EXHIBIT 99.1
TEXACO REPORTS RESULTS
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FOR THE FOURTH QUARTER AND YEAR 1996
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FOR IMMEDIATE RELEASE: THURSDAY, JANUARY 23, 1997.
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WHITE PLAINS, N.Y., Jan. 23 - Texaco announced today total net income
of $2.0 billion for the year 1996, capping off what Chairman and Chief Executive
Officer Peter I. Bijur called an "excellent" year. The company's fourth quarter
results represent a 10th consecutive quarter with earnings before special items
exceeding previous years' levels. Texaco cited the outstanding performance of
its worldwide exploration and production business which benefited from increased
crude oil and natural gas production and higher commodity prices.
Texaco's total reported net income for the fourth quarter of 1996 was
$509 million, or $1.90 per share. The quarter included special items amounting
to a net gain of $129 million. Comparable income for the fourth quarter of 1995,
which included a special $639 million non-cash charge relating to the adoption
of a new accounting standard (SFAS 121), was a loss of $251 million, or $1.02
per share. For the year 1996, total reported net income was $2,018 million, or
$7.52 per share, as compared with $607 million, or $2.10 per share, for the year
1995.
In commenting on 1996 results, Texaco Inc. Chairman and Chief Executive
Officer Peter I. Bijur stated, "Texaco's excellent results for 1996 signal that
we are on track to achieve our plan for growth. The outstanding performance of
our upstream business anchored solid results for the fourth quarter and year.
Strong commodity prices throughout the year and higher worldwide oil and natural
gas production caused upstream earnings to rise sharply. Production increased by
more than three percent, reversing declines from non-core asset sales and
maturing fields. Using advanced technologies, we were successful in bringing to
production new fields while raising production from existing fields through
improved recovery. This success was especially evident in our U.S. upstream
operations, which posted record operating earnings of $1.1 billion for the year.
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"In refining and marketing, 1996 results in the United States improved
over 1995's depressed levels due to higher margins and increased branded
gasoline sales volumes. However, results in the 1996 fourth quarter were
disappointing as product margins, especially on the West Coast, were squeezed by
higher crude costs and competitive pressures in the marketplace, and two
refinery incidents that raised costs and impacted yields. In the international
sector, results decreased significantly in 1996 as industry overcapacity led to
poor margins in both the Caltex operating areas and in Europe, more than
offsetting another year of strong earnings growth in Latin America," Bijur said.
"Throughout 1996, while growing the business, we continued our focus on
cost containment. Also, our strong earnings and cash flows provided increased
funds to invest in growth opportunities as our capital expenditures for the
year, which were mainly directed to key upstream projects, rose 10 percent to
$3.4 billion. Our return on capital employed, excluding special items, exceeded
12.5 percent, while our debt to equity ratio improved to 34 percent, the lower
end of our target range. Finally, our total return to shareholders was 30
percent for the year, led by a sharp rise in the market price of the stock and
higher dividends."
Net income before special items for the fourth quarter of 1996 was $380
million, or $1.41 per share, as compared with $367 million, or $1.35 per share,
for the fourth quarter of 1995. For the year 1996, net income before special
items rose 45 percent to $1,665 million, or $6.17 per share, as compared with
$1,152 million, or $4.20 per share, for the year 1995. Included in the results
for the fourth quarter and year 1996 are non-cash currency translation charges
relating to deferred income taxes of $54 million and $58 million, respectively,
as the Pound Sterling strengthened in relation to the U.S. dollar in the fourth
quarter. This compared with benefits of $11 million for the fourth quarter and
$5 million for the year 1995.
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Fourth Quarter Year
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Texaco Inc. (Millions): 1996 1995 1996 1995
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Net income before special items $ 380 $ 367 $ 1,665 $ 1,152
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Tax benefits on asset sales 188 21 188 65
Gains (losses) on major asset sales (30) - 194 232
Employee separation costs (65) - (65) (56)
Financial reserves for various issues (32) - (32) (26)
U.S. and International tax issues 68 - 68 -
Adoption of new accounting standard
Write-downs of assets - (639) - (639)
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129 (618) 353 (424)
Cumulative effect of accounting change - - - (121)
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129 (618) 353 (545)
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Total reported net income (loss) $ 509 $ (251) $ 2,018 $ 607
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<FN>
Details on special items are included in the following functional analysis of net income.
</FN>
ANALYSIS OF FUNCTIONAL NET INCOME
OPERATING EARNINGS (LOSSES)
PETROLEUM AND NATURAL GAS
EXPLORATION AND PRODUCTION
Fourth Quarter Year
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United States (Millions): 1996 1995 1996 1995
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Operating earnings before special items $ 351 $ 191 $ 1,123 $ 674
Special items - (493) - (381)
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Total operating net income (loss) $ 351 $ (302) $ 1,123 $ 293
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In the U.S. upstream, increased production of crude and natural gas for
the comparative fourth quarter and year 1996 along with higher commodity prices
resulted in significantly improved earnings. The increased production, up 2.5
percent, was due to enhanced production from existing fields and new production,
primarily in the Gulf of Mexico. The production increase reverses declines from
the sale of non-core assets and from maturing fields. Exploratory expenses
increased 32 percent to $41 million in the fourth quarter and 63 percent to $153
million for the year 1996, reflecting higher activity on an expanded inventory
of new prospects.
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Texaco's U.S. average crude oil price for the fourth quarter and year
1996 increased over 1995 by $5.11 and $2.83 per barrel, respectively, as lean
petroleum stocks and increased demand contributed to worldwide price strength
and volatility.
Texaco's U.S. average natural gas price for the fourth quarter and year
1996 increased over 1995 by $.73 and $.54 per thousand cubic feet, respectively.
These price increases occurred as demand rose and inventory levels remained low.
Special items for the year 1995 included a fourth quarter write-down of
assets associated with the adoption of SFAS 121 of $493 million and a first
quarter net gain of $112 million, principally resulting from the sale of
non-core assets.
Fourth Quarter Year
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International (Millions): 1996 1995 1996 1995
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Operating earnings before special items $ 86 $ 90 $ 451 $ 343
Special items 27 (3) 27 (3)
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Total operating net income $ 113 $ 87 $ 478 $ 340
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In the international upstream, comparative results for the fourth
quarter and year 1996 benefited from significantly higher crude oil prices,
which averaged $5.79 and $3.26 per barrel, respectively, over 1995.
Additionally, earnings benefited from increased crude oil and natural gas
production, up more than seven percent in the fourth quarter and more than four
percent for the year due to continuing development programs and new fields.
Crude production increased primarily in the Partitioned Neutral Zone between
Saudi Arabia and Kuwait and Angola, while gas production increased in Trinidad
and Colombia. Partly offsetting these positive factors were higher exploration
expenses, up 22 percent to $95 million in the fourth quarter and up 16 percent
to $226 million for the year. Also, production declined from maturing fields in
the United Kingdom (U.K.) and Australia.
Further, operating results for the fourth quarter and year 1996
included non-cash currency translation charges relating to deferred income taxes
of $36 million and $38 million, respectively, due to the strengthening of the
Pound Sterling in relation to the U.S. dollar, as compared with benefits of $5
million for the fourth quarter and $2 million for the year 1995.
The special item of $27 million in the fourth quarter of 1996 was
related to a Danish deferred tax benefit. The year 1995 included fourth quarter
special charges of $3 million for the write-down of assets associated with the
adoption of SFAS 121.
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MANUFACTURING, MARKETING AND DISTRIBUTION
Fourth Quarter Year
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United States (Millions): 1996 1995 1996 1995
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Operating earnings (losses) before special items $ (9) $ 60 $ 233 $ 141
Special items (26) (9) (26) (20)
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Total operating net income (loss) $ (35) $ 51 $ 207 $ 121
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In the U. S. downstream, results for the fourth quarter of 1996
reflected lower earnings, primarily on the West Coast, as compared to the same
period of 1995, as higher crude costs and competitive pressures in the
marketplace depressed margins. Also, fourth quarter results were adversely
impacted by the effects of fires at the Los Angeles, Calif., refinery in
November and the Convent, La., refinery in December. These two incidents
resulted in property damage charges of $10 million, as well as earnings losses
associated with lower yields. These negative impacts were partly offset by the
continued strength in gasoline and diesel sales volumes, with Texaco branded
gasoline sales increasing in the fourth quarter 1996.
The year 1996 experienced a significant improvement in earnings over
last year. Improved margins during the first half of the year reflected product
price increases due to shortages resulting from regional industry refining
problems, new California gasoline formulation requirements, and the seasonal
increase in market demand. Earnings for the year 1996 also benefited from higher
gasoline and diesel sales volumes, with Texaco branded gasoline sales up three
percent, as well as overall improvement of refinery operations, particularly at
the East and Gulf coast refineries.
Results for 1996 included a fourth quarter special charge of $25
million relating to the loss on the pending sale of a chemical facility, as well
as $1 million for employee separations. Operating results for 1995 included
special charges of $9 million in the fourth quarter for the write-down of assets
associated with the adoption of SFAS 121 and $11 million in the third quarter
for employee separations.
Fourth Quarter Year
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International (Millions): 1996 1995 1996 1995
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Operating earnings before special items $ 43 $ 117 $ 252 $ 358
Special items (26) (31) 198 7
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Total operating net income $ 17 $ 86 $ 450 $ 365
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In the international downstream, comparative fourth quarter and year
1996 earnings reflected lower results in both the Caltex and Europe operating
areas, partly offset by higher earnings in Latin America.
In the Caltex area of operations, refining and marketing margins were
generally lower in Australia, Korea, Thailand, and Japan due to the inability to
recover higher crude costs in the marketplace. Lower paraxylene sales volumes
and prices in Korea added to the unfavorable comparative results.
In Europe, operating results for the fourth quarter and year 1996
included non-cash currency translation charges relating to deferred income taxes
of $18 million and $20 million, respectively, due to the strengthening of the
Pound Sterling in relation to the U.S. dollar. This compared with benefits of $6
million for the fourth quarter and $3 million for the year 1995. Excluding these
non-cash charges, fourth quarter earnings in Europe improved as higher refining
margins more than offset lower marketing margins. For the year, significantly
depressed marketing margins due to intense competitive pressures and oversupply
in the marketplace, especially in the U.K., were only partly offset by improved
refining operations and margins.
Improved earnings in Latin America, primarily a result of strong margin
and volume growth in Brazil, as well as entry into new markets, partly offset
the lower Caltex and European results.
Results for the year 1996 included net special gains of $198 million,
consisting of a first quarter $224 million gain relating to the sale by Caltex
of its interest in Nippon Petroleum Refining Company, Limited which was reduced
by a related fourth quarter charge of $5 million for additional taxes on the
sale. Also, included in 1996 results is a fourth quarter charge for employee
separations of $21 million. Net special gains of $7 million for the year 1995
included a net gain of $80 million, principally for the first quarter sale of
land by a Caltex affiliate in Japan, $42 million in charges during the third
quarter related to employee separations and restructuring, and a fourth quarter
charge of $31 million associated with the adoption of SFAS 121.
NONPETROLEUM
Fourth Quarter Year
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(Millions): 1996 1995 1996 1995
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Operating earnings before special items $ 5 $ 12 $ 16 $ 32
Special items - (87) - (60)
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Total operating net income (loss) $ 5 $ (75) $ 16 $ (28)
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Comparative nonpetroleum results decreased in the fourth quarter and
year 1996 due to better loss experience of insurance operations in 1995. This
decrease was partially offset by higher 1996 gasification licensing revenues.
Special items in 1995 included a fourth quarter charge of $87 million
related to the write-down of assets associated with the adoption of SFAS 121 and
a third quarter gain of $27 million from the sale of the company's interest in
Pekin Energy Company.
CORPORATE/NONOPERATING RESULTS
Fourth Quarter Year
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(Millions): 1996 1995 1996 1995
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Results before special items $ (96) $ (103) $ (410) $ (396)
Special items 154 5 154 33
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Total corporate/nonoperating $ 58 $ (98) $ (256) $ (363)
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Comparative corporate/nonoperating results for the year were impacted
by gains on sales of equity securities held for investment by insurance
operations in 1995. This effect was partially offset by reduced interest expense
in 1996 principally in the fourth quarter from lower interest rates and debt
levels.
Results for both 1996 and 1995 included special items. Special items
for 1996, recorded in the fourth quarter, included $188 million of tax benefits
attributable to sales of interests in a subsidiary. Results for the fourth
quarter and year 1995 included similar benefits of $21 million and $65 million,
respectively. The fourth quarter of 1996 also 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. Additionally, fourth quarter 1996 and third quarter 1995 included
charges of $43 million and $16 million, respectively, for employee separations.
Fourth quarter 1995 results included $16 million in charges for the write-down
of assets associated with the adoption of SFAS 121.
CAPITAL AND EXPLORATORY EXPENDITURES
Capital and exploratory expenditures, including equity in such
expenditures of affiliates, were $3,431 million for the year 1996 as compared to
$3,128 million for 1995. For the fourth quarter, expenditures totaled $1,179
million in 1996 as compared to $1,084 million for 1995.
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In the United States, exploration and development expenditures
increased during 1996 reflecting strategic opportunities in both the shelf and
deepwater areas of the Gulf of Mexico. Utilizing the synergies of advanced
technologies, Texaco continues to add oil and gas reserves and expand
development activities on key projects in this region. Also, construction has
commenced on a major natural gas gathering and transmission pipeline and
processing complex to be located onshore and offshore South Louisiana.
International upstream expenditures in 1996 also increased from 1995
levels reflecting continued development efforts in the Erskine Field and Mariner
Block in the U.K. North Sea, in Indonesia, in the Partitioned Neutral Zone, and
for offshore projects in Australia and Nigeria. In addition, higher expenditures
reflect several new fields brought into production in 1996 in Angola, Colombia
and Trinidad, as well as a general increase in exploratory activity. These
increases were partially offset by reduced expenditures in the Captain Field in
the North Sea, which will begin production shortly.
Downstream expenditure levels in the United States decreased due to the
completion of major refinery projects and upgrades both for Texaco and its
affiliate Star Enterprise. Partly offsetting these declines were increased joint
marketing initiatives with quick service restaurants and lube outlets, as well
as strategic service station site acquisitions and alliances. Also, construction
continued on the Poseidon oil pipeline, which will service new deepwater and
subsalt oil production from the central Gulf of Mexico.
International downstream expenditures also decreased primarily due to
significant 1995 expenditures related to Caltex's refinery construction in
Thailand and upgrade in Singapore, as well as Texaco's 1995 expenditures to
upgrade refineries in Panama and the U.K. However, marketing investments in
1996, particularly by Texaco in Latin American growth markets and selected
European locations, and by Caltex in high-growth areas of the Pacific Rim,
largely offset the decrease in refinery spending.
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CONTACTS: Chris Gidez 914-253-4042
Jim Swords 914-253-4156
Cynthia Michener 914-253-4743
Yorick Fonseca 914-253-7034
Additional Texaco information is available on the World Wide Web at:
http://www.texaco.com
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Fourth Quarter (a) Year (a)
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1996 1995 1996 1995
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FUNCTIONAL NET INCOME (LOSS) ($000,000)
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Operating Earnings (Losses)
Petroleum and natural gas
Exploration and production
United States $ 351 $(302) $1,123 $ 293
International 113 87 478 340
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Total 464 (215) 1,601 633
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Manufacturing, marketing and
distribution
United States (35) 51 207 121
International 17 86 450 365
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Total (18) 137 657 486
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Total petroleum and natural gas 446 (78) 2,258 1,119
Nonpetroleum 5 (75) 16 (28)
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Total operating earnings (losses) 451 (153) 2,274 1,091
Corporate/Nonoperating 58 (98) (256) (363)
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Net income (loss) before accounting change (b) 509 (251) 2,018 728
Cumulative effect of adoption of SFAS 121 - - - (121)
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Total net income (loss) $ 509 $ (251) $2,018 $ 607
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EARNINGS (LOSSES) PER COMMON SHARE (dollars)
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Net income (loss) before cumulative effect of
accounting change $ 1.90 $(1.02) $ 7.52 $ 2.57
Cumulative effect of accounting change - - - (.47)
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Total net income (loss) $ 1.90 $(1.02) $ 7.52 $ 2.10
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Average number of common shares
outstanding for computation
of earnings per share (000,000) 260.7 260.3 260.7 260.0
<FN>
(a) Includes special items as detailed in news release text
(b) Includes provision (benefit) for income taxes
($000,000) $ (3) $ (230) $ 965 $ 258
</FN>
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Fourth Quarter Year
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OTHER FINANCIAL DATA ($000,000) 1996 1995 1996 1995
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Revenues $12,871 $ 9,647 $45,500 $36,787
Total assets as of December 31 (c) $27,000 $24,937
Stockholders' equity as of December 31 (c) $10,380 $ 9,519
Total debt as of December 31 (c) $ 5,600 $ 6,240
Capital and exploratory expenditures
(includes equity in affiliates)
Exploration and production
United States $ 349 $ 285 $ 1,243 $ 904
International 373 306 1,135 1,033
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Total 722 591 2,378 1,937
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Manufacturing, marketing and
distribution
United States 126 190 360 453
International 313 272 658 687
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Total 439 462 1,018 1,140
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Other 18 31 35 51
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Total $1,179 $ 1,084 $ 3,431 $ 3,128
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Texaco Inc. and subsidiary companies
Exploratory expenses included above:
United States $ 41 $ 31 $ 153 $ 94
International 95 78 226 195
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Total $ 136 $ 109 $ 379 $ 289
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Dividends paid to common stockholders $ 221 $ 208 $ 859 $ 832
Dividends per common share (dollars) $ .85 $ .80 $ 3.30 $ 3.20
Dividend requirements for preferred
stockholders $ 14 $ 14 $ 57 $ 60
<FN>
(c) Preliminary
</FN>
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Fourth Quarter Year
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OPERATING DATA - INCLUDING 1996 1995 1996 1995
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INTERESTS IN AFFILIATES
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Exploration and Production
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United States
Net production of crude oil and
natural gas liquids (000 BPD) 387 382 388 381
Net production of natural gas -
available for sale (000 MCFPD) 1,661 1,592 1,675 1,619
Total net production (000 BOEPD) 664 647 667 651
Natural gas sales (000 MCFPD) 3,404 3,124 3,176 3,153
Natural gas liquids sales
(including purchased LPGs) (000 BPD) 203 222 206 216
Average U.S. crude (per bbl.) $20.00 $14.89 $17.93 $15.10
Average U.S. natural gas (per mcf) $ 2.54 $ 1.81 $ 2.19 $ 1.65
Average WTI (Spot) (per bbl.) $24.67 $18.15 $22.16 $18.43
Average Kern (Spot) (per bbl.) $17.32 $12.57 $15.53 $13.57
International
Net production of crude oil and
natural gas liquids (000 BPD):
Europe 116 113 115 116
Indonesia 152 153 145 150
Partitioned Neutral Zone 80 69 76 59
Other 64 58 63 56
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Total 412 393 399 381
Net production of natural gas -
available for sale (000 MCFPD):
Europe 207 183 188 203
Colombia 148 119 125 119
Other 80 51 69 51
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Total 435 353 382 373
Total net production (000 BOEPD) 485 452 463 443
Natural gas sales (000 MCFPD) 538 439 477 435
Natural gas liquids sales
(including purchased LPGs) (000 BPD) 68 81 89 80
Average International crude (per bbl.) $21.96 $16.17 $19.55 $16.29
Average U.K. natural gas (per mcf) $ 2.83 $ 2.76 $ 2.63 $ 2.65
Average Colombia natural gas (per mcf) $ .99 $ .97 $ .96 $ .89
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Fourth Quarter Year
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OPERATING DATA - INCLUDING 1996 1995 1996 1995
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INTERESTS IN AFFILIATES
Manufacturing, Marketing and Distribution
United States
Refinery input (000 BPD)
Subsidiary 401 396 404 393
Affiliate - Star Enterprise 320 301 320 300
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Total 721 697 724 693
Refined product sales (000 BPD)
Gasolines 499 451 499 449
Avjets 112 127 123 99
Middle Distillates 222 206 216 196
Residuals 73 44 67 51
Other 120 164 131 139
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Total 1,026 992 1,036 934
International
Refinery input (000 BPD)
Europe 352 347 340 300
Affiliate - Caltex 352 451 364 443
Latin America/West Africa 39 68 58 45
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Total 743 866 762 788
Refined product sales (000 BPD)
Europe 488 531 461 473
Affiliate - Caltex 599 698 601 658
Latin America/West Africa 373 378 391 362
Other 74 72 64 74
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Total 1,534 1,679 1,517 1,567