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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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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):
April 27, 1999
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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 April 27, 1999, the Registrant issued an Earnings Press Release entitled
"Texaco Reports Results: First Quarter 1999 Earnings Total $199 Million," a copy
of which is attached hereto as Exhibit 99.1 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 April 27, 1999,
entitled "Texaco Reports Results: First Quarter 1999 Earnings
Total $199 Million."
<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: April 27, 1999
EXHIBIT 99.1
TEXACO REPORTS RESULTS:
-----------------------
FIRST QUARTER 1999 EARNINGS TOTAL $199 MILLION
----------------------------------------------
FOR IMMEDIATE RELEASE: TUESDAY, APRIL 27, 1999.
- -----------------------------------------------
WHITE PLAINS, N.Y., April 27, 1999 -- Texaco reported today first
quarter 1999 net income of $199 million ($.35 per share). This compares
to net income of $234 million ($.42 per share) for the first quarter of
1998. Both periods included special items. Excluding special items,
income was $105 million ($.18 per share) for the first quarter of 1999
and $259 million ($.46 per share) for the first quarter of 1998.
Texaco Chairman and Chief Executive Officer Peter I. Bijur
commented, "Continuing low crude oil and natural gas prices through
early March and a high level of exploratory expenses depressed our
first quarter earnings. Fortunately, prices have recently strengthened
significantly, which is a very positive signal for the rest of the
year. I am also encouraged by the results of our cost containment
programs, which have reduced our expenses per barrel by six percent,
and by the acceleration by our U.S. downstream alliances of targeted
synergy benefits during 1999."
Bijur also said that the company's worldwide production levels
declined as a result of operational problems in the U.K. North Sea,
which impacted expected production by approximately 30,000 barrels per
day, and in the U.S., due to reduced capital spending by Texaco and
other operators in reaction to the significantly lower prices for oil
and gas. In April, production in the U.K. North Sea returned to normal
levels and overall worldwide production is expected to be higher in
the second quarter and for the remainder of the year.
"Despite the challenges our industry faced this past year, Texaco
continued to aggressively search for new sources of production and in
the first quarter of 1999, we announced two significant exploratory
successes offshore Nigeria.
"In the U.S. downstream, after a slow start, margins improved
late in the first quarter. While first quarter earnings were weaker in
the international downstream compared to last year, the stabilization
of markets in the Caltex region and in Brazil in March are encouraging
signs which should lead to improved margins in the months ahead,"
Bijur said.
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<PAGE>
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<TABLE>
<CAPTION>
First Quarter
-------------------------
Texaco Inc. (Millions of dollars): 1999 1998
- ----------------------------------------------------------------------
<S> <C> <C>
Income before special items $ 105 $ 259
------ ------
Inventory valuation adjustments 83 -
Production tax refund 11 -
------ ------
Special items 94 -
------ ------
Adoption of new accounting standard
Cumulative effect of accounting change - (25)
------ ------
Net income $ 199 $ 234
====== ======
<FN>
Inventory valuation adjustments represent the reversal at March
31, 1999 of a portion of the lower of cost or market adjustments
recorded at December 31, 1998.
Effective January 1, 1998, Texaco's Caltex affiliate adopted a
new accounting standard, SOP 98-5, resulting in a change in
accounting for start-up costs at its Thailand refinery. Texaco's
first quarter 1998 results included a $25 million charge
associated with this accounting change.
Details on special items are included in the following segment
information.
</FN>
</TABLE>
<TABLE>
<CAPTION>
OPERATING RESULTS
EXPLORATION AND PRODUCTION
First Quarter
------------------------
United States (Millions of dollars): 1999 1998
- ----------------------------------------------------------------------
<S> <C> <C>
Operating income before special items $ 27 $ 108
Special items 11 -
------ ------
Total operating income $ 38 $ 108
====== ======
</TABLE>
U.S. Exploration and Production earnings for the first quarter of
1999 were below last year mostly due to lower crude oil and natural
gas prices. Continued weakness in worldwide demand growth and high
inventory levels contributed to the decline in prices. For the first
quarter of 1999, average realized crude oil prices were $9.11 per
barrel, 23 percent below last year and average natural gas prices were
$1.79 per MCF, 16 percent below last year. However, prices began to
rise in March as OPEC and several non-OPEC countries announced
production cutbacks and worldwide inventory levels began to decline.
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<PAGE>
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Daily production for the first quarter of 1999 was 12 percent
lower than last year due to natural field declines. Capital
expenditures were reduced by Texaco and other operators given the low
prevailing commodity prices.
Expenses were lower as a result of cost savings from the
restructuring of our worldwide upstream organization. Exploratory
expenses for the quarter were $54 million before tax, $42 million
below last year.
Results for the first quarter of 1999 included a special benefit
of $11 million for a production tax refund.
<TABLE>
<CAPTION>
First Quarter
-------------------------
International (Millions of dollars): 1999 1998
- ----------------------------------------------------------------------
<S> <C> <C>
Operating income (loss)
before special items $ (20) $ 48
Special items - -
------ ------
Total operating income (loss) $ (20) $ 48
====== ======
</TABLE>
International Exploration and Production operating results for
the first quarter of 1999 were below last year mostly due to lower
crude oil and natural gas prices and higher exploratory expenses.
Industry fundamentals of low demand growth and high inventories kept
downward pressure on commodity prices. For the first quarter of 1999,
average realized crude oil prices were $9.88 per barrel, 17 percent
lower than last year and average natural gas prices were $1.51 per
MCF, seven percent below last year. In March, crude oil prices began
to rise due to worldwide production cutbacks and inventory declines.
Daily production for the first quarter of 1999 was unchanged from
last year. Decreased production of 30,000 barrels per day, mostly as a
result of separator problems at the Captain field, in the U.K. North
Sea reduced earnings by $10 million. Production increased in the
Partitioned Neutral Zone and the U.K. Galley field.
Exploratory expenses for the first quarter were $76 million
before taxes, $31 million higher than last year mostly due to an
unsuccessful exploratory well in a new offshore area of Trinidad.
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<PAGE>
- 4 -
<TABLE>
<CAPTION>
REFINING, MARKETING AND DISTRIBUTION
First Quarter
-------------------------
United States (Millions of dollars): 1999 1998
- ----------------------------------------------------------------------
<S> <C> <C>
Operating income before special items $ 55 $ 47
Special items 8 -
------ ------
Total operating income $ 63 $ 47
====== ======
</TABLE>
U.S. Refining, Marketing and Distribution earnings were higher
than last year. U.S. downstream activities are primarily conducted
through Equilon Enterprises LLC, Texaco's western alliance with Shell
Oil Company, and Motiva Enterprises LLC, Texaco's eastern alliance
with Shell Oil Company and Saudi Refining, Inc.
During the quarter, Equilon's earnings benefited from improved
refining margins. Although West Coast refining margins were weak for
the first two months due to high inventory levels, they improved
during March as a result of industry supply disruptions. The first
quarter of 1999 also benefited from the realization of synergies
including reduced additive costs and higher utilization of proprietary
pipelines.
Motiva captured synergy benefits which contributed to higher
first quarter 1999 results. The most significant of these relate to
marketing staff and function consolidation and hydrotreater
realignment at the Convent refinery. These benefits, together with
higher gasoline sales, were somewhat offset by weaker refinery margins
in 1999 due to warmer than normal weather and high inventory levels.
Results for the first quarter of 1999 included a special benefit
of $8 million for inventory valuation adjustments to reflect higher
prices on March 31, 1999 for crude oil and refined products.
<TABLE>
<CAPTION>
First Quarter
------------------------
International (Millions of dollars): 1999 1998
- ----------------------------------------------------------------------
<S> <C> <C>
Operating income before special items $ 145 $ 182
Special items 75 -
------ -------
Total operating income $ 220 $ 182
====== =======
</TABLE>
International Refining, Marketing and Distribution earnings
before special items for the first quarter of 1999 declined from 1998.
The decline was due to lower operating earnings in our Caltex and
Latin American areas of operations. In our Caltex affiliate, Korean
margins in the first quarter 1998
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<PAGE>
- 5 -
benefited from the partial recovery of currency losses experienced in
the fourth quarter of 1997. After adjusting for currency effects,
Caltex's operating income improved in 1999 due to stronger marketing
margins, higher sales volumes, and reduced operating expenses.
Results in Latin America declined due to the margin impacts and
currency effects related to the weakening of the Brazilian economy in
the first quarter of 1999. However, margins increased in West Africa,
Central America and the Caribbean this year, which partly offset the
events in Brazil. Results in Europe were in line with last year.
Results for the first quarter of 1999 included a special benefit
of $75 million for inventory valuation adjustments to reflect higher
prices on March 31, 1999 for crude oil and refined products.
<TABLE>
<CAPTION>
GLOBAL GAS MARKETING
First Quarter
-------------------------
(Millions of dollars): 1999 1998
- ----------------------------------------------------------------------
<S> <C> <C>
Operating income (loss)
before special items $ 12 $ (9)
Special items - -
------ ------
Total operating income (loss) $ 12 $ (9)
====== ======
</TABLE>
Global Gas Marketing earnings for the first quarter of 1999
benefited from improved margins in our U.S. operations. Additionally,
our U.S. gas marketing results included a gain on the sale of a gas
gathering pipeline. We also recognized a gain on the sale of our 50
percent interest in our retail gas marketing operation in the United
Kingdom. This sale successfully completed our exit from the U.K.
domestic gas market where we disposed of our wholesale business in
late 1998.
<TABLE>
<CAPTION>
CORPORATE/NON-OPERATING RESULTS
First Quarter
----------------------------
(Millions of dollars): 1999 1998
- ---------------------------------------------------------------------
<S> <C> <C>
Results before special items $ (108) $ (119)
Special items - -
------ ------
Total corporate/non-operating $ (108) $ (119)
====== ======
</TABLE>
Corporate/Non-operating results for the first quarter of 1999
benefited from gains on the sale of marketable securities. Net
interest expense for the first quarter of 1999 was unchanged from last
year.
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- 6 -
CAPITAL AND EXPLORATORY EXPENDITURES
Capital and exploratory expenditures were $669 million for the
first quarter of 1999, compared with $967 million for 1998.
While U.S. upstream spending slowed considerably, we continued to
focus on platform construction in the Gulf of Mexico and developmental
drilling in California. Internationally, increased exploratory
activity, primarily in Trinidad and Colombia, and developmental work
in the U.K. North Sea Captain field were more than offset by lower
spending in Eurasia where we made a significant investment in the
Karachaganak project in the first quarter of 1998.
Downstream activities also decreased following refinery project
completions in the U.S. and the slowing of re-imaging and brand
initiatives in the U.S. and Caltex areas of operation. There was also
lower spending on a gas pipeline project which incurred peak
expenditures in 1998. Other operations reflected an increase in
spending for an Indonesian cogeneration facility.
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CONTACTS: Faye Cox 914-253-7745
Chris Gidez 914-253-4042
Kelly McAndrew 914-253-6295
INVESTOR RELATIONS:
Elizabeth Smith 914-253-4478
Listen in live to Texaco's first quarter 1999 earnings discussion
with financial analysts on Wednesday, April 28, at 11:30 am EDT at:
http://www.webevents.broadcast.com/texaco/q199earnings
------------------------------------------------------
For technical assistance, call Sheila Lujan at 800-366-9831
Note: This press release contains forward-looking statements
about our expectations for worldwide crude oil production and
downstream margins in 1999. Our actual production and margins in
1999 may be different than we currently expect, if business
conditions, such as energy prices, world economic conditions,
demand growth, and inventory levels, change. 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
and Factors That May Affect Our Business" in Texaco's 1998 Annual
Report on Form 10-K.
<TABLE>
<CAPTION>
Income (loss) First Quarter
(Millions of dollars) -----------------------
1999(a) 1998
------- -------
<S> <C> <C>
Exploration and production
United States $ 38 $ 108
International (20) 48
------ -------
Total 18 156
Refining, marketing and distribution
United States 63 47
International 220 182
------ -------
Total 283 229
Global gas marketing 12 (9)
------ -------
Total operating segments 313 376
------ -------
Other business units (6) 2
Corporate/Non-operating (108) (119)
------ -------
Income before cumulative effect
of accounting change 199 259
Cumulative effect of accounting change (b) - (25)
------ -------
Net income $ 199 $ 234
====== =======
Net income per common share (dollars)
- diluted $ .35 $ .42
Average number of common shares
outstanding for computation of earnings
per share (millions)
- diluted 526.9 551.4
Provision for (benefit from) income taxes
included in net income $ (15) $ 140
<FN>
(a) Includes special items indicated in this release.
(b) Caltex adoption of SOP 98-5 of the AICPA, "Reporting on the Costs
of Start-Up Activities".
</FN>
</TABLE>
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<PAGE>
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<TABLE>
<CAPTION>
Other Financial Data First Quarter
(Millions of dollars) ---------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenues $ 7,190 $ 8,147
Total assets as of March 31 (c)$ 28,200 $ 28,871
Stockholders' equity as of March 31 (c)$ 11,780 $ 12,732
Total debt as of March 31 (c)$ 7,450 $ 6,816
Capital and exploratory expenditures
Exploration and production
United States $ 256 $ 442
International 222 290
-------- --------
Total 478 732
Refining, marketing and distribution
United States 73 88
International 77 99
-------- --------
Total 150 187
Global gas marketing 11 34
-------- --------
Total operating segments 639 953
Other business units 30 14
-------- --------
Total $ 669 $ 967
======== =========
Exploratory expenses included above
United States $ 54 $ 96
International 76 45
-------- --------
Total $ 130 $ 141
======== ========
Dividends paid to common stockholders $ 237 $ 239
Dividends per common share (dollars) $ .45 $ .45
Dividend requirements for preferred
stockholders $ 13 $ 14
<FN>
(c) Preliminary
</FN>
</TABLE>
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<TABLE>
<CAPTION>
Operating Data First Quarter
------------------------
1999 1998
-------- -------
<S> <C> <C>
Exploration and production
United States
Net production of crude oil
and natural gas liquids (MBPD) 406 452
Net production of natural gas
available for sale (MMCFPD) 1,487 1,738
-------- --------
Total net production (MBOEPD) 654 742
Natural gas sales (MMCFPD) 3,579 3,882
Average U.S. crude (per bbl.) $ 9.11 $ 11.78
Average U.S. natural gas (per mcf) $ 1.79 $ 2.14
Average WTI (Spot) (per bbl.) $ 13.15 $ 15.92
Average Kern (Spot) (per bbl.) $ 7.65 $ 8.89
International
Net production of crude oil
and natural gas liquids (MBPD)
Europe 130 158
Indonesia 180 155
Partitioned Neutral Zone 116 108
Other 67 70
-------- --------
Total 493 491
Net production of natural gas
available for sale (MMCFPD)
Europe 286 258
Colombia 153 208
Other 111 123
-------- --------
Total 550 589
-------- --------
Total net production (MBOEPD) 585 589
Natural gas sales (MMCFPD) 565 777
Average International crude
(per bbl.) $ 9.88 $ 11.95
Average International natural gas
(per mcf) $ 1.51 $ 1.62
Average U.K. natural gas
(per mcf) $ 2.64 $ 2.65
Average Colombia natural gas
(per mcf) $ .65 $ .91
Total worldwide net production
(MBOEPD) 1,239 1,331
</TABLE>
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<TABLE>
<CAPTION>
Operating Data* First Quarter
-----------------------
1999 1998
------- -------
<S> <C> <C>
Refining, Marketing and Distribution
United States
Refinery input (MBPD)
Equilon area 365 374
Motiva area 302 313
----- -----
Total 667 687
Refined product sales (MBPD)
Equilon area 596 532
Motiva area 355 333
Other operations 307 234
----- -----
Total 1,258 1,099
International
Refinery input (MBPD)
Europe 368 374
Caltex area 438 437
Latin America/West Africa 71 57
----- -----
Total 877 868
Refined product sales (MBPD)
Europe 638 564
Caltex area 672 593
Latin America/West Africa 479 428
Other 103 49
----- -----
Total 1,892 1,634
<FN>
* Volumetric data includes Texaco's equity interests in Caltex,
Equilon and Motiva.
</FN>
</TABLE>
