net income per common share is based on net income less preferred stock
dividend requirements divided by the average number of common shares outstanding
and common equivalents. Fully diluted net income per common share assumes full
conversion of all convertible securities into common stock at the later of the
beginning of the year or date of issuance (unless antidilutive).
Accounting for Contingencies
Certain conditions may exist as of the date financial statements are issued,
which may result in a loss to the company, but which will only be resolved when
one or more future events occur or fail to occur. Such contingent liabilities
are assessed by the company's management and legal counsel. The assessment of
loss contingencies necessarily involves an exercise of judgment and is a matter
of opinion. In assessing loss contingencies related to legal proceedings that
are pending against the company or unasserted claims that may result in such
proceedings, the company's legal counsel evaluates the perceived merits of any
legal proceedings or unasserted claims as well as the perceived merits of the
amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a
material liability had been incurred and the amount of the loss can be
estimated, then the estimated liability would be accrued in the company's
financial statements. If the assessment indicates that a potentially material
liability is not probable, but is reasonably possible, or is probable but cannot
be estimated, then the nature of the contingent liability, together with an
estimate of the range of possible loss if determinable and material, would be
disclosed.
Loss contingencies considered remote are generally not disclosed unless
they involve guarantees, in which case the nature of the guarantee would be
disclosed. However, in some instances in which disclosure is not otherwise
required, the company may disclose contingent liabilities of an unusual nature
which, in the judgment of management and its legal counsel, may be
of interest to stockholders or others.
47
<PAGE>
Reclassifications
Certain previously reported amounts have been reclassified to conform to current
year presentation.
2 Note Two - Changes in Accounting Principles
During 1995, Texaco adopted Statement of Financial Accounting Standards,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" (SFAS 121). Under SFAS 121, assets whose carrying amounts are
not expected to be fully recovered by future use or disposition must be written
down to their fair values.
Adoption of this Standard resulted in a non-cash after-tax charge of $639
million against fourth quarter 1995 earnings. Application of SFAS 121 to assets
that the company intends to retain resulted in a pre-tax fourth quarter charge
of $775 million, principally due to depreciation, depletion and amortization
expense. On an after-tax basis, this charge amounted to $514 million and
primarily reflected the write-down to their estimated fair values of certain of
the company's producing properties in the United States which were evaluated for
impairment on a field-by-field basis rather than in the aggregate. Fair values
were based on estimated future discounted cash flows. To a large extent, the
impairments resulted from acquisitions of U.S. upstream properties at times when
price assumptions and reserve estimates were higher. Additionally, constraints
on production and development in certain areas due to environmental concerns
have curtailed originally projected production levels and increased costs to the
point that original investments cannot be fully recovered. Also in the fourth
quarter, certain non-core coal and marketing properties, surplus buildings and
other properties and equipment that the company intends to abandon or dispose of
pursuant to its plan for growth were written down by a $184 million charge,
principally due to depreciation, depletion and amortization expense. Including
estimated disposal costs, this charge to income was $125 million, net-of-tax.
There were no material changes in the estimated fair values of assets to be
disposed of subsequent to the determination of their impairment. At year-end
1996 and 1995, the carrying amounts of assets to be disposed of were not
significant. Adoption of SFAS 121 by Star Enterprise and the Caltex group of
companies, each owned 50% by Texaco, had no effect on 1995 net income.
In accordance with SFAS 121, a $121 million after-tax write-down of
non-core domestic producing properties held for sale at January 1, 1995,
previously recorded in the first quarter of 1995 in income from continuing
operations, has been classified as the cumulative effect of an accounting
change.
3 Note Three - Discontinued Operations
In 1993, Texaco announced its intention to dispose of substantially all of its
worldwide chemical operations, including its lubricant additives business.
Texaco has since accounted for these operations as discontinued operations.
On April 21, 1994, Texaco Inc. completed the sale of Texaco Chemical
Company and related international chemical operations to Huntsman Corporation
for $850 million, consisting of $650 million in cash and an 11-year subordinated
note with a face value of $200 million. The note was prepaid in January 1996. On
February 29, 1996, Texaco sold 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.
The results of these operations have been classified as discontinued
operations for all periods presented in the Statement of Consolidated Income.
The assets and liabilities of the worldwide lubricant additives business are
classified as "Net assets of discontinued operations" in the December 31, 1995
Consolidated Balance Sheet. Discontinued operations have not been segregated in
the Statement of Consolidated Cash Flows and, therefore, amounts for certain
captions will not agree with the respective Statement of Consolidated Income.
Purchase and sale transactions between the discontinued operations and
Texaco's significant affiliates, as well as resultant receivables and payables,
were immaterial for each period presented.
The summarized results of discontinued operations and related per common
share effects are as follows:
<TABLE>
<CAPTION>
(Millions of dollars) For the years ended December 31 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 32 $ 222 $ 415
====================================================================================================================================
Loss on disposal before income taxes* $ -- $ -- $(103)
Benefit from income taxes -- -- 34
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss on disposal $ -- $ -- $ (69)
====================================================================================================================================
*1996 includes $3 million of losses, 1995 includes $11 million of income and 1994 includes $15 million of
income during the phase-out period.
Per common share (dollars)
Net loss on disposal $ -- $ -- $(.26)
====================================================================================================================================
<FN>
The net assets of discontinued operations of $164 million at December 31, 1995
consisted primarily of properties, plant and equipment of $130 million and
working capital.
</FN>
</TABLE>
48
<PAGE>
4 Note Four - Inventories
(Millions of dollars) As of December 31 1996 1995
- --------------------------------------------------------------------------------
Crude oil $ 296 $ 294
Petroleum products and petrochemicals 904 839
Other merchandise 58 27
Materials and supplies 202 197
- --------------------------------------------------------------------------------
Total $1,460 $1,357
================================================================================
The excess of estimated current cost over the book value of inventories
carried on the LIFO basis of accounting was approximately $398 million and $231
million at December 31, 1996 and 1995, respectively.
5 Note Five - Investments and Advances
Investments in affiliates, including corporate joint-ventures and partnerships,
owned 50% or less are accounted for on the equity method. Texaco's total
investments and advances are summarized as follows:
(Millions of dollars) As of December 31 1996 1995
- -------------------------------------------------------------------------------
Affiliates accounted for on the equity method
Caltex group of companies
Exploration and production $ 448 $ 445
Manufacturing, marketing and distribution 1,679 2,035
- -------------------------------------------------------------------------------
Total Caltex group of companies 2,127 2,480
Star Enterprise 756 755
Other affiliates 928 850
- -------------------------------------------------------------------------------
3,811 4,085
Miscellaneous investments, long-term receivables,
etc., accounted for at
Fair value 544 682
Cost, less reserve 641 511
- -------------------------------------------------------------------------------
Total $4,996 $5,278
===============================================================================
Texaco's equity in the net income of affiliates accounted for on the equity
method, adjusted to reflect income taxes for partnerships whose income is
directly taxable to Texaco, is as follows:
(Millions of dollars) For the years ended December 31 1996 1995 1994
- --------------------------------------------------------------------------------
Equity in net income (loss)
Caltex group of companies
Exploration and production $ 188 $ 156 $ 136
Manufacturing, marketing and distribution 347 294 210
- --------------------------------------------------------------------------------
Total Caltex group of companies 535 450 346
Star Enterprise 14 (47) 37
Other affiliates 120 121 111
- --------------------------------------------------------------------------------
Total $ 669 $ 524 $ 494
- --------------------------------------------------------------------------------
Dividends received from these companies $ 878 $ 427 $ 467
================================================================================
The undistributed earnings of these affiliates included in Texaco's
retained earnings were $2,609 million, $2,768 million and $2,657 million as of
December 31, 1996, 1995 and 1994, respectively.
49
<PAGE>
Caltex Group
Texaco has investments in the Caltex group of companies, owned 50% by Texaco and
50% by Chevron Corporation. The Caltex group consists of P.T. Caltex Pacific
Indonesia, American Overseas Petroleum Limited and subsidiary and Caltex
Petroleum Corporation and subsidiaries. This group of companies is engaged in
the exploration for and production, transportation, refining and marketing of
crude oil and products in Africa, Asia, the Middle East, Australia and New
Zealand.
On April 2, 1996, Caltex Petroleum Corporation completed the sale of its
50% interest in Nippon Petroleum Refining Company, Limited (NPRC) to its
partner, Nippon Oil Company, for approximately $2 billion. Caltex Petroleum
Corporation's net income for 1996 includes a gain of $621 million associated
with this sale. Texaco's results include a net gain of $219 million relating to
this sale, comprised of its equity share of the gain, less an adjustment in the
carrying value of its investment and further reduced by a tax on the dividend
distributed to the shareholders.
Star Enterprise
Star Enterprise (Star) is a joint-venture partnership owned 50% by Texaco and
50% by the Saudi Arabian Oil Company. The partnership refines, distributes and
markets certain Texaco-branded petroleum products, including gasolines, in 26
East and Gulf Coast states and the District of Columbia.
o o o o o o
The following table provides summarized financial information on a 100%
basis for the Caltex group, Star and all other affiliates accounted for on the
equity method, as well as Texaco's share. The net income of all partnerships,
including Star, is net of estimated income taxes. The actual income tax
liability is reflected in the accounts of the respective partners and not shown
in the following table.
Star's assets at the respective balance sheet dates include the remaining
portion of the assets which were originally transferred from Texaco to Star at
the fair market value on the date of formation. Texaco's investment and equity
in the income of Star, as reported in the consolidated financial statements,
reflect the remaining unamortized historical carrying cost of the assets
transferred to Star at formation. Additionally, Texaco's investment includes
adjustments necessary to reflect contractual arrangements on the formation of
this partnership, principally involving contributed inventories.
50
<PAGE>
<TABLE>
<CAPTION>
(Millions of dollars) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Caltex group
For the years ended December 31:
Gross revenues $ 18,166 $ 15,622 $ 15,148
Income before income taxes $ 2,175 $ 1,366 $ 1,111
Net income $ 1,193 $ 899 $ 689
====================================================================================================================================
As of December 31:
Current assets $ 2,565 $ 2,323 $ 2,421
Noncurrent assets 6,830 7,794 7,389
Current liabilities (2,999) (3,223) (3,072)
Noncurrent liabilities and deferred credits (2,018) (1,799) (1,853)
Minority interest in subsidiary companies (122) (136) (152)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $ 4,256 $ 4,959 $ 4,733
====================================================================================================================================
Star Enterprise
For the years ended December 31:
Gross revenues $ 8,006 $ 6,619 $ 6,100
Income (loss) before income taxes $ 38 $ (135) $ 101
Net income (loss) $ 25 $ (88) $ 66
====================================================================================================================================
As of December 31:
Current assets $ 816 $ 832 $ 928
Noncurrent assets 3,204 3,299 3,247
Current liabilities (704) (745) (748)
Noncurrent liabilities and deferred credits (1,141) (1,207) (1,109)
- ------------------------------------------------------------------------------------------------------------------------------------
Partners' equity $ 2,175 $ 2,179 $ 2,318
====================================================================================================================================
Other equity affiliates
For the years ended December 31:
Gross revenues $ 3,940 $ 3,662 $ 3,058
Income before income taxes $ 697 $ 691 $ 639
Net income $ 451 $ 440 $ 410
====================================================================================================================================
As of December 31:
Current assets $ 1,049 $ 925 $ 641
Noncurrent assets 3,853 3,622 3,351
Current liabilities (1,182) (1,180) (759)
Noncurrent liabilities and deferred credits (1,845) (1,703) (1,835)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (or partners' equity) $ 1,875 $ 1,664 $ 1,398
====================================================================================================================================
Texaco's share
For the years ended December 31:
Gross revenues $ 14,644 $ 12,567 $ 11,766
Income before income taxes $ 1,310 $ 818 $ 780
Net income $ 669 $ 524 $ 494
====================================================================================================================================
As of December 31:
Current assets $ 1,913 $ 1,739 $ 1,711
Noncurrent assets 6,378 6,820 6,453
Current liabilities (2,329) (2,420) (2,213)
Noncurrent liabilities and deferred credits (2,090) (1,986) (1,969)
Minority interest in subsidiary companies (61) (68) (76)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (or partners' equity) $ 3,811 $ 4,085 $ 3,906
====================================================================================================================================
</TABLE>
51
<PAGE>
6 Note Six - Properties, Plant and Equipment
As of December 31, 1996 and 1995, net exploration and production properties,
plant and equipment totaled $5,258 million and $4,914 million, respectively,
relating to U.S. operations and $2,474 million and $2,180 million, respectively,
relating to international operations. As of December 31, 1996 and 1995, net
manufacturing, marketing, and distribution properties, plant and equipment
totaled $2,834 million and $2,856 million, respectively, relating to U.S.
operations and $2,219 million and $2,040 million, respectively, relating to
international operations.
<TABLE>
<CAPTION>
Gross Net Gross Net
- ------------------------------------------------------------------------------------------------------------------------------------
(Millions of dollars) As of December 31 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Exploration and production $24,786 $ 7,732 $24,015 $ 7,094
- ------------------------------------------------------------------------------------------------------------------------------------
Manufacturing, marketing and distribution
Manufacturing 3,476 2,097 3,370 2,115
Marketing 3,651 2,607 3,360 2,376
Marine 173 8 226 12
Pipelines 870 341 950 393
- ------------------------------------------------------------------------------------------------------------------------------------
Total manufacturing, marketing and distribution 8,170 5,053 7,906 4,896
- ------------------------------------------------------------------------------------------------------------------------------------
Other 1,032 626 982 590
- ------------------------------------------------------------------------------------------------------------------------------------
Total $33,988 $13,411 $32,903 $12,580
====================================================================================================================================
Capital lease amounts included above $ 450 $ 111 $ 559 $ 60
====================================================================================================================================
</TABLE>
Accumulated depreciation, depletion and amortization totaled $20,577
million and $20,323 million at December 31, 1996 and 1995, respectively.
Interest capitalized as part of properties, plant and equipment was $12 million
in 1996, $20 million in 1995 and $13 million in 1994.
7 Note Seven - Short-Term Debt, Long-Term Debt, Capital Lease Obligations and
Related Derivatives
Notes payable, commercial paper and current portion of long-term debt
<TABLE>
<CAPTION>
(Millions of dollars) As of December 31 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial paper $ 326 $ 609
Notes payable to banks and others with originating terms of one year or less 443 464
Current portion of long-term debt and capital lease obligations
Indebtedness 640 684
Capital lease obligations 13 27
- ------------------------------------------------------------------------------------------------------------------------------------
1,422 1,784
Less short-term obligations intended to be refinanced 957 1,047
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 465 $ 737
====================================================================================================================================
</TABLE>
The weighted average interest rate of commercial paper and notes payable to
banks at December 31, 1996 and 1995 was 6.1%.
52
<PAGE>
Long-term debt and capital lease obligations
<TABLE>
<CAPTION>
(Millions of dollars) As of December 31 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long-Term Debt
6-7/8% Guaranteed notes, due 1999 $ 200 $ 200
6-7/8% Guaranteed debentures, due 2023 195 195
7-1/2% Guaranteed debentures, due 2043 198 198
7-3/4% Guaranteed debentures, due 2033 199 199
8% Guaranteed debentures, due 2032 147 147
8-1/4% Guaranteed debentures, due 2006 150 150
8-3/8% Guaranteed debentures, due 2022 198 198
8-1/2% Guaranteed notes, due 2003 199 199
8-5/8% Guaranteed debentures, due 2010 150 150
8-5/8% Guaranteed debentures, due 2031 199 199
8-5/8% Guaranteed debentures, due 2032 199 199
8.65% Guaranteed notes, due 1998 200 200
8-7/8% Guaranteed debentures, due 2021 150 150
9% Guaranteed notes, due 1996 -- 400
9% Guaranteed notes, due 1997 200 200
9% Guaranteed notes, due 1999 200 200
9-3/4% Guaranteed debentures, due 2020 250 250
Medium-term notes, maturing from 1996 to 2043 (7.8%) 568 573
Revolving Credit Facility, due 1998-2002 - variable rate (5.6%) 330 330
Pollution Control Revenue Bonds, due 2012 - variable rate (3.5%) 166 166
Other long-term debt:
Texaco Inc. - Guarantee of ESOP Series B and F loans - fixed and variable rates (5.0%) 145 213
U.S. dollars (6.5%) 374 295
Other currencies (8.3%) 59 38
- ------------------------------------------------------------------------------------------------------------------------------------
Total 4,676 5,049
Capital Lease Obligations (see Note 8) 145 118
- ------------------------------------------------------------------------------------------------------------------------------------
4,821 5,167
Less current portion of long-term debt and capital lease obligations 653 711
- ------------------------------------------------------------------------------------------------------------------------------------
4,168 4,456
Short-term obligations intended to be refinanced 957 1,047
- ------------------------------------------------------------------------------------------------------------------------------------
Total long-term debt and capital lease obligations $5,125 $5,503
====================================================================================================================================
</TABLE>
The percentages reflected for variable-rate debt are the interest rates at
December 31, 1996. The percentages reflected for the categories "Medium-term
notes" and "Other long-term debt" are the weighted average interest rates at
year-end 1996. Where applicable, principal amounts reflected in the preceding
schedule include unamortized premium or discount. Interest paid, net of amounts
capitalized, amounted to $433 million in 1996, $482 million in 1995 and $500
million in 1994.
At December 31, 1996, Texaco was party to a revolving credit facility with
commitments of $1.5 billion with a syndicate of major U.S. and international
banks, available as support for the issuance of the company's commercial paper,
as well as for working capital and for other general corporate purposes. Texaco
has no amounts outstanding under this facility at year-end 1996. Texaco pays a
facility fee on the $1.5 billion facility. The banks reserve the right to
terminate the credit facility upon the occurrence of certain specific events,
including change in control.
At December 31, 1996, Texaco's long-term debt included $957 million of
short-term obligations scheduled to mature during 1997, which the company has
both the intent and the ability to refinance on a long-term basis, through the
use of its $1.5 billion revolving credit facility.
Contractual annual maturities of long-term debt, including sinking fund
payments and other redemption requirements, for the five years subsequent to
December 31, 1996 are as follows (in millions): 1997 - $640; 1998 - $326; 1999 -
$546; 2000 - $169; and 2001 - $169. The preceding maturities are before
consideration of short-term obligations intended to be refinanced and also
exclude capital lease obligations.
Debt-related derivatives
Texaco seeks to maintain a balanced capital structure that will provide
financial flexibility and support the company's strategic objectives while
achieving a low cost of capital. This is achieved by balancing the company's
liquidity and interest rate exposures. These exposures are managed primarily
through the use of long-term and short-term debt instruments which are reported
on the balance sheet. However,
53
<PAGE>
off-balance sheet derivative instruments, primarily interest rate swaps, are
also used as a management tool in achieving the company's objectives. These
instruments are used to manage identifiable exposures on a non-leveraged,
non-speculative basis.
As part of its interest rate exposure management, the company seeks to
balance the benefit of the lower cost of floating rate debt, with its inherent
increased risk, with fixed rate debt having less market risk.
Summarized below are the carrying amounts and fair values of the company's
debt and debt-related derivatives at December 31, 1996 and 1995. Derivative
usage during the periods presented was limited to interest rate swaps, where the
company either paid or received the net effect of a fixed rate versus a floating
rate (commercial paper or LIBOR) index at specified intervals, calculated by
reference to an agreed notional principal amount.
<TABLE>
<CAPTION>
Carrying Fair Carrying Fair
Amount Value Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
(Millions of dollars) At December 31 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Notes Payable and Commercial Paper $ 769 $ 769 $ 1,073 $ 1,073
Related Derivatives - (Receivable) Payable -- (4) -- 3
Notional principal amount $ 150 $ 200
Weighted average maturity (years) 6.8 6.0
Weighted average fixed pay rate 7.06% 7.35%
Weighted average floating receivable rate 5.50% 5.69%
Long-Term Debt, including current maturities $ 4,676 $ 4,943 $ 5,049 $ 5,626
Related Derivatives - (Receivable) Payable -- 1 -- (6)
Notional principal amount $ 583 $ 596
Weighted average maturity (years) 1.5 2.7
Weighted average fixed receivable rate 5.08% 5.78%
Weighted average floating pay rate 4.93% 5.63%
Unamortized net gain on terminated swaps $ 5 $ 3
====================================================================================================================================
</TABLE>
During 1996, pay fixed rate swaps having an aggregate notional principal amount
of $50 million matured. Also during 1996, pay floating rate swaps having an
aggregate notional principal amount of $13 million were amortized or matured.
Fair values noted above are based upon quoted market prices, as well as
rates currently available to the company for borrowings with similar terms and
maturities. The fair value of swaps is the estimated amount that would be
received or paid to terminate the agreements at year-end, taking into account
current interest rates and the current creditworthiness of the swap
counterparties.
Amounts receivable or payable based on the interest rate differentials of
derivatives are accrued monthly and are reflected in interest expense as a hedge
of interest on outstanding debt. Gains and losses on terminated swaps are
deferred and amortized over the life of the associated debt or the original term
of the swap, whichever is shorter.
Since counterparties to the company's derivative transactions are major
financial institutions with strong credit ratings, exposure to credit risk on
the net interest differential on notional amounts is minimal. The notional
amounts of derivative contracts do not represent cash flow and are not subject
to credit risk. The company's counterparty credit exposure limits have been set
based upon the maturity and notional amounts of these transactions.
8 Note Eight - Lease Commitments and Rental Expense
The company has leasing arrangements involving service stations, tanker
charters, a manufacturing plant, crude oil production and processing equipment,
and other facilities. Amounts due under capital leases are reflected in the
company's balance sheet as obligations, while Texaco's interest in the related
assets is principally reflected as properties, plant and equipment. The
remaining lease commitments are operating leases, and payments on such leases
are recorded as rental expense.
54
<PAGE>
As of December 31, 1996, Texaco Inc. and its subsidiary companies had
estimated minimum commitments for payment of rentals (net of noncancelable
sublease rentals) under leases which, at inception, had a noncancelable term of
more than one year, as follows:
<TABLE>
<CAPTION>
(Millions of dollars) Operating leases Capital leases
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1997 $ 782 $ 29
1998 131 27
1999 125 22
2000 116 21
2001 394 31
After 2001 602 72
- --------------------------------------------------------------------------------------------------------------------
Total lease commitments $2,150 $202
====================================================================================================================
Less amounts representing
Executory costs 28
Interest 75
Add noncancelable sublease rentals netted in capital lease commitments above 46
-------
Present value of total capital lease obligations $145
====================================================================================================================
</TABLE>
Included in operating lease commitments above is $510 million on the lease of a
manufacturing plant, which expires in 1997. It is expected that an option to
purchase this plant will be exercised in conjunction with the anticipated sale
of the plant in 1997.
In 1995, Texaco as lessee entered into a lease agreement for equipment related
to the production and processing of crude oil from the Captain Field in the
United Kingdom sector of the North Sea. The equipment is principally comprised
of a movable drilling and production platform and a floating production storage
offloading vessel. The lease has an initial noncancelable term of five years
with renewal options for an additional six years. The agreement also provides
for residual value guarantees if a renewal option or purchase option is not
exercised by Texaco. Both the lease payment amounts and residual value guarantee
for this operating lease are dependent upon the final construction costs of the
equipment. Construction was completed in early 1997. The above table of
operating lease commitments includes the estimated amounts based upon
construction costs paid by the lessor through December 31, 1996. Lease payments
are expected to begin in 1997.
Rental expense (excluding discontinued operations) relative to operating leases,
including contingent rentals based on factors such as gallons sold, is provided
in the table below. Such payments do not include rentals on leases covering oil
and gas mineral rights.
<TABLE>
<CAPTION>
(Millions of dollars) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rental expense
Minimum lease rentals $259 $224 $205
Contingent rentals 10 16 15
- -------------------------------------------------------------------------------------------------------------------
Total 269 240 220
Less rental income on properties subleased to others 53 43 40
- -------------------------------------------------------------------------------------------------------------------
Net rental expense $216 $197 $180
===================================================================================================================
</TABLE>
9 Note Nine - Preferred Stock and Rights
Series B ESOP Convertible Preferred Stock
An amendment to Texaco Inc.'s Employees Thrift Plan created an Employee Stock
Ownership Plan (ESOP) feature. In 1988, the ESOP purchased 833,333 1/3 shares of
Series B ESOP Convertible Preferred Stock (Series B) from the company for $600
per share, or an aggregate purchase price of $500 million. Texaco Inc.
guaranteed a $500 million variable-rate loan made to the ESOP which was used to
acquire the shares of Series B. Subsequently, in 1991, Texaco Inc. refinanced
approximately $103 million of the outstanding balance through a Grantor Trust
structure at a fixed interest rate. The current fixed interest rate is 6.13%.
Dividends on each share of Series B are cumulative and are payable
semiannually at the rate of $57 per annum. Dividends on Series B totaled $42
million for 1996, $43 million for 1995 and $45 million for 1994.
Participants may partially convert their Series B holdings into common
stock beginning at age 55, and may elect full conversion upon retirement or
separation from service with the company. The conversion ratio and number of
votes per share of Series B are subject to adjustment under certain conditions.
At present, each share of Series B entitles a participant to 12.9 votes, voting
together with the holders of common stock, and is convertible into 12.868 shares
of common stock. As an alternative to conversion, a participant can elect to
receive $600 per share of Series B, payable in cash or common stock. If the
participant elects to receive common stock, the company provides shares of
common stock to the plan trustee, who then transmits the shares to the
participant. Should the participant elect to receive cash, it is the intent of
the company to provide the plan trustee with shares of common stock, so that the
trustee can sell such shares in the open market and have sufficient cash to
transmit to the participant. The outstanding shares of Series B may
55
<PAGE>
be redeemed by Texaco Inc. at $611.40 and $605.70 per share through December 19,
1997 and 1998, respectively, and at $600 per share on or after December 20,
1998. Also, Texaco Inc. may be required to redeem all outstanding shares of
Series B under certain circumstances.
Series D Junior Participating Preferred Stock and Rights
In 1989, the company declared a dividend distribution of one Right for each
outstanding share of common stock. Under certain circumstances, each Right may
be exercised to purchase from the company a unit consisting of 1/100th of a
share (Unit) of Series D Junior Participating Preferred Stock (Series D), par
value $1.00 per share, at a purchase price of $150 per Unit (the Purchase
Price), subject to adjustment.
The Rights may be exercised only after a person has acquired, or obtained
the right to acquire, beneficial ownership of 20% or more of the company's
common stock other than pursuant to a Qualifying Offer, or has commenced a
tender offer that would result in that person owning 20% or more of the common
stock.
A Qualifying Offer is an all-cash, fully financed tender offer for all
outstanding shares of common stock which remains open for 45 days, which results
in the acquiror owning a majority of the company's voting stock, and in which
the acquiror agrees to purchase for cash all remaining shares of common stock.
The Rights expire on April 3, 1999, or sooner, upon the acquisition of the
company pursuant to a Qualifying Offer, and may be redeemed by the company at a
price of $.01 per Right at any time prior to 10 days after the Rights become
exercisable.
In the event that a person becomes the beneficial owner of 20% or more of
the common stock other than pursuant to a Qualifying Offer, each Right will
thereafter entitle the holder to receive, upon exercise of the Right, in lieu of
the Series D, a number of shares of common stock, property, cash or other
securities having a formula value equal to two times the exercise price of the
Right.
In the event that the company is acquired in a transaction in which the
company is not the surviving corporation, or in the event 50% or more of the
company's assets or earning power is sold or transferred, each holder of a Right
thereafter has the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right.
Until a Right is exercised, the holder thereof, as such, has no rights as a
stockholder of the company, including the rights to vote or to receive
dividends.
As of December 31, 1996, there were 3,000,000 shares designated as Series D
with a liquidation value of $100 per share. In general, the terms of the Series
D have been designed so that each Unit of Series D should be substantially the
economic equivalent of one share of common stock. The Series D will, if issued,
be junior to any other series of Preferred Stock which may be authorized and
issued, unless the terms of such other series provide otherwise. Each share of
the Series D which may be issued will entitle the holder to receive a quarterly
dividend equal to the greater of (i) $5.00 per share or (ii) 100 times the
quarterly dividend declared per share of common stock, subject to adjustment.
In the event of liquidation of the company, the holders of the Series D
will be entitled to receive a preferred liquidation payment of $100 per share
plus accrued and unpaid dividends to the date of payment, but in no event less
than an amount equal to 100 times the payment made per share of common stock, if
greater. The Series D will be redeemable as a whole, or in part, at any time, or
from time to time, at the option of the company at a redemption price per share
equal to 100 times the then market price of a share of common stock, plus
accrued and unpaid dividends through the redemption date. Each share of the
Series D will have 100 votes, voting together with the common stock.
In the event of any merger, consolidation or other transaction in which the
shares of common stock are exchanged, each share of the Series D will entitle
the holder thereof to receive 100 times the amount received per share of common
stock.
If dividends on the Series D are in arrears in an aggregate amount equal to
six quarterly dividends, the number of directors of the company will be
increased by two, and the holders of the Series D outstanding at the time of
such dividend arrearage, voting separately as a class with any other series of
preferred stock likewise qualified to vote, will be entitled at the next annual
meeting to elect two directors. The Series D will also have a separate class
vote on certain matters which would adversely affect the rights and preferences
of the Series D.
The Purchase Price payable and the number of Units of Series D or other
securities or property issuable upon exercise of the Rights are subject to
adjustment from time to time in certain events to prevent dilution.
Series F ESOP Convertible Preferred Stock
An amendment to Texaco Inc.'s Employees Savings Plan created an Employee Stock
Ownership Plan (ESOP) feature. In 1990, the ESOP purchased 67,796.61 shares of
Series F ESOP Convertible Preferred Stock (Series F) from the company for
$737.50 per share, or an aggregate purchase price of $50 million. Texaco Inc.
guaranteed a $50 million variable-rate loan made to the ESOP which was used to
acquire the shares of Series F.
Dividends on each share of Series F are cumulative and are payable
semiannually at the rate of $64.53 per annum. Annual dividends on Series F
totaled $4 million for 1996, 1995 and 1994.
56
<PAGE>
Participants may partially convert their Series F holdings into common
stock beginning at age 55, and may elect full conversion upon retirement or
separation from service with the company. The conversion ratio and number of
votes per share of Series F are subject to adjustment under certain conditions.
At present, each share of Series F entitles a participant to 10 votes, voting
together with the holders of common stock, and is convertible into 10 shares of
common stock. As an alternative to conversion, a participant can elect to
receive $737.50 per share of Series F, in cash or common stock. If the
participant elects to receive common stock, the company provides shares of
common stock to the plan trustee, who then transmits the shares to the
participant. Should the participant elect to receive cash, it is the intent of
the company to provide the plan trustee with shares of common stock, so that the
trustee can sell such shares in the open market and have sufficient cash to
transmit to the participant. The outstanding shares of Series F may be redeemed
by Texaco Inc. at $756.86, $750.41 and $743.95 per share through February 12,
1998, 1999 and 2000, respectively, and at $737.50 per share on or after February
13, 2000. Also, Texaco Inc. may be required to redeem all outstanding shares of
Series F under certain circumstances.
Market Auction Preferred Shares
In 1992, the company issued 1,200 shares of cumulative variable rate preferred
stock, called Market Auction Preferred Shares (MAPS) in a private placement, for
an aggregate purchase price of $300 million. The MAPS are grouped into four
series (300 shares each of Series G, H, I and J) of $75 million each.
The dividend rates for each series are determined by Dutch auctions
conducted at seven-week intervals. The length of the dividend periods can be
changed at each auction. Alternatively, the dividend rate and the dividend
period can be negotiated with potential investors.
During 1996, the annual dividend rate for the MAPS ranged between 3.90% and
4.19% and dividends totaled $12 million ($9,510, $11,043, $11,009 and $11,015
per share for series G, H, I and J, respectively).
For 1995, the annual dividend rate for the MAPS ranged between 4.22% and
4.65% and dividends totaled $13 million ($12,255, $10,558, $10,521 and $10,531
per share for Series G, H, I and J, respectively). For 1994, the annual dividend
rate for the MAPS ranged between 2.48% and 4.57% and dividends totaled $10
million ($7,784, $8,057, $9,156 and $9,356 per share for Series G, H, I and J,
respectively).
The company may redeem the MAPS, in whole or in part at any time at a
liquidation preference of $250,000 per share, plus premium, if any, and accrued
and unpaid dividends thereon.
The MAPS are non-voting, except under certain limited circumstances.
Series C and Series E Variable Rate Cumulative Preferred Stock
On September 30, 1994, the company redeemed in cash and retired all outstanding
shares of Series C. For 1994, dividends on the Series C totaled $13 million
($2.43 per share).
On November 8, 1994, the company exchanged 6.1 million shares of its common
stock held in treasury, which were acquired during the year, for all the issued
and outstanding shares of Series E, which were then retired. For 1994, dividends
on the Series E totaled $19 million ($4,850 per share).
10 Note Ten - Foreign Currency
Currency translations from continuing operations resulted in a pre-tax loss of
$60 million in 1996, compared to a gain of $23 million in 1995 and a loss of $18
million in 1994. After applicable taxes, the loss in 1996 was $66 million,
compared to a gain in 1995 of $30 million and a loss in 1994 of $49 million.
These amounts include Texaco's equity in such gains and losses of affiliates
accounted for on the equity method of accounting.
Currency exchange impacts for the years 1994 through 1996 were primarily
due to the effects of SFAS 109 "Accounting for Income Taxes" with respect to the
Pound Sterling on deferred income taxes, as well as the impact of strong
inflationary factors within developing countries and the Caltex area.
Currency translation adjustments reflected in the separate stockholders'
equity account result from translation items pertaining to certain affiliates of
Caltex. During the year 1996, losses of $66 million resulted from these
adjustments, as well as the reversal of a $60 million existing deferred gain due
to the sale by Caltex of its investment in NPRC. As a result, a $60 million gain
was included in Texaco's net income as part of the gain on this sale. During the
year 1995, losses of $26 million in stockholders' equity resulted from the
effects of currency translation adjustments.
57
<PAGE>
11 Note Eleven - Taxes
<TABLE>
<CAPTION>
United United United
States Foreign Total States Foreign Total States Foreign Total
- ------------------------------------------------------------------------------------------------------------------------------------
(Millions of dollars) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Direct taxes
Provision (benefit) for income taxes
Current
U.S. Federal and foreign $ 359 $ 642 $1,001 $ 34 $ 357 $ 391 $ (68) $ 296 $ 228
U.S. state and local (16) -- (16) (31) -- (31) 36 -- 36
Deferred 13 (33) (20) (90) (12) (102) (33) (6) (39)
- ------------------------------------------------------------------------------------------------------------------------------------
Total provision (benefit) for income taxes 356 609 965 (87) 345 258 (65) 290 225
Taxes other than income taxes
Oil and gas production 112 2 114 91 3 94 101 8 109
Sales and use -- 82 82 -- 73 73 -- 55 55
Property 105 14 119 109 18 127 111 18 129
Payroll 72 48 120 72 44 116 78 39 117
Other 29 32 61 63 18 81 38 48 86
- ------------------------------------------------------------------------------------------------------------------------------------
Total taxes other than income taxes 318 178 496 335 156 491 328 168 496
Import duties and other governmental levies 38 4,127 4,165 43 3,914 3,957 53 3,939 3,992
- ------------------------------------------------------------------------------------------------------------------------------------
Total direct taxes 712 4,914 5,626 291 4,415 4,706 316 4,397 4,713
Taxes collected from consumers for
governmental agencies 1,413 1,824 3,237 1,266 1,803 3,069 1,313 2,124 3,437
- ------------------------------------------------------------------------------------------------------------------------------------
Total $2,125 $6,738 $8,863 $1,557 $6,218 $7,775 $1,629 $6,521 $8,150
====================================================================================================================================
</TABLE>
All information in this note excludes discontinued operations.
The deferred income tax assets and liabilities included in the Consolidated
Balance Sheet as of December 31, 1996 and 1995 amounted to $242 million and $99
million, respectively, as net current assets and $795 million and $634 million,
respectively, as net noncurrent liabilities. The table that follows shows
deferred income tax assets and liabilities by category. Deferred income taxes
are not recorded on differences between financial reporting and tax bases of
investments in stock of subsidiary companies, unless realization of the effect
is probable in the foreseeable future. Certain potential deferred tax asset
amounts for which possibility of realization is deemed extremely remote have
been eliminated and are therefore excluded from the following table:
<TABLE>
<CAPTION>
(Liability) Asset
- ------------------------------------------------------------------------------------------------------------------------------------
(Millions of dollars) As of December 31 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Depreciation $ (947) $ (912)
Depletion (271) (327)
Intangible drilling costs (655) (501)
Other deferred tax liabilities (502) (343)
- ------------------------------------------------------------------------------------------------------------------------------------
Total (2,375) (2,083)
Employee benefit plans 523 524
Tax loss carryforwards 955 907
Tax-related reserves 26 36
Tax credit carryforwards 351 388
Environmental reserves 176 211
Other deferred tax assets 614 383
- ------------------------------------------------------------------------------------------------------------------------------------
Total 2,645 2,449
- ------------------------------------------------------------------------------------------------------------------------------------
Total before valuation allowance 270 366
- ------------------------------------------------------------------------------------------------------------------------------------
Valuation allowance (823) (901)
------- -------
Total - net $ (553) $ (535)
====================================================================================================================================
</TABLE>
58
<PAGE>
The following schedule reconciles the differences between the U.S. Federal
income tax rate and the effective income tax rate:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal income tax rate assumed to be applicable 35.0% 35.0% 35.0%
Net earnings and dividends attributable to affiliated corporations accounted for on the equity method (5.5) (17.1) (10.5)
Aggregate earnings and losses from international operations 12.7 18.5 11.1
Sales of stock of subsidiaries (6.3) (6.6) (15.7)
Energy credits (1.9) (3.3) (2.4)
Other (1.6) (.4) 1.2
- ------------------------------------------------------------------------------------------------------------------------------------
Effective income tax rate 32.4% 26.1% 18.7%
====================================================================================================================================
</TABLE>
For companies operating in the United States, pre-tax earnings from
continuing operations before cumulative effect of accounting change aggregated
$1,783 million in 1996, $40 million in 1995 and $402 million in 1994. For
companies with operations located outside the United States, pre-tax earnings on
that basis aggregated $1,200 million in 1996, $946 million in 1995 and $802
million in 1994.
Income taxes paid, net of refunds, amounted to $917 million, $554 million
and $329 million in 1996, 1995 and 1994, respectively.
The undistributed earnings of subsidiary companies and of affiliated
corporate joint-venture companies accounted for on the equity method, for which
deferred U.S. income taxes have not been provided at December 31, 1996 amounted
to $1,302 million and $2,124 million, respectively. The corresponding amounts at
December 31, 1995 were $1,262 million and $2,308 million, respectively.
Recording of deferred income taxes on these undistributed earnings is not
required relative to foreign companies and pre-1993 earnings of domestic
companies when the earnings have been permanently reinvested. These amounts
would be subject to possible U.S. taxation only if remitted as dividends. The
determination of the hypothetical amount of unrecognized deferred U.S. taxes on
undistributed earnings of foreign entities is not practicable. For domestic
entities, such unrecorded deferred income taxes were not material.
For the year 1996, a benefit of $54 million was recorded for the
utilization of loss carryforwards in the 1995 U.S. Federal income tax return.
For the years 1995 and 1994 there was no utilization of loss carryforwards
recorded for U.S. Federal income taxes. For the years 1996, 1995 and 1994, the
utilization of loss carryforwards resulted in income tax benefits of $16
million, $13 million and $57 million in foreign income taxes, respectively.
At December 31, 1996, Texaco had worldwide tax basis loss carryforwards of
approximately $2,347 million, including $1,044 million which do not have an
expiration date. The remainder expire at various dates through 2012.
Foreign tax credit carryforwards available for U.S. Federal income tax
purposes amounted to approximately $223 million at December 31, 1996, expiring
at various dates through 2001. Alternative minimum tax and other tax credit
carryforwards available for U.S. Federal income tax purposes were $351 million
at December 31, 1996, of which $347 million have no expiration date. The
remaining credits expire at various dates through 2011. The credits that are not
utilized by the expiration dates may be taken as deductions for U.S. Federal
income tax purposes. In 1996, tax credit carryforwards of $43 million were
utilized for U.S. Federal income tax purposes.
12 Note Twelve - Employee Benefit Plans
Texaco Inc. and certain of its non-U.S. subsidiaries sponsor various benefit
plans for active employees and retirees. The costs of the savings, health care
and life insurance plans relative to employees' active service are shared by the
company and its employees, with Texaco's costs for these plans charged to
expense as incurred. In addition, reserves for employee benefit plans are
provided principally for the unfunded costs of various pension plans, retiree
health and life insurance benefits, incentive compensation plans and for
separation benefits payable to employees.
The discussion of employee benefit plans that follows is for total plan
activity, including benefits and amounts applicable to employees of the
discontinued operations. Amounts relative to the discontinued operations are not
material for any of the years discussed.
Employee Stock Ownership Plans (ESOP)
Texaco recorded ESOP expense of $15 million in 1996, $28 million in 1995 and $20
million in 1994. Company contributions to the Employees Thrift Plan of Texaco
Inc. and the Employees Savings Plan of Texaco Inc. (the Plans) amounted to $26
million in 1996, $17 million in 1995 and $20 million in 1994. These Plans are
designed to provide participants with a benefit of approximately 6% of base pay.
Included in the 1996 and 1995 ESOP expense is $9 million and $11 million,
respectively, for an employee incentive award program. Award payments were made
in early 1996 to individual participants' ESOP accounts.
In 1996, 1995 and 1994, the company paid $46 million, $47 million and $49
million, respectively, in dividends on Series B and Series F stock. The
dividends are applied by the trustee to fund interest payments which amounted to
$10 million, $14 million and $13 million for 1996, 1995 and 1994, respectively,
as well as to reduce principal on the ESOP loans. Dividends on the shares of
Series B and Series F used to service debt of the Plans are tax deductible to
the company.
Reflected in Texaco's long-term debt are the Plans' ESOP loans which are
guaranteed by Texaco Inc. Commensurate with each repayment on the ESOP loans and
as a result of the allocation of the Series B and Series F stock by the trustee
of the Plans to the individual participating employees, there is a reduction in
the remaining ESOP-related unearned employee compensation included as a
component of stockholders' equity.
59
<PAGE>
Benefit Plan Trust
During 1995, Texaco established a benefit plan trust (Trust) for funding company
obligations under certain benefit plans. Texaco transferred four million shares
of treasury stock to the Trust. The company intends to continue to pay its
obligations under its benefit plans. The Trust will use the shares, proceeds
from the sale of such shares and dividends on such shares to pay benefits only
to the extent not paid by the company. The shares held in the Trust will be
voted by the trustee as instructed by the Trust's beneficiaries. The shares held
by the Trust are not considered outstanding for earnings per share purposes
until distributed or sold by the Trust in payment of benefit obligations.
Pension Plans
The company sponsors pension plans that cover the majority of employees.
Generally, these plans provide defined pension benefits based on years of
service and final average pay. However, the level of benefits and terms of
vesting vary among plans. Amounts charged to pension expense, as well as amounts
funded, are generally based on actuarial studies. Pension plan assets are
administered by trustees and are principally invested in equity and fixed income
securities and deposits with insurance companies.
The total worldwide expense for all employee pension plans of Texaco,
including pension supplementations and the smaller non-U.S. plans, was $91
million in 1996, $86 million in 1995 and $109 million in 1994.
The following data are provided for U.S. plans and principal non-U.S.
plans:
Components of Pension Expense
<TABLE>
<CAPTION>
United States Plans Non-U.S. Plans
- -----------------------------------------------------------------------------------------------------------------------------------
(Millions of dollars) 1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Benefits earned during the year $ 57 $ 48 $ 69 $ 16 $ 16 $ 22
Actual investment return on plan assets, (gain) loss (226) (279) 27 (102) (123) 33
Interest cost on projected benefit obligations 117 114 125 81 81 74
Amortization of net deferred amounts 104 158 (145) 38 64 (104)
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 52 $ 41 $ 76 $ 33 $ 38 $ 25
===================================================================================================================================
</TABLE>
The assumed long-term return on plan assets for U.S. plans was 10% for 1996 and
1995, and 9% for 1994; for non-U.S. plans the weighted average rate was 8.7% for
1996 and 1995, and 8.5% for 1994.
60
<PAGE>
Funded Status of Pension Plans
<TABLE>
<CAPTION>
United States Plans
- ------------------------------------------------------------------------------------------------------------------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
- ------------------------------------------------------------------------------------------------------------------------------------
(Millions of dollars) As of December 31 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Present value of the estimated pension benefits to be paid in the future
Vested benefits $(1,097) $ (97) $(1,132) $ (83)
Nonvested benefits (94) (2) (105) (3)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligations (ABO) (1,191) (99) (1,237) (86)
Effect of projected future salary increases (353) (14) (394) (21)
- ------------------------------------------------------------------------------------------------------------------------------------
Total projected benefit obligations (PBO) (1,544) (113) (1,631) (107)
Plan assets at fair value 1,483 -- 1,361 --
- ------------------------------------------------------------------------------------------------------------------------------------
Assets less than PBO (61) (113) (270) (107)
Net transition (asset) liability (37) 7 (47) 10
Unrecognized net prior-service costs 62 14 70 15
Unrecognized net (gains) and losses 2 (7) 179 (4)
- ------------------------------------------------------------------------------------------------------------------------------------
Net pension liability recorded in Texaco's Consolidated Balance Sheet $ (34) $ (99) $ (68) $ (86)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Non-U.S. Plans
- ------------------------------------------------------------------------------------------------------------------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
- ------------------------------------------------------------------------------------------------------------------------------------
(Millions of dollars) As of December 31 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Present value of the estimated pension benefits to be paid in the future
Vested benefits $ (436) $ (274) $ (388) $ (260)
Nonvested benefits (21) (32) (19) (22)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligations (ABO) (457) (306) (407) (282)
Effect of projected future salary increases (19) (19) (19) (22)
- ------------------------------------------------------------------------------------------------------------------------------------
Total projected benefit obligations (PBO) (476) (325) (426) (304)
Plan assets at fair value 789 40 677 36
- ------------------------------------------------------------------------------------------------------------------------------------
Assets in excess of (less than) PBO 313 (285) 251 (268)
Net transition (asset) liability (39) 7 (46) 11
Unrecognized net prior-service costs 23 32 22 33
Unrecognized net (gains) and losses (25) (20) 11 (21)
- ------------------------------------------------------------------------------------------------------------------------------------
Net pension (liability) asset recorded in Texaco's Consolidated Balance Sheet $ 272 $ (266) $ 238 $ (245)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Weighted Average Rate Assumptions Used in Estimating Pension Benefit Obligations
<TABLE>
<CAPTION>
United States Plans Non-U.S. Plans
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount rate 7.5% 7.0% 12.0% 11.5%
Rate of increase in compensation levels 4.0% 4.0% 7.4% 7.9%
====================================================================================================================================
</TABLE>
Other Postretirement Benefits
Texaco sponsors postretirement plans in the U.S. that provide health care and
life insurance for retirees and eligible dependents. The company's U.S. health
insurance obligation is its fixed dollar contribution. The plans are unfunded,
and the costs are shared by the company and its employees and retirees.
The determination of the company's obligation is based on the terms of the
life and health insurance plans, along with applicable actuarial assumptions.
The company continues to fund these benefit costs on a pay-as-you-go basis, with
retirees paying the excess over the company's fixed dollar contribution for
health insurance. For employees who retire from Texaco between age 55 and 65,
most will be eligible to receive health care benefits, similar to those
available to active employees, as well as life insurance benefits. The company's
cost to provide these postretirement benefits for health insurance is currently
equal to the company's cost for an active employee. After attaining age 65, the
retirees' health care coverage is coordinated with available Medicare benefits.
Fixed dollar contributions for health care benefits are determined annually
by the company. For measurement purposes, no increase is expected in the per
capita company contribution in 1997. Commencing in 1998, the fixed dollar
contribution is expected to increase
61
<PAGE>
by 4% per annum for both pre-age 65 and post-age 65 retirees for all future
years. The assumed fixed dollar contributions do not necessarily represent an
obligation of the company.
Assuming a 1% increase in the annual rate of increase in the fixed dollar
contribution for health insurance, the accumulated postretirement benefit
obligation and annual expense would increase by approximately $49 million and $5
million, respectively.
Certain of the company's non-U.S. subsidiaries have postretirement benefit
plans. However, most retirees outside the U.S. are covered by government
sponsored and administered programs, the cost of which is not significant to the
company.
The following tables provide information on the status of the principal
postretirement plans:
Components of Other Postretirement Benefit Expense
<TABLE>
<CAPTION>
Health Life Health Life Health Life
Care Insurance Total Care Insurance Total Care Insurance Total
- ------------------------------------------------------------------------------------------------------------------------------------
(Millions of dollars) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Benefits earned during the year $ 9 $ 3 $ 12 $ 7 $ 2 $ 9 $ 12 $ 4 $ 16
Interest cost on accumulated postretirement
benefit obligations 30 21 51 33 21 54 38 20 58
Amortization of net deferred amounts (1) -- (1) (3) (1) (4) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 38 $ 24 $ 62 $ 37 $ 22 $ 59 $ 50 $ 24 $ 74
====================================================================================================================================
</TABLE>
Funded Status of Other Postretirement Plans
<TABLE>
<CAPTION>
Health Life Health Life
Care Insurance Total Care Insurance Total
- ------------------------------------------------------------------------------------------------------------------------------------
(Millions of dollars) As of December 31 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accumulated unfunded postretirement benefit obligations
Retirees $266 $239 $505 $272 $242 $514
Fully eligible active participants 31 1 32 33 1 34
Other active plan participants 102 60 162 125 67 192
- ------------------------------------------------------------------------------------------------------------------------------------
Total accumulated unfunded postretirement benefit obligations 399 300 699 430 310 740
Unrecognized net gain 110 27 137 72 5 77
- ------------------------------------------------------------------------------------------------------------------------------------
Net other postretirement benefit liability recorded in
Texaco's Consolidated Balance Sheet $509 $327 $836 $502 $315 $817
===================================================================================================================================
</TABLE>
Weighted Average Rate Assumptions Used in Estimating Other Postretirement
Benefit Oblitations
1996 1995
- -------------------------------------------------------------------------------
Discount rate 7.5% 7.0%
Rate of increase in compensation levels 4.0% 4.0%
===============================================================================
13 Note Thirteen - Stock Incentive Plan
Under the company's stock incentive plan (the Plan) approved by stockholders,
stock options and restricted stock may be granted to executives and certain key
employees. The total number of shares available each year for issuance under the
Plan through December 31, 2002 is eight-tenths of one percent (0.8%) of the
aggregate number of shares of common stock issued and outstanding on December 31
of the previous year, adjusted for certain plan activity. Shares not issued in
the current year are available for future grant. The option price per share
cannot be less than the fair market value of a share of common stock on the date
granted unless adjusted as provided in the Plan.
The following table summarizes the number of shares at December 31, 1996,
1995 and 1994 available for awards during the subsequent year:
<TABLE>
<CAPTION>
(Shares) As of December 31 1996 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
To all participants 3,513,505 2,851,983 1,981,129
To those participants not officers or directors 966,398 687,089 552,915
- -----------------------------------------------------------------------------------
Total 4,479,903 3,539,072 2,534,044
===================================================================================
</TABLE>
<PAGE>
During 1996, Texaco adopted the disclosure provision versus fair value method of
accounting for stock-based compensation associated with the Statement of
Financial Accounting Standards "Accounting for Stock-Based Compensation" (SFAS
123). Consistent with this adoption, the company has elected to continue to
account for stock options by applying the guidelines of Accounting Principles
Board Opinion "Accounting for Stock Issued to Employees" (APB 25). Had stock
options been accounted for based on the fair value method of SFAS 123, the
impact on net income would not be material and, therefore, no pro forma
disclosures are provided. Stock options granted under the Plan extend for 10
years from the date of grant and become 50% exercisable on the first
anniversary. These options are fully exercisable on the second anniversary,
except for the January 1990 awards, which became fully exercisable on the fourth
anniversary of the award.
The Plan permits the company to grant restored options to a participant in
the Plan who has previously been granted stock options. This feature enables a
participant, who exercises an option by exchanging previously acquired common
stock or who has shares withheld by the company to satisfy tax withholding
obligations, to receive new options, exercisable at the then market value, for
the same number of shares as were exchanged or withheld. Under existing
regulations, restored options are fully exercisable six months after the date of
grant.
Option activity during 1996, 1995 and 1994 is summarized in the following
table:
<TABLE>
<CAPTION>
(Stock Options) 1996 1995 1994 Price Range Per Share
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding January 1 4,667,644 3,964,098 3,368,949 $ 46.78-$79.94
Granted 1,020,265 945,367 643,985 59.69- 85.72
Exercised (4,044,020) (2,177,630) (732,286) 46.78- 86.31
Restored 3,135,860 1,935,809 683,450 61.25-105.19
Canceled (61,546) -- -- 61.63- 84.88
Outstanding December 31 4,718,203 4,667,644 3,964,098 46.78-105.19
Exercisable December 31 1,426,618 2,148,743 2,671,225 46.78- 87.81
====================================================================================================================================
</TABLE>
14 Note Fourteen - Other Financial Information and Commitments
Environmental Reserves
Texaco Inc. and subsidiary companies have financial reserves relating to
environmental remediation programs which the company believes are sufficient for
known requirements. At December 31, 1996, reserves for future environmental
remediation costs amounted to $591 million and reserves relative to the future
cost of restoring and abandoning existing oil and gas properties were $813
million. Texaco's significant affiliates also have recorded reserves for
environmental remediation and restoration and abandonment costs.
Texaco has provided, to the extent reasonably measurable, financial
reserves for its probable environmental remediation liabilities. The recording
of these obligations is based on technical evaluations of the currently
available facts, interpretation of the regulations and the company's experience
with similar sites. Additional financial reserve requirements relative to
existing and new remediation sites may be necessary in the future when more
facts are known. The potential also exists for further legislation to provide
limitations on liability. It is not possible to project the overall costs or a
range of costs for environmental items beyond that disclosed above due to
uncertainty surrounding future developments, both in relation to remediation
exposure and to regulatory initiatives. However, while future environmental
expenditures that will be incurred by the petroleum industry are expected to be
significant in the absolute, they will be a cost of doing business that will
have to be recovered in the marketplace. Moreover, it is not believed that such
future costs will be material to the company's financial position nor to its
operating results over any reasonable period of time.
Preferred Stock of Subsidiary Companies
At December 31, 1996 and 1995, minority holders owned $602 million of preferred
stock of subsidiary companies. Such amounts are reflected as minority interest
in subsidiary companies in the Consolidated Balance Sheet.
In October 1993, a wholly owned subsidiary, MVP Production Inc., issued
variable rate cumulative preferred stock in a private placement for an aggregate
purchase price of $75 million. The shares have voting rights in the subsidiary
and are redeemable on September 30, 2003. Annual dividends on these shares
totaled $4 million for both 1996 and 1995 and $3 million for 1994.
In November 1993, a wholly owned subsidiary, Texaco Capital LLC, issued 14
million shares of Cumulative Guaranteed Monthly Income Preferred Shares, Series
A (Series A), in a public offering, for an aggregate purchase price of $350
million. In June 1994, Texaco Capital LLC issued 4.5 million shares of
Cumulative Adjustable Rate Monthly Income Preferred Shares, Series B (Series B),
in a public offering for an aggregate purchase price of $112 million. In
December 1995, Texaco Capital LLC issued 3.6 million shares of Deferred
Preferred Shares, Series C (Series C) in Canadian dollars, in a public offering,
for an aggregate purchase price of $65 million. Texaco Capital LLC's sole assets
are notes receivable from Texaco Inc.
The fixed dividend rate for Series A is 67/8% per annum. The dividend rate
for Series B averaged 5.9% per annum for 1996 and 6.26% for 1995. The initial
dividend rate for Series B was 6.4% per annum from June, 1994 through September
30, 1994 and 6.75% per annum for the fourth quarter of 1994. The dividend rate
on Series B is reset quarterly and is equal to 88% of the highest of three U.S.
Treasury maturities (three-month, ten-year and thirty-year), but in no event
less than 4.5% per annum nor greater than 10.5% per annum. The
63
<PAGE>
payment of dividends and payments on liquidation or redemption with respect to
Series A and Series B are guaranteed by Texaco Inc. Dividends on Series A and
Series B are paid monthly. Dividends on Series A for 1996, 1995 and 1994 totaled
$24 million for each year. Annual dividends on Series B totaled $7 million for
both 1996 and 1995 and $4 million for 1994.
Series A and Series B are redeemable, at the option of Texaco Capital LLC
(with Texaco Inc.'s consent) in whole or in part, from time to time, at $25 per
share on or after October 31, 1998 for Series A and June 30, 1999 for Series B,
plus, in each case, accrued and unpaid dividends to the date fixed for
redemption. In addition, under certain circumstances, Texaco Capital LLC (with
Texaco Inc.'s consent) can redeem Series A and Series B at any time, in whole or
in part, at $25 per share plus accrued and unpaid dividends.
Dividends on Series C at a rate of 7.17% per annum, compounded annually,
will be paid at the redemption date of February 28, 2005 unless earlier
redemption occurs. Early redemption may result upon the occurrence of certain
specific events. The payment of dividends and payments on liquidation or
redemption of Series C are guaranteed by Texaco Inc. The par value and dividends
payable in Canadian dollars have been hedged by a swap contract to eliminate
foreign currency risk.
Series A, Series B and Series C are non-voting, except under certain
limited circumstances.
The above preferred stock issues currently require annual dividend payments
of approximately $35 million. The company is required to redeem $75 million of
this preferred stock in 2003, $65 million (plus accreted dividends of $59
million) in 2005, $112 million in 2024 and $350 million in 2043. Texaco has the
ability to extend the required redemption dates for the $112 million and $350
million of preferred stock beyond 2024 and 2043, respectively.
Financial Guarantees
The company has guaranteed the payment of certain debt and other obligations of
third parties and affiliate companies. These guarantees totaled $246 million and
$206 million at December 31, 1996 and 1995, respectively.
Exposure to credit risk in the event of non-payment by the obligors is
represented by the contractual amount of these instruments. No loss is
anticipated under these guarantees.
Throughput Agreements
Texaco Inc. and certain of its subsidiary companies have entered into certain
long-term agreements wherein they have committed either to ship through
affiliated pipeline companies and an offshore oil port, or to refine at an
affiliated refining company a sufficient volume of crude oil or petroleum
products to enable these affiliated companies to meet a specified portion of
their individual debt obligations, or, in lieu thereof, to advance sufficient
funds to enable these affiliated companies to meet these obligations.
Additionally, Texaco has entered into long-term purchase commitments with third
parties for take or pay gas transportation. At December 31, 1996 and 1995 the
company's maximum exposure to loss was estimated to be $629 million and $713
million, respectively.
However, based on Texaco's right of counterclaim against third parties in
the event of nonperformance, Texaco's net exposure was estimated to be $489
million and $546 million at December 31, 1996 and 1995, respectively.
No losses are anticipated as a result of these obligations.
Other Commitments
In 1995 and 1996, Texaco sold leasehold interests in certain equipment not yet
in service and received British pound payments totaling $509 million. Additional
British pound payments will be received in 1997, contingent upon the amount of
future costs of the equipment prior to the in-service date. Under a related
agreement, Texaco as lessee will lease back these leasehold interests. The lease
provides that collateral or third party security in specified forms is required
as a guarantee of the lease payments. Texaco intends to satisfy this requirement
by a British pound payment in 1997, resulting in the release of Texaco from
future lease commitments under this agreement. This payment will effectively
repurchase the leasehold interests previously sold.
15 Note Fifteen Financial Instruments
In the normal course of its business, the company utilizes various types of
financial instruments. These instruments include recorded assets and
liabilities, and also items which principally involve off-balance sheet risk.
Information about the company's financial instruments, including derivatives, is
presented below.
Cash and cash equivalents - Fair value approximates cost as reflected in
the Consolidated Balance Sheet at December 31, 1996 and 1995 because of the
short-term maturities of these instruments. Cash equivalents are classified as
held-to-maturity. The amortized cost of cash equivalents was as follows:
(Millions of dollars) As of December 31 1996 1995
- --------------------------------------------------------------------------------
Time deposits and certificates of deposit $ 62 $111
Commercial paper and other 197 155
- --------------------------------------------------------------------------------
$259 $266
================================================================================
64
<PAGE>
Short-term and long-term investments - Fair value is primarily based on quoted
market prices and valuation statements obtained from major financial
institutions. Information concerning investments held at December 31, 1996 and
1995 in short-term and long-term debt securities and in publicly-traded equity
securities that are classified as available-for-sale is shown in the tables that
follow. Excluded from the tables is a $4 million investment in a time deposit at
December 31, 1996 and 1995, which the company intends to hold to its maturity in
the year 2001.
<TABLE>
<CAPTION>
Gross unrealized Gross unrealized
Amortized ---------------- Estimated Amortized ---------------- Estimated
Cost Gains Losses Fair Value Cost Gains Losses Fair Value
- ------------------------------------------------------------------------------------------------------------------------------------
(Millions of dollars) As of December 31 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. government securities $141 $1 $2 $140 $156 $ 4 $ 1 $159
Foreign government securities 189 9 2 196 212 13 7 218
Corporate and other debt securities 160 2 1 161 246 5 -- 251
Equity securities 64 28 4 88 59 32 2 89
- ------------------------------------------------------------------------------------------------------------------------------------
$554 $40 $9 $585 $673 $54 $10 $717
====================================================================================================================================
</TABLE>
Proceeds from sales of available-for-sale securities were $1,503 million in
1996, $1,175 million in 1995 and $610 million in 1994. These sales resulted in
gross realized gains of $51 million in 1996, $81 million in 1995 and $19 million
in 1994, and, gross realized losses of $17 million, $27 million, and $14
million, respectively.
At December 31, 1996, available-for-sale debt securities had the following
scheduled maturities:
Amortized Estimated
Cost Fair Value
(Millions of dollars) As of December 31 1996
- --------------------------------------------------------------------------------
Due in one year or less $ 41 $ 41
Due after one year through five years 230 233
Due after five years 219 223
- --------------------------------------------------------------------------------
$490 $497
================================================================================
The estimated fair value of other long-term investments not included above, for
which it is practicable to estimate fair value, approximated the December 31,
1996 and 1995 carrying values of $192 million and $133 million, respectively.
Short-term debt, long-term debt and related derivatives - Shown below are the
carrying amounts and fair values of Texaco's debt and related derivatives as of
year-end 1996 and 1995.
<TABLE>
<CAPTION>
Carrying Fair Carrying Fair
Amount Value Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
(Millions of dollars) As of December 31 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-term and long-term debt $ 5,445 $ 5,712 $ 6,122 $ 6,699
Debt-related derivatives-(receivables) $ -- $ (3) $ -- $ (3)
====================================================================================================================================
</TABLE>
Refer to Note 7 for additional information concerning debt and related
derivatives outstanding at December 31, 1996 and 1995.
Forward Exchange and Option Contracts - As an international company, Texaco is
exposed to currency exchange risk. To hedge against adverse changes in foreign
currency exchange rates, the company will enter into forward and option
contracts to buy and sell foreign currencies. Shown below in U.S. dollars are
the notional amounts of outstanding forward exchange contracts to buy and sell
foreign currencies.
<TABLE>
<CAPTION>
Buy Sell Buy Sell
- ---------------------------------------------------------------------------------------------------------------------------
(Millions of dollars) As of December 31 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australian dollars $ 284 $ 18 $ 272 $ 4
British pounds* 1,030 54 570 10
Danish krone 173 2 151 29
Dutch guilders 228 29 177 --
Other European currencies 114 201 143 181
Other currencies 197 39 43 61
- ---------------------------------------------------------------------------------------------------------------------------
$2,026 $343 $1,356 $285
===========================================================================================================================
<FN>
* Including British pound buy contracts hedging the commitment to repurchase
leasehold interests - See Note 14 "Other Commitments"
</FN>
</TABLE>
Market risk exposure on these contracts is essentially limited to currency rate
movements. At year-end 1996, there were $39 million unrealized gains and $2
million unrealized losses related to
65
<PAGE>
these contracts. At year-end 1995, unrealized gains and losses related to these
contracts were immaterial, since the contractual forward rates approximated
year-end spot rates. The company's exposure to credit risk on forward exchange
and option contracts is minimal, since the counterparties are major financial
institutions with strong credit ratings. The company does not anticipate
nonperformance by any of the various counterparties.
The company uses forward exchange contracts to buy foreign currencies
primarily to hedge the net monetary liability position of its European and
Australian operations and to hedge portions of significant foreign currency
capital expenditures and lease commitments. These contracts generally have terms
of 60 days or less. Contracts that hedge foreign currency monetary positions are
marked-to-market monthly. Any resultant gains and losses are included in income
currently as other costs. At year-end 1996 and 1995, hedges of foreign currency
commitments principally involve capital projects requiring expenditure of
British pounds and Danish krone. Approximately 68% of planned British pound
expenditures and 49% Danish krone expenditures were hedged at year-end 1996. At
year-end 1995, approximately one-third of the planned Danish krone and British
pound expenditures were hedged. Realized gains and losses on hedges of foreign
currency commitments are initially recorded to deferred charges. Subsequently,
the amounts are applied to the capitalized project cost on a
percentage-of-completion basis, and are then amortized over the lives of the
applicable projects. At year-end 1996 and 1995, net hedging gains of $84 million
and $23 million, respectively, had yet to be amortized.
Contracts to sell foreign currencies are primarily related to a separately
managed program to hedge the value of the company's investment portfolio
denominated in foreign currencies. The company's strategy is to hedge the full
value of this portion of its investment portfolio and to close out forward
contracts upon the sale or maturity of the corresponding investments. These
contracts are valued at market based on the foreign exchange rates in effect on
the balance sheet dates. Changes in the value of these contracts are recorded as
part of the carrying amount of the related investments. Related gains and losses
are recorded, net of applicable income taxes, to stockholders' equity until the
underlying investments are sold or mature.
At year-end 1996, there were open option contracts to sell Brazilian real
for $40 million which hedged a net monetary asset position in the company's
Brazilian operations. There were no unrealized gains at year-end 1996 related to
these options.
Interest Rate and Currency Swap - In connection with the December 1995 sale of
Series C preferred stock by Texaco Capital LLC, Texaco entered into an interest
rate and currency swap contract that matures in the year 2005.
Over the life of the interest rate swap component of the contract, Texaco
will make LIBOR-based floating rate interest payments based on a notional
principal amount of $65 million. Canadian dollar interest will accrue to Texaco
at a fixed rate applied to the accreted notional principal amount, which was
Cdn. $87 million at the inception of the swap.
The currency swap component of the transaction calls for Texaco to exchange
$65 million for Cdn. $170 million, which includes Cdn. $87 million plus accrued
interest on the contract's maturity date. The carrying amount of this contract
represents the Canadian dollar accrued interest receivable by Texaco. At
year-end 1996, the carrying amount and the fair value of this transaction were
not material.
Commodity Hedging - The company hedges a portion of the market risks associated
with its crude oil, natural gas and petroleum product purchases, sales and
exchange activities. All hedge transactions are subject to the company's
corporate risk management policy which sets out dollar, volumetric and term
limits, as well as to management approvals as set forth in the company's
delegations of authorities. Company policy does not permit speculative position
taking using derivative financial instruments.
The company uses established petroleum futures exchanges, as well as
"over-the-counter" hedge instruments, including forwards, options, swaps and
other derivative products. These hedge tools are used to reduce the company's
exposure to price volatility by establishing margins, costs or revenues on
designated transactions as well as for planned future purchases and sales,
inventory, production and processing. In carrying out its hedging programs, the
company analyzes its major commodity streams for fixed cost, fixed revenue and
margin exposure to market price changes. Based on this corporate risk profile,
forecasted trends, and overall business objectives, a determination is made as
to an appropriate strategy for risk reduction.
Hedge positions are marked-to-market for valuation purposes. Gains and
losses on hedge transactions, which offset losses and gains on the underlying
"cash market" transactions, are recorded to deferred income or charges until the
hedged transaction is closed, or until the anticipated future purchases, sales,
or production occur. At that time, any gain or loss on the hedging contract is
recorded to operating revenues as an increase or decrease in margins, or to
inventory, as appropriate.
Over-the-counter hedge positions expose the company to counterparty credit
risk. However, because the hedge contracts are placed with parties whose
creditworthiness has been pre-determined in accordance with the company's credit
policy, non-performance by any counterparty is not anticipated. Such
over-the-counter commodity contracts do not expose the company to any
concentrations of credit risk because of the dollar limits incorporated in risk
management policies.
At December 31, 1996 and 1995, there were open derivative commodity
contracts required to be settled in cash, consisting mostly of swaps. Notional
contract amounts, excluding unrealized gains and losses, were $1,327 million and
$868 million, respectively, at year-end 1996 and 1995. These amounts principally
represent future values of contract volumes over the remaining duration of
outstanding swap contracts at the respective dates. These contracts hedge a
small fraction of the company's business activities, generally for the next
twelve months. Unrealized gains and losses on contracts outstanding at year-end
1996 were $63 million and $48 million, respectively. At year-end 1995,
unrealized gains and losses were $28 million and $67 million, respectively.
66
<PAGE>
16 Note Sixteen - Contingent Liabilities
Internal Revenue Service Claims
In 1989, Texaco commenced an action in the United States Tax Court (Tax Court)
to challenge an Internal Revenue Service (IRS) claim that, during the 1979-1981
years, Texaco should be taxed as if it had resold Saudi crude oil at prices
higher than those mandated by the Saudi Arab Government (Aramco Advantage
issue).
In 1993, the Tax Court issued an opinion upholding the company's position
on the Aramco Advantage issue. The Tax Court held that the IRS was barred from
taxing the company on income never received, and which could only have been
received by violating Saudi law. Finding that the Saudi Arab Government's
mandate represented the sovereign law of that country, the Tax Court determined
that the company was required to comply with the Saudi Arab Government's mandate
and did in fact observe it. The IRS appealed, in November 1995, to the United
States Court of Appeals for the Fifth Circuit (Fifth Circuit). The Fifth Circuit
affirmed, in October 1996, the favorable Tax Court opinion. In January 1997, the
IRS petitioned for a writ of certiorari to the United States Supreme Court,
seeking reversal of the favorable Fifth Circuit opinion.
In 1988, prior to the commencement of the Tax Court action, the company, as
a condition of its emergence from Chapter 11 proceedings, agreed to make certain
cash deposits with the IRS in contemplation of potential tax claims (Deposit
Fund). From time to time, the company has applied Deposit Fund amounts to final
liabilities agreed upon by the company and the IRS for income tax and windfall
profit tax years of Texaco and Getty not involved in the Tax Court litigation. A
portion of the Deposit Fund also will be applied to issues settled in the Tax
Court litigation years. After satisfaction of all liabilities associated with
settled issues, it is anticipated that in excess of $700 million will remain in
the Deposit Fund and continue to accrue interest. If the company ultimately
prevails on the appeal of the Aramco Advantage issue, the amount remaining in
the Deposit Fund will be refunded to the company, with interest.
Other Matters
Texaco and approximately fifty other oil companies are defendants in fourteen
purported class actions in which the plaintiffs allege that the defendants
undervalued oil produced from properties leased from the plaintiffs by
establishing artificially low selling prices, thereby underpaying to plaintiffs
royalties or severance taxes based on those prices. The actions are pending in
Texas, New Mexico, Oklahoma, Louisiana, Utah and Alabama. Plaintiffs seek to
recover royalty underpayments and interest and in some cases severance taxes and
treble and punitive damages.
o o o o o o
In the company's opinion, while it is impossible to ascertain the ultimate
legal and financial liability with respect to the above-mentioned and other
contingent liabilities and commitments, including lawsuits, claims, guarantees,
taxes and regulations, the aggregate amount of such liability in excess of
financial reserves, together with deposits and prepayments made against disputed
tax claims, is not anticipated to be materially important in relation to the
consolidated financial position or results of operations of Texaco Inc. and its
subsidiaries.
17 Note Seventeen - Financial Data by Geographic Area
Texaco Inc. and its subsidiary companies, together with affiliates, represent a
vertically integrated enterprise principally engaged in the worldwide
exploration for and production, transportation, refining and marketing of crude
oil, natural gas and petroleum and other processed products, as well as
nonpetroleum operations such as insurance and alternate energy activities. These
products and services are sold and provided to various purchasers including
wholesale and retail distributors, utilities, industrial end users and
governmental agencies throughout the world. Operations and investments in some
foreign areas are subject to political and business risks, the nature of which
varies from country to country and from time to time. At year-end 1996, net
assets located outside the United States amounted to $1,159 million, $3,249
million and $2,771 million in Other Western Hemisphere, Europe and Other Eastern
Hemisphere areas, respectively.
Operating profit represents total sales and services as shown on the
Statement of Consolidated Income less operating costs and expenses, net of
income taxes. Corporate/nonoperating includes interest income and expense,
general corporate expenses and other nonoperating items, net of income taxes.
Equity in income or losses of partnership joint-venture companies is reflected
net of taxes, since this income is directly taxable to Texaco.
Intergeographic sales and services shown are based on prices which are
generally representative of market prices or arm's-length negotiated prices.
Identifiable assets are those from continuing operations which can be
directly identified or associated with operations which have been geographically
segregated. Net assets of discontinued operations (see Note 3) are reflected in
corporate/nonoperating to conform to the presentation of net loss from
discontinued operations. Investments in affiliates pertain to those affiliates
which are accounted for on the equity method. Corporate assets include cash and
cash investments, as well as receivables, properties, plant and equipment and
other assets which are corporate in nature.
67
<PAGE>
<TABLE>
<CAPTION>
Other Other
United Western Eastern Corporate/ Consoli-
(Millions of dollars) States Hemisphere Europe Hemisphere Nonoperating* dated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year 1996
Sales and services
Outside $ 23,320 $ 6,486 $ 10,258 $ 4,497 $ -- $ 44,561
Intergeographic 838 31 502 28 (1,399) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total sales and services $ 24,158 $ 6,517 $ 10,760 $ 4,525 $ (1,399) $ 44,561
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss)
Operating profit $ 1,229 $ 179 $ 93 $ 104 $ -- $ 1,605
Equity in income of affiliates 114 1 16 538 -- 669
Corporate/nonoperating -- -- -- -- (256) (256)
- ------------------------------------------------------------------------------------------------------------------------------------
Total net income (loss) $ 1,343 $ 180 $ 109 $ 642 $ (256) $ 2,018
- ------------------------------------------------------------------------------------------------------------------------------------
Identifiable assets $ 12,477 $ 2,047 $ 4,861 $ 1,628 $ -- $ 21,013
Investments in affiliates 1,098 28 543 2,142 -- 3,811
Corporate assets -- -- -- -- 2,139 2,139
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 13,575 $ 2,075 $ 5,404 $ 3,770 $ 2,139 $ 26,963
====================================================================================================================================
Year 1995
Sales and services
Outside $ 17,302 $ 5,440 $ 8,906 $ 3,903 $ -- $ 35,551
Intergeographic 410 40 228 59 (737) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total sales and services $ 17,712 $ 5,480 $ 9,134 $ 3,962 $ (737) $ 35,551
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss)
Operating profit $ 291 $ 166 $ 32 $ 78 $ -- $ 567
Equity in income of affiliates 45 6 21 452 -- 524
Corporate/nonoperating -- -- -- -- (363) (363)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) before cumulative effect of accounting change 336 172 53 530 (363) 728
Cumulative effect of accounting change -- -- -- -- (121) (121)
- ------------------------------------------------------------------------------------------------------------------------------------
Total net income (loss) $ 336 $ 172 $ 53 $ 530 $ (484) $ 607
- ------------------------------------------------------------------------------------------------------------------------------------
Identifiable assets $ 11,068 $ 1,800 $ 4,480 $ 1,386 $ -- $ 18,734
Net assets of discontinued operations -- -- -- -- 164 164
Investments in affiliates 1,042 24 540 2,479 -- 4,085
Corporate assets -- -- -- -- 1,954 1,954
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 12,110 $ 1,824 $ 5,020 $ 3,865 $ 2,118 $ 24,937
====================================================================================================================================
Year 1994
Sales and services
Outside $ 15,936 $ 4,710 $ 8,479 $ 3,415 $ -- $ 32,540
Intergeographic 335 198 764 43 (1,340) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total sales and services $ 16,271 $ 4,908 $ 9,243 $ 3,458 $ (1,340) $ 32,540
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss)
Operating profit $ 522 $ 104 $ 65 $ 67 $ -- $ 758
Equity in income of affiliates 134 6 1 353 -- 494
Corporate/nonoperating -- -- -- -- (273) (273)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) before discontinued operations 656 110 66 420 (273) 979
Discontinued operations -- -- -- -- (69) (69)
- ------------------------------------------------------------------------------------------------------------------------------------
Total net income (loss) $ 656 $ 110 $ 66 $ 420 $ (342) $ 910
- ------------------------------------------------------------------------------------------------------------------------------------
Identifiable assets $ 11,851 $ 1,587 $ 4,641 $ 1,180 $ -- $ 19,259
Net assets of discontinued operations -- -- -- -- 195 195
Investments in affiliates 1,144 26 370 2,366 -- 3,906
Corporate assets -- -- -- -- 2,145 2,145
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 12,995 $ 1,613 $ 5,011 $ 3,546 $ 2,340 $ 25,505
====================================================================================================================================
<FN>
*Includes intergeographic sales and services eliminations.
</FN>
</TABLE>
68
<PAGE>
REPORT OF Texaco Inc.
MANAGEMENT and Subsidiary Companies
The consolidated financial statements are the responsibility of the management
of Texaco Inc. They were prepared in accordance with generally accepted
accounting principles and are, in part, based on certain estimates and
judgments, as required. Other information contained in this Annual Report is
presented on a basis consistent with the financial statements.
To meet these responsibilities, it is Texaco's long-established corporate
policy to maintain a control conscious environment and an effective internal
control system throughout its worldwide operations. Included in this system are
Corporate Conduct Guidelines which require that all employees maintain the
highest level of ethical standards. The internal control system provides
reasonable assurance that assets are safeguarded against unauthorized
acquisition, use or disposition, and that financial records are accurately and
objectively maintained, thus serving as a reliable basis for the preparation of
financial statements. This system is augmented by written policies and
procedures and an organizational structure that provides for an appropriate
division of responsibility. Management personnel are required to formally
certify each year that an effective internal control system is maintained. The
internal controls are complemented by Texaco's internal auditors who conduct
regular and extensive internal audits throughout the company. In addition, the
independent public accounting firm of Arthur Andersen LLP is engaged to provide
an objective, independent audit of the company's financial statements. Their
accompanying report is based on an audit conducted in accordance with generally
accepted auditing standards, which included obtaining a sufficient understanding
of the company's internal controls to plan their audit and determine the nature,
timing and extent of audit tests to be performed. In conducting their audits,
the auditors have access to the minutes of all meetings of the company's Board
of Directors. The appointment of the independent auditors is presented to the
stockholders for approval at each Annual Meeting of the Stockholders.
The Board of Directors of Texaco Inc. maintains an Audit Committee which
has been in place since 1939. This Committee, currently comprised of six
non-employee Directors, met two times in 1996. Depending on the nature of the
matters under review, the independent auditors, as well as certain officers and
employees of the company, may attend all or part of a meeting. The Committee
reviews and evaluates the company's accounting policies and reporting practices,
internal auditing, internal controls, security procedures and other matters
deemed appropriate. The Audit Committee also reviews the performance of Arthur
Andersen LLP in their audit of Texaco's financial statements and evaluates their
independence and professional competence, as well as the scope of their audit.
Both the internal and independent auditors have unrestricted access to the Audit
Committee to discuss the results of their audits and the quality of the
company's financial reporting and internal control system.
/s/ Peter I. Bijur /s/ Patrick J. Lynch /s/ Robert C. Oelkers
Peter I. Bijur Patrick J. Lynch Robert C. Oelkers
Chairman of the Board and Senior Vice President and Vice President and
Chief Executive Officer Chief Financial Officer Comptroller
69
<PAGE>
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
To the Stockholders, Texaco Inc.:
We have audited the accompanying consolidated balance sheet of Texaco Inc. (a
Delaware corporation) and subsidiary companies as of December 31, 1996 and 1995,
and the related statements of consolidated income, cash flows and stockholders'
equity for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Texaco Inc. and subsidiary
companies as of December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996 in conformity with generally accepted accounting principles.
As explained in Note 2 to the Consolidated Financial Statements, in 1995
the company changed its method of accounting for long-lived assets to be held
and used and long-lived assets to be disposed of.
Arthur Andersen LLP
February 27, 1997
New York, N.Y.
70
<PAGE>
SUPPLEMENTAL OIL AND Texaco Inc.
GAS INFORMATION and Subsidiary Companies
The following information for Texaco Inc. and consolidated subsidiaries, as well
as Texaco's equity in P.T. Caltex Pacific Indonesia (CPI), a 50%-owned affiliate
operating in Other Eastern Hemisphere areas, is presented in accordance with
Statement of Financial Accounting Standards No. 69, "Disclosures about Oil and
Gas Producing Activities" (SFAS 69).
Estimated Proved Reserves
Volumes reported for proved liquid and gas reserves are based upon reasonable
estimates. These estimates are consistent with current knowledge of the
characteristics and production history of the reserves. Although they are based
upon sound geological and engineering principles, by their very nature, such
estimates are subject to upward and downward revision as additional information
about producing fields and technology becomes available. Reported volumes
include only such reserves as can reasonably be classified as proved. Net
reserves represent the volumes estimated to be available after deduction of the
royalty interests of others from gross reserves. In addition to reported
reserves, Texaco has a large inventory of potential reserves that will add to
the company's proved reserve base as future investments are made in exploration
and development programs.
CPI's estimated liquid reserves include volumes projected to be recovered
as reimbursement for a portion of costs incurred. Accordingly, these volumes
will fluctuate annually with the price of crude oil. CPI's natural gas
production is all consumed in its operations.
Annually, Texaco Inc. provides information concerning oil and gas reserves
to the U.S. Department of Energy and to certain governmental bodies. Such
information is consistent with the information presented in this Annual Report.
During 1996, reserve increases, including equity and excluding purchases
and sales, replaced 113% of worldwide combined oil and gas production. Of such
reserve replacements, 87% were additions comprised of new fields, new sands, new
plants, extensions, and improved recovery, and 13% were comprised of revisions
to previous estimates. Texaco recognizes only those reserves where it is
reasonably certain that such reserves can be economically produced. Subsequent
revisions naturally result as new information is obtained from development
drilling, production profiles, and changes in economic factors. During the
three-year period 1994-1996, Texaco's reserve increases were 118% of worldwide
production. During this period, additions accounted for 80% of reserve increases
and revisions accounted for 20%. During the five-year period 1992-1996, Texaco's
reserve increases were 112% of worldwide production. During this period,
additions accounted for 72% of reserve increases and revisions accounted for
28%. Increases in proved reserves during 1996 were primarily due to the
following:
In the United States, liquid and gas reserves were added from drilling that
extended the productive limits of existing fields, such as the Carthage field in
Texas. Other drilling-related liquid and gas reserve increases resulted from the
discovery of new productive formations in California, Texas and onshore and
offshore Louisiana. Liquid reserve increases also resulted from improved
recovery in fields in Texas, Utah and New Mexico and at steamflood operations in
California as a result of expanding the steamflood. Extension of contracts at
plants in New Mexico and Oklahoma, plus the addition of a CO2 plant in New
Mexico, added liquid reserves.
Outside the United States, in the Other Western Hemisphere area,
significant gas reserves were added from the discovery of a new productive
formation in a gas field offshore Trinidad. Substantial volumes of new gas were
added from offshore platform drilling that extended the size of a producing
field in Colombia. In Europe, increases in liquid and gas reserves were from
extensions in an offshore field in the United Kingdom sector of the North Sea.
Additional volumes of liquids and gas reserves were added from a new field in
the Danish sector of the North Sea along with improved performance from the
North Sea fields, Roar (Danish sector) and Britannia (U.K.). In the Other
Eastern Hemisphere area, significant liquid reserves were added from extensions
as a result of additional drilling at a field in the Partitioned Neutral Zone
between Saudi Arabia and Kuwait. In China, new liquid reserves were added from
the discovery of new production fields. Affiliate liquid reserves in Indonesia
were improved significantly due to expanding of the world's largest steamflood
project to new areas.
During 1997, Texaco expects that net production of natural gas will
approximate 2.3 billion cubic feet per day. This estimate is based upon past
performance and on the assumption that such gas quantities can be produced under
operating and economic conditions existing at December 31, 1996. Possible future
changes in prices or world economic conditions were not factored into this
estimate. These expected production volumes, together with normal related supply
arrangements, are sufficient to meet anticipated delivery requirements under
contractual arrangements. Approximately 34% of Texaco's proved natural gas
reserves in the United States as of December 31, 1996, 31% at December 31, 1995
and 33% at December 31, 1994 were covered by long-term sales contracts. These
agreements are primarily priced at market.
71
<PAGE>
Estimated Net Proved Developed and Undeveloped Reserves of Crude Oil
<TABLE>
<CAPTION>
Texaco Inc. and Consolidated Subsidiaries Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Affiliate-
Other Other Other
United Western Eastern Eastern
(Millions of barrels) States Hemisphere Europe Hemisphere Total Hemisphere Worldwide
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31, 1993 1,278 74 285 380 2,017 456 2,473
Increase (decrease) attributable to:
Extensions, discoveries and other additions 29 2 66 71 168 -- 168
Improved recovery 21 -- 7 7 35 24 59
Revisions of previous estimates 5 5 4 10 24 16 40
Sales of minerals-in-place (9) (2) (5) -- (16) -- (16)
Production (119) (7) (41) (41) (208) (57) (265)
- ------------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1994* 1,205 72 316 427 2,020 439 2,459
Increase (decrease) attributable to:
Extensions, discoveries and other additions 30 -- 32 71 133 1 134
Improved recovery 51 -- 15 -- 66 45 111
Revisions of previous estimates 56 (2) (2) 25 77 2 79
Purchases of minerals-in-place 1 -- -- -- 1 -- 1
Sales of minerals-in-place (98) (11) -- -- (109) -- (109)
Production (110) (6) (39) (48) (203) (55) (258)
- ------------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1995* 1,135 53 322 475 1,985 432 2,417
Increase (decrease) attributable to:
Extensions, discoveries and other additions 49 4 80 29 162 1 163
Improved recovery 20 -- -- -- 20 81 101
Revisions of previous estimates 44 2 (23) 20 43 (3) 40
Purchases of minerals-in-place 8 -- 3 -- 11 -- 11
Sales of minerals-in-place (28) -- -- (1) (29) -- (29)
Production (113) (4) (39) (58) (214) (54) (268)
- ------------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1996* 1,115 55 343 465 1,978 457 2,435
====================================================================================================================================
*Includes net proved developed reserves
As of December 31, 1994 947 68 152 365 1,532 356 1,888
As of December 31, 1995 928 51 133 413 1,525 344 1,869
As of December 31, 1996 905 49 158 417 1,529 348 1,877
====================================================================================================================================
</TABLE>
72
<PAGE>
Estimated Net Proved Developed and Undeveloped Reserves of Natural Gas Liquids
<TABLE>
<CAPTION>
Texaco Inc. and Consolidated Subsidiaries Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Affiliate-
Other Other Other
United Western Eastern Eastern World-
(Millions of barrels) States Hemisphere Europe Hemisphere Total Hemisphere wide
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31, 1993 180 1 26 -- 207 5 212
Increase (decrease) attributable to:
Extensions, discoveries and other additions 32 -- 3 -- 35 -- 35
Revisions of previous estimates 12 -- 1 -- 13 1 14
Sales of minerals-in-place (4) -- -- -- (4) -- (4)
Production (29) -- (3) -- (32) -- (32)
- ------------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1994* 191 1 27 -- 219 6 225
Increase (decrease) attributable to:
Extensions, discoveries and other additions 28 -- 5 -- 33 -- 33
Improved recovery 5 -- -- -- 5 -- 5
Revisions of previous estimates 22 -- (1) -- 21 -- 21
Sales of minerals-in-place (11) -- -- -- (11) -- (11)
Production (29) -- (3) -- (32) -- (32)
- ------------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1995* 206 1 28 -- 235 6 241
Increase (decrease) attributable to:
Extensions, discoveries and other additions 33 -- -- -- 33 -- 33
Revisions of previous estimates -- -- 29 1 30 -- 30
Sales of minerals-in-place (3) -- -- -- (3) -- (3)
Production (29) -- (3) -- (32) -- (32)
- ------------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1996* 207 1 54 1 263 6 269
====================================================================================================================================
*Includes net proved developed reserves
As of December 31, 1994 182 1 11 -- 194 5 199
As of December 31, 1995 197 1 9 -- 207 6 213
As of December 31, 1996 195 1 7 1 204 6 210
====================================================================================================================================
Grand Total Reserves of Crude Oil and Natural Gas Liquids
As of December 31, 1994 1,396 73 343 427 2,239 445 2,684
As of December 31, 1995 1,341 54 350 475 2,220 438 2,658
As of December 31, 1996 1,322 56 397 466 2,241 463 2,704
====================================================================================================================================
</TABLE>
73
<PAGE>
Estimated Net Proved Developed and Undeveloped Reserves of Natural Gas
<TABLE>
<CAPTION>
Texaco Inc. and Consolidated Subsidiaries Equity
- ---------------------------------------------------------------------------------------------------------------------------------
Affiliate-
Other Other Other
United Western Eastern Eastern
(Billions of cubic feet) States Hemisphere Europe Hemisphere Total Hemisphere Worldwide
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31, 1993 4,329 722 875 44 5,970 140 6,110
Increase (decrease) attributable to:
Extensions, discoveries and other additions 522 17 71 -- 610 26 636
Improved recovery 2 -- 2 1 5 -- 5
Revisions of previous estimates 260 22 15 4 301 (5) 296
Purchases of minerals-in-place -- 9 -- 1 10 -- 10
Sales of minerals-in-place (61) (1) (20) -- (82) -- (82)
Production (645) (57) (66) (3) (771) (11) (782)
- ---------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1994* 4,407 712 877 47 6,043 150 6,193
Increase (decrease) attributable to:
Extensions, discoveries and other additions 397 100 164 6 667 6 673
Improved recovery 21 -- -- -- 21 -- 21
Revisions of previous estimates 103 103 (15) 39 230 14 244
Purchases of minerals-in-place 26 -- -- -- 26 -- 26
Sales of minerals-in-place (287) (6) (2) (1) (296) -- (296)
Production (605) (62) (80) (4) (751) (15) (766)
- ---------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1995* 4,062 847 944 87 5,940 155 6,095
Increase (decrease) attributable to:
Extensions, discoveries and other additions 436 263 34 3 736 15 751
Improved recovery 8 -- -- -- 8 1 9
Revisions of previous estimates (99) (1) 58 13 (29) -- (29)
Purchases of minerals-in-place 5 -- -- -- 5 -- 5
Sales of minerals-in-place (58) (7) -- 1 (64) -- (64)
Production (626) (71) (75) (4) (776) (18) (794)
- ---------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1996* 3,728 1,031(a) 961 100 5,820(a) 153 5,973(a)
=================================================================================================================================
*Includes net proved developed reserves
As of December 31, 1994 3,899 558 465 44 4,966 133 5,099
As of December 31, 1995 3,666 522 452 84 4,724 140 4,864
As of December 31, 1996 3,360 893 452 96 4,801 136 4,937
=================================================================================================================================
<FN>
(a) In addition to proved reserves at December 31, 1996, there is approximately
458 billion cubic feet of natural gas in the Other Western Hemisphere which will
be available from production during the period 2005-2016 under a long-term
purchase arrangement associated with a field operated by Texaco under a service
agreement.
</FN>
</TABLE>
74
<PAGE>
Capitalized Costs
Capitalized costs represent cumulative expenditures for proved and unproved
properties and support equipment and facilities used in oil and gas exploration
and producing operations together with related accumulated depreciation,
depletion and amortization (including aggregate provisions for restoration and
abandonment costs, net of such costs expended to date).
<TABLE>
<CAPTION>
Texaco Inc. and Consolidated Subsidiaries Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Affiliate-
Other Other Other
United Western Eastern Eastern
(Millions of dollars) States Hemisphere Europe Hemisphere Total Hemisphere Worldwide
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Proved properties $ 17,450 $ 603 $ 4,102 $ 1,372 $ 23,527 $ 1,018 $ 24,545
Unproved properties 370 15 81 210 676 293 969
Support equipment and facilities 432 32 38 185 687 548 1,235
- ------------------------------------------------------------------------------------------------------------------------------------
Gross capitalized costs 18,252 650 4,221 1,767 24,890 1,859 26,749
Accumulated depreciation,
depletion and amortization (13,158) (308) (2,739) (1,012) (17,217) (903) (18,120)
- ------------------------------------------------------------------------------------------------------------------------------------
Net capitalized costs $ 5,094 $ 342 $ 1,482 $ 755 $ 7,673 $ 956 $ 8,629
====================================================================================================================================
As of December 31, 1995
Proved properties $ 17,384 $ 505 $ 3,551 $ 1,279 $ 22,719 $ 900 $ 23,619
Unproved properties 383 11 125 116 635 320 955
Support equipment and facilities 381 28 47 133 589 494 1,083
- ------------------------------------------------------------------------------------------------------------------------------------
Gross capitalized costs 18,148 544 3,723 1,528 23,943 1,714 25,657
Accumulated depreciation,
depletion and amortization (13,298) (291) (2,520) (905) (17,014) (793) (17,807)
- ------------------------------------------------------------------------------------------------------------------------------------
Net capitalized costs $ 4,850 $ 253 $ 1,203 $ 623 $ 6,929 $ 921 $ 7,850
====================================================================================================================================
</TABLE>
75
<PAGE>
Costs Incurred
Costs Incurred represent amounts capitalized or charged against income as
expended. Property acquisition costs include costs to purchase or lease proved
and unproved properties. Exploration costs include the costs of geological and
geophysical work, carrying and retaining undeveloped properties and drilling and
equipping exploratory wells. Development costs include expenditures to drill and
equip development wells; to provide improved recovery systems; to construct
facilities for extraction, treating, gathering and storing liquids and natural
gas; and to maintain producing facilities for existing developed reserves.
Exploration and development costs include applicable depreciation of support
equipment and facilities used in those activities, rather than the expenditures
to acquire such assets. Development costs incurred in Europe during 1994 for the
Captain Field include $59 million which was recovered during 1995 in a sale of
incomplete construction on property to be leased by Texaco. (See Note 8.)
<TABLE>
<CAPTION>
Texaco Inc. and Consolidated Subsidiaries Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Affiliate-
Other Other Other
United Western Eastern Eastern
(Millions of dollars) States Hemisphere Europe Hemisphere Total Hemisphere Worldwide
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the year ended December 31, 1996
Proved property acquisition $ 56 $ -- $ -- $ -- $ 56 $ -- $ 56
Unproved property acquisition 91 5 -- 20 116 -- 116
Exploration 356 18 90 225 689 9 698
Development 827 107 384 113 1,431 144 1,575
- ------------------------------------------------------------------------------------------------------------------------------------
Total $1,330 $ 130 $ 474 $ 358 $2,292 $ 153 $2,445
====================================================================================================================================
For the year ended December 31, 1995
Proved property acquisition $ 7 $ 31 $ -- $ -- $ 38 $ -- $ 38
Unproved property acquisition 35 3 2 11 51 -- 51
Exploration 151 48 76 117 392 11 403
Development 845 66 207 105 1,223 99 1,322
- ------------------------------------------------------------------------------------------------------------------------------------
Total $1,038 $ 148 $ 285 $ 233 $1,704 $ 110 $1,814
====================================================================================================================================
For the year ended December 31, 1994
Proved property acquisition $ 5 $ 2 $ -- $ -- $ 7 $ -- $ 7
Unproved property acquisition 13 2 -- 33 48 -- 48
Exploration 165 19 58 110 352 9 361
Development 729 43 253 108 1,133 129 1,262
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 912 $ 66 $ 311 $ 251 $1,540 $ 138 $1,678
====================================================================================================================================
</TABLE>
76
<PAGE>
Results of Operations - Oil and Gas Exploration and Producing Activities
The results below solely relate to Texaco's exploration for and net production
of liquids and natural gas reserves. They exclude special items (including the
effect associated with the adoption of SFAS 121, which resulted in a net-of-tax
non-cash charge against 1995 earnings of $496 million, principally in the United
States) and operating earnings related to the sale of purchased oil and gas,
equity earnings of certain affiliates, liquids and gas trading activity, general
overhead, and miscellaneous operating income. Related estimated income tax
expense was computed by applying the statutory income tax rates, including state
and local income taxes, to the pre-tax results of operations and reflects
applicable credits and allowances.
<TABLE>
<CAPTION>
Texaco Inc. and Consolidated Subsidiaries Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Affiliate-
Other Other Other
United Western Eastern Eastern
(Millions of dollars) States Hemisphere Europe Hemisphere Total Hemisphere Worldwide
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the year ended December 31, 1996
Gross revenues from:
Sales and transfers to affiliates and to divisions
and subsidiaries within Texaco $ 3,383 $ -- $ 524 $ 863 $ 4,770 $ 648 $ 5,418
Sales to unaffiliated entities 310 140 475 181 1,106 45 1,151
Production costs (937) (54) (321) (215) (1,527) (183) (1,710)
Exploration expenses (196) (27) (57) (150) (430) (8) (438)
Depreciation, depletion and amortization (652) (24) (310) (107) (1,093) (110) (1,203)
Other expenses (241) (1) (1) (40) (283) 8 (275)
- ------------------------------------------------------------------------------------------------------------------------------------
Results before estimated income taxes 1,667 34 310 532 2,543 400 2,943
Estimated income taxes (534) (26) (112) (417) (1,089) (212) (1,301)
- ------------------------------------------------------------------------------------------------------------------------------------
Net results $ 1,133 $ 8 $ 198 $ 115 $ 1,454 $ 188 $ 1,642
====================================================================================================================================
For the year ended December 31, 1995
Gross revenues from:
Sales and transfers to affiliates and to divisions
and subsidiaries within Texaco $ 2,652 $ -- $ 394 $ 613 $ 3,659 $ 583 $ 4,242
Sales to unaffiliated entities 291 127 485 131 1,034 35 1,069
Production costs (951) (45) (314) (198) (1,508) (169) (1,677)
Exploration expenses (87) (35) (79) (96) (297) (9) (306)
Depreciation, depletion and amortization (682) (20) (293) (109) (1,104) (94) (1,198)
Other expenses (254) (6) -- (24) (284) (13) (297)
- ------------------------------------------------------------------------------------------------------------------------------------
Results before estimated income taxes 969 21 193 317 1,500 333 1,833
Estimated income taxes (295) (14) (74) (260) (643) (177) (820)
- ------------------------------------------------------------------------------------------------------------------------------------
Net results $ 674 $ 7 $ 119 $ 57 $ 857 $ 156 $ 1,013
====================================================================================================================================
For the year ended December 31, 1994
Gross revenues from:
Sales and transfers to affiliates and to divisions
and subsidiaries within Texaco $ 2,672 $ -- $ 336 $ 491 $ 3,499 $ 514 $ 4,013
Sales to unaffiliated entities 403 129 448 113 1,093 24 1,117
Production costs (1,100) (41) (325) (198) (1,664) (163) (1,827)
Exploration expenses (115) (17) (53) (115) (300) (9) (309)
Depreciation, depletion and amortization (934) (29) (295) (96) (1,354) (74) (1,428)
Other expenses (249) (8) -- (27) (284) (27) (311)
- ------------------------------------------------------------------------------------------------------------------------------------
Results before estimated income taxes 677 34 111 168 990 265 1,255
Estimated income taxes (217) (31) (43) (130) (421) (131) (552)
- ------------------------------------------------------------------------------------------------------------------------------------
Net results $ 460 $ 3 $ 68 $ 38 $ 569 $ 134 $ 703
====================================================================================================================================
</TABLE>
77
<PAGE>
Average Sales Prices and Production Costs - Per Unit
Average sales prices per unit are based upon the gross revenues reported in the
Results of Operations - Oil and Gas Exploration and Producing Activities table.
Average production costs per composite barrel include related depreciation,
depletion and amortization of support equipment and facilities. It also includes
cash lifting costs, excluding payments for royalties and income taxes. However,
users of this information are cautioned that such income taxes and royalties
substantially add to the total cost of producing operations and substantially
reduce the profitability and cash flow from such operations.
<TABLE>
<CAPTION>
Average sales prices
- ------------------------------------------------------------------------------------------------------------------------------------
Crude oil Crude oil Crude oil
and natural Natural and natural Natural and natural Natural
gas gas per gas gas per gas gas per
liquids thousand liquids thousand liquids thousand
per cubic per cubic per cubic Average production costs
barrel feet barrel feet barrel feet (per composite barrel)
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $16.97 $2.10 $14.25 $1.62 $12.81 $1.87 $3.82 $3.97 $4.33
Other Western Hemisphere 16.80 .96 13.34 .87 10.94 .87 3.44 2.92 2.66
Europe 20.37 2.47 16.57 2.50 15.24 2.17 5.95 6.08 6.01
Other Eastern Hemisphere 18.61 3.20 15.90 2.61 14.58 2.70 4.07 4.30 4.92
Affiliate - Other Eastern Hemisphere 16.11 -- 14.05 -- 11.96 -- 3.71 3.37 3.13
====================================================================================================================================
</TABLE>
Standardized Measure of Discounted Future Net Cash Flows
The following table shows estimated future net cash flows from future production
of net developed and undeveloped proved reserves of crude oil, natural gas
liquids and natural gas (including amounts applicable to a long-term purchase
and operating service arrangement); therefore, reserves exclude the royalty
interests of others. As prescribed by SFAS 69, such future net cash flows were
estimated using year-end prices, costs, and tax rates, and a 10% annual discount
factor. Future production costs are based upon current year costs used uniformly
throughout the life of the reserves. Future development costs include
restoration and abandonment costs, net of residual salvage value. Estimated
future income taxes were computed by applying the statutory income tax rates,
including state and local taxes, to the future pre-tax net cash flows less
appropriate tax deductions, giving effect to tax credits. Effective tax rates
were used for certain foreign areas.
Texaco is presenting this information in accordance with the requirements
of SFAS 69 and has exercised all due care in developing the data. It is
necessary to caution investors and other users of the information to avoid its
simplistic use. While the intent of this disclosure is to provide a common
benchmark to help financial statement users project future cash flows and
compare companies, users should note the following: data in this table excludes
the effect of future changes in prices, costs, and tax rates which past
experience indicates will occur. Such future changes could significantly impact
the disclosed discounted net cash flows. The data also excludes the estimated
net cash flows from reserves that are yet to be proved. Extensive judgment is
used to estimate the timing of production and future costs over the remaining
life of the reserves utilized in developing this disclosure. Values can be
distorted by the use of year-end prices that may reflect seasonal factors or
unpredictable distortions from wars and other significant world events. For all
the preceding reasons, this disclosure is not necessarily indicative of Texaco's
perception of the future cash flows to be derived from underground reserves.
78
<PAGE>
Standardized Measure of Discounted Future Net Cash Flows
<TABLE>
<CAPTION>
Texaco Inc. and Consolidated Subsidiaries Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Affiliate-
Other Other Other
United Western Eastern Eastern
(Millions of dollars) States Hemisphere Europe Hemisphere Total Hemisphere Worldwide
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Future cash inflows from sale of oil & gas,
and service fee revenue $ 41,807 $ 2,863 $ 11,242 $ 9,261 $ 65,173 $ 6,632 $ 71,805
Future production costs (8,080) (894) (2,368) (1,993) (13,335) (1,776) (15,111)
Future development costs (2,790) (141) (2,094) (551) (5,576) (740) (6,316)
Future income tax expense (10,444) (758) (1,946) (5,099) (18,247) (2,181) (20,428)
- -----------------------------------------------------------------------------------------------------------------------------------
Net future cash flows before discount 20,493 1,070 4,834 1,618 28,015 1,935 29,950
10% discount for timing of future cash flows (8,602) (458) (1,740) (489) (11,289) (695) (11,984)
- -----------------------------------------------------------------------------------------------------------------------------------
Standardized measure: discounted
future net cash flows $ 11,891 $ 612 $ 3,094 $ 1,129 $ 16,726 $ 1,240 $ 17,966
===================================================================================================================================
As of December 31, 1995
Future cash inflows from sale of oil & gas,
and service fee revenue $ 28,603 $ 2,144 $ 8,753 $ 7,820 $ 47,320 $ 5,357 $ 52,677
Future production costs (8,232) (628) (2,150) (2,210) (13,220) (1,448) (14,668)
Future development costs (2,618) (181) (1,352) (439) (4,590) (515) (5,105)
Future income tax expense (5,505) (573) (1,457) (3,862) (11,397) (1,799) (13,196)
- -----------------------------------------------------------------------------------------------------------------------------------
Net future cash flows before discount 12,248 762 3,794 1,309 18,113 1,595 19,708
10% discount for timing of future cash flows (4,988) (375) (1,502) (418) (7,283) (553) (7,836)
- -----------------------------------------------------------------------------------------------------------------------------------
Standardized measure: discounted future
net cash flows $ 7,260 $ 387 $ 2,292 $ 891 $ 10,830 $ 1,042 $ 11,872
===================================================================================================================================
As of December 31, 1994
Future cash inflows from sale of oil & gas $ 26,545 $ 1,568 $ 6,933 $ 6,006 $ 41,052 $ 4,664 $ 45,716
Future production costs (9,374) (609) (2,434) (2,567) (14,984) (1,393) (16,377)
Future development costs (3,011) (134) (1,372) (354) (4,871) (193) (5,064)
Future income tax expense (3,968) (361) (966) (2,229) (7,524) (1,632) (9,156)
- -----------------------------------------------------------------------------------------------------------------------------------
Net future cash flows before discount 10,192 464 2,161 856 13,673 1,446 15,119
10% discount for timing of future cash flows (4,313) (155) (814) (271) (5,553) (554) (6,107)
- -----------------------------------------------------------------------------------------------------------------------------------
Standardized measure: discounted future
net cash flows $ 5,879 $ 309 $ 1,347 $ 585 $ 8,120 $ 892 $ 9,012
===================================================================================================================================
</TABLE>
Changes in the Standardized Measure of Discounted Future Net Cash Flows
<TABLE>
<CAPTION>
Texaco Inc. and Consolidated Worldwide Including Equity in
Subsidiaries - Total Affiliate - Other Eastern Hemisphere
- ------------------------------------------------------------------------------------------------------------------------------------
(Millions of dollars) 1996 1995 1994 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Standardized measure - Beginning of year $ 10,830 $ 8,120 $ 6,181 $ 11,872 $ 9,012 $ 6,727
Sales of minerals-in-place (458) (679) (104) (458) (679) (104)
- ------------------------------------------------------------------------------------------------------------------------------------
10,372 7,441 6,077 11,414 8,333 6,623
Changes in ongoing oil and gas operations:
Sales and transfers of produced oil and gas, net of
production costs during the period (4,349) (3,185) (2,932) (4,859) (3,634) (3,307)
Net changes in prices, production and development costs 8,407 4,265 3,024 8,820 4,564 3,707
Extensions, discoveries and improved recovery,
less related costs 2,950 1,770 1,355 3,182 1,891 1,479
Development costs incurred during the period 1,431 1,223 1,133 1,575 1,322 1,262
Timing of production and other changes (209) (733) (618) (251) (677) (648)
Revisions of previous quantity estimates 563 988 537 527 990 626
Purchases of minerals-in-place 138 42 7 138 42 7
Accretion of discount 1,731 1,238 907 1,952 1,428 1,023
Net change in discounted future income taxes (4,308) (2,219) (1,370) (4,532) (2,387) (1,760)
- ------------------------------------------------------------------------------------------------------------------------------------
Standardized measure - End of year $ 16,726 $ 10,830 $ 8,120 $ 17,966 $ 11,872 $ 9,012
====================================================================================================================================
</TABLE>
79
<PAGE>
SELECTED Texaco Inc.
FINANCIAL DATA and Subsidiary Companies
Selected Quarterly Financial Data
<TABLE>
<CAPTION>
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------------------------------------------
(Millions of dollars) 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Sales and services $10,059 $10,817 $10,901 $12,784 $8,585 $9,031 $8,621 $ 9,314
Equity in income of affiliates, interest,
asset sales and other 212 444 196 87 482 228 193 333
- ------------------------------------------------------------------------------------------------------------------------------------
10,271 11,261 11,097 12,871 9,067 9,259 8,814 9,647
- ------------------------------------------------------------------------------------------------------------------------------------
Deductions
Purchases and other costs 7,782 8,345 8,399 10,117 6,526 6,980 6,556 7,175
Operating expenses 684 700 721 873 731 696 713 767
Selling, general and administrative expenses 400 399 406 488 371 377 411 421
Maintenance and repairs 88 90 88 101 88 96 88 103
Exploratory expenses 69 90 84 136 55 59 66 109
Depreciation, depletion and amortization 350 354 364 387 397 348 346 1,294
Interest expense, taxes other than income
taxes and minority interest 234 252 253 263 265 256 248 259
- ------------------------------------------------------------------------------------------------------------------------------------
9,607 10,230 10,315 12,365 8,433 8,812 8,428 10,128
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations
before income taxes 664 1,031 782 506 634 447 386 (481)
Provision for (benefit from) income taxes 278 342 348 (3) 216 176 96 (230)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) from continuing operations 386 689 434 509 418 271 290 (251)
Cumulative effect of accounting change -- -- -- -- (121) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 386 $ 689 $ 434 $ 509 $ 297 $ 271 $ 290 $ (251)
====================================================================================================================================
Per common share (dollars)
Net income (loss) from
continuing operations $ 1.42 $ 2.59 $ 1.61 $ 1.90 $ 1.55 $ .99 $ 1.06 $ (1.02)
Cumulative effect of accounting change -- -- -- -- (.47) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 1.42 $ 2.59 $ 1.61 $ 1.90 $ 1.08 $ .99 $ 1.06 $ (1.02)
====================================================================================================================================
</TABLE>
Fourth quarter 1995 results include a pre-tax charge of $959 million, primarily
to depreciation, depletion and amortization, due to the adoption of SFAS 121.
(Refer to Note 2 - Changes in Accounting Principles for further details.) On an
after-tax basis, this charge amounted to $639 million.
See accompanying notes to consolidated financial statements.
80
<PAGE>
SELECTED Texaco Inc.
FINANCIAL DATA and Subsidiary Companies
Five-Year Comparison of Selected Financial Data
<TABLE>
<CAPTION>
(Millions of dollars) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the Year:
Revenues from continuing operations $45,500 $36,787 $33,353 $34,071 $36,530
Net income (loss) before cumulative effect of accounting changes
Continuing operations $ 2,018 $ 728 $ 979 $ 1,259 $ 1,038
Discontinued operations -- -- (69) (191) (26)
Cumulative effect of accounting changes -- (121) -- -- (300)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 2,018 $ 607 $ 910 $ 1,068 $ 712
- ------------------------------------------------------------------------------------------------------------------------------------
Per common share (dollars)
Net income (loss) before cumulative effect of accounting changes
Continuing operations $ 7.52 $ 2.57 $ 3.43 $ 4.47 $ 3.63
Discontinued operations -- -- (.26) (.73) (.10)
Cumulative effect of accounting changes -- (.47) -- -- (1.16)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 7.52 $ 2.10 $ 3.17 $ 3.74 $ 2.37
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends $ 3.30 $ 3.20 $ 3.20 $ 3.20 $ 3.20
Total cash dividends paid on common stock $ 859 $ 832 $ 830 $ 828 $ 828
At End of Year:
Total assets $26,963 $24,937 $25,505 $26,626 $25,992
Debt and capital lease obligations
Short-term $ 465 $ 737 $ 917 $ 669 $ 140
Long-term 5,125 5,503 5,564 6,157 6,441
- ------------------------------------------------------------------------------------------------------------------------------------
Total debt and capital lease obligations $ 5,590 $ 6,240 $ 6,481 $ 6,826 $ 6,581
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
81
<PAGE>
INVESTOR Texaco Inc.
INFORMATION
Shareholder Communications
<TABLE>
<S> <C> <C>
For information about Texaco or assistance Texaco Inc. Security analysts and institutional investors
with your account, please contact: Investor Services should contact:
2000 Westchester Avenue Elizabeth P. Smith
White Plains, NY 10650-0001 Vice President, Texaco Inc.
Phone: 1-800-283-9785 Phone: (914) 253-4478
Fax: (914) 253-6286 Fax: (914) 253-6269
E-mail: [email protected] E-mail: [email protected]
</TABLE>
Common Stock Market and Dividend Information
Texaco Inc. common stock (symbol TX) is traded principally on the New York Stock
Exchange. As of February 27, 1997, there were 195,680 shareholders of record.
Texaco's common stock price reached a high of $107.13 during October 1996 and
closed at $98.13. The stock appreciation, plus a quarterly dividend increase of
6.25%, provided a total return to Texaco shareholders of 30% for the year.
<TABLE>
<CAPTION>
Common Stock Price Range
- ---------------------------------------------------------------------------------------------
High Low High Low Dividends
- ---------------------------------------------------------------------------------------------
1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $ 88.75 $75.50 $66.75 $59.75 $.80 $.80
Second Quarter 88.50 78.88 69.63 64.25 .80 .80
Third Quarter 96.13 83.13 67.63 62.75 .85 .80
Fourth Quarter 107.13 91.50 80.50 64.00 .85 .80
=============================================================================================
</TABLE>
<TABLE>
<S> <C> <C>
Stock Transfer Agent NY Drop Agent Co-Transfer Agent
Texaco Inc. Chase Mellon Shareholder Services Montreal Trust Company
Investor Services 120 Broadway - 13th Floor 151 Front Street West - 8th Floor
2000 Westchester Avenue New York, NY 10271 Toronto, Ontario, Canada M5J 2N1
White Plains, NY 10650-0001 Phone: (212) 374-2500 Phone: 1-800-663-9097
Phone: 1-800-283-9785 Fax: (212) 571-0871 Fax: (416) 981-9507
Fax: (914) 253-6286
</TABLE>
Annual Meeting
Texaco Inc.'s Annual Shareholders Meeting will be held at the Rye Town Hilton,
Rye Brook, NY, on Tuesday, May 13, 1997. A formal notice of the meeting,
together with a proxy statement and proxy form, is being mailed to shareholders
with this Report.
Investor Services Plan
The company's Investor Services Plan offers a variety of benefits to individuals
seeking an easy way to invest in Texaco Inc. common stock. Enrollment in the
Plan is open to anyone, and all investors may make initial investments directly
through the company. The Plan features dividend reinvestment, optional cash
investments and custodial service for stock certificates. Texaco's Investor
Services Plan is an excellent way to start an investment program for friends or
family members. For a complete informational package, including a Plan
prospectus, call 1-800-283-9785, or visit Texaco's Internet home page:
http://www.texaco.com.
Publications for Shareholders
In addition to the Annual Report, Texaco issues several financial and
informational publications which are available free of charge to interested
shareholders on request from Investor Services at the above address:
Texaco Inc.'s 1996 Annual Report on Form 10-K filed with the U.S. Securities and
Exchange Commission.
Financial and Operational Supplement - Comprehensive data on Texaco's 1996
activities.
Texaco Foundation 1996 Annual Report - Information on charitable contributions
to select tax-exempt organizations in the U.S.
Equal Opportunity and Texaco: A Report - A description of Texaco's programs that
foster equal employment opportunity.
1996 Environment, Health and Safety Review - A report on Texaco's programs,
policies and results in the areas of corporate responsibility.
82
<PAGE>
EXHIBIT 21
Subsidiaries of Registrant
1996
<TABLE>
<CAPTION>
Parents of Registrant
None
Registrant
Texaco Inc.
The significant subsidiaries included in the consolidated financial statements
of the Registrant are as follows:
Organized
under
the laws of
-----------
<S> <C>
Four Star Oil and Gas Company Delaware
Heddington Insurance Ltd. Bermuda
MVP Production Inc. Delaware
Refineria Panama, S.A. Panama
S.A. Texaco Belgium N.V. Belgium
Saudi Arabian Texaco Inc. Delaware
TEPI Holdings Inc. Delaware
TRMI Holdings Inc. Delaware
Texaco Brazil S.A. - Produtos de Petroleo Brazil
Texaco Britain Limited England
Texaco Canada Petroleum Inc. Canada
Texaco Caribbean Inc. Delaware
Texaco Chemical Inc. Delaware
Texaco Cogeneration Company Delaware
Texaco Denmark Inc. Delaware
Texaco Exploration and Production Inc. Delaware
Texaco International Trader Inc. Delaware
Texaco Investments (Netherlands), Inc. Delaware
Texaco (Ireland) Limited Ireland
Texaco Limited England
Texaco Natural Gas Inc. Delaware
Texaco Nederland B.V. Netherlands
Texaco North Sea U.K. Company Delaware
Texaco Oil Development Company Delaware
Texaco Overseas Holdings Inc. Delaware
Texaco Overseas (Nigeria) Petroleum Company, Unlimited Nigeria
Texaco Overseas Petroleum Company Delaware
Texaco Panama Inc. Panama
Texaco Pipeline Inc. Delaware
Texaco Puerto Rico Inc. Puerto Rico
Texaco Raffinaderij Pernis B.V. Netherlands
Texaco Refining and Marketing Inc. Delaware
Texaco Refining and Marketing (East) Inc. Delaware
Texaco Trading and Transportation Inc. Delaware
Texaco Trinidad Inc. Delaware
Texas Petroleum Company New Jersey
<FN>
Names of certain subsidiary companies are omitted because, considered in the
aggregate as a single subsidiary company, they do not constitute a significant
subsidiary company.
</FN>
</TABLE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated February 27, 1997 incorporated by reference in
Texaco Inc.'s Form 10-K for the year ended December 31, 1996, into the following
previously filed Registration Statements:
1. Form S-3 File Number 2-37010
2. Form S-3 File Number 33-31148
3. Form S-8 File Number 2-67125
4. Form S-8 File Number 2-76755
5. Form S-8 File Number 2-90255
6. Form S-8 File Number 33-34043
7. Form S-3 File Number 33-40309
8. Form S-8 File Number 33-45952
9. Form S-8 File Number 33-45953
10. Form S-3 File Number 33-63996
11. Form S-3 File Number 33-50553 and 33-50553-01
12. Form S-8 File Number 333-11019
Arthur Andersen LLP
New York, N.Y.
March 27, 1997
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of them
(with full power to act without the other), as the undersigned's true and lawful
attorneys-in-fact and agents, with full power and authority to act in any and
all capacities for and in the name, place and stead of the undersigned in
connection with the filing of: (i) any and all registration statements and all
amendments and post-effective amendments thereto (collectively, "Registration
Statements") under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission, and any and all registrations, qualifications or
notifications under the applicable securities laws of any and all states and
other jurisdictions, with respect to the securities of the Company of whatever
class, including without limitation thereon the Company's Common Stock, par
value $6.25 per share, and preferred stock, par value $1.00 per share, however
offered, sold, issued, distributed, placed or resold by the Company, by any of
its subsidiary companies, or by any other person or entity, that may be required
to effect: (a) any such filing, (b) any primary or secondary offering, sale,
distribution, exchange, or conversion of the Company's securities, (c) any
acquisition, merger, reorganization or consolidation involving the issuance of
the Company's securities, (d) any stock option, restricted stock grant,
incentive, investment, thrift, profit sharing, or other employee benefit plan
relating to the Company's securities, or (e) any dividend reinvestment or stock
purchase plan relating to the Company's securities; (ii) the Company's Annual
Report to the Securities and Exchange Commission for the year ended December 31,
1996, on Form 10-K, and any and all amendments thereto on Form 8 or otherwise,
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
(iii) Statements of Changes of Beneficial Ownership of Securities on Form 4 or
Form 5 (or such other forms as may be designated from time to time for such
purposes), pursuant to Section 16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority,
such attorneys-in-fact and agents, or either of them, are hereby granted full
power and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such
attorneys-in-fact and agents, and either of them, also include the full right,
power and authority to effect necessary or appropriate substitutions or
revocations. The undersigned hereby ratifies, confirms, and adopts, as his own
act and deed, all action lawfully taken pursuant to the powers and authorities
herein granted by such attorneys-in-fact and agents, or either of them, or by
their respective substitutes. This Power of Attorney expires by its terms and
shall be of no further force and effect on March 31, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the
22nd day of January, 1997.
PETER I. BIJUR
--------------
EXHIBIT 24.2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of them
(with full power to act without the other), as the undersigned's true and lawful
attorneys-in-fact and agents, with full power and authority to act in any and
all capacities for and in the name, place and stead of the undersigned in
connection with the filing of: (i) any and all registration statements and all
amendments and post-effective amendments thereto (collectively, "Registration
Statements") under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission, and any and all registrations, qualifications or
notifications under the applicable securities laws of any and all states and
other jurisdictions, with respect to the securities of the Company of whatever
class, including without limitation thereon the Company's Common Stock, par
value $6.25 per share, and preferred stock, par value $1.00 per share, however
offered, sold, issued, distributed, placed or resold by the Company, by any of
its subsidiary companies, or by any other person or entity, that may be required
to effect: (a) any such filing, (b) any primary or secondary offering, sale,
distribution, exchange, or conversion of the Company's securities, (c) any
acquisition, merger, reorganization or consolidation involving the issuance of
the Company's securities, (d) any stock option, restricted stock grant,
incentive, investment, thrift, profit sharing, or other employee benefit plan
relating to the Company's securities, or (e) any dividend reinvestment or stock
purchase plan relating to the Company's securities; (ii) the Company's Annual
Report to the Securities and Exchange Commission for the year ended December 31,
1996, on Form 10-K, and any and all amendments thereto on Form 8 or otherwise,
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
(iii) Statements of Changes of Beneficial Ownership of Securities on Form 4 or
Form 5 (or such other forms as may be designated from time to time for such
purposes), pursuant to Section 16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority,
such attorneys-in-fact and agents, or either of them, are hereby granted full
power and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such
attorneys-in-fact and agents, and either of them, also include the full right,
power and authority to effect necessary or appropriate substitutions or
revocations. The undersigned hereby ratifies, confirms, and adopts, as his own
act and deed, all action lawfully taken pursuant to the powers and authorities
herein granted by such attorneys-in-fact and agents, or either of them, or by
their respective substitutes. This Power of Attorney expires by its terms and
shall be of no further force and effect on March 31, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as of
the 13th day of January, 1997.
ALLEN J. KROWE
--------------
EXHIBIT 24.3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of them
(with full power to act without the other), as the undersigned's true and lawful
attorneys-in-fact and agents, with full power and authority to act in any and
all capacities for and in the name, place and stead of the undersigned in
connection with the filing of: (i) any and all registration statements and all
amendments and post-effective amendments thereto (collectively, "Registration
Statements") under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission, and any and all registrations, qualifications or
notifications under the applicable securities laws of any and all states and
other jurisdictions, with respect to the securities of the Company of whatever
class, including without limitation thereon the Company's Common Stock, par
value $6.25 per share, and preferred stock, par value $1.00 per share, however
offered, sold, issued, distributed, placed or resold by the Company, by any of
its subsidiary companies, or by any other person or entity, that may be required
to effect: (a) any such filing, (b) any primary or secondary offering, sale,
distribution, exchange, or conversion of the Company's securities, (c) any
acquisition, merger, reorganization or consolidation involving the issuance of
the Company's securities, (d) any stock option, restricted stock grant,
incentive, investment, thrift, profit sharing, or other employee benefit plan
relating to the Company's securities, or (e) any dividend reinvestment or stock
purchase plan relating to the Company's securities; (ii) the Company's Annual
Report to the Securities and Exchange Commission for the year ended December 31,
1996, on Form 10-K, and any and all amendments thereto on Form 8 or otherwise,
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
(iii) Statements of Changes of Beneficial Ownership of Securities on Form 4 or
Form 5 (or such other forms as may be designated from time to time for such
purposes), pursuant to Section 16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority,
such attorneys-in-fact and agents, or either of them, are hereby granted full
power and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such
attorneys-in-fact and agents, and either of them, also include the full right,
power and authority to effect necessary or appropriate substitutions or
revocations. The undersigned hereby ratifies, confirms, and adopts, as his own
act and deed, all action lawfully taken pursuant to the powers and authorities
herein granted by such attorneys-in-fact and agents, or either of them, or by
their respective substitutes. This Power of Attorney expires by its terms and
shall be of no further force and effect on March 31, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the
13th day of January, 1997.
PATRICK J. LYNCH
----------------
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
EXHIBIT 24.4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of them
(with full power to act without the other), as the undersigned's true and lawful
attorneys-in-fact and agents, with full power and authority to act in any and
all capacities for and in the name, place and stead of the undersigned in
connection with the filing of: (i) any and all registration statements and all
amendments and post-effective amendments thereto (collectively, "Registration
Statements") under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission, and any and all registrations, qualifications or
notifications under the applicable securities laws of any and all states and
other jurisdictions, with respect to the securities of the Company of whatever
class, including without limitation thereon the Company's Common Stock, par
value $6.25 per share, and preferred stock, par value $1.00 per share, however
offered, sold, issued, distributed, placed or resold by the Company, by any of
its subsidiary companies, or by any other person or entity, that may be required
to effect: (a) any such filing, (b) any primary or secondary offering, sale,
distribution, exchange, or conversion of the Company's securities, (c) any
acquisition, merger, reorganization or consolidation involving the issuance of
the Company's securities, (d) any stock option, restricted stock grant,
incentive, investment, thrift, profit sharing, or other employee benefit plan
relating to the Company's securities, or (e) any dividend reinvestment or stock
purchase plan relating to the Company's securities; (ii) the Company's Annual
Report to the Securities and Exchange Commission for the year ended December 31,
1996, on Form 10-K, and any and all amendments thereto on Form 8 or otherwise,
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
(iii) Statements of Changes of Beneficial Ownership of Securities on Form 4 or
Form 5 (or such other forms as may be designated from time to time for such
purposes), pursuant to Section 16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority,
such attorneys-in-fact and agents, or either of them, are hereby granted full
power and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such
attorneys-in-fact and agents, and either of them, also include the full right,
power and authority to effect necessary or appropriate substitutions or
revocations. The undersigned hereby ratifies, confirms, and adopts, as his own
act and deed, all action lawfully taken pursuant to the powers and authorities
herein granted by such attorneys-in-fact and agents, or either of them, or by
their respective substitutes. This Power of Attorney expires by its terms and
shall be of no further force and effect on March 31, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the
31st day of January, 1997.
ROBERT C. OELKERS
-----------------
Vice President and Comptroller
(Principal Accounting Officer)
EXHIBIT 24.5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of them
(with full power to act without the other), as the undersigned's true and lawful
attorneys-in-fact and agents, with full power and authority to act in any and
all capacities for and in the name, place and stead of the undersigned in
connection with the filing of: (i) any and all registration statements and all
amendments and post-effective amendments thereto (collectively, "Registration
Statements") under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission, and any and all registrations, qualifications or
notifications under the applicable securities laws of any and all states and
other jurisdictions, with respect to the securities of the Company of whatever
class, including without limitation thereon the Company's Common Stock, par
value $6.25 per share, and preferred stock, par value $1.00 per share, however
offered, sold, issued, distributed, placed or resold by the Company, by any of
its subsidiary companies, or by any other person or entity, that may be required
to effect: (a) any such filing, (b) any primary or secondary offering, sale,
distribution, exchange, or conversion of the Company's securities, (c) any
acquisition, merger, reorganization or consolidation involving the issuance of
the Company's securities, (d) any stock option, restricted stock grant,
incentive, investment, thrift, profit sharing, or other employee benefit plan
relating to the Company's securities, or (e) any dividend reinvestment or stock
purchase plan relating to the Company's securities; (ii) the Company's Annual
Report to the Securities and Exchange Commission for the year ended December 31,
1996, on Form 10-K, and any and all amendments thereto on Form 8 or otherwise,
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
(iii) Statements of Changes of Beneficial Ownership of Securities on Form 4 or
Form 5 (or such other forms as may be designated from time to time for such
purposes), pursuant to Section 16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority,
such attorneys-in-fact and agents, or either of them, are hereby granted full
power and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such
attorneys-in-fact and agents, and either of them, also include the full right,
power and authority to effect necessary or appropriate substitutions or
revocations. The undersigned hereby ratifies, confirms, and adopts, as his own
act and deed, all action lawfully taken pursuant to the powers and authorities
herein granted by such attorneys-in-fact and agents, or either of them, or by
their respective substitutes. This Power of Attorney expires by its terms and
shall be of no further force and effect on March 31, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the
14th day of January, 1997.
ROBERT A. BECK
--------------
EXHIBIT 24.6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of them
(with full power to act without the other), as the undersigned's true and lawful
attorneys-in-fact and agents, with full power and authority to act in any and
all capacities for and in the name, place and stead of the undersigned in
connection with the filing of: (i) any and all registration statements and all
amendments and post-effective amendments thereto (collectively, "Registration
Statements") under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission, and any and all registrations, qualifications or
notifications under the applicable securities laws of any and all states and
other jurisdictions, with respect to the securities of the Company of whatever
class, including without limitation thereon the Company's Common Stock, par
value $6.25 per share, and preferred stock, par value $1.00 per share, however
offered, sold, issued, distributed, placed or resold by the Company, by any of
its subsidiary companies, or by any other person or entity, that may be required
to effect: (a) any such filing, (b) any primary or secondary offering, sale,
distribution, exchange, or conversion of the Company's securities, (c) any
acquisition, merger, reorganization or consolidation involving the issuance of
the Company's securities, (d) any stock option, restricted stock grant,
incentive, investment, thrift, profit sharing, or other employee benefit plan
relating to the Company's securities, or (e) any dividend reinvestment or stock
purchase plan relating to the Company's securities; (ii) the Company's Annual
Report to the Securities and Exchange Commission for the year ended December 31,
1996, on Form 10-K, and any and all amendments thereto on Form 8 or otherwise,
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
(iii) Statements of Changes of Beneficial Ownership of Securities on Form 4 or
Form 5 (or such other forms as may be designated from time to time for such
purposes), pursuant to Section 16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority,
such attorneys-in-fact and agents, or either of them, are hereby granted full
power and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such
attorneys-in-fact and agents, and either of them, also include the full right,
power and authority to effect necessary or appropriate substitutions or
revocations. The undersigned hereby ratifies, confirms, and adopts, as his own
act and deed, all action lawfully taken pursuant to the powers and authorities
herein granted by such attorneys-in-fact and agents, or either of them, or by
their respective substitutes. This Power of Attorney expires by its terms and
shall be of no further force and effect on March 31, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the
28th day of February, 1997.
JOHN BRADEMAS
-------------
EXHIBIT 24.7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of them
(with full power to act without the other), as the undersigned's true and lawful
attorneys-in-fact and agents, with full power and authority to act in any and
all capacities for and in the name, place and stead of the undersigned in
connection with the filing of: (i) any and all registration statements and all
amendments and post-effective amendments thereto (collectively, "Registration
Statements") under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission, and any and all registrations, qualifications or
notifications under the applicable securities laws of any and all states and
other jurisdictions, with respect to the securities of the Company of whatever
class, including without limitation thereon the Company's Common Stock, par
value $6.25 per share, and preferred stock, par value $1.00 per share, however
offered, sold, issued, distributed, placed or resold by the Company, by any of
its subsidiary companies, or by any other person or entity, that may be required
to effect: (a) any such filing, (b) any primary or secondary offering, sale,
distribution, exchange, or conversion of the Company's securities, (c) any
acquisition, merger, reorganization or consolidation involving the issuance of
the Company's securities, (d) any stock option, restricted stock grant,
incentive, investment, thrift, profit sharing, or other employee benefit plan
relating to the Company's securities, or (e) any dividend reinvestment or stock
purchase plan relating to the Company's securities; (ii) the Company's Annual
Report to the Securities and Exchange Commission for the year ended December 31,
1996, on Form 10-K, and any and all amendments thereto on Form 8 or otherwise,
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
(iii) Statements of Changes of Beneficial Ownership of Securities on Form 4 or
Form 5 (or such other forms as may be designated from time to time for such
purposes), pursuant to Section 16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority,
such attorneys-in-fact and agents, or either of them, are hereby granted full
power and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such
attorneys-in-fact and agents, and either of them, also include the full right,
power and authority to effect necessary or appropriate substitutions or
revocations. The undersigned hereby ratifies, confirms, and adopts, as his own
act and deed, all action lawfully taken pursuant to the powers and authorities
herein granted by such attorneys-in-fact and agents, or either of them, or by
their respective substitutes. This Power of Attorney expires by its terms and
shall be of no further force and effect on March 31, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the
29th day of January, 1997.
WILLARD C. BUTCHER
------------------
EXHIBIT 24.8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of them
(with full power to act without the other), as the undersigned's true and lawful
attorneys-in-fact and agents, with full power and authority to act in any and
all capacities for and in the name, place and stead of the undersigned in
connection with the filing of: (i) any and all registration statements and all
amendments and post-effective amendments thereto (collectively, "Registration
Statements") under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission, and any and all registrations, qualifications or
notifications under the applicable securities laws of any and all states and
other jurisdictions, with respect to the securities of the Company of whatever
class, including without limitation thereon the Company's Common Stock, par
value $6.25 per share, and preferred stock, par value $1.00 per share, however
offered, sold, issued, distributed, placed or resold by the Company, by any of
its subsidiary companies, or by any other person or entity, that may be required
to effect: (a) any such filing, (b) any primary or secondary offering, sale,
distribution, exchange, or conversion of the Company's securities, (c) any
acquisition, merger, reorganization or consolidation involving the issuance of
the Company's securities, (d) any stock option, restricted stock grant,
incentive, investment, thrift, profit sharing, or other employee benefit plan
relating to the Company's securities, or (e) any dividend reinvestment or stock
purchase plan relating to the Company's securities; (ii) the Company's Annual
Report to the Securities and Exchange Commission for the year ended December 31,
1996, on Form 10-K, and any and all amendments thereto on Form 8 or otherwise,
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
(iii) Statements of Changes of Beneficial Ownership of Securities on Form 4 or
Form 5 (or such other forms as may be designated from time to time for such
purposes), pursuant to Section 16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority,
such attorneys-in-fact and agents, or either of them, are hereby granted full
power and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such
attorneys-in-fact and agents, and either of them, also include the full right,
power and authority to effect necessary or appropriate substitutions or
revocations. The undersigned hereby ratifies, confirms, and adopts, as his own
act and deed, all action lawfully taken pursuant to the powers and authorities
herein granted by such attorneys-in-fact and agents, or either of them, or by
their respective substitutes. This Power of Attorney expires by its terms and
shall be of no further force and effect on March 31, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the
15th day of January, 1997.
EDMUND M. CARPENTER
-------------------
EXHIBIT 24.9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of them
(with full power to act without the other), as the undersigned's true and lawful
attorneys-in-fact and agents, with full power and authority to act in any and
all capacities for and in the name, place and stead of the undersigned in
connection with the filing of: (i) any and all registration statements and all
amendments and post-effective amendments thereto (collectively, "Registration
Statements") under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission, and any and all registrations, qualifications or
notifications under the applicable securities laws of any and all states and
other jurisdictions, with respect to the securities of the Company of whatever
class, including without limitation thereon the Company's Common Stock, par
value $6.25 per share, and preferred stock, par value $1.00 per share, however
offered, sold, issued, distributed, placed or resold by the Company, by any of
its subsidiary companies, or by any other person or entity, that may be required
to effect: (a) any such filing, (b) any primary or secondary offering, sale,
distribution, exchange, or conversion of the Company's securities, (c) any
acquisition, merger, reorganization or consolidation involving the issuance of
the Company's securities, (d) any stock option, restricted stock grant,
incentive, investment, thrift, profit sharing, or other employee benefit plan
relating to the Company's securities, or (e) any dividend reinvestment or stock
purchase plan relating to the Company's securities; (ii) the Company's Annual
Report to the Securities and Exchange Commission for the year ended December 31,
1996, on Form 10-K, and any and all amendments thereto on Form 8 or otherwise,
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
(iii) Statements of Changes of Beneficial Ownership of Securities on Form 4 or
Form 5 (or such other forms as may be designated from time to time for such
purposes), pursuant to Section 16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority,
such attorneys-in-fact and agents, or either of them, are hereby granted full
power and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such
attorneys-in-fact and agents, and either of them, also include the full right,
power and authority to effect necessary or appropriate substitutions or
revocations. The undersigned hereby ratifies, confirms, and adopts, as his own
act and deed, all action lawfully taken pursuant to the powers and authorities
herein granted by such attorneys-in-fact and agents, or either of them, or by
their respective substitutes. This Power of Attorney expires by its terms and
shall be of no further force and effect on March 31, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the
17th day of January, 1997.
MICHAEL C. HAWLEY
-----------------
EXHIBIT 24.10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of them
(with full power to act without the other), as the undersigned's true and lawful
attorneys-in-fact and agents, with full power and authority to act in any and
all capacities for and in the name, place and stead of the undersigned in
connection with the filing of: (i) any and all registration statements and all
amendments and post-effective amendments thereto (collectively, "Registration
Statements") under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission, and any and all registrations, qualifications or
notifications under the applicable securities laws of any and all states and
other jurisdictions, with respect to the securities of the Company of whatever
class, including without limitation thereon the Company's Common Stock, par
value $6.25 per share, and preferred stock, par value $1.00 per share, however
offered, sold, issued, distributed, placed or resold by the Company, by any of
its subsidiary companies, or by any other person or entity, that may be required
to effect: (a) any such filing, (b) any primary or secondary offering, sale,
distribution, exchange, or conversion of the Company's securities, (c) any
acquisition, merger, reorganization or consolidation involving the issuance of
the Company's securities, (d) any stock option, restricted stock grant,
incentive, investment, thrift, profit sharing, or other employee benefit plan
relating to the Company's securities, or (e) any dividend reinvestment or stock
purchase plan relating to the Company's securities; (ii) the Company's Annual
Report to the Securities and Exchange Commission for the year ended December 31,
1996, on Form 10-K, and any and all amendments thereto on Form 8 or otherwise,
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
(iii) Statements of Changes of Beneficial Ownership of Securities on Form 4 or
Form 5 (or such other forms as may be designated from time to time for such
purposes), pursuant to Section 16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority,
such attorneys-in-fact and agents, or either of them, are hereby granted full
power and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such
attorneys-in-fact and agents, and either of them, also include the full right,
power and authority to effect necessary or appropriate substitutions or
revocations. The undersigned hereby ratifies, confirms, and adopts, as his own
act and deed, all action lawfully taken pursuant to the powers and authorities
herein granted by such attorneys-in-fact and agents, or either of them, or by
their respective substitutes. This Power of Attorney expires by its terms and
shall be of no further force and effect on March 31, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the
29th day of January, 1997.
FRANKLYN G. JENIFER
-------------------
EXHIBIT 24.11
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of them
(with full power to act without the other), as the undersigned's true and lawful
attorneys-in-fact and agents, with full power and authority to act in any and
all capacities for and in the name, place and stead of the undersigned in
connection with the filing of: (i) any and all registration statements and all
amendments and post-effective amendments thereto (collectively, "Registration
Statements") under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission, and any and all registrations, qualifications or
notifications under the applicable securities laws of any and all states and
other jurisdictions, with respect to the securities of the Company of whatever
class, including without limitation thereon the Company's Common Stock, par
value $6.25 per share, and preferred stock, par value $1.00 per share, however
offered, sold, issued, distributed, placed or resold by the Company, by any of
its subsidiary companies, or by any other person or entity, that may be required
to effect: (a) any such filing, (b) any primary or secondary offering, sale,
distribution, exchange, or conversion of the Company's securities, (c) any
acquisition, merger, reorganization or consolidation involving the issuance of
the Company's securities, (d) any stock option, restricted stock grant,
incentive, investment, thrift, profit sharing, or other employee benefit plan
relating to the Company's securities, or (e) any dividend reinvestment or stock
purchase plan relating to the Company's securities; (ii) the Company's Annual
Report to the Securities and Exchange Commission for the year ended December 31,
1996, on Form 10-K, and any and all amendments thereto on Form 8 or otherwise,
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
(iii) Statements of Changes of Beneficial Ownership of Securities on Form 4 or
Form 5 (or such other forms as may be designated from time to time for such
purposes), pursuant to Section 16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority,
such attorneys-in-fact and agents, or either of them, are hereby granted full
power and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such
attorneys-in-fact and agents, and either of them, also include the full right,
power and authority to effect necessary or appropriate substitutions or
revocations. The undersigned hereby ratifies, confirms, and adopts, as his own
act and deed, all action lawfully taken pursuant to the powers and authorities
herein granted by such attorneys-in-fact and agents, or either of them, or by
their respective substitutes. This Power of Attorney expires by its terms and
shall be of no further force and effect on March 31, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the
31st day of January, 1997.
THOMAS S. MURPHY
----------------
EXHIBIT 24.12
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of them
(with full power to act without the other), as the undersigned's true and lawful
attorneys-in-fact and agents, with full power and authority to act in any and
all capacities for and in the name, place and stead of the undersigned in
connection with the filing of: (i) any and all registration statements and all
amendments and post-effective amendments thereto (collectively, "Registration
Statements") under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission, and any and all registrations, qualifications or
notifications under the applicable securities laws of any and all states and
other jurisdictions, with respect to the securities of the Company of whatever
class, including without limitation thereon the Company's Common Stock, par
value $6.25 per share, and preferred stock, par value $1.00 per share, however
offered, sold, issued, distributed, placed or resold by the Company, by any of
its subsidiary companies, or by any other person or entity, that may be required
to effect: (a) any such filing, (b) any primary or secondary offering, sale,
distribution, exchange, or conversion of the Company's securities, (c) any
acquisition, merger, reorganization or consolidation involving the issuance of
the Company's securities, (d) any stock option, restricted stock grant,
incentive, investment, thrift, profit sharing, or other employee benefit plan
relating to the Company's securities, or (e) any dividend reinvestment or stock
purchase plan relating to the Company's securities; (ii) the Company's Annual
Report to the Securities and Exchange Commission for the year ended December 31,
1996, on Form 10-K, and any and all amendments thereto on Form 8 or otherwise,
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
(iii) Statements of Changes of Beneficial Ownership of Securities on Form 4 or
Form 5 (or such other forms as may be designated from time to time for such
purposes), pursuant to Section 16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority,
such attorneys-in-fact and agents, or either of them, are hereby granted full
power and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such
attorneys-in-fact and agents, and either of them, also include the full right,
power and authority to effect necessary or appropriate substitutions or
revocations. The undersigned hereby ratifies, confirms, and adopts, as his own
act and deed, all action lawfully taken pursuant to the powers and authorities
herein granted by such attorneys-in-fact and agents, or either of them, or by
their respective substitutes. This Power of Attorney expires by its terms and
shall be of no further force and effect on March 31, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the
14th day of January, 1997.
CHARLES H. PRICE, II
--------------------
EXHIBIT 24.13
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of them
(with full power to act without the other), as the undersigned's true and lawful
attorneys-in-fact and agents, with full power and authority to act in any and
all capacities for and in the name, place and stead of the undersigned in
connection with the filing of: (i) any and all registration statements and all
amendments and post-effective amendments thereto (collectively, "Registration
Statements") under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission, and any and all registrations, qualifications or
notifications under the applicable securities laws of any and all states and
other jurisdictions, with respect to the securities of the Company of whatever
class, including without limitation thereon the Company's Common Stock, par
value $6.25 per share, and preferred stock, par value $1.00 per share, however
offered, sold, issued, distributed, placed or resold by the Company, by any of
its subsidiary companies, or by any other person or entity, that may be required
to effect: (a) any such filing, (b) any primary or secondary offering, sale,
distribution, exchange, or conversion of the Company's securities, (c) any
acquisition, merger, reorganization or consolidation involving the issuance of
the Company's securities, (d) any stock option, restricted stock grant,
incentive, investment, thrift, profit sharing, or other employee benefit plan
relating to the Company's securities, or (e) any dividend reinvestment or stock
purchase plan relating to the Company's securities; (ii) the Company's Annual
Report to the Securities and Exchange Commission for the year ended December 31,
1996, on Form 10-K, and any and all amendments thereto on Form 8 or otherwise,
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
(iii) Statements of Changes of Beneficial Ownership of Securities on Form 4 or
Form 5 (or such other forms as may be designated from time to time for such
purposes), pursuant to Section 16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority,
such attorneys-in-fact and agents, or either of them, are hereby granted full
power and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such
attorneys-in-fact and agents, and either of them, also include the full right,
power and authority to effect necessary or appropriate substitutions or
revocations. The undersigned hereby ratifies, confirms, and adopts, as his own
act and deed, all action lawfully taken pursuant to the powers and authorities
herein granted by such attorneys-in-fact and agents, or either of them, or by
their respective substitutes. This Power of Attorney expires by its terms and
shall be of no further force and effect on March 31, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto set her name as of the
15th day of January, 1997.
ROBIN B. SMITH
--------------
EXHIBIT 24.14
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of them
(with full power to act without the other), as the undersigned's true and lawful
attorneys-in-fact and agents, with full power and authority to act in any and
all capacities for and in the name, place and stead of the undersigned in
connection with the filing of: (i) any and all registration statements and all
amendments and post-effective amendments thereto (collectively, "Registration
Statements") under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission, and any and all registrations, qualifications or
notifications under the applicable securities laws of any and all states and
other jurisdictions, with respect to the securities of the Company of whatever
class, including without limitation thereon the Company's Common Stock, par
value $6.25 per share, and preferred stock, par value $1.00 per share, however
offered, sold, issued, distributed, placed or resold by the Company, by any of
its subsidiary companies, or by any other person or entity, that may be required
to effect: (a) any such filing, (b) any primary or secondary offering, sale,
distribution, exchange, or conversion of the Company's securities, (c) any
acquisition, merger, reorganization or consolidation involving the issuance of
the Company's securities, (d) any stock option, restricted stock grant,
incentive, investment, thrift, profit sharing, or other employee benefit plan
relating to the Company's securities, or (e) any dividend reinvestment or stock
purchase plan relating to the Company's securities; (ii) the Company's Annual
Report to the Securities and Exchange Commission for the year ended December 31,
1996, on Form 10-K, and any and all amendments thereto on Form 8 or otherwise,
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
(iii) Statements of Changes of Beneficial Ownership of Securities on Form 4 or
Form 5 (or such other forms as may be designated from time to time for such
purposes), pursuant to Section 16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority,
such attorneys-in-fact and agents, or either of them, are hereby granted full
power and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such
attorneys-in-fact and agents, and either of them, also include the full right,
power and authority to effect necessary or appropriate substitutions or
revocations. The undersigned hereby ratifies, confirms, and adopts, as his own
act and deed, all action lawfully taken pursuant to the powers and authorities
herein granted by such attorneys-in-fact and agents, or either of them, or by
their respective substitutes. This Power of Attorney expires by its terms and
shall be of no further force and effect on March 31, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the
30th day of January, 1997.
WILLIAM C. STEERE, JR.
----------------------
EXHIBIT 24.15
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of them
(with full power to act without the other), as the undersigned's true and lawful
attorneys-in-fact and agents, with full power and authority to act in any and
all capacities for and in the name, place and stead of the undersigned in
connection with the filing of: (i) any and all registration statements and all
amendments and post-effective amendments thereto (collectively, "Registration
Statements") under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission, and any and all registrations, qualifications or
notifications under the applicable securities laws of any and all states and
other jurisdictions, with respect to the securities of the Company of whatever
class, including without limitation thereon the Company's Common Stock, par
value $6.25 per share, and preferred stock, par value $1.00 per share, however
offered, sold, issued, distributed, placed or resold by the Company, by any of
its subsidiary companies, or by any other person or entity, that may be required
to effect: (a) any such filing, (b) any primary or secondary offering, sale,
distribution, exchange, or conversion of the Company's securities, (c) any
acquisition, merger, reorganization or consolidation involving the issuance of
the Company's securities, (d) any stock option, restricted stock grant,
incentive, investment, thrift, profit sharing, or other employee benefit plan
relating to the Company's securities, or (e) any dividend reinvestment or stock
purchase plan relating to the Company's securities; (ii) the Company's Annual
Report to the Securities and Exchange Commission for the year ended December 31,
1996, on Form 10-K, and any and all amendments thereto on Form 8 or otherwise,
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
(iii) Statements of Changes of Beneficial Ownership of Securities on Form 4 or
Form 5 (or such other forms as may be designated from time to time for such
purposes), pursuant to Section 16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority,
such attorneys-in-fact and agents, or either of them, are hereby granted full
power and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such
attorneys-in-fact and agents, and either of them, also include the full right,
power and authority to effect necessary or appropriate substitutions or
revocations. The undersigned hereby ratifies, confirms, and adopts, as his own
act and deed, all action lawfully taken pursuant to the powers and authorities
herein granted by such attorneys-in-fact and agents, or either of them, or by
their respective substitutes. This Power of Attorney expires by its terms and
shall be of no further force and effect on March 31, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the
4th day of February, 1997.
THOMAS A. VANDERSLICE
---------------------
EXHIBIT 24.16
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
TEXACO INC., a Delaware corporation (the "Company"), hereby makes, designates,
constitutes and appoints CARL B. DAVIDSON and ROBERT E. KOCH, and either of them
(with full power to act without the other), as the undersigned's true and lawful
attorneys-in-fact and agents, with full power and authority to act in any and
all capacities for and in the name, place and stead of the undersigned in
connection with the filing of: (i) any and all registration statements and all
amendments and post-effective amendments thereto (collectively, "Registration
Statements") under the Securities Act of 1933, as amended, with the Securities
and Exchange Commission, and any and all registrations, qualifications or
notifications under the applicable securities laws of any and all states and
other jurisdictions, with respect to the securities of the Company of whatever
class, including without limitation thereon the Company's Common Stock, par
value $6.25 per share, and preferred stock, par value $1.00 per share, however
offered, sold, issued, distributed, placed or resold by the Company, by any of
its subsidiary companies, or by any other person or entity, that may be required
to effect: (a) any such filing, (b) any primary or secondary offering, sale,
distribution, exchange, or conversion of the Company's securities, (c) any
acquisition, merger, reorganization or consolidation involving the issuance of
the Company's securities, (d) any stock option, restricted stock grant,
incentive, investment, thrift, profit sharing, or other employee benefit plan
relating to the Company's securities, or (e) any dividend reinvestment or stock
purchase plan relating to the Company's securities; (ii) the Company's Annual
Report to the Securities and Exchange Commission for the year ended December 31,
1996, on Form 10-K, and any and all amendments thereto on Form 8 or otherwise,
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
(iii) Statements of Changes of Beneficial Ownership of Securities on Form 4 or
Form 5 (or such other forms as may be designated from time to time for such
purposes), pursuant to Section 16(a) of the Exchange Act.
Without limiting the generality of the foregoing grant of authority,
such attorneys-in-fact and agents, or either of them, are hereby granted full
power and authority, on behalf of and in the name, place and stead of the
undersigned, to execute and deliver all such Registration Statements,
registrations, qualifications, or notifications, the Company's Form 10-K, any
and all amendments thereto, statements of changes, and any and all other
documents in connection with the foregoing, and take such other and further
action as such attorneys-in-fact and agents, or either of them, deem necessary
or appropriate. The powers and authorities granted herein to such
attorneys-in-fact and agents, and either of them, also include the full right,
power and authority to effect necessary or appropriate substitutions or
revocations. The undersigned hereby ratifies, confirms, and adopts, as his own
act and deed, all action lawfully taken pursuant to the powers and authorities
herein granted by such attorneys-in-fact and agents, or either of them, or by
their respective substitutes. This Power of Attorney expires by its terms and
shall be of no further force and effect on March 31, 1998.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as of the
30th day of January, 1997.
WILLIAM WRIGLEY
---------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
TEXACO INC.'S 1996 ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<CASH> 511
<SECURITIES> 41
<RECEIVABLES> 5,229
<ALLOWANCES> 34
<INVENTORY> 1,460
<CURRENT-ASSETS> 7,665
<PP&E> 33,988
<DEPRECIATION> 20,577
<TOTAL-ASSETS> 26,963
<CURRENT-LIABILITIES> 6,184
<BONDS> 5,125
0
629
<COMMON> 1,483
<OTHER-SE> 8,260
<TOTAL-LIABILITY-AND-EQUITY> 26,963
<SALES> 44,561
<TOTAL-REVENUES> 45,500
<CGS> 34,643
<TOTAL-COSTS> 37,621
<OTHER-EXPENSES> 4,462
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 434
<INCOME-PRETAX> 2,983
<INCOME-TAX> 965
<INCOME-CONTINUING> 2,018
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,018
<EPS-PRIMARY> 7.52
<EPS-DILUTED> 7.36
</TABLE>
