================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
----------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
January 7, 1999
----------
TEXACO INC.
(Exact name of registrant as specified in its charter)
Delaware 1-27 74-1383447
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation) Number) Identification Number)
2000 Westchester Avenue, 10650
White Plains, New York (Zip Code)
(Address of principal executive offices)
(914) 253-4000
(Registrant's telephone number, including area code)
================================================================================
<PAGE>
Item 5. Other Events
- ---------------------
On January 7, 1999, the Registrant issued a Press Release
entitled "Texaco Announces $600 Million Reduction in 1999
Capital and Exploratory Spending Plan - Spending Plan Coupled
with Accelerated $650 Million Cost Reduction Program," a copy
of which is attached hereto as Exhibit 99.1 and made a part
hereof.
On January 8, 1999, the Registrant issued a Press Release
entitled "Texaco Announces Fourth Quarter Charges - Inventory
and Asset Write-Downs, Restructuring Costs Noted," a copy of
which is attached hereto as Exhibit 99.2 and made a part
hereof.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
- ---------------------------------------------------------------------------
(c) Exhibits
99.1 Press Release issued by Texaco Inc. dated January 7, 1999,
entitled "Texaco Announces $600 Million Reduction in 1999
Capital and Exploratory Spending Plan."
99.2 Press Release issued by Texaco Inc. dated January 8, 1999,
entitled "Texaco Announces Fourth Quarter Charges."
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TEXACO INC.
-----------------------
(Registrant)
By: R. E. KOCH
-----------------------
(Assistant Secretary)
Date: January 8, 1999
---------------
EXHIBIT 99.1
TEXACO ANNOUNCES $600 MILLION REDUCTION IN
------------------------------------------
1999 CAPITAL AND EXPLORATORY SPENDING PLAN
------------------------------------------
Spending Plan Coupled with Accelerated $650 Million Cost Reduction Program
FOR IMMEDIATE RELEASE: THURSDAY, JANUARY 7, 1999.
- -------------------------------------------------------
WHITE PLAINS, N.Y., Jan. 7 - Texaco Inc. today announced a revised 1999
capital and exploratory (capex) plan of $3.7 billion, including subsidiaries and
affiliates, down $600 million from its original $4.3 billion plan. Texaco will
also accelerate its $650 million cost and expense reduction program announced in
December 1998.
Commenting on the revised capex plan, Texaco Chairman and Chief
Executive Officer Peter I. Bijur stated, "Given this period of low energy
prices, our revised spending plan together with our cost and expense reduction
program are appropriate actions. We are strategically focusing capital on the
key projects that represent optimum long-term growth opportunities, and at the
same time continuing our effort to drive down costs. These measures will assist
Texaco in weathering this extended period of low prices."
At Texaco's annual security analysts meeting in December 1998, the
company announced a 1999 capex plan of $4.3 billion, based on an average WTI
crude price of $15.00 per barrel. The revised plan of $3.7 billion is based on a
lower crude price premise, reflecting general industry consensus that crude oil
prices will not rebound as previously expected.
For the year 1998, capital expenditures are expected to be 11 percent
below the $4.6 billion originally planned. Texaco reduced its spending program
during 1998 when it became evident that oil prices would remain low for an
extended period. Preliminary 1998 and forecasted 1999 expenditures for
subsidiaries and affiliates are as follows (in billions of dollars):
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Subsidiaries $3.0 $2.7
Affiliates 1.1 1.0
--- ---
Total $4.1 $3.7
</TABLE>
<PAGE>
- 2 -
The subsidiary capital program includes most of Texaco's worldwide
upstream business and its European and Latin American downstream businesses, as
well as natural gas and other businesses.
The affiliate capital program includes Texaco's share of the U.S.
downstream alliance companies (Equilon and Motiva), Caltex, and power and
cogeneration projects in Thailand, Italy, Philippines and Brazil. The capital
requirements of Equilon, Motiva and Caltex, which are fully funded through
affiliates, will be lower in 1999. Expenditures for the power and cogeneration
projects, also funded through affiliates, will increase by some $250 million in
1999.
In the U.S. upstream, spending will be directed primarily toward
continuing development of the Deepwater Gulf of Mexico. Major international
upstream projects include exploration activities in Nigeria, Angola and
Trinidad. Development work on the Captain B, Jade and Elgin-Franklin fields in
the U.K. North Sea and projects in Denmark will be fully funded. However,
development expenditures in certain other international areas will be deferred
due to depressed economic conditions.
In the Europe and Latin America downstream regions, 80 percent of the
expenditures are centered on marketing and 20 percent on manufacturing.
Marketing expenditures are for service stations and logistical support,
primarily in growth-oriented markets such as the U.K., Ireland and the
Caribbean. Most of the manufacturing capital will be spent at the Pembroke Plant
in the U.K. on feedstock flexibility and projects to satisfy the more stringent
European fuel specification requirements.
At the security analysts meeting, Texaco outlined other steps the
company is taking to manage in the low price environment, including cost and
expense reductions. The company identified recurring annual cost and expense
reductions of $650 million through the year 2000, of which $450 million is
expected to be realized in 1999. Significant efforts are underway to accelerate
the realization of the full $650 million in 1999.
- xxx -
Note: This press release contains forward-looking statements about Texaco's
plans for capital and exploratory spending and for cost and expense reductions.
These plans may change if business conditions, such as energy prices and world
economic conditions, change. For a further discussion of additional factors that
could cause actual results to materially differ from those in the
forward-looking statements, please refer to the section entitled
"Forward-Looking Statements" in Texaco's 1997 Annual Report on Form 10-K.
CONTACTS: Faye Cox (914) 253-7745
Chris Gidez (914) 253-4042
EXHIBIT 99.2
TEXACO ANNOUNCES FOURTH QUARTER CHARGES
---------------------------------------
Inventory and Asset Write-Downs, Restructuring Costs Noted
FOR IMMEDIATE RELEASE: FRIDAY, JANUARY 8, 1999.
- ------------------------------------------------------
WHITE PLAINS, N.Y., Jan. 8 - Texaco announced today that its fourth quarter 1998
results will include net special charges of approximately $350 million. Texaco
Senior Vice President and Chief Financial Officer Patrick J. Lynch noted,
"Continuing weak demand and surplus supplies have driven crude oil, natural gas
and refined product prices sharply downward. In this low price environment, we
will be required to revalue inventories. We will also write-down oil and gas
properties where remaining investments will not be fully recovered."
Fourth quarter 1998 net after-tax charges will include:
* Inventory write-downs of approximately $170 million in businesses in Europe,
the U.S. and the Caltex operating areas to recognize current market values;
* Asset write-downs of $100 million relating to the impairment of upstream
investments in the U.S., Canada and the U.K. North Sea;
* Employee separation costs of $95 million relating to previously announced
restructuring of Worldwide Upstream and Natural Gas businesses, along with
Corporate Center restructuring and other cost-cutting initiatives; and
* Tax benefits of $20 million on asset sales.
Additionally, Caltex has elected to adopt, effective January 1, 1998, SOP 98-5
of the AICPA, causing Caltex to change the accounting for start-up costs at its
Thailand refinery. Texaco's first quarter 1998 earnings will be restated to
include an after-tax charge of $25 million for the accounting change. (See
editor's notes for definition of SOP 98-5.)
Commenting on fourth quarter 1998 earnings, Lynch said, "Due to continuing low
crude oil prices, weak refining margins and currency translation losses of $65
million in the Caltex Asian operations, results for the fourth quarter,
excluding net special charges, are estimated to be in the range of $.13 to $.16
per share."
Lynch went on to say, "This past year was extremely difficult for the entire
industry and first quarter 1999 appears to be equally challenging; however,
Texaco will continue to effectively manage its business during this period of
low energy prices."
-xxx-
Note: SOP 98-5 is an accounting rule adopted by the American Institute of
Certified Public Accountants (AICPA) in 1998. It provides that costs incurred
during the start-up period for a new facility, new product, process or service,
or expansion of business area or customer base must be charged to expense as
incurred. This does not include costs during the construction phase of a new
facility.
The comment in this press release regarding anticipated fourth quarter results
is a "forward-looking statement." Final fourth quarter results may be different
when actual results are determined. For a further discussion of additional
factors that could cause actual results to materially differ from those in the
forward-looking statement, please refer to the section entitled "Forward-Looking
Statements" in Texaco's 1997 Annual Report on Form 10-K.
CONTACTS: Faye Cox 914-253-7745
Additional Texaco information is available on the World Wide Web at:
http://www.texaco.com
