SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995 or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-170-2
AMOCO CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 36-1812780
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 EAST RANDOLPH DRIVE, CHICAGO, ILLINOIS 60601
(Address of principal executive offices) (Zip Code)
312-856-6111
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address, and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Number of shares outstanding as of September 30, 1995--
496,769,331
PART I-- FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income
(millions of dollars)
Three Months Nine Months
Ended Ended
September 30, September 30,
1995 1994 1995 1994
Revenues:
Sales and other operating
revenues................. $ 6,660 $ 6,764 $20,094 $19,221
Consumer excise taxes...... 859 883 2,502 2,553
Other income............... 119 133 319 806
Total revenues........... 7,638 7,780 22,915 22,580
Cost and Expenses:
Purchased crude oil,
natural gas, petroleum
products and merchandise. 3,401 3,593 10,488 9,972
Operating expenses......... 1,132 1,118 3,356 3,508
Petroleum exploration
expenses, including
exploratory dry holes.... 149 151 380 428
Selling and administrative
expenses................. 496 550 1,509 1,711
Taxes other than income
taxes.................... 1,046 1,061 3,057 3,129
Depreciation, depletion,
amortization, and retire-
ments and abandonments... 532 572 1,590 1,686
Interest expense........... 84 64 259 199
Total costs and expenses. 6,840 7,109 20,639 20,633
Income before income taxes... 798 671 2,276 1,947
Income taxes................. 199 226 621 694
Net income................... $ 599 $ 445 $ 1,655 $ 1,253
Weighted average number of
shares of common stock
outstanding (in thousands). 494,060 496,847 495,078 496,648
Per Share Data (Based on weighted
average shares outstanding):
Net income................... $ 1.21 $ .89 $ 3.34 $ 2.52
Cash dividends per share..... $ .60 $ .55 $ 1.80 $ 1.65
Consolidated Statement of Financial Position
(millions of dollars)
Sept. 30, Dec. 31,
ASSETS 1995 1994
Current Assets:
Cash........................................ $ 163 $ 166
Marketable securities -- at cost (corporate
except $49 on September 30,1995, and
$355 on December 31, 1994 which represents
state and municipal securities)........... 964 1,623
Accounts and notes receivable (less
allowances of $22 at September 30, 1995,
and $23 at December 31, 1994)............. 3,061 3,180
Inventories
Crude oil and products.................... 908 748
Materials and supplies.................... 308 294
Prepaid expenses and income taxes........... 725 631
Total current assets...................... 6,129 6,642
Investments and Other Assets:
Investments and related advances............ 732 470
Long-term receivables and other assets...... 828 661
1,560 1,131
Properties--at costs, less accumulated depre-
ciation, depletion, and amortization of
$25,689 at September 30, 1995, and $24,906
at December 31, 1994 (The successful
efforts method of accounting is followed
for costs incurred in oil and gas producing
activities)................................. 22,097 21,543
Total assets.............................. $29,786 $29,316
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term obligations.... $ 170 $ 24
Short-term obligations...................... 913 224
Accounts payable............................ 2,455 2,759
Accrued liabilities......................... 1,049 1,162
Taxes payable (including income taxes)...... 864 855
Total current liabilities................. 5,451 5,024
Long-Term Debt................................ 3,775 4,387
Deferred Credits and Other Non-Current Liabilities:
Income taxes................................ 3,057 2,961
Other....................................... 2,454 2,547
5,511 5,508
Minority Interest............................. 15 15
Shareholders' Equity:
Common stock (authorized 800,000,000 shares;
issued and outstanding at September 30,
1995 --496,769,331; December 31, 1994
--496,393,067 shares)..................... 2,592 2,166
Earnings retained and invested in the
business.................................. 12,426 12,223
Foreign currency translation adjustment..... 16 (7)
15,034 14,382
Total liabilities and shareholders' equity $29,786 $29,316
Consolidated Statement of Cash Flows
(millions of dollars)
Nine Months Ended
September 30,
1995 1994
Cash Flows from Operating Activities:
Net income................................... $ 1,655 $ 1,253
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, amortization,
and retirements and abandonments......... 1,590 1,686
Decrease in receivables................... 94 72
(Increase) decrease in inventories......... (174) 74
(Decrease) increase in payables and
accrued liabilities...................... (298) 209
Deferred taxes and other items............. (376) (140)
Net cash provided by operating activities.. 2,491 3,154
Cash Flows From Investing Activities:
Capital expenditures......................... (2,367) (1,699)
Proceeds from dispositions of properties
and other assets........................... 230 138
Net investments, advances and business
acquisitions............................... (164) (11)
Proceeds from sales of investments........... - 175
Other........................................ 9 (9)
Net cash used in investing activities...... (2,292) (1,406)
Cash Flows from Financing Activities:
New long-term obligations.................... 245 418
Repayment of long-term obligations........... (277) (50)
Cash dividends paid.......................... (888) (819)
Issuances of common stock.................... 31 20
Acquisitions of common stock................. (661) -
Increase (decrease) in short-term obligations 689 (891)
Net cash used in financing activities...... (861) (1,322)
(Decrease) increase in Cash and Marketable
Securities................................... (662) 426
Cash and Marketable Securities-
Beginning of Period......................... 1,789 1,217
Cash and Marketable Securities-End of Period.. $ 1,127 $ 1,643
Basis of Financial Statement Preparation
The consolidated financial statements contained herein are
unaudited and have been prepared from the books and records of
Amoco Corporation ("Amoco" or the "Corporation"). In the opinion
of management, the consolidated financial statements reflect all
adjustments, consisting of only normal recurring adjustments,
necessary for a fair statement of the results for the interim
periods. The consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and,
therefore, do not include all information and notes necessary for
a complete presentation of results of operations, financial
position and cash flows in conformity with generally accepted
accounting principles.
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of", which will require the
Corporation to change its method of accounting for the impairment
of value of long-lived assets. The Corporation has not fully
evaluated the effect of this change in accounting method, but the
effect could be material to income in the quarter of adoption.
Implementation of SFAS No. 121 will occur no later than the
quarter ending March 31, 1996.
Item 2. Management's Discussion and Analysis
Results of Operations
Nine Months 1995 vs. Nine Months 1994
Net income for the first nine months of 1995 amounted to $1,655
million, or $3.34 per share. Net income for the first nine
months of 1994 amounted to $1,253 million, or $2.52 per share.
Included in 1994 results were after-tax benefits recorded in the
second quarter of $270 million relating to final settlements with
the Internal Revenue Service ("IRS") involving crude oil excise
taxes ("COET") in the 1980s. Also included in 1994 results were
after-tax restructuring charges of $256 million. Included in
third-quarter 1994 results were charges of $32 million related to
environmental remediation activities. Excluding these items,
earnings for the first nine months of 1994 would have been $1,271
million, or $2.56 per share.
The increase in earnings for the first nine months of 1995
primarily reflected higher chemical earnings resulting from both
higher volumes and margins across most product lines. Also
contributing to the increase was strong exploration and
production ("E&P") earnings overseas, primarily reflecting higher
crude oil prices and lower exploration and other expenses.
Partially offsetting were lower U.S. E&P earnings, reflecting
lower natural gas prices, and lower petroleum product results
attributable to lower refined product margins, higher refinery
maintenance expenses and increased marketing activity-related
expense.
Sales and other operating revenues totaled $20.1 billion for the
first nine months of 1995, 5 percent higher than the $19.2
billion reported in the corresponding 1994 period. Chemical
revenues increased 37 percent resulting from higher volumes and
prices across most product lines. Refined product revenues were
6 percent above the 1994 level, primarily resulting from
strengthening U.S. gasoline prices. Natural gas revenues
decreased 16 percent, primarily due to lower prices.
Other income totaled $319 million for the first nine months of
1995 compared with $806 million for the same period for 1994.
Included in other income for the first nine months of 1994 was
the benefit of the COET settlement of approximately $400 million.
Purchases of crude oil, natural gas, petroleum products and
merchandise totaled $10.5 billion for the first nine months of
1995, 5 percent higher than 1994's first nine months. The
increase was primarily attributable to higher refined product
purchase prices and volumes, higher crude oil prices and
increased chemical purchases.
Operating expenses totaled $3.4 billion for the first nine months
of 1995, compared with $3.5 billion for the corresponding 1994
period. Included in first nine-month 1994 results were
restructuring charges of $169 million related to various facility
closings and asset dispositions. Exclusive of that charge, first
nine-month operating expenses for 1995 were about level with the
same period in 1994. Expense reductions related to restructuring
efforts were offset by higher refinery expenses, reflecting
planned and unplanned maintenance, and an increase in chemical
manufacturing operations.
Petroleum exploration expenses of $380 million in the first nine
months of 1995 decreased 11 percent compared with the prior-year
period, primarily reflecting lower overseas dry hole costs.
Selling and administrative expenses for the first nine months of
$1.5 billion compared with $1.7 billion for the comparable 1994
period. Included in the first nine-month 1994 results were
restructuring charges of $225 million related to severance costs.
Exclusive of these charges, selling and administrative expenses
increased slightly as a result of ongoing additional
restructuring charges of approximately $85 million before tax,
mainly related to system development redesign. Also included in
1995 first nine-month results were adverse before tax currency
effects of $13 million, compared with favorable currency effects
of $32 million for the corresponding 1994 period.
Interest expense of $259 million for the first nine months of
1995 compared with $199 million for the corresponding 1994
period, reflecting higher debt balances and slightly higher
interest rates.
Third Quarter 1995 vs. Third Quarter 1994
Third-quarter 1995 net income totaled $599 million, or $1.21 per
share, compared with $445 million, or $.89 per share, in the
third quarter of 1994. Earnings for the third quarter of 1995
were 35 percent higher than last year's third quarter, reflecting
higher chemical earnings resulting from increases in margins for
most product lines. Also attributing to the increase was higher
overseas E&P earnings primarily related to higher crude oil sales
volumes and lower exploration and other expenses.
Sales and other operating revenues totaled $6.7 billion for the
third quarter of 1995, 2 percent lower than the $6.8 billion
reported in the third quarter of 1994. The decrease resulted
from lower crude oil sales volumes and lower natural gas
revenues, mainly reflecting lower prices. Largely offsetting
were higher chemical revenues due to increased prices.
Purchases of crude oil, natural gas, petroleum products and
merchandise totaled $3.4 billion for the third quarter of 1995, 5
percent lower than the prior-year quarter. The decrease reflects
lower crude oil prices and volumes during the quarter.
Third-quarter 1995 operating expenses totaled $1.1 billion, about
the same as the 1994 third quarter of 1994. Included in 1994
operating expenses were charges related to environmental
remediation activities. Excluding these charges, savings
resulting from restructuring efforts were more than offset by
increased chemical activity.
Selling and administrative expenses for the third quarter of 1995
totaled $496 million, 10 percent below the $550 million for the
third quarter of 1994, reflecting restructuring efforts.
Included in third quarter expenses were ongoing restructuring
charges of $25 million before tax related to system development
and redesign.
Interest expense of $84 million for the third quarter of 1995
increased $20 million over the third quarter of 1994, resulting
from higher debt balances and slightly higher interest rates.
For the 12 months ended September 30, 1995, return on average
shareholders' equity was 15.0 percent compared with 13.3 percent
for the 12 months ended September 30, 1994. Return on average
capital employed was 12.2 percent for the 12-month period ended
September 30, 1995, compared with 10.4 percent for the
corresponding prior-year period.
Results by Industry Segment
As previously announced, Amoco changed the reporting segments to
align more closely with its organizational structure that
includes three sectors: exploration and production, petroleum
products and chemicals. Segment earnings for 1994 have been
restated to conform to the new basis.
Nine Months Third Quarter
(millions of dollars) 1995 1994 1995 1994
Exploration and
Production
United States $ 523 $ 675 $ 159 $ 178
Canada 69 132 (10) 27
Overseas 239 (69) 91 (3)
Subtotal 831 738 240 202
Petroleum Products 254 298 131 168
Chemicals 775 333 296 142
Corporate and
Other Operations* (205) (116) (68) (67)
Net Income $1,655 $1,253 $ 599 $ 445
* Corporate and other operations include net interest and
general corporate expenses as well as the results of
investments in technology companies, real estate interests
and other activities.
Nine Months 1995 vs. Nine Months 1994
Exploration and Production - U. S.
U.S. E&P operations earned $523 million in the first nine months
of 1995 compared with restated earnings of $675 million for the
similar 1994 period. Included in the first nine-month results
for 1994 were $90 million associated with the favorable COET
settlement. Partly offsetting were restructuring charges of $47
million, primarily related to severance costs. Adjusting for
these factors, 1995 U.S. E&P earnings of $523 million were 17
percent below the comparable 1994 period.
The decrease in earnings mainly resulted from lower natural gas
prices, partly offset by higher crude oil prices. For the first
nine months of 1995, Amoco's U.S. natural gas prices averaged
about $1.30 per thousand cubic feet ("mcf"), almost $.50 per mcf
below the first nine months of 1994. Average crude oil prices
for the same time period averaged about $16.20 per barrel,
approximately $1.70 per barrel above the same period last year.
Natural gas production for the first nine months of 1995 was 2.4
billion cubic feet per day, which was comparable to the same
period in 1994. Crude oil and natural gas liquids ("NGL")
production of 291 thousand barrels per day for the first nine
months of 1995 was essentially level with the prior-year period.
Exploration and Production - Canada
Canadian earnings, which include supply and marketing of NGL, for
the first nine months of 1995 were $69 million compared with last
year's restated nine months earnings of $132 million. The
decrease in earnings as compared to the first nine months of 1994
reflected lower natural gas prices, which were over $.60 per mcf
below the year-earlier period, and lower crude oil and NGL
production. Nine-month 1995 results also included unfavorable
currency effects of $22 million. Partially offsetting were
higher crude oil prices, which averaged almost $2.40 per barrel
above 1994, and an increase in supply and marketing earnings,
reflecting higher NGL margins.
For the first nine months of 1995, natural gas production
averaged 828 million cubic feet per day, 2 percent above the
comparable 1994 period. Crude oil and NGL production averaged 66
thousand barrels per day for the first nine months of 1995, 11
percent below 1994, primarily as a result of property
dispositions.
Exploration and Production - Overseas
Overseas E&P earnings were $239 million for the first nine months
of 1995, an increase of $308 million over restated 1994 earnings
for the same period. Earnings for 1994 included second-quarter
restructuring charges of $17 million, primarily related to
severance costs, and charges of $18 million related to concession
relinquishments.
The increase in nine-month 1995 results also reflected higher
crude oil prices, lower exploration and other expenses and a gain
of $18 million related to the divestment of Amoco's Congo
operations. Partially offsetting was lower crude oil production.
For the first nine months of 1995, overseas natural gas
production averaged 901 million cubic feet per day, 5 percent
above 1994 production levels of 856 million cubic feet per day.
Crude oil and NGL production averaged 296 thousand barrels per
day, 2 percent below the comparable 1994 period.
Petroleum Products
Petroleum Product activities earned $254 million for the first
nine months of 1995, compared with restated earnings of $298
million for the comparable 1994 period. Included in 1994 results
were second-quarter restructuring charges of $41 million,
primarily related to severance costs and third-quarter charges of
$32 million related to environmental remediation activities.
Excluding these items, earnings of $254 million for the first
nine months of 1995 were $117 million lower than the same period
in 1994. The decrease in earnings between the two periods mainly
reflected lower refined product margins, and higher operating
expenses resulting from an increase in refinery maintenance
expense and marketing activity expenses.
For the first nine months of 1995, U.S. refined product sales
averaged 1,149 thousand of barrels per day, a decrease of 2
percent from the corresponding 1994 period. For the first nine
months of 1995, refineries ran at 92 percent of rated capacity,
compared with 99 percent for the comparable 1994 period,
reflecting higher planned and unplanned maintenance.
Chemicals
Chemical operations earned $775 million for the first nine months
of 1995 compared with restated earnings of $333 million for the
similar period in 1994. Included in restated 1994 results were
second-quarter restructuring charges of $36 million, primarily
related to severance costs. After adjusting for this item, 1995
earnings increased by $406 million.
The increase in earnings for the first nine months of 1995
resulted from higher margins and sales volumes for major product
lines, reflecting strong customer demand. Olefin volumes for the
first nine months of 1995 increased 9 percent over the comparable
1994 period. Also, purified terephthalic acid ("PTA") and
polypropylene volumes increased 3 percent and 2 percent,
respectively, over the same period.
Corporate and Other Operations
Corporate and other operations include net interest and general
corporate expenses as well as the results of investments in
technology companies, real estate interests and other activities.
Corporate and other operations reported net expenses of $205
million for the first nine months of 1995, compared with net
expenses after tax of $116 million for the first nine months of
1994. Corporate and other operations expenses for 1994 included
second-quarter interest income of $180 million related to the
COET settlement and restructuring charges of $112 million.
Adjusting for these items, net expenses for the first nine months
of 1995 of $205 million were $21 million higher than 1994. The
increase resulted from ongoing after-tax restructuring charges of
approximately $45 million, primarily associated with system
development and redesign. Also affecting net expenses in 1995
were higher interest expense, reflecting an increase in debt
balances and slightly higher interest rates, and a loss on an
asset disposition. Partly offsetting were favorable currency
effects and lower costs associated with technology and other
activities.
Third Quarter 1995 vs. Third Quarter 1994
Exploration and Production - U.S.
U.S. E&P earnings were $159 million in the third quarter of 1995
compared with restated 1994 third-quarter earnings of $178
million. The 1995 decrease of $19 million primarily resulted
from lower natural gas prices.
Amoco's U.S. natural gas prices averaged about $1.20 per mcf
during the quarter, about 40 cents per mcf less than last year's
third quarter, reflecting increased industry supplies. Also
affecting results were lower industry crude oil prices, which
were about $.50 per barrel below the third quarter of 1994.
Natural gas production for the third quarter of 1995 averaged 2.5
billion cubic feet per day, which was slightly higher than the
same quarter last year. Crude oil and NGL production averaged
286 thousand barrels per day, essentially level with the prior-
year period.
Exploration and Production - Canada
Canadian E&P operations incurred a loss of $10 million in the
third quarter of 1995 compared with restated earnings of $27
million for the third quarter of 1994. The decrease in earnings
between the two periods reflected lower natural gas prices. Also
contributing to the decrease were lower crude oil prices, and
lower crude oil production volumes reflecting property
divestments.
For the third quarter of 1995, natural gas prices averaged about
$.80 per mcf, $.50 per mcf below the comparable 1994 period.
Crude oil prices averaged about $15.25 per barrel in the third
quarter of 1995, down about $.85 per barrel over the previous
year. Natural gas production averaged 856 million cubic feet per
day in the third quarter of 1995, 13 percent above the comparable
1994 period. Crude oil and NGL production averaged 65,000
barrels per day, down 8 percent from the prior-year period.
Exploration and Production - Overseas
Overseas E&P operations earned $91 million in the third quarter
of 1995 compared with a restated loss of $3 million for the third
quarter of 1994. The increase in third-quarter 1995 earnings
reflected higher crude oil sales volumes and lower exploration
and other expenses. Partly offsetting was lower crude oil
prices.
Natural gas production for the third quarter of 1995 of 820
million cubic feet per day increased 15 percent over the
comparable prior-year period. Crude oil and NGL production for
the third quarter of 1995 averaged 298 thousand barrels per day,
2 percent higher than the prior-year period.
Petroleum Products
Petroleum Product activities earned $131 million during the third
quarter of 1995, compared with restated earnings of $168 million
in the third quarter of 1994. Included in 1994 third-quarter
results were charges of $32 million related to environmental
remediation activities.
Adjusting for these charges, 1995 earnings would have been $69
million lower than the corresponding prior-year period. The
decrease in third quarter 1995 earnings resulted from lower
margins, as refined product prices declined more than crude
costs. Also affecting the decrease was higher expenses in part
reflecting increased marketing activity.
U.S. sales of refined products averaged 1,221 thousands of
barrels per day during the third quarter of 1995, a decrease of 1
percent from the comparable 1994 period. Refineries ran at 98
percent of rated capacity during the third quarter of 1995,
compared with 104 percent in the third quarter of 1994.
Chemicals
Chemical operations earned $296 million in the third quarter of
1995, compared with $142 million for the third quarter of 1994.
The improvement in 1995 earnings resulted from continued strong
margins in several product lines, in particular paraxylene and
olefins. Worldwide paraxylene margins more than doubled over the
third quarter of 1994 and olefin margins increased by almost 90%
over 1994 third-quarter margins.
Corporate and Other Operations
Corporate and other operations reported net expenses after tax of
$68 million for the third quarter of 1995 compared with the 1994
net expenses after tax of $67 million. Lower corporate expenses
were partially offset by costs of about $15 million related to
ongoing restructuring expenses.
Outlook
The Corporation and the oil industry will continue to be affected
by the volatility of crude oil and natural gas prices. Affecting
chemical and petroleum product activities are the overall
industry product supply and demand balance. Amoco's future
performance is expected to continue to be impacted by its
organizational structure announced in July 1994 and associated
savings; ongoing cost reduction programs; the divestment of
marginal properties and underperforming assets; application of
new technologies; and new governmental regulation.
Amoco's E&P exploration efforts will continue to target those
areas that offer the most potential. Amoco will pursue areas
that capitalize on its natural gas resources and continue to
develop internationally. Amoco's petroleum products marketing
strategy will continue to emphasize brand product quality and to
grow in the convenience retail business. Amoco is also expanding
marketing operations in Central Europe and Mexico. In order to
meet expected growth in PTA demand, Amoco's chemical segment is
expanding its PTA operations in the United States, Europe and the
Asia-Pacific region.
Amoco announced plans to sell the Amoco Motor Club to the
Signature Group, a wholly owned subsidiary of Montgomery Ward,
and a provider of auto club services to members across the
country.
On October 10, 1995, Amoco and Shell Oil Company ("Shell")
announced plans to form a limited partnership combining
exploration and production assets in the greater Permian Basin
area of west Texas and southeast New Mexico. The plan calls for
ownership in the new company to be 65 percent Amoco and 35
percent Shell, based on the relative value of assets contributed,
and is contingent on the successful completion of ongoing
discussions regarding design, management and operation of the
company. Start up of the partnership is expected by mid-1996.
In this area, Amoco and Shell employ about 1,300 people operating
12,000 area wells that produce approximately 210,000 gross
barrels of crude oil and 250 million gross cubic feet per day
("mmcfd")of natural gas. These operations also include plants
that process more than 400 mmcfd of natural gas and yield about
33,000 barrels per day of natural gas liquids.
On November 2, 1995, Amoco announced it is negotiating with
Albemarle Corporation ("Albemarle") on an exclusive basis for
acquisition of Albemarle's olefins and related businesses. No
final agreement has been reached.
Restructuring
In July 1994, Amoco announced that its organizational structure
was being changed into 17 business groups with a shared services
organization providing support services. In conjunction with the
restructuring, an after-tax charge of $256 million was accrued in
the second quarter of 1994. Selling and administrative expenses
for that period included charges of $225 million ($146 million
after-tax) related to employee-termination costs associated with
the severance of approximately 3,800 employees expected to occur
by year-end 1995. Since July of last year, charges against the
accrual totaled $137 million ($89 million after-tax). As of
September 30, 1995, the accrual balance associated with
restructuring was $88 million ($57 million after-tax), which was
considered adequate for all future severances and other related
activities to which the Corporation has committed. First nine-
month 1995 earnings reflected before-tax savings of more than
$350 million in employment costs and other costs resulting from
the Corporation's restructuring effort.
The second-quarter 1994 accrual also included charges in
operating expenses of $169 million ($110 million after-tax)
related to a reduction in carrying value of assets that were to
be divested. Disposition of these assets, including the recently
completed sale of a hazardous-waste incineration facility, will
not have a material effect on revenues, depreciation or income.
At the time of the July 1994 restructuring announcement,
additional restructuring costs totaling approximately $200
million after-tax were expected to be incurred. These
restructuring costs represent charges for system redesign,
relocations, work force consolidation and development of new
processes in support of the restructuring. Since July, 1994,
costs incurred, primarily for system development and redesign,
totaled approximately $70 million after-tax.
Liquidity and Capital Resources
Cash flows from operating activities for the first nine months of
1995 amounted to $2,491 million compared with $3,154 million in
the prior-year period. Working capital of $678 million at
September 30, 1995, decreased $940 million from $1,618 million at
December 31, 1994. The Corporation's current ratio was 1.12 to 1
at September 30, 1995, compared with 1.32 to 1 at year-end 1994.
As a matter of policy, Amoco practices asset and liability
management techniques that are designed to minimize its
investment in non-cash working capital. This does not impair
operational capability or flexibility since the Corporation has
ready access to both short-term and long-term debt markets.
Amoco's debt totaled $4.9 billion at September 30, 1995, compared
with $4.6 billion as of year-end 1994. Debt as a percentage of
debt-plus-equity was 24.4 percent at September 30, 1995, and 24.3
percent at year-end 1994.
Amoco announced on April 25, 1995, that it planned to purchase up
to 8.9 million shares of its common stock in excess of amounts
needed for benefit plan purposes. Through July 31, 1995, 8.9
million shares were repurchased at a cost of $601 million,
completing the stock repurchase program.
Amoco Corporation guarantees the outstanding public debt
obligations of Amoco Company. Amoco Corporation and Amoco
Company guarantee the outstanding public notes and debentures of
Amoco Canada Petroleum Company LTD. ("Amoco Canada"). In June,
Amoco Canada issued bond warrants, which entitle the holders to
acquire U.S. $200 million Amoco Canada bonds, guaranteed by Amoco
and Amoco Company, having a coupon rate of 8.98 percent. The
warrants are exercisable from six to nine months after issue.
Effective September 1, 1995, Amoco Canada called the 7 3/8
percent Subordinated Exchangeable Debentures ("SEDs")for
redemption. The balance of the SEDs totaled $458 million. The
SEDs were exchangeable for common stock of Amoco Corporation at
an exchange price of $52.50 per share. A total of 8.6 million
shares of Amoco Corporation common stock was issued in exchange
for SEDs totaling $442 million.
Amoco Canada's conditions relating to the July 7, 1995 proposal
to purchase all of the common shares of Home Oil Company Limited
for approximately Cdn. $757 million (about $550 million U.S.
based on June 30, 1995, exchange rates) were not satisfied and
the purchase was not completed.
The Corporation believes its strong financial position will
permit the financing of business needs and opportunities in an
orderly manner. It is anticipated that ongoing operations will
be financed primarily by internally generated funds. Short-term
obligations, such as commercial paper borrowings, give the
Corporation the flexibility to meet short-term working capital
and other temporary requirements. At September 30, 1995, bank
lines of credit available to support commercial paper borrowings
amounted to $490 million, all of which were supported by
commitment fees. On September 5, 1995, Amoco Canada obtained a
U.S. $225 million revolving term facility, guaranteed by Amoco
and Amoco Company, to be used for general corporate purposes.
Amoco Canada is charged a standby fee for the facility, which has
not been used.
To maintain flexibility, a shelf registration statement for Amoco
Company of $500 million in debt securities remains on file with
the Securities and Exchange Commission ("SEC") to permit ready
access to capital markets. Amoco Argentina Oil Company
("Amoco Argentina"), an indirect wholly owned subsidiary of
Amoco, filed a shelf registration with the SEC for $200 million
in debt securities, of which $100 million in debt securities were
subsequently issued. Amoco Corporation and Amoco Company
guarantee the securities issued under this registration statement.
Capital and exploration expenditures for the first nine months of
1995 totaled $2,747 million compared with $2,127 million for the
comparable 1994 period. Approximately 66 percent of the total
1995 expenditures has been spent in exploration and production
operations.
The Corporation has provided in its accounts for the reasonably
estimable future costs of probable environmental remediation
obligations relating to various oil and gas operations,
refineries, marketing sites and chemical locations, including
multiparty sites at which Amoco and certain of its subsidiaries
have been identified as potentially responsible parties by the
U.S. Environmental Protection Agency. Such estimated costs will
be refined over time as remedial requirements and regulations
become better defined. However, any additional environmental
costs cannot be reasonably estimated at this time due to
uncertainty of timing, the magnitude of contamination, future
technology, regulatory changes and other factors. Although
future costs could have a significant effect on the results of
operations in any one period, they are not expected to be
material in relation to Amoco's liquidity or consolidated
financial position. In total, the accrued liability represents a
reasonable best estimate of Amoco's remediation liability.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material developments in the status of legal
proceedings described in Part I, Item 3 of the Corporation's 1994
Annual Report on Form 10-K and Part II, Item 1 of the
Corporation's Report on Form 10-Q for the quarterly period ended
March 31, 1995.
Thirteen proceedings instituted by governmental authorities are
pending or known to be contemplated against Amoco and certain of
its subsidiaries under federal, state or local environmental
laws, each of which could result in monetary sanctions in excess
of $100,000. No individual proceeding is, nor are the
proceedings as a group, expected to have a material adverse
effect on Amoco's liquidity, consolidated financial position or
results of operations. Amoco estimates that in the aggregate the
monetary sanctions reasonably likely to be imposed from these
proceedings amount to approximately $7 million.
Amoco has various other suits and claims pending against it among
which are several class actions for substantial monetary damages
which in Amoco's opinion are not meritorious. While it is
impossible to estimate with certainty the ultimate legal and
financial liability in respect to these other suits and claims,
Amoco believes that, while the aggregate amount could be
significant, it will not be material in relation to its liquidity
or its consolidated financial position.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Shown below is summarized financial information of
Amoco's wholly owned subsidiary, Amoco Company.
Three Months Nine Months
Ended Ended
September 30 September 30
1995 1994 1995 1994
(millions of dollars)
Total Revenues(including
excise taxes)...... $7,062 $7,204 $20,996 $20,737
Operating Profit... $ 926 $ 711 $ 2,415 $ 1,816
Net Income......... $ 606 $ 488 $ 1,554 $ 1,426
Sept. 30, Dec. 31,
1995 1994
(millions of dollars)
Current assets............... $ 5,162 $ 5,399
Total assets................. $26,434 $24,549
Current liabilities.......... $ 3,967 $ 4,142
Long-term debt............... $ 6,919 $ 6,190
Deferred credits............. $ 4,665 $ 4,584
Minority interest............ $ 10 $ 5
Shareholder's equity......... $10,873 $ 9,628
Summarized financial data for Amoco Argentina are
presented below.
Three Months Nine Months
Ended Ended
September 30, September 30,
1995 1994 1995 1994
(millions of dollars)
Revenues.............. $ 67 $ 75 $189 $155
Net Income............ $ 20 $ 27 $ 64 $ 65
Sept. 30, Dec. 31,
1995 1994
(millions of dollars)
Current assets................ $119 $ 97
Total assets.................. $417 $349
Current liabilities........... $ 51 $ 58
Non-current liabilities....... $111 $100
Shareholder's equity.......... $255 $191
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Sequentially
Exhibit Numbered
Number Page
12 Statement Setting Forth Computation of
Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1995.
Signature
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Amoco Corporation
(Registrant)
Date: November 13, 1995
J. R. Reid
J. R. Reid
Vice President and
Controller
(Duly Authorized and Chief
Accounting Officer)