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United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
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Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1999 Commission file number 1-27
Texaco Inc.
(Exact name of the registrant as specified in its charter)
Delaware 74-1383447
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2000 Westchester Avenue
White Plains, New York 10650
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 253-4000
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Texaco Inc. (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past 90 days.
As of July 30, 1999, there were outstanding 552,731,443 shares of Texaco
Inc. Common Stock - par value $3.125.
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PART I - FINANCIAL INFORMATION
TEXACO INC.
STATEMENT OF CONSOLIDATED INCOME
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 1999 AND 1998
---------------------------------------------------------
(Millions of dollars, except as noted)
(Unaudited)
------------------------------------------------
For the six months For the three months
ended June 30, ended June 30,
------------------ --------------------
1999 1998 1999 1998
---- ---- ---- ----
REVENUES
Sales and services $15,030 $15,651 $ 8,116 $ 7,729
Equity in income of affiliates, interest,
asset sales and other 429 540 153 315
------- ------- ------- -------
15,459 16,191 8,269 8,044
------- ------- ------- -------
DEDUCTIONS
Purchases and other costs 11,806 12,086 6,356 5,972
Operating expenses 1,109 1,225 550 645
Selling, general and administrative expenses 601 572 311 296
Exploratory expenses 210 231 80 90
Depreciation, depletion and amortization 726 763 365 375
Interest expense 245 234 124 116
Taxes other than income taxes 148 225 72 109
Minority interest 35 30 16 15
------- ------- ------- -------
14,880 15,366 7,874 7,618
------- ------- ------- -------
Income before income taxes and cumulative
effect of accounting change 579 825 395 426
Provision for income taxes 107 224 122 84
------- ------- ------- -------
Income before cumulative effect of
accounting change 472 601 273 342
Cumulative effect of accounting change - (25) - -
------- ------- ------- -------
NET INCOME $ 472 $ 576 $ 273 $ 342
======= ======= ======= =======
Preferred stock dividend requirements $ 23 $ 27 $ 10 $ 13
------- ------- ------- -------
Net income available for common stock $ 449 $ 549 $ 263 $ 329
======= ======= ======= =======
Per common share (dollars)
Basic net income $ 0.85 $ 1.03 $ 0.50 $ 0.62
Diluted net income $ 0.85 $ 1.03 $ 0.50 $ 0.61
Cash dividends paid $ 0.90 $ 0.90 $ 0.45 $ 0.45
Average shares outstanding for computation
of earnings per share (thousands)
Basic 526,965 531,232 527,700 530,550
Diluted 529,640 550,598 530,236 549,775
<FN>
See accompanying notes to consolidated financial statements.
</FN>
- 1 -
TEXACO INC.
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1999 AND DECEMBER 31, 1998
-----------------------------------------
(Millions of dollars)
June 30, December 31,
1999 1998
----------- ------------
(Unaudited)
-----------
ASSETS
Current Assets
Cash and cash equivalents $ 323 $ 249
Short-term investments - at fair value 26 22
Accounts and notes receivable, less allowance for doubtful
accounts of $27 million in 1999 and $28 million in 1998 3,593 3,955
Inventories 1,366 1,154
Deferred income taxes and other current assets 285 256
------- -------
Total current assets 5,593 5,636
Investments and Advances 6,671 7,184
Properties, Plant and Equipment - at cost 35,499 35,494
Less - accumulated depreciation, depletion and amortization 20,604 20,733
------- -------
Net properties, plant and equipment 14,895 14,761
Deferred Charges 1,036 989
------- -------
Total $28,195 $28,570
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 590 $ 939
Accounts payable and accrued liabilities
Trade liabilities 2,247 2,302
Accrued liabilities 1,121 1,368
Estimated income and other taxes 701 655
------- -------
Total current liabilities 4,659 5,264
Long-Term Debt and Capital Lease Obligations 6,787 6,352
Deferred Income Taxes 1,476 1,644
Employee Retirement Benefits 1,272 1,248
Deferred Credits and Other Noncurrent Liabilities 1,487 1,550
Minority Interest in Subsidiary Companies 700 679
------- -------
Total 16,381 16,737
Stockholders' Equity
Market Auction Preferred Shares 300 300
ESOP Convertible Preferred Stock - 428
Unearned employee compensation and benefit plan trust (320) (334)
Common stock (authorized: 700,000,000 shares, $3.125 par value;
567,576,504 shares issued in 1999; 567,606,290 shares issued in 1998) 1,774 1,774
Paid-in capital in excess of par value 1,302 1,640
Retained earnings 9,536 9,561
Other accumulated nonowner changes in equity
Currency translation adjustment (107) (107)
Minimum pension liability adjustment (24) (24)
Unrealized net gain on investments 8 30
------- -------
Total other accumulated nonowner changes in equity (123) (101)
------- -------
12,469 13,268
Less - Common stock held in treasury, at cost 655 1,435
------- -------
Total stockholders' equity 11,814 11,833
------- -------
Total $28,195 $28,570
======= =======
<FN>
See accompanying notes to consolidated financial statements.
</FN>
-2-
TEXACO INC.
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
-----------------------------------------------
(Millions of dollars)
(Unaudited)
-----------------------
For the six months
ended June 30,
-----------------------
1999 1998
---- ----
OPERATING ACTIVITIES
Net income $ 472 $ 576
Reconciliation to net cash provided by (used in)
operating activities
Cumulative effect of accounting change -- 25
Depreciation, depletion and amortization 726 763
Deferred income taxes (96) (21)
Exploratory expenses 210 231
Minority interest in net income 35 30
Dividends from affiliates, greater (less) than
equity in income 58 (116)
Gains on asset sales (62) (58)
Changes in working capital (267) (316)
Other - net (23) 9
------- -------
Net cash provided by operating activities 1,053 1,123
INVESTING ACTIVITIES
Capital and exploratory expenditures (1,109) (1,503)
Proceeds from asset sales 219 113
Purchases of investment instruments (283) (405)
Sales/maturities of investment instruments 606 458
Collection of note/formation payments from U.S. affiliate 101 463
Other - net -- 25
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Net cash used in investing activities (466) (849)
FINANCING ACTIVITIES
Borrowings having original terms in excess
of three months
Proceeds 1,843 967
Repayments (298) (454)
Net increase (decrease) in other borrowings (1,522) 201
Purchases of common stock -- (404)
Dividends paid to the company's stockholders
Common (474) (479)
Preferred (23) (28)
Dividends paid to minority stockholders (15) (35)
------- -------
Net cash used in financing activities (489) (232)
CASH AND CASH EQUIVALENTS
Effect of exchange rate changes (24) (8)
------- -------
Increase during period 74 34
Beginning of year 249 311
------- -------
End of period $ 323 $ 345
======= =======
<FN>
See accompanying notes to consolidated financial statements.
</FN>
-3-
TEXACO INC.
CONDENSED STATEMENT OF CONSOLIDATED NONOWNER CHANGES IN EQUITY
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 1999 AND 1998
--------------------------------------------------------------
(Millions of dollars)
(Unaudited)
-------------------------------------------------
For the six months For the three months
ended Jurne 30, ended June 30,
------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
Net income $ 472 $ 576 $ 273 $ 342
Other nonowner changes in equity (net of tax)
Currency translation adjustment - (2) - -
Minimum pension liability adjustment - 2 - -
Unrealized net gain (loss) on investments (22) 7 (2) 2
------- ------- ------- --------
(22) 7 (2) 2
------- ------- ------- --------
Total nonowner changes in equity $ 450 $ 583 $ 271 $ 344
======= ======= ======= ========
TEXACO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Segment Information
- ---------------------------
For the six months ended June 30,
-------------------------------------------------------------------------------
1999 1998
-------------------------------------- -------------------------------------
Sales and Services After Sales and Services After
Inter- Tax Inter- Tax
Outside Segment Total Profit (Loss) Outside Segment Total Profit (Loss)
------- ------- ----- ------------- ------- ------- ----- -------------
(Millions of dollars)
(Unaudited)
Exploration and production
United States $ 826 $ 666 $ 1,492 $ 186 $ 926 $ 905 $ 1,831 $208
International 1,022 724 1,746 56 1,027 663 1,690 109
Refining, marketing and distribution
United States 1,440 7 1,447 87 1,358 78 1,436 111
International 9,856 74 9,930 371 9,883 26 9,909 376
Global gas marketing 1,854 51 1,905 13 2,430 44 2,474 1
------- ------ ------ ---- ------- ------ ------ ----
Segment totals $14,998 $1,522 16,520 713 $15,624 $1,716 17,340 805
======= ====== ======= ======
Other business units 45 (5) 44 --
Corporate/Non-operating 4 (236) 2 (204)
Intersegment eliminations (1,539) -- (1,735) --
------ ---- ------ ----
Consolidated, before
cumulative effect of
accounting change $15,030 $ 472 $15,651 $601
======= ===== ======= ====
- 4 -
For the three months ended June 30,
-------------------------------------------------------------------------------
1999 1998
-------------------------------------- --------------------------------------
Sales and Services After Sales and Services After
Inter- Tax Inter- Tax
Outside Segment Total Profit (Loss) Outside Segment Total Profit (Loss)
------- ------- ----- ------------- ------- ------- ----- -------------
(Millions of dollars)
(Unaudited)
Exploration and production
United States $ 477 $370 $ 847 $148 $ 438 $451 $ 889 $100
International 577 485 1,062 76 498 367 865 61
Refining, marketing and distribution
United States 835 4 839 24 642 23 665 64
International 5,304 35 5,339 151 4,929 15 4,944 194
Global gas marketing 906 27 933 1 1,213 25 1,238 10
------ ---- ----- ---- ------- ---- ----- ----
Segment totals $8,099 $921 9,020 400 $ 7,720 $881 8,601 429
====== ==== ======= ====
Other business units 22 1 18 (2)
Corporate/Non-operating 3 (128) -- (85)
Intersegment eliminations (929) -- (890) --
----- ---- ----- ---
Consolidated $8,116 $273 $7,729 $342
====== ==== ====== ====
Assets as of
--------------------------------------------
June 30, December 31,
1999 1998
----------- ------------
(Unaudited)
(Millions of dollars)
Exploration and production
United States $ 8,681 $ 8,699
International 4,561 4,352
Refining, marketing and distribution
United States 3,666 4,095
International 8,745 8,306
Global gas marketing 822 879
------- -------
Segment totals 26,475 26,331
Other business units 557 506
Corporate/Non-operating 1,486 1,945
Intersegment eliminations (323) (212)
------- -------
Consolidated $28,195 $28,570
======= =======
- 5 -
Note 2. Inventories
- -------------------
The inventory accounts of Texaco are presented below (in millions of dollars):
As of
--------------------------------------
June 30, December 31,
1999 1998
----------- ------------
(Unaudited)
Crude oil $ 203 $ 116
Petroleum products and petrochemicals 932 799
Other merchandise 37 40
Materials and supplies 194 199
------ -------
Total $1,366 $ 1,154
====== =======
Note 3. Redemption of Series B and Series F ESOP Convertible Preferred Stock
- ----------------------------------------------------------------------------
On June 30, 1999, each share of Series B ESOP Convertible Preferred Stock was
converted into 25.736 shares, or 15.1 million shares in total, of Common Stock
of Texaco Inc., after we called the Series B for redemption.
On February 16, 1999, each share of Series F ESOP Convertible Preferred Stock
was converted into 20 shares, or 1.1 million shares in total, of Common Stock of
Texaco Inc., after we called the Series F for redemption.
These noncash financing activities for the first six months of 1999 resulted in
reductions of $391 million in preferred stock outstanding and $308 million in
paid-in capital. This was offset by a $699 million reduction in the cost of
shares held in treasury.
Note 4. Other Financial Information, Commitments and Contingencies
- ------------------------------------------------------------------
Information relative to commitments and contingent liabilities of Texaco is
presented in Note 16, pages 67-68, of our 1998 Annual Report and in Note 4,
pages 5 and 6, of our first quarter, 1999 Form 10-Q.
It is impossible for us to ascertain the ultimate legal and financial liability
with respect to contingencies and commitments. However, we do not anticipate
that the aggregate amount of such liability in excess of accrued liabilities
will be materially important in relation to our consolidated financial position
or results of operations.
Note 5. Investments in Significant Equity Affiliates
- ----------------------------------------------------
U.S. Downstream Alliances
Summarized unaudited financial information for Equilon, formed January 1, 1998
and jointly owned 44% by Texaco and 56% by Shell Oil Company, is presented below
on a 100% Equilon basis (in millions of dollars):
For the six months For the three months
ended June 30, ended June 30,
-------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
Gross revenues $13,787 $12,095 $8,008 $6,070
Income (loss) before income taxes $ 48 $ 310 $ (123) $ 198
- 6 -
Summarized unaudited financial information for Motiva, formed July 1, 1998 and
jointly owned 32.5% each by Texaco and Saudi Refining, Inc. (a corporate
affiliate of Saudi Aramco) and 35% by Shell Oil Company, is presented below on a
100% Motiva basis (in millions of dollars):
For the six months For the three months
ended June 30, 1999 ended June 30, 1999
------------------- -------------------
Gross revenues $5,315 $3,073
Income (loss) before income taxes $ 20 $ (21)
We account for our interests in Equilon and Motiva using the equity method of
accounting. Under this method, we record our share of Equilon's and Motiva's
results of operations on a one-line basis to Equity in Income of Affiliates in
the Statement of Consolidated Income. Additionally, since Equilon and Motiva are
limited liability companies, we record the provision and related liability for
income taxes applicable to our share of Equilon's and Motiva's pre-tax income in
our consolidated financial statements.
Caltex Group of Companies
Summarized unaudited financial information for the Caltex Group of Companies,
owned 50% by Texaco and 50% by Chevron Corporation, is presented below on a 100%
Caltex Group basis (in millions of dollars):
For the six months For the three months
ended June 30, ended June 30,
--------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
Gross revenues $8,666 $8,555 $4,706 $4,249
Income before income taxes and cumulative
effect of accounting change $ 518 $ 590 $ 229 $ 270
Income before cumulative effect
of accounting change $ 343 $ 427 $ 140 $ 222
Net income $ 343 $ 377 $ 140 $ 222
Effective January 1, 1998, Caltex adopted a new accounting standard, Statement
of Position 98-5, "Reporting on the Costs of Start-Up Activities," issued by the
American Institute of Certified Public Accountants. This resulted in a change in
accounting for start-up costs at Caltex' Thailand refinery. Caltex' first
quarter 1998 results included a $50 million charge (no tax benefit) associated
with this accounting change.
Note 6. Subsequent Events
- -------------------------
In July 1999, the Governing Council of the United Nations Compensation
Commission (UNCC) approved an award to Saudi Arabian Texaco Inc. (SAT), a
wholly-owned subsidiary of Texaco Inc., of about $505 million, plus unspecified
interest, for damages sustained as a result of Iraq's invasion of Kuwait in
1990. Payments to SAT are subject to income tax in Saudi Arabia at an applicable
tax rate of 85%. SAT is party to a concession agreement with the Kingdom of
Saudi Arabia covering the Partitioned Neutral Zone in Southern Kuwait and
Northern Saudi Arabia.
UNCC funds compensation awards by retaining 30% of Iraqi oil sales revenue under
an agreement with Iraq. We do not know when we will receive this award since the
timing of payments by UNCC depends on several factors, including the total
amount of all compensation awards, the ability of Iraq to produce and sell oil,
the price of Iraqi oil and the duration of U.N. trade sanctions on Iraq. This
award will be recognized in income when collection is assured.
- 7 -
Caltex Corporation, our 50% owned affiliate, announced on July 28, 1999 that it
had entered into a non-binding, written understanding with Nippon Mitsubishi Oil
Corporation (NMOC) relating to a public tender offer for shares of Koa Oil Co.
Ltd. (Koa), a Japanese refining enterprise. Caltex currently owns 72,600,000
shares, or 50 percent, of Koa. The understanding sets forth conditions under
which NMOC would undertake a public tender in Japan for 72,600,000 shares of Koa
at 360 Yen (about $3.10) per share. If formalized, the public tender would
commence in late August and run until mid-September. The public tender offer is
subject to pricing, market conditions and due-diligence reviews by NMOC. Caltex
has not committed to tendering its shares to NMOC. There are numerous
uncertainties surrounding the ultimate outcome of the tender offer. If Caltex
were to tender its shares to NMOC for the equivalent of $3.10 per share, the
impact on us from this transaction would be a loss in the third quarter.
* * * * * * * * * * *
We have consistently applied the accounting policies we used in preparing the
financial statements we issued in our 1998 Annual Report to our unaudited
financial statements for the six and three-month periods ended June 30, 1999 and
1998. In our opinion, we have made all adjustments and disclosures necessary to
present fairly our results of operations for such periods. These adjustments
include normal recurring adjustments. The information is subject to year-end
audit by independent public accountants. We make no forecasts or representations
with respect to the level of net income for the year 1999.
* * * * * * * * * * *
SUPPLEMENTAL MARKET RISK DISCLOSURES
We are exposed to the following types of market risks:
o The price of crude oil, natural gas and petroleum products
o The value of foreign currencies in relation to the U.S. dollar
o Interest rates
We use derivative financial instruments, such as futures, forwards, options and
swaps, in managing these risks. There were no material changes during the first
six months of 1999 in our exposure to losses from possible future changes in the
price of crude oil, natural gas and petroleum products, or from possible future
changes in the value of foreign currencies in relation to the U. S. dollar.
The Liquidity and Capital Resources section of the MD&A appearing on page 14 of
this Form 10-Q describes financing and related hedging transactions we entered
into during the first six months of 1999. As a result of those transactions, our
variable rate debt, before the effects of interest rate swaps, now totals $2.2
billion, as compared with $2.7 billion at year-end 1998. The notional amount of
interest rate swaps increased $850 million and now totals $1.6 billion. Based on
our present interest rate exposure on variable rate debt and interest rate
swaps, a hypothetical increase or decrease in interest rates of 200 basis points
would not materially affect our consolidated financial position, net income or
cash flows.
- 8 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Texaco's net income for the second quarter of 1999 was $273 million, or $0.50
per share, as compared with $342 million, or $0.61 per share, for the second
quarter of 1998. Net income for the first six months of 1999 was $472 million,
or $0.85 per share, as compared with $576 million, or $1.03 per share, for the
first six months of 1998. Both the 1999 and 1998 periods included special items.
Income before special items for the second quarter of 1999 was $286 million, or
$0.52 per share, as compared with $335 million, or $0.60 per share, for the
second quarter of 1998. For the first six months of 1998, income before special
items was $391 million, or $0.70 per share, as compared with $594 million, or
$1.06 per share, for the first six months of 1998.
Our second quarter earnings, while below last year, showed marked improvement
over this year's first quarter as we benefited from the recovery in crude oil
and natural gas prices. The benchmark price for crude has risen into the $19 to
$20 per barrel range signaling higher upstream earnings in the months ahead.
Refining margins, however, remain at historically low levels in most areas of
the world. A bright spot in our downstream was the solid performance of our
Western U.S. operations. Also, our Latin American operations continue to grow
led by solid earnings in the Caribbean and Central American areas.
While we maintain our focus on strategic growth opportunities, our accelerated
$650 million cost reduction program continues to produce benefits. Expenses per
barrel declined nine percent versus a year ago, the U.S. downstream alliances
are ahead of schedule in capturing synergy benefits and the cost reduction and
restructuring programs by Caltex should enhance its returns as the Asian
economies recover.
Recent successes in our pursuit of high-impact exploration and production
opportunities include:
o June start-up production from the Gemini project in the Gulf of Mexico;
o The acquisition of an additional 10 percent equity ownership in the Hamaca
oil project in Venezuela, raising our ownership share to 30 percent;
o An agreement with Petrobras, Brazil's national oil company, to become an
equity partner in the Campos exploration and the Frade development areas
offshore Brazil; and
o A successful bid on three high potential offshore exploration blocks in
Brazil's First License Round.
Results for 1999 and 1998 are summarized in the table on the following page.
Details on special items are included in the segment analysis which follows this
table.
- 9 -
(Unaudited)
-------------------------------------------------
For the six months For the three months
ended June 30, ended June 30,
------------------ --------------------
1999 1998 1999 1998
---- ---- ---- ----
(Millions of Dollars)
Income before special items $ 391 $ 594 $ 286 $ 335
------- ------- ------ -----
Inventory valuation adjustments 138 - 55 -
Write-down of assets (76) - (76) -
Tax issues 65 19 54 19
Gains on major asset sales 21 20 21 20
Reorganization, restructuring and employee separation costs (67) (32) (67) (32)
------- ------- ------ -----
Special items 81 7 (13) 7
------- ------- ------ -----
Adoption of new accounting standard
Cumulative effect of accounting change - (25) - -
------- ------- ------ -----
Net income $ 472 $ 576 $ 273 $ 342
======= ======= ====== =====
Effective January 1, 1998, our affiliate, Caltex, adopted a new accounting
standard, Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities," issued by the American Institute of Certified Public Accountants.
This resulted in a change in accounting for start-up costs at its Thailand
refinery. Our first quarter 1998 results included a $25 million charge
associated with this accounting change.
OPERATING RESULTS
EXPLORATION AND PRODUCTION
United States
Exploration and production earnings in the U.S. for the second quarter of 1999
were $148 million, as compared with $100 million for the second quarter of 1998.
For the first six months of 1999 and 1998, earnings were $186 million and $208
million. Results for 1999 included a second quarter special gain of $21 million
from the sale of our interest in six California onshore and offshore fields, and
a special charge of $11 million for employee separation costs. See the section
entitled, Reorganizations, Restructurings and Employee Severance Programs
beginning on page 14 of this Form 10-Q for additional information. Results for
the first six months of 1999 also included a first quarter special benefit of
$11 million for a production tax refund. Excluding these special items, results
for the second quarter and first six months of 1999 totaled $138 million and
$165 million.
U.S. exploration and production earnings in the second quarter of 1999 were
above last year's levels mostly due to higher crude oil prices. Prices continued
to rise in the second quarter as there was high compliance by OPEC and several
non-OPEC countries with previously announced production cutbacks leading to a
decline in worldwide inventory levels. Average realized crude oil prices for the
second quarter 1999 were $12.80 per barrel, a 40 percent increase over the first
quarter and 19 percent above last year. Average natural gas prices were $2.05
per MCF in the second quarter, the same as last year.
Earnings for the first six months of 1999 were below last year due to lower
production and depressed natural gas prices during the first quarter. Average
natural gas prices were $1.92 per MCF, nine percent below last year. Also,
average realized crude oil prices were $10.95 per barrel, three percent below
last year.
- 10 -
Production decreased 12 percent for the second quarter and first half of 1999
due to natural field declines and asset sales. Focusing on capital efficiency,
Texaco and our operating partners reduced developmental activities such as
infill drilling, recompletions and secondary recovery projects, normally
undertaken to offset production declines within mature fields.
Expenses were lower for the second quarter and first half of 1999 as a result of
cost savings from the restructuring of our worldwide upstream organization.
Exploratory expenses for the second quarter and first half of 1999 were $38
million and $92 million before tax, $13 million and $55 million below the same
periods of 1998.
International
Exploration and production earnings outside the U.S. for the second quarter of
1999 were $76 million, as compared with $61 million for the second quarter of
1998. For the first six months of 1999 and 1998, earnings were $56 million and
$109 million. Results for 1999 included second quarter special charges of $2
million for employee separation costs. See the section entitled,
Reorganizations, Restructurings and Employee Severance Programs beginning on
page 14 of this Form 10-Q for additional information. Excluding the special
charges, results for the second quarter and first six months of 1999 totaled $78
million and $58 million.
International exploration and production operating results for the second
quarter of 1999 were above last year's levels mostly due to higher crude oil
prices. Crude oil prices for the second quarter of 1999 continued to rise due to
worldwide production cutbacks and inventory declines. Average realized crude oil
prices for the second quarter of 1999 were $13.73 per barrel, a 39 percent
increase over the prior quarter and 20 percent above last year.
Operating results for the first six months of 1999 were below last year mostly
due to higher exploratory expenses. Also, average realized crude oil prices were
$11.60 per barrel, slightly lower than last year and average natural gas prices
were $1.37 per MCF, 15 percent below last year.
Daily production in the second quarter and first six months of 1999 was flat
with last year. During the first half of 1999 production declines from the U.K.
North Sea, due to temporary operating problems in the first quarter, and lower
gas production in Latin America were offset by increased production in the
Partitioned Neutral Zone, Indonesia and Karachaganak. Expenses were lower for
the second quarter of 1999 as a result of cost savings from the restructuring of
our worldwide upstream organization. Exploratory expenses for the second quarter
of 1999 were $42 million before taxes, slightly higher than last year.
Exploratory expenses for the first six months of 1999 were $118 million before
taxes, $34 million higher than last year due to an unsuccessful first quarter
exploratory well in a new offshore area of Trinidad.
Looking Forward in the Worldwide Upstream
We intend to cost-effectively explore for, develop and produce crude oil and
natural gas reserves. Our areas of focus include the U.S. Gulf of Mexico, the
U.K. North Sea, Kazakhstan, Latin America and West Africa, where we recently
announced two major oil discoveries offshore Nigeria.
We have begun to capture the expected $200 million in annual pre-tax cash
expense savings from our worldwide upstream restructuring program announced in
November, 1998. The program is designed to place greater emphasis on our
long-term production and reserve growth, and to address the need for
streamlining costs and improving competitiveness. These savings include lower
people-related and operating expenses.
- 11 -
REFINING, MARKETING AND DISTRIBUTION
United States
We conduct our U.S. downstream activities primarily through Equilon, our western
alliance with Shell Oil Company, and Motiva, our eastern alliance with Shell Oil
Company and Saudi Refining, Inc.
Our share of refining, marketing and distribution earnings in the U.S. for the
second quarter of 1999 were $24 million, as compared with $64 million for the
second quarter of 1998. For the first six months of 1999 and 1998, earnings were
$87 million and $111 million. Results for 1999 included second quarter special
charges of $76 million for asset write-downs to their estimated sales values due
to the pending sales by Equilon of its El Dorado and Wood River refineries and
$11 million for alliance reorganization, restructuring and employee separation
costs. Results for 1999 included a first quarter special benefit of $8 million
due to higher inventory values on March 31, 1999. This follows a fourth-quarter
1998 charge of $34 million to reflect lower prices on December 31, 1998 for
inventories of crude oil and refined products. We value inventories at the lower
of cost or market, after initial recording at cost. Inventory valuation
adjustments are reversed when the associated physical units of inventory are
sold. Excluding these special items, results for the second quarter and first
six months of 1999 were $111 million and $166 million. The second quarter of
1998 included a special charge of $32 million, mainly for alliance employee
separation costs. Excluding this special charge, results for the second quarter
and first six months of 1998 were $96 million and $143 million.
During the second quarter and first half of 1999, Equilon's earnings benefited
from improved West Coast refining and marketing margins, although operational
problems at the Puget Sound refinery and scheduled maintenance at the Los
Angeles refinery had a negative impact on earnings. Margins on the West Coast
remained strong as a result of refinery outages leading to industry supply
disruptions.
Motiva continued to experience weak refining margins during the second quarter
due to high industry wide inventory levels. These effects were partially offset
by higher gasoline volumes.
The second quarter and first half of 1999 also benefited from the realization of
synergies for Equilon and Motiva, which included higher utilization of
proprietary pipelines, marketing staff and function consolidations, reduced
additive costs, and hydrotreater realignment at the Convent refinery.
International
Refining, marketing and distribution earnings outside the U.S. for the second
quarter of 1999 were $151 million, as compared with $194 million for the second
quarter of 1998. For the first six months of 1999 and 1998, earnings were $371
million and $376 million. Results for 1999 included first and second quarter
special benefits of $75 million and $55 million to reflect higher prices for
crude oil and refined products. This follows a fourth-quarter 1998 special
charge of $108 million to reflect lower prices on December 31, 1998, as well as
additional charges previously recorded. We value inventories at the lower of
cost or market, after initial recording at cost. Inventory valuation adjustments
are reversed when the associated physical units of inventory are sold. Results
for the second quarter of 1999 also included a Korean tax benefit of $54
million, as well as Caltex restructuring charges of $25 million and employee
separation costs in Europe and Latin America of $9 million. See the section
entitled, Reorganizations, Restructurings and Employee Severance Programs
beginning on page 14 of this Form 10-Q for additional information. Excluding
these special items, results for the second quarter and first six months of 1999
were $76 million and $221 million.
International refining and marketing operating results for the second quarter of
1999 declined significantly from 1998. The decline was due to the protracted
weakness of international refining margins in both the Caltex and European areas
of operation. Results in Latin America declined due to weak economic conditions
in Brazil and poor refining margins in Panama.
- 12 -
Results for the first half of 1999 were similarly affected by lower refining
margins and intensified competitive pressures. Improved economic conditions in
Asia, resulting in higher sales volumes and reduced currency volatility, were
more than offset by lower margins in the Caltex region. Results in Latin America
and Europe were down due to the economic situation in Brazil and poor refining
margins in the U.K., Netherlands and Panama. In the Caribbean and Central
American areas, marketing results increased due to lower acquisition costs and
increased sales in the industrial sector.
Looking Forward in the Worldwide Downstream
Our U.S. joint ventures with Shell and Saudi Refining, Inc. will continue to
lower costs and capture synergies. We expect that our share of these annual
pre-tax cost reductions will be over $300 million. These savings include lower
people-related expenses and reductions in cash operating expenses due to
efficiencies. We will continue to expand our operations in Latin America. We
have begun to capture the expected $25 million in annual pre-tax cost savings
from our international downstream operations' announced restructuring,
representing lower people-related expenses. In addition, we expect that our
share of the annual pre-tax cost savings from the Caltex reorganization will be
over $25 million, representing lower people-related expenses.
Global Gas Marketing
Global gas marketing earnings for the second quarter of 1999 were $1 million, as
compared with $10 million for the second quarter of 1998. For the first six
months of 1999 and 1998, earnings were $13 million and $1 million. Results for
1999 included a second quarter special charge of $3 million for employee
separation costs. See the section entitled, Reorganizations, Restructurings and
Employee Severance Programs beginning on page 14 of this Form 10-Q for
additional information. Excluding this special charge, results for the second
quarter and first six months of 1999 were $4 million and $16 million. Results
for 1998 included a second quarter special gain of $20 million from the sale of
a partial interest in a pipeline. Excluding this special gain, results for the
second quarter and first six months of 1998 were losses of $10 million and $19
million.
Global gas marketing operating results for the second quarter of 1999 benefited
from the continued improvement of natural gas margins. Results for the first
half of 1999 reflected gains on normal asset sales including our interest in a
U.K. retail gas marketing operation and the sale of a U.S. gas gathering
pipeline.
We have begun to capture over $20 million in annual pre-tax cost savings from
the global gas marketing restructuring announced in November 1998. These savings
include lower people-related expenses and benefits from our exiting the United
Kingdom gas marketing business.
Other Business Units
Results for the second quarter of 1999 were $1 million, as compared with a loss
of $2 million for the second quarter of 1998. Results for the first six months
of 1999 were a loss of $5 million, while there were no earnings for the first
six months of 1998. Our other business units include insurance activity and
power generation and gasification operations.
CORPORATE/NON-OPERATING
Corporate/Non-operating charges for the second quarter of 1999 were $128
million, as compared with charges of $85 million for the second quarter of 1998.
For the first six months of 1999 and 1998, charges were $236 million and $204
million. Results for 1999 included a second quarter special charge of $6 million
for employee separation costs. See the section entitled, Reorganizations,
Restructurings and Employee Severance Programs beginning on page 14 of this Form
10-Q for additional information. Excluding this special charge, charges for the
second quarter and first six months of 1999 were $122 million and $230 million.
Results for 1998 included a second quarter special tax benefit of $19 million
attributable to the sale of an interest in a subsidiary. Excluding this special
gain, charges for the second quarter and first six months of 1998 were $104
million and $223 million.
- 13 -
Corporate/Non-operating results for the second quarter and first half of 1999
reflect higher net interest expense due to decreased interest income from
investments and higher interest expense due to increased debt. First half
results this year included gains on the first quarter sales of marketable
securities.
We have begun to capture the expected $60 million in annual pre-tax cost savings
as a result of the fourth quarter 1998 corporate center reorganization and other
cost-cutting initiatives, mainly lower people-related expenses and operating
expenses.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Our cash, cash equivalents and short-term investments were $349 million at June
30, 1999, as compared with $271 million at year-end 1998.
During 1999, our operations provided cash of $1,053 million. We also had cash
inflows of $219 million from asset sales, $323 million from net sales of
investment instruments and $23 million from net borrowings. Early collection of
a note receivable from our affiliate Equilon provided another $101 million. We
spent $1,109 million on our capital and exploratory program and paid $512
million in common, preferred and minority interest dividends.
At June 30, 1999, our ratio of total debt to total borrowed and invested capital
was 37.1%, as compared with 36.8% at year-end 1998. At June 30, 1999, our
long-term debt included $2.05 billion of debt scheduled to mature within one
year, which we have both the intent and ability to refinance on a long-term
basis. During the first six months of 1999, our debt activity included a $400
million borrowing due 2009, $1,242 million issued under our medium-term note
program and a $100 million borrowing associated with one of our producing
interests located in the U.K. North Sea. In addition, we reduced our commercial
paper by $1,568 million, to $49 million at June 30, 1999, while decreasing other
debt obligations by $151 million. During the first six months of 1999, we
entered into $850 million of floating rate pay interest rate swaps. All floating
rate swaps entered into to date in 1999 are indexed to LIBOR. We maintain $2.05
billion in revolving credit facilities, which were unused at June 30, 1999, to
provide additional support for liquidity and our commercial paper program.
Subsequent to June 30, 1999, we established a new "shelf" registration for $1.5
billion, bringing our total capacity under this program to $2.0 billion.
We consider our financial position to be sufficiently strong to meet our
anticipated future financial requirements.
REORGANIZATIONS, RESTRUCTURINGS AND EMPLOYEE SEVERANCE PROGRAMS
- ---------------------------------------------------------------
In the fourth quarter of 1998, we announced that we were reorganizing several of
our operations and implementing other cost-cutting initiatives. The principal
units affected were our worldwide upstream operations; our international
downstream operations, principally our marketing operations in the United
Kingdom and Brazil and our refining operations in Panama; our global gas
marketing operations; and our corporate center. The reorganizations were
substantially completed by the end of the first quarter of 1999. We accrued $115
million ($80 million, net of tax) for employee separations, curtailment costs
and special termination benefits associated with these announced restructurings
in the fourth quarter of 1998. During the second quarter of 1999, we expanded
the employee severance programs and recorded an additional provision of $48
million ($31 million, net of tax). For the most part, severance accruals are
shown as operating expenses in the Statement of Consolidated Income.
The table on the following page, which identifies each of our four restructuring
initiatives, provides the provision recorded in the fourth quarter of 1998 and
the additional provision recorded in the second quarter of 1999, along with the
payments made through June 30, 1999 and the remaining obligations as of June 30,
1999. We will pay the remaining obligations in future periods in accordance with
plan provisions.
- 14 -
Provision Recorded in the
------------------------- Payments Remaining
Fourth Quarter, Second Quarter, Made Through Obligations as of
1998 1999 June 30, 1999 June 30, 1999
--------------- --------------- ------------- -----------------
(Millions of Dollars)
Worldwide upstream $ 56 $20 $(30) $ 46
International downstream 25 13 (18) 20
Global gas marketing 5 4 (2) 7
Corporate center 29 11 (13) 27
----- --- ---- ----
Total $ 115 $48 $(63) $100
===== === ==== ====
At the time we initially announced these programs, we estimated that over 1,400
employee reductions would result. Employee reductions of 800 in our worldwide
upstream operations, 300 in our international downstream areas, 100 in our
global gas marketing operations and 200 in our corporate center were expected.
During the second quarter of 1999, we expanded the program by almost 1,100
employees, comprised of 600 employees in our worldwide upstream operations, 250
employees in our international downstream areas, 100 employees in our global gas
marketing operations and 150 employees in our corporate center. Through June 30,
1999, employee reductions totaled 1,232 in our worldwide upstream operations,
339 in our international downstream areas, 144 in our global gas marketing
operations and 349 in our corporate center. Almost all of the remaining
reductions will occur during the third quarter of this year.
CAPITAL AND EXPLORATORY EXPENDITURES
- ------------------------------------
Capital and exploratory expenditures were $1,458 million for the first half of
1999, compared with $1,881 million for 1998.
Upstream expenditures in the U.S. for the first six months of 1999 were
significantly below 1998 levels due to reductions and deferrals of exploratory
and developmental spending related to market conditions. Continuing areas of
focus included platform development in deepwater Gulf of Mexico projects and
developmental drilling in California.
Internationally, expenditures increased slightly as we raised our ownership
interest in the Venezuelan Hamaca project and continued to focus spending for
Nigerian lease acquisitions and developmental work in the U.K. North Sea -
Captain B field. These increases were offset by decreased spending in Eurasia
where a significant investment in the Karachaganak project was made in the first
half of 1998. Exploratory expenditures increased due to activity in offshore
Trinidad.
Downstream capital expenditures 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 showed an
increase in spending for Indonesia, California and Philippines cogeneration
facilities.
NEW ACCOUNTING STANDARD
- -----------------------
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes new accounting rules
and disclosure requirements for most derivative instruments and hedge
transactions. In July 1999, the FASB issued SFAS 137, which deferred the
effective date of SFAS 133. We will adopt SFAS 133 effective January 1, 2001 and
are currently assessing the initial effects of adoption.
- 15 -
EURO CONVERSION
- ---------------
On January 1, 1999, 11 of the 15 member countries of the European Union
established fixed conversion rates between their existing legacy currencies and
one common currency--the euro. The euro began trading on world currency
exchanges and may be used in business transactions. On January 1, 2002, new
euro-denominated bills and coins will be issued, and legacy currencies will be
completely withdrawn from circulation by June 30 of that year.
Prior to introduction of the euro, our operating subsidiaries affected by the
euro conversion completed computer systems upgrades and fiscal and legal due
diligence to ensure our euro readiness. Computer systems have been adapted to
ensure that all our operating subsidiaries have the capability to comply with
necessary business requirements and customer/supplier preferences. Legal due
diligence was conducted to ensure post-euro continuity of contracts, and fiscal
reviews were completed to ensure compatibility with our banking relationships.
We, therefore, experienced no major impact to our current business operations.
We continue to review our marketing and operational policies and procedures to
ensure our ability to continue to successfully conduct all aspects of our
business in this new, price-transparent market. We believe that the euro
conversion will not have a material adverse impact on our financial condition or
results of operations.
YEAR 2000
- ---------
On pages 39 and 40 of our 1998 Annual Report, we discussed our state of
readiness and our costs, risks and contingency plans for dealing with potential
Year 2000 (Y2K) date change problems. We reported that approximately 95% of the
computers and computer software involved in corporate financial applications,
and about 5% of our industrial automation systems used in refineries, lubricant
and gas plants and oil well operations needed modification or upgrade. Since
that time, we have not identified any additional material Y2K risks. We continue
to believe that the worst case scenario we described in our 1998 Annual Report
is not likely to occur. However, if it occurs, Y2K failures, if not corrected on
a timely basis or otherwise mitigated by our contingency plans, could have a
material adverse effect on our results of operations, liquidity and overall
financial condition.
As of the end of the second quarter of 1999, we completed modifying or upgrading
99% of the corporate financial applications and 99% of the industrial automation
systems that required such work. We are not able to complete a small percentage
of upgrades until our vendors provide the required equipment. We expect to
complete the last of these upgrades by September 1, 1999. If these upgrades are
delayed beyond that date, we will use contingency plans to work around any
noncompliant systems or seek alternative vendors, as appropriate. We are
approximately 99% through our review of our critical suppliers and customers,
and the development of contingency plans, as required. If we cannot satisfy
ourselves that these critical suppliers and customers will be able to operate in
2000, we will seek alternatives and/or utilize contingency plans.
We have identified over 45,000 systems for assessment of potential Y2K issues.
These were categorized as: Applications, Telecommunications, Computer Systems or
Embedded Systems (Industrial Automation). We assessed each system and
prioritized them as Critical, Essential or Important. Critical systems are those
related to Safety, Health and Environment, including monitoring and regulatory
reporting systems. Essential systems are those required to accomplish business
objectives. Important systems are those used in a support role and are not
required for day-to-day operations. As of July 1, 1999, we have 129 Critical and
Essential systems pending upgrades, which are all scheduled for completion
during the third quarter.
We are also evaluating the business resumption plans of all our business units
for any Year 2000 issues, and we have begun implementing end-of-year rollover
plans. This effort is part of our Contingency Planning project, and is 99%
complete.
- 16 -
During the second quarter of 1999, we spent $5 million in readying our systems
for Y2K, bringing our total spent through June 30, 1999 to $49 million. We
estimate that we will spend about $11 million during the second half of 1999,
most in December as we implement our Early Alert System.
FORWARD-LOOKING STATEMENTS
- --------------------------
Portions of the foregoing discussion of RESULTS OF OPERATIONS; REORGANIZATIONS,
RESTRUCTURINGS AND EMPLOYEE SEVERANCE PROGRAMS; EURO CONVERSION; and, YEAR 2000
contain "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These statements are based on our current expectations, estimates and
projections. Therefore, they could ultimately prove to be inaccurate. Factors
which could affect our expectations for worldwide crude oil production, upstream
earnings and downstream margins in 1999 are changes in business conditions, such
as energy prices, world economic conditions, demand growth and inventory levels.
The extent and timing of our anticipated cost savings and reorganization
programs will depend upon worldwide and industry economic conditions. Factors
that could alter the financial impact of our euro conversion include: changes in
current governmental regulations and interpretations of such regulations;
unanticipated implementation costs; and the effect of the euro conversion on
product prices and margins. Factors that could affect our ability to be Year
2000 compliant by the end of 1999 include: the failure of our customers,
suppliers, governmental entities and others to achieve compliance and the
inaccuracy of certifications received from them; our inability to identify and
remediate every possible problem; and a shortage of necessary programmers,
hardware and software. 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 and
Factors That May Affect Our Business" in our 1998 Annual Report on Form 10-K.
- 17 -
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
We have provided information about legal proceedings pending against Texaco
in Note 4 to the Consolidated Financial Statements of this Form 10-Q, in Item 1
of our first quarter, 1999 Form 10-Q and in Item 3 of our 1998 Annual Report on
Form 10-K. Note 4 of this Form 10-Q, Item 1 of our first quarter 1999 Form 10-Q
and Item 3 of our 1998 Form 10-K are incorporated here by reference.
The Securities and Exchange Commission ("SEC") requires us to report
proceedings that were instituted or contemplated by governmental authorities
against us under laws or regulations relating to the protection of the
environment. None of these proceedings is material to our business or financial
condition. Following is a brief description of a proceeding that was resolved
during the second quarter of 1999.
o We previously reported that the U.S. Department of Justice filed suit in
U.S. District Court in Nevada against our affiliates, Nevada Cogeneration
Associates #1 and Nevada Cogeneration Associates #2. The suit sought
penalties under the Clean Air Act for alleged excess emissions from
cogeneration facilities in Clark County, Nevada. The defendants have
installed emission control equipment at each facility and agreed to pay a
fine of $100,000 for each facility, pursuant to a Consent Decree settling
the lawsuit, expected to be approved by the Court later this month.
- 18 -
Item 5. Other Information
- -------------------------
(Unaudited)
------------------------------------------------
For the six months For the three months
ended June 30, ended June 30,
------------------ --------------------
1999 1998 1999 1998
---- ---- ---- ----
(Millions of dollars)
CAPITAL AND EXPLORATORY EXPENDITURES
Exploration and production
United States $ 463 $ 816 $ 207 $ 374
International 568 551 346 261
------ -------- ------ ------
Total 1,031 1,367 553 635
------ -------- ------ ------
Refining, marketing and distribution
United States 158 183 85 95
International 176 228 99 129
------ -------- ------ ------
Total 334 411 184 224
------ -------- ------ ------
Global gas marketing 25 83 14 49
------ -------- ------ ------
Total operating segments 1,390 1,861 751 908
Other business units 68 20 38 6
------ -------- ------ ------
Total $1,458 $1,881 $ 789 $ 914
====== ====== ====== ======
Exploratory expenses included above
United States $ 92 $ 147 $ 38 $ 51
International 118 84 42 39
------ -------- ------ ------
Total $ 210 $ 231 $ 80 $ 90
====== ======== ====== ======
- 19 -
(Unaudited)
--------------------------------------------------
For the six months For the three months
ended June 30, ended June 30,
------------------ --------------------
1999 1998 1999 1998
---- ---- ---- ----
OPERATING DATA
- --------------
Exploration and Production
- --------------------------
United States
- -------------
Net production of crude oil and natural
gas liquids (000 BPD) 404 449 399 447
Net production of natural gas - available
for sale (000 MCFPD) 1,483 1,721 1,479 1,703
------ ------ ------ ------
Total net production (000 BOEPD) 651 736 646 731
Natural gas sales (000 MCFPD) 3,295 3,908 3,015 3,934
Average U.S. crude (per bbl) $10.95 $11.26 $12.80 $10.72
Average U.S. natural gas (per mcf) $ 1.92 $ 2.10 $ 2.05 $ 2.05
Average WTI (Spot) (per bbl) $15.44 $15.26 $17.66 $14.62
Average Kern (Spot) (per bbl) $ 9.49 $ 8.31 $11.26 $ 7.75
International
- -------------
Net production of crude oil and natural
gas liquids (000 BPD)
Europe 136 154 143 149
Indonesia 165 155 150 156
Partitioned Neutral Zone 119 106 121 105
Other 67 69 69 67
------ ------ ------ ------
Total 487 484 483 477
Net production of natural gas - available
for sale (000 MCFPD)
Europe 265 251 244 245
Colombia 157 196 160 185
Other 111 118 112 112
------ ------ ------ ------
Total 533 565 516 542
------ ------ ------ ------
Total net production (000 BOEPD) 576 578 569 567
Natural gas sales (000 MCFPD) 557 721 549 665
Average International crude (per bbl) $11.60 $11.68 $13.73 $11.42
Average International natural gas (per mcf) $ 1.37 $ 1.61 $ 1.23 $ 1.59
Average U.K. natural gas (per mcf) $ 2.39 $ 2.64 $ 2.17 $ 2.64
Average Colombia natural gas (per mcf) $ 0.62 $ 0.91 $ 0.59 $ 0.92
Worldwide
- ---------
Total worldwide net production (000 BOEPD) 1,227 1,314 1,215 1,298
- 20 -
(Unaudited)
-----------
For the six months For the three months
ended June 30, ended June 30,
------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
OPERATING DATA
- --------------
Refining, marketing and distribution
- ------------------------------------
United States
- -------------
Refinery input (000 BPD)
Equilon area 369 377 373 396
Motiva area 307 323 313 333
----- ----- ----- -----
Total 676 700 686 729
Refined product sales (000 BPD)
Equilon area 669 561 741 590
Motiva area 378 337 376 341
Other 299 234 291 234
----- ----- ----- -----
Total 1,346 1,132 1,408 1,165
International
- -------------
Refinery input (000 BPD)
Europe 367 371 368 367
Caltex area 427 428 416 419
Latin America/West Africa 73 64 72 70
----- ----- ----- -----
Total 867 863 856 856
Refined product sales (000 BPD)
Europe 619 582 601 602
Caltex area 667 589 663 586
Latin America/West Africa 489 444 501 460
Other 93 51 82 56
----- ----- ----- -----
Total 1,868 1,666 1,847 1,704
- 21 -
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
-- (3.1) Copy of Restated Certificate of Incorporation of Texaco Inc.,
as amended to and including August 4, 1999, including
Certificate of Designations, Preferences and Rights of
Series D Junior Participating Preferred Stock and Series
G, H, I and J Market Auction Preferred Shares.
-- (11) Computation of Earnings Per Share of Common Stock.
-- (12) Computation of Ratio of Earnings to Fixed Charges of Texaco on
a Total Enterprise Basis.
-- (20) Copy of Texaco Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 (including portions of
Texaco Inc.'s Annual Report to Stockholders for the year 1998)
and a copy of Texaco Inc.'s Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 1999, as previously filed
by the Registrant with the Securities and Exchange Commission,
File No. 1-27.
-- (27) Financial Data Schedule.
(b) Reports on Form 8-K:
During the second quarter of 1999, the Registrant filed Current Reports on
Form 8-K for the following events:
1. April 27, 1999
Item 5. Other Events -- reported that Texaco issued an Earnings Press
Release for the first quarter 1999.
2. April 28, 1999
Item 5. Other Events -- provided a description of an Officers'
Certificate dated April 28, 1999 executed by Texaco Capital Inc., a
wholly-owned subsidiary of the Registrant, which established the terms
and provisions of a series of securities designated "Series 1999
Medium-Term Notes," for up to $1.5 billion.
- 22 -
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, thereunto duly authorized.
Texaco Inc.
---------------------
(Registrant)
By: G.J. Batavick
---------------------
(Comptroller)
By: R.E. Koch
---------------------
(Assistant Secretary)
Date: August 12, 1999
---------------
- 23 -