1
1993
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File Number 1-2475
SHELL OIL COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-1299890
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
ONE SHELL PLAZA, HOUSTON, TEXAS 77002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 241-6161
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
8 1/2% DEBENTURES DUE 2000 NEW YORK STOCK EXCHANGE
7 1/4% DEBENTURES DUE 2002 NEW YORK STOCK EXCHANGE
8% DEBENTURES DUE 2007 NEW YORK STOCK EXCHANGE
GUARANTEES --
EVIDENCING GUARANTEE OF 7 1/2% GUARANTEED
SINKING FUND DEBENTURES DUE 1999 OF
SHELL PIPE LINE CORPORATION NEW YORK STOCK EXCHANGE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
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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 .
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not applicable.
State the aggregate market value of the voting stock held by nonaffiliates
of the registrant. None.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. Outstanding as of March 24,
1994 -- 1,000 shares of Common Stock, of a par value of $10.00 a share.
------------------------
OMISSION OF CERTAIN INFORMATION
In accordance with General Instruction J of Form 10-K, the registrant is
omitting Items 4, 10, 11, 12 and 13 (and related Exhibits) because:
(1) Royal Dutch Petroleum Company, a Netherlands company, and The "Shell"
Transport and Trading Company, public limited company, an English company, each
of which is a reporting company under the Securities Exchange Act of 1934 that
has filed all material required to be filed by it pursuant to Section 13, 14, or
15(d) thereof and is named in conjunction with the registrant's description of
its business, own directly or indirectly 60 percent and 40 percent,
respectively, of the shares of all the companies of Royal Dutch/Shell Group of
Companies, including all the equity securities of the registrant; and
(2) during the preceding thirty-six calendar months and any subsequent
period of days, there has not been any material default in the payment of
principal, interest, sinking or purchase fund installment, or any other material
default not cured within thirty days with respect to any indebtedness of the
registrant or its subsidiaries, and there has not been any material default in
the payment by the registrant or its subsidiaries of rentals under material
long-term leases.
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DOCUMENTS INCORPORATED BY REFERENCE: None
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2
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES.
Shell Oil Company was incorporated under the laws of the State of Delaware
on February 8, 1922. It has its principal executive offices at One Shell Plaza,
Houston, Texas 77002, and its telephone number is (713) 241-6161. Unless
otherwise required by the context, the term "Company" as used herein refers to
Shell Oil Company and the term "Shell Oil" refers to the Company and its
consolidated subsidiaries.
The Company is wholly owned by Shell Petroleum Inc., a Delaware
corporation, whose shares are directly or indirectly owned 60 percent by Royal
Dutch Petroleum Company, The Hague, The Netherlands, and 40 percent by The
"Shell" Transport and Trading Company, public limited company, London, England.
Royal Dutch Petroleum Company and The "Shell" Transport and Trading Company,
public limited company, are holding companies which together directly or
indirectly own securities of companies of the Royal Dutch/Shell Group of
Companies, the members of which are severally engaged throughout the greater
part of the world in one or more phases of the oil and natural gas, chemical,
coal and metals industries.
Shell Oil is engaged, principally in the United States, in the exploration
for, and development, production, purchase, transportation and marketing of,
crude oil and natural gas, and the purchase, manufacture, transportation and
marketing of oil and chemical products. In addition, Shell Oil is engaged in the
exploration for, and production of, crude oil and natural gas outside the United
States, including several ventures with companies of the Royal Dutch/Shell Group
of Companies. Also, Shell Oil is engaged in the development, production and
marketing of sulfur and carbon dioxide, and is exploring business opportunities
in alternative fuels.
The three major reporting segments of Shell Oil's businesses are Oil and
Gas Exploration and Production, Oil Products, and Chemical Products. The two
products segments are integrated through certain common manufacturing
facilities, raw material supplies and technical support.
Compared with other integrated enterprises in the petroleum industry, the
Company believes that in 1993, domestically, Shell Oil ranked fourth in the net
production of crude oil and natural gas liquids, sixth in net production of
natural gas, second in refined products sold and third in refinery processing
intakes. Additionally, within the petroleum industry, Shell Oil is a leader in
the domestic manufacturing and marketing of chemicals.
At December 31, 1993, Shell Oil had 22,212 employees.
FINANCIAL INFORMATION BY MAJOR BUSINESS SEGMENT
Information on revenue, operating profit, net income, identifiable assets
and capital expenditures of each business segment is reported in this item. The
discussion of segment results included in Management's Discussion and Analysis
of Financial Condition and Results of Operations appearing in Item 7 of this
report is incorporated herein by reference. Income taxes are allocated to
segments on the basis of contributions to taxable income reduced by applicable
tax credits. Segment revenues, operating profit and assets outside the United
States are not of a level which requires separate geographical reporting.
2
3
The following is a summarized disaggregation of Shell Oil's consolidated
net income for each of the past three years.
1993 1992 1991
------ ------ ------
(millions of dollars)
SEGMENT NET INCOME (LOSS)
Oil and Gas Exploration and Production............ $ 477 $ 469 $ 241
Oil Products...................................... 280 6 (164)
Chemical Products................................. 35 12 157
Other............................................. (27) (70) 24
----- ------ -----
TOTAL................................... 765 417 258
NON-ALLOCATED COSTS.................................... (16) (28) 238
----- ------ -----
INCOME FROM OPERATIONS.................. $ 781 $ 445 $ 20
----- ------ -----
CUMULATIVE EFFECT OF ACCOUNTING CHANGES........... -- (635) --
----- ------ -----
NET INCOME (LOSS)....................... $ 781 $ (190) $ 20
===== ====== =====
OIL AND GAS EXPLORATION AND PRODUCTION
General
Total revenues, operating profit and segment income from operations for Oil
and Gas Exploration and Production activities for each of the past three years,
together with capital expenditures and related identifiable assets at the end of
each year, were as set out below. For additional information, see Note 18 of the
Notes to Consolidated Financial Statements included in Item 14a.
1993 1992 1991
------- ------- -------
(millions of dollars)
REVENUES
Sales and other operating revenue................ $ 1,418 $ 1,280 $ 1,021
Other revenue.................................... 96 113 49
Intersegment transfers........................... 2,492 3,032 3,268
------- ------- -------
TOTAL REVENUES......................... 4,006 4,425 4,338
COSTS AND EXPENSES
Costs and operating expenses..................... 2,110 2,404 2,558
Depreciation, depletion, amortization and
retirements.................................... 1,225 1,539 1,371
------- ------- -------
OPERATING PROFIT....................... 671 482 409
Allocated corporate expenses..................... 53 62 71
Allocated income taxes........................... 163 (29) 111
Equity in net (income) loss of others............ (23) (20) (15)
------- ------- -------
INCOME FROM ONGOING OPERATIONS......... 478 469 242
Other charges*................................... 1 -- 1
------- ------- -------
SEGMENT NET INCOME..................... $ 477 $ 469 $ 241
------- ------- -------
------- ------- -------
CAPITAL EXPENDITURES.................................. $ 877 $ 877 $ 1,421
------- ------- -------
------- ------- -------
IDENTIFIABLE ASSETS AT DECEMBER 31.................... $12,697 $13,525 $14,487
- ---------------
* Amounts associated with major product classifications for which there has been
no revenue stream or investment in the last five years. For 1993, includes
certain environmental provisions previously reported as "Nonallocated costs."
Amount for 1991 has been reclassified from "Costs and operating expenses."
Exploration and Production Operations
Domestically, Shell Oil produces crude oil (including condensate), natural
gas, and natural gas liquids in 12 states, the Gulf of Mexico, and offshore
California. In 1993, domestic onshore production accounted for 66
3
4
percent of Shell Oil's crude oil production and 50 percent of its natural gas
production. The Gulf of Mexico, California and Texas are Shell Oil's principal
areas of production activity, providing about 85 percent of its combined oil and
gas production on a crude oil equivalent basis. The majority of Shell Oil's oil
and gas production interests are acquired under leases (including many leases on
federal onshore and offshore tracts); such leases are generally obtained for an
initial fixed term which is automatically extended by the establishment of
production for so long as production continues, subject to compliance with the
terms of the lease (including, in the case of federal leases, extensive
regulations imposed by federal law). Shell Oil also has international oil and
gas production and produces sulfur from its natural gas processing plants in the
United States.
Supplemental and Enhanced Recovery
Shell Oil continues to develop and use supplemental and enhanced recovery
techniques to produce crude oil which could not be recovered by natural
reservoir forces. These recovery operations accounted for 58 percent of Shell
Oil's domestic crude oil production in 1993. Activities include steam injection
to produce heavy, more viscous crude oil, carbon dioxide (CO2) injection for
increased recovery of lighter oil, and supplemental water injection.
Steam injection methods, primarily in California, accounted for 30 percent
of domestic crude oil production in 1993, slightly less than 1992. Also, in
1993, CO2 injection projects in West Texas and Mississippi accounted for 17,600
net barrels per day of crude oil production.
Domestic Offshore Oil and Gas
Shell Oil acquired interests in 21 tracts in the Gulf of Mexico during 1993
at a bonus cost of $7 million. Shell Oil now holds interests in 701 tracts in
the Gulf, 452 of which are in water depths exceeding 1,500 feet, comprising
about one-third of the industry's deep-water leaseholds.
Exploration and development of offshore acreage continued in 1993 with
Shell Oil participating in the drilling of 45 gross wells, of which 35 were
classified as producing or capable of producing (producers).
In late 1993, Shell Oil completed construction and towed a tension leg
platform (TLP) onto its location on prospect Auger, 214 miles southwest of New
Orleans. Auger is expected to provide a total gross ultimate recovery of 220
million barrels of crude oil equivalents. To date, 10 of the planned 14 wells
have been predrilled and await completion. Production is expected to commence in
April 1994. In September 1993 plans for the development of prospect Mars were
approved. Mars, located 130 miles southeast of New Orleans, is owned 71.5% by
Shell Oil. The first phase of Mars development is designed to recover about 500
million barrels, gross ultimate recovery. Plans for this phase call for the
installation of a TLP in 2,933 feet of water. Pre-drilling of the first nine
wells started in October 1993; the remaining 15 wells will be drilled from the
TLP. First production is expected in late 1996. A decision on subsequent
development will be made about two to three years after production from the
first phase commences. Detailed design of the subsea system for prospect Popeye,
located in 2,100 feet of water, is proceeding with two wells to be drilled in
1994. The subsea gas well at prospect Tahoe was put on production in January
1994.
Domestic Onshore Oil and Gas
During 1993, Shell Oil participated in drilling 280 gross development wells
of which 226 were producers. Most of this activity was in Shell Oil's heavy oil
fields in California.
Shell Oil acquired some 20 crew months of seismic data in 1993 and
participated in drilling 27 gross exploratory wells. Sixteen were producers.
Exploration activities were primarily along the Gulf Coast.
International Oil and Gas
In 1993, the Company's subsidiaries were active in 12 countries outside of
the United States and had exploratory rights, as of December 31, 1993, to about
38 million gross acres. These subsidiaries participated in
4
5
drilling 70 gross exploratory and development wells, of which 59 were producers.
The drilling activity was concentrated in Syria and Yemen.
In 1993, Shell Oil exchanged the assets of subsidiaries which held
production rights in Syria for an interest in a Dutch affiliate which had also
acquired rights in the Danish North Sea from another affiliate. Shell Oil's
investment in the Dutch affiliate is accounted for using the equity method.
With coventurers, the development of commercial fields in Yemen continued,
with first production beginning in July 1993. Also with coventurers, development
of two fields in offshore China is being carried out, with first production
expected in 1994.
First production began from the Merluza prospect in offshore Brazil in
February 1993. Operatorship was turned over to Petrobras, the Brazilian national
oil company, concurrent with first commercial production in May 1993.
Results of Operations and Costs
Results of operations for oil and gas producing activities, as prescribed
by Statement of Financial Accounting Standards No. 69, "Disclosures about Oil
and Gas Producing Activities," are shown below. These results exclude related
activities, such as the purchase and resale of natural gas, and revenues and
expenses associated with certain non-hydrocarbon products, such as sulfur and
carbon dioxide, which are included in the Segment Net Income data set forth
above and in Note 18 of the Notes to Consolidated Financial Statements included
in Item 14a of this report.
1993* 1992 1991
------------------------ ------------------------ ------------------------
U.S. INT'L TOTAL U.S. INT'L TOTAL U.S. INT'L** TOTAL
------ ---- ------ ------ ---- ------ ------ ---- ------
(millions of dollars)
Sales................. $1,111 $ 37 $1,148 $1,050 $ 31 $1,081 $ 954 $ 3 $ 957
Transfers............. 1,901 359 2,260 2,269 423 2,692 2,348 578 2,926
------ ---- ------ ------ ---- ------ ------ ---- ------
Total Revenues... 3,012 396 3,408 3,319 454 3,773 3,302 581 3,883
Production costs...... 1,104 131 1,235 1,348 137 1,485 1,489 172 1,661
Exploration
expenses............ 224 74 298 250 86 336 310 112 422
Depreciation,
depletion and
amortization........ 1,119 97 1,216 1,440 87 1,527 1,254 117 1,371
Income tax expense.... 63 54 117 (195) 50 (145) 23 116 139
------ ---- ------ ------ ---- ------ ------ ---- ------
Results of
Operations***... $ 502 $ 40 $ 542 $ 476 $ 94 $ 570 $ 226 $ 64 $ 290
------ ---- ------ ------ ---- ------ ------ ---- ------
Shell Oil's interest
in results of
operations of equity
companies........... -- $ 3 $ 3 -- -- -- -- -- --
------ ---- ------ ------ ---- ------ ------ ---- ------
------ ---- ------ ------ ---- ------ ------ ---- ------
- ------------
* In 1993, the value of own production consumed as fuel has been eliminated
from production costs. Years 1992 and 1991 have been restated to conform
with the 1993 presentation. These changes have been made to provide data
which more closely follows with industry practice.
** The 1991 results include revenues of $179 million and costs of $169 million
associated with Malaysian and Canadian operations which were transferred
effective January 1, 1992 to other companies affiliated with the Royal
Dutch/Shell Group of Companies.
*** Excludes research, corporate overhead and interest costs.
5
6
The weighted average price per unit of production of crude oil and
condensate, natural gas liquids and natural gas available for market, as well as
production expenses and results of operations for oil and gas producing
activities on a per barrel of equivalent net hydrocarbon production basis, for
each of the past three years were as follows:
1993 1992 1991
------------------------ ------------------------ ------------------------
U.S. INT'L TOTAL U.S. INT'L TOTAL U.S. INT'L TOTAL
------ ------ ------ ------ ------ ------ ------ ------ ------
UNIT STATISTICS
Weighted Average Price per
Barrel of Net Production:
Crude oil and condensate.... $14.08 $16.05 $14.38 $15.78 $18.33 $16.14 $16.06 $18.54 $16.47
Natural gas liquids......... $12.87 16.70 12.93 13.03 17.50 13.11 14.84 13.40 14.84
Weighted Average Price per
Thousand Cubic Feet of Net
Marketable Natural Gas
Produced.................... 2.12 2.22 2.12 1.71 1.07 1.69 1.60 1.14 1.59
Production Expenses (dollars
per barrel of equivalent net
hydrocarbon production)*.... 4.47 5.17 4.53 4.95 5.28 4.98 5.57 5.34 5.55
Results of Operations (dollars
per barrel of equivalent net
hydrocarbon production)*.... 2.12 1.63 2.07 2.02 3.83 2.18 1.05 2.15 1.17
- ---------------
* In 1993, the value of own production consumed as fuel and restructuring costs
have been eliminated from production expenses. Years 1992 and 1991 have been
restated to conform with the 1993 presentation. These changes have been made
to provide data which more closely follows with industry practice. The
restructuring costs on a dollars per barrel of equivalent net hydrocarbon
production basis which have been excluded were $0.07, $0.26 and $0.23 in 1993,
1992, and 1991, respectively.
6
7
Capitalized costs related to oil and gas producing activities at year-end,
and costs incurred in oil and gas property acquisition, exploration and
development activities for each year, are shown below. These amounts do not
include costs of carbon dioxide and other non-hydrocarbon projects which, for
segment reporting, are included in the Oil and Gas Exploration and Production
data presented in Notes 13 and 18 of the Notes to Consolidated Financial
Statements.
1993 1992 1991
-------------------------- -------------------------- --------------------------
U.S. INT'L TOTAL U.S. INT'L TOTAL U.S. INT'L TOTAL
------- ------ ------- ------- ------ ------- ------- ------ -------
(millions of dollars)
CAPITALIZED COSTS
Proved properties........ $19,628 $1,335 $20,963 $19,925 $1,652 $21,577 $20,304 $1,983 $22,287
Unproved properties...... 1,178 47 1,225 1,426 64 1,490 1,551 105 1,656
Support equipment and
facilities............ 459 16 475 554 70 624 701 65 766
------- ------ ------- ------- ------ ------- ------- ------ -------
Total Capitalized
Costs............ 21,265 1,398 22,663 21,905 1,786 23,691 22,556 2,153 24,709
Accumulated depreciation,
depletion and
amortization.......... 11,011 565 11,576 10,980 702 11,682 10,668 965 11,633
------- ------ ------- ------- ------ ------- ------- ------ -------
NET CAPITALIZED
COSTS............ $10,254 $ 833 $11,087 $10,925 $1,084 $12,009 $11,888 $1,188 $13,076
------- ------ ------- ------- ------ ------- ------- ------ -------
------- ------ ------- ------- ------ ------- ------- ------ -------
Shell Oil's interest in
net capitalized costs
of equity companies... -- $ 226 $ 226 -- -- -- -- -- --
COSTS INCURRED IN PROPERTY
ACQUISITION, EXPLORATION
AND DEVELOPMENT
ACTIVITIES*
Acquisition of
properties
Proved.............. $ 20 $ -- $ 20 $ 6 $ -- $ 6 $ 16 $ -- $ 16
Other............... 17 6 23 12 6 18 30 3 33
Exploration costs..... 253 86 339 239 108 347 377 130 507
Development costs..... 554 209 763 612 201 813 964 271 1,235
------- ------ ------- ------- ------ ------- ------- ------ -------
Shell Oil's share of
costs incurred by
equity companies.... -- $ 19 $ 19 -- -- -- -- -- --
- ------------
* Costs have been categorized on the basis of Financial Accounting Standards
Board definitions which include costs of oil and gas producing activities
whether capitalized or charged to expense as incurred.
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8
Shell Oil's participation in oil and gas exploration and development
drilling during the years indicated, and the wells in which Shell Oil had an
interest and which were producing or capable of producing at the end of each
year, were as follows:
1993 1992 1991
--------------------- --------------------- ---------------------
U.S. INT'L TOTAL U.S. INT'L TOTAL U.S. INT'L TOTAL
------ --- ------ ------ --- ------ ------ --- ------
NET WELLS DRILLED
Exploratory
Oil and Gas Wells......... 27 1 28 8 5 13 18 4 22
Dry Holes................. 17 3 20 13 9 22 14 5 19
Development
Oil and Gas Wells......... 178 13 191 193 15 208 512 19 531
Dry Holes................. 4 1 5 5 2 7 11 2 13
OIL AND GAS WELLS PRODUCING OR
CAPABLE OF PRODUCING
Gross Wells
Oil....................... 23,908 411 24,319 26,213 475 26,688 28,717 779 29,496
Gas....................... 1,578 25 1,603 1,799 33 1,832 1,648 34 1,682
Net Wells
Oil....................... 14,733 113 14,846 16,350 142 16,492 18,414 288 18,702
Gas....................... 1,011 8 1,019 1,077 10 1,087 1,124 11 1,135
Number of net oil and gas
wells above completed in
more than one producing
formation................. 289 3 292 390 2 392 396 54 450
As of December 31, 1993, Shell Oil's interest in wells which were in the
process of being drilled was as follows:
EXPLORATORY DEVELOPMENT TOTAL
------------- -------------- --------------
GROSS NET GROSS NET GROSS NET
WELLS IN PROCESS OF BEING DRILLED
United States....................... 4.0 2.2 23.0 15.2 27.0 17.4
International....................... 2.0 .5 1.0 0.1 3.0 .6
---- --- ---- ---- ---- ----
Total.......................... 6.0 2.7 24.0 15.3 30.0 18.0
==== === ==== ==== ==== ====
Acreage in which Shell Oil had an interest at the end of each of the
periods indicated was as follows:
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
(thousands of acres)
UNDEVELOPED ACREAGE
Gross
United States
Onshore........................ 1,354 1,983 2,535 3,644 6,601
Offshore....................... 4,086 4,966 6,390 6,698 6,898
International..................... 37,823 40,860 49,725 66,682 75,731
------ ------ ------ ------ ------
TOTAL..................... 43,263 47,809 58,650 77,024 89,230
====== ====== ====== ====== ======
Net
United States
Onshore........................ 960 1,472 1,948 2,790 5,299
Offshore....................... 3,717 4,544 5,550 5,747 5,985
International..................... 13,780 16,308 20,670 29,170 43,331
------ ------ ------ ------ ------
TOTAL..................... 18,457 22,324 28,168 37,707 54,615
====== ====== ====== ====== ======
PRODUCING OIL AND GAS ACREAGE
Gross
United States..................... 1,329 1,513 1,599 1,575 1,622
International..................... 69 109 110 99 93
------ ------ ------- ------ ------
TOTAL..................... 1,398 1,622 1,709 1,674 1,715
====== ====== ====== ====== ======
Net
United States..................... 1,072 1,115 1,167 1,131 1,174
International..................... 20 30 32 28 25
------ ------ ------ ------ ------
TOTAL..................... 1,092 1,145 1,199 1,159 1,199
====== ====== ====== ====== ======
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Shell Oil's net production (after deducting interests of others, including
royalty) was as follows for the periods indicated:
LIQUIDS (THOUSANDS OF BARRELS DAILY)
NATURAL GAS (MILLIONS OF CUBIC FEET
DAILY) 1993 1992 1991 1990 1989
----- ----- ----- ----- ----
NET CRUDE OIL AND CONDENSATE PRODUCED
United States
Gulf of Mexico................. 113 122 105 92 95
California..................... 140 160 181 188 197
Louisiana...................... 8 10 10 12 14
Michigan....................... 8 10 11 13 14
Texas.......................... 50 56 58 61 64
Other.......................... 30 30 35 35 43
----- ----- ----- ----- -----
Total United States............ 349 388 400 401 427
International....................... 61 63 81 80 81
----- ----- ----- ----- -----
Total consolidated companies... 410 451 481 481 508
Shell Oil's interest in production
of equity companies............... 29 -- -- -- --
NATURAL GAS LIQUIDS PRODUCED
Predominantly domestic.............. 54 59 56 60 67
----- ----- ----- ----- -----
TOTAL LIQUIDS PRODUCED......... 493 510 537 541 575
===== ===== ===== ===== =====
NET NATURAL GAS PRODUCED*
United States
Gulf of Mexico................. 741 711 709 763 807
Louisiana...................... 129 140 50 39 47
Michigan....................... 120 134 132 107 113
Oklahoma....................... -- -- -- 14 15
Texas.......................... 370 343 331 333 313
Other.......................... 115 126 151 159 164
International....................... 39 28 26 26 26
----- ----- ----- ----- -----
TOTAL GAS PRODUCED............. 1,514 1,482 1,399 1,441 1,485
===== ===== ===== ===== =====
Net natural gas available for
market, excluding consumed in
operations........................ 1,361 1,158 1,187 1,185 1,189
- ------------
* Natural gas is reported on the basis of actual or calculated volumes which
remain after removal of liquefiable hydrocarbons by lease or field separation
facilities and of non-hydrocarbons where they occur in sufficient quantities
to render the gas unmarketable.
Proved Reserve Estimates
Oil and gas proved reserves cannot be measured exactly. Reserve estimates
are based on many factors related to reservoir performance which require
evaluation by the engineers interpreting the available data, as well as price
and other economic factors. The reliability of these estimates at any point in
time depends on both the quality and quantity of the technical and economic
data, the production performance of the reservoirs as well as extensive
engineering judgment. Consequently, reserve estimates are subject to revision as
additional data become available during the producing life of a reservoir. When
a commercial reservoir is discovered, proved reserves are initially determined
based on limited data from the first well or wells. Subsequent data may better
define the extent of the reservoir and additional production performance, well
tests and engineering studies will likely improve the reliability of the reserve
estimate. The evolution of technology may also result in the application of
improved recovery techniques such as supplemental or enhanced recovery projects,
or both, which have the potential to increase reserves beyond those envisioned
during the early years of a reservoir's producing life.
Shell Oil reports its reserve position annually. Revisions to reserves are
based on engineering analyses of individual reservoirs at the field level. Prior
to finalizing the annual reserve report, a team of senior technical
9
10
employees of Shell Oil reviews the reserve estimates, procedures and explanation
of revisions for proven reservoirs.
Proved reserves are those quantities which, upon analysis of geological and
engineering data, appear with reasonable certainty to be recoverable in the
future from known oil and gas reservoirs under current prices and costs as of
the date the estimate is made. For major revisions, extensions and discoveries,
proved reserves must also be recoverable under future prices and costs
forecasted by Shell Oil. Proved developed reserves are those reserves which can
be expected to be recovered through existing wells with existing equipment and
operating methods. Proved undeveloped reserves are those reserves which are
expected to be recovered from new wells on undrilled acreage or from existing
wells where a relatively major expenditure is required.
Net proved reserves represent the estimated recoverable volumes after
deducting from gross proved reserves the portion due land owners or others as
royalty or operating interests.
Estimated quantities of net proved oil, natural gas liquids and natural gas
reserves and of changes in net quantities of proved developed and undeveloped
reserves for each of the periods indicated were as follows:
1993 1992 1991
LIQUIDS (MILLIONS OF BARRELS) ------------------------ ------------------------ ------------------------
NATURAL GAS (BILLIONS OF CUBIC FEET) U.S. INT'L TOTAL U.S. INT'L TOTAL U.S. INT'L TOTAL
----- ----- ------ ----- ----- ------ ----- ----- ------
OIL RESERVES
Proved Developed and Undeveloped
Beginning of year...................... 1,984 255 2,239 2,229 294 2,523 2,554 236 2,790
Revisions of previous estimates........ (72) (18) (90) (90) 10 (80) (213) 7 (206)
Improved recovery...................... 6 1 7 4 9 13 24 1 25
Purchases of reserves*................. 1 (101)(1) (100) 2 -- 2 4 -- 4
Extensions and discoveries............. 219 13 232 12 60 72 16 80 96
Sales of reserves...................... (55) -- (55) (31) (95)(2) (126) (10) -- (10)
Production............................. (127) (23) (150) (142) (23) (165) (146) (30) (176)
----- ----- ----- ----- ---- ----- ----- ---- -----
End of year............................ 1,956 127 2,083 1,984 255 2,239 2,229 294 2,523
----- ----- ----- ----- ---- ----- ----- ---- -----
----- ----- ----- ----- ---- ----- ----- ---- -----
Net changes for year................... (28) (128) (156) (245) (39) (284) (325) 58 (267)
Shell Oil's interest in proved reserves
of equity companies at end of year... -- 69 69 -- -- -- -- -- --
Proved Developed
Beginning of year...................... 1,372 131 1,503 1,504 138 1,642 1,564 128 1,692
End of year............................ 1,252 79 1,331 1,372 131 1,503 1,504 138 1,642
NATURAL GAS LIQUIDS RESERVES
Proved Developed and Undeveloped
Beginning of year...................... 227 4 231 246 4 250 269 2 271
Revisions of previous estimates........ 17 (1) 16 (2) -- (2) (2) 1 (1)
Purchases of reserves*................. -- (2)(1) (2) -- -- -- 1 -- 1
Extensions and discoveries............. 32 -- 32 7 -- 7 5 1 6
Sales of reserves...................... (9) -- (9) (3) -- (3) (6) -- (6)
Production............................. (20) -- (20) (21) -- (21) (21) -- (21)
----- ----- ------ ----- ---- ----- ----- ---- -----
End of year............................ 247 1 248 227 4 231 246 4 250
----- ----- ----- ----- ---- ----- ----- ---- -----
----- ----- ----- ----- ---- ----- ----- ---- -----
Net changes for year................... 20 (3) 17 (19) -- (19) (23) 2 (21)
Proved Developed
Beginning of year...................... 173 3 176 182 3 185 194 1 195
End of year............................ 170 1 171 173 3 176 182 3 185
NATURAL GAS RESERVES**
Proved Developed and Undeveloped
Beginning of year...................... 5,235 435 5,670 5,967 439 6,406 6,398 397 6,795
Revisions of previous estimates........ (119) (21) (140) (322) (13) (335) (90) (3) (93)
Improved recovery...................... 4 -- 4 1 -- 1 3 -- 3
Purchases of reserves*................. 16 (112)(1) (96) 9 -- 9 9 -- 9
Extensions and discoveries............. 457 -- 457 261 19 280 209 55 264
Sales of reserves...................... (143) -- (143) (149) -- (149) (61) -- (61)
Production............................. (539) (14) (553) (532) (10) (542) (501) (10) (511)
----- ----- ----- ----- ---- ----- ----- ----- -----
End of year............................ 4,911 288 5,199 5,235 435 5,670 5,967 439 6,406
----- ----- ----- ----- ---- ----- ----- ---- -----
----- ----- ----- ----- ---- ----- ----- ---- -----
Net changes for year................... (324) (147) (471) (732) (4) (736) (431) 42 (389)
Shell Oil's interest in proved reserves
of equity companies at end of year... -- 374 374 -- -- -- -- -- --
Proved Developed
Beginning of year...................... 4,215 332 4,547 4,602 327 4,929 4,560 234 4,794
End of year............................ 3,712 288 4,000 4,215 332 4,547 4,602 327 4,929
(Footnotes on following page)
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- ------------
* Includes the net effect of exchanges of reserves with other companies.
** Natural gas is reported on the basis of actual or calculated volumes which
remain after removal of liquefiable hydrocarbons by lease or field separation
facilities and of non-hydrocarbons where they occur in sufficient quantities
to render the gas unmarketable. Natural gas reserve volumes include
liquefiable hydrocarbons approximating five percent of total gas reserves
which are recoverable at natural gas processing plants downstream from the
lease or field separation facilities. Such recoverable liquids also have been
included in natural gas liquids reserve volumes.
(1) Represents the transfer of reserves associated with Syrian operations which
were exchanged for an equity interest in a company affiliated with the Royal
Dutch/Shell Group of companies.
(2) Represents the transfer of reserves associated with Malaysian and Canadian
operations to companies affiliated with the Royal Dutch/Shell Group of
Companies.
Standardized Measure
The following disclosures concerning the standardized measure of future
cash flows from proved oil and gas reserves are presented in accordance with
Statement of Financial Accounting Standards No. 69. As prescribed by this
Statement, the amounts shown are based on prices and costs at the end of each
period, currently enacted tax rates and a 10 percent annual discount factor.
Since prices and costs do not remain static, and no price or cost changes have
been considered, the results are not necessarily indicative of the fair market
value of estimated proved reserves, but they do provide a common benchmark which
may enhance the users' ability to project future cash flows.
For this purpose, individual estimates of production quantities, revenues
and costs were developed for major fields and combinations of smaller, closely
related fields. These fields contained approximately 80 percent of Shell Oil's
total estimated proved reserves. Estimates for the remaining fields were
developed in the aggregate by major geographic regions. Extensive judgments are
involved in estimating the timing of production and the costs that will be
incurred throughout the remaining lives of these fields. Therefore, the results
may not be comparable to estimates disclosed by other oil and gas producers.
The standardized measure of discounted future net cash flows related to
proved oil and gas reserves at the end of each year was as follows:
1993 1992
---------------------------- ----------------------------
U.S. INT'L TOTAL U.S. INT'L TOTAL
------- ------ ------- ------- ------ -------
(millions of dollars)
STANDARDIZED MEASURE OF DISCOUNTED
FUTURE NET CASH FLOWS
Future cash inflows................ $33,240 $2,101 $35,341 $44,140 $6,060 $50,200
Future production and development
costs............................ 19,953 927 20,880 25,273 2,554 27,827
Future income tax expenses......... 2,988 220 3,208 5,182 1,466 6,648
------- ------ ------- ------- ------ -------
Future net cash flows*............. 10,299 954 11,253 13,685 2,040 15,725
10 percent annual discount for
estimated timing of cash flows... 4,531 397 4,928 5,969 907 6,876
------- ------ ------- ------- ------ -------
TOTAL......................... $ 5,768 $ 557 $ 6,325 $ 7,716 $1,133 $ 8,849
------- ------ ------- ------- ------ -------
------- ------ ------- ------- ------ -------
Shell Oil's share of standardized
measure of discounted future net
cash flows of equity companies... -- $ 353 $ 353 -- -- --
- ------------
* Future net cash flows were estimated using year-end prices and costs, and
currently enacted tax rates. Shell Oil's domestic and international weighted
average crude oil prices at year-end 1993 were $9.89 per barrel and $13.23 per
barrel, respectively, compared to year-end 1992 prices of $14.99 and $20.96
per barrel, respectively.
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The aggregate change in the standardized measure of discounted future net
cash flows was a decrease of $2,524 million in 1993, an increase of $1,469
million in 1992 and a decrease of $5,729 million in 1991. The principal sources
of change were as follows:
1993 1992 1991
------- ------- -------
(millions of dollars)
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED
FUTURE NET CASH FLOWS
Sales and transfers of oil and gas produced, net of
production costs................................... $(2,191) $(2,288) $(2,222)
Net changes in prices and costs...................... (3,264) 1,613 (8,685)
Extensions, discoveries, additions and improved
recovery,
less related costs................................. 1,291 559 749
Net purchases and sales of reserves.................. (896) (793) (61)
Development costs incurred during the period......... 763 813 1,235
Revisions of previous reserve estimates.............. (252) (558) (730)
Accretion of discount................................ 1,274 1,019 1,938
Net change in income taxes........................... 2,119 (1,087) 3,460
OIL PRODUCTS
General
The Oil Products business is engaged in the refining, transporting and
marketing of oil products, principally in the United States. This segment is
oriented toward light fuel products; accordingly, refineries are designed, and
are being further upgraded, to produce large quantities of motor gasoline and
jet fuel. The Company is a leader in sales of fuels and lubricants for motor
vehicles and aircraft.
Total revenues, operating profit and segment net income for Oil Products'
activities for each of the past three years, together with capital expenditures
and related identifiable assets at the end of each year, were as set out below.
For additional information, see Note 18 of the Notes to Consolidated Financial
Statements included in Item 14a.
1993 1992 1991
------- ------- -------
(millions of dollars)
REVENUES
Sales and other operating revenue.............. $15,462 $15,650 $16,798
Other revenue.................................. 8 11 38
Intersegment transfers......................... 949 1,007 1,047
------- ------- -------
TOTAL REVENUES....................... 16,419 16,668 17,883
COSTS AND EXPENSES
Costs and operating expenses................... 15,708 16,347 17,717
Depreciation, depletion, amortization and
retirements.................................. 253 259 401
------- ------- -------
OPERATING PROFIT (LOSS).............. 458 62 (235)
Allocated corporate expenses................... 25 70 70
Allocated income taxes......................... 163 3 (128)
Equity in net (income) loss of others.......... (15) (19) (16)
------- ------- -------
INCOME (LOSS) FROM ONGOING
OPERATIONS......................... 285 8 (161)
Other charges*................................. 5 2 3
------- ------- -------
SEGMENT NET INCOME (LOSS)............ $ 280 $ 6 $ (164)
------- ------- -------
------- ------- -------
CAPITAL EXPENDITURES................................ $ 704 $ 790 $ 805
------- ------- -------
------- ------- -------
IDENTIFIABLE ASSETS AT DECEMBER 31.................. $ 7,232 $ 7,107 $ 6,812
------- ------- -------
------- ------- -------
- ------------
* Amounts associated with major product classifications for which there has been
no revenue stream or investment in the last five years. For 1993, includes
certain environmental provisions previously reported as "Nonallocated costs."
Amounts for 1992 and 1991 have been reclassified from "Costs and operating
expenses."
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Supplies
Shell Oil supplements its own crude oil production to meet its refinery
requirements by the purchase of crude oil from both domestic and international
sources. During 1993, 39 percent of the Company's net crude supply came from
sources outside the United States. Approximately 23 percent was purchased from
government oil companies in four foreign countries and 16 percent was purchased
from other sources, including companies affiliated with the Royal Dutch/Shell
Group of Companies.
Net sources of crude oil, and oil products supply and distribution were as
follows for the periods indicated:
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
(thousands of barrels daily)
NET SOURCES OF CRUDE OIL
United States.............................. 527 591 670 587 616
International.............................. 339 334 317 338 374
----- ----- ----- ----- -----
TOTAL................................. 866 925 987 925 990
----- ----- ----- ----- -----
----- ----- ----- ----- -----
OIL PRODUCTS SUPPLY
Net crude oil produced..................... 410 451 481 481 508
Natural gas liquids produced............... 54 59 56 60 67
Crude oil purchased........................ 1,182 1,164 1,173 1,028 1,091
Crude oil sold............................. (726) (690) (667) (584) (609)
Crude oil inventory change................. 5 -- (1) 23 (26)
Oil products purchased..................... 424 276 270 323 298
----- ----- ----- ----- -----
TOTAL SUPPLY.......................... 1,349 1,260 1,312 1,331 1,329
----- ----- ----- ----- -----
----- ----- ----- ----- -----
OIL PRODUCTS DISTRIBUTION
Refined products sold...................... 1,200 1,120 1,195 1,188 1,207
Used in chemical manufactures.............. 121 128 119 118 119
Product inventory change................... 6 (1) (7) 20 (4)
Own consumption, etc....................... 22 13 5 5 7
----- ----- ----- ----- -----
TOTAL DISTRIBUTION.................... 1,349 1,260 1,312 1,331 1,329
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Manufacturing
During 1993, the Company owned and operated refining facilities located at
Martinez, California; Wood River, Illinois; Norco, Louisiana; Deer Park and
Odessa, Texas; and Anacortes, Washington, which had a total rated crude oil
distillation capacity of 892*** thousands of barrels daily. In April 1993, a
50/50 joint venture was formed with a subsidiary of Mexico's national oil
company Petroleos Mexicanos (Pemex) involving the Deer Park, Texas refinery. In
August and December 1993, new MTBE plants were completed at the Norco, Louisiana
and Deer Park, Texas refineries, respectively.
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Refinery processing intakes of crude oil, natural gas liquids and other raw
materials for the manufacture of petroleum products at the Company's refineries
and certain other refinery statistics were as follows for the periods indicated:
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
(thousands of barrels daily)
REFINERY PROCESSING INTAKES
Anacortes, Washington..................... 107 103 82 89 89
Deer Park, Texas*......................... 142 225 202 176 189
Martinez, California...................... 168 165 140 119 125
Norco, Louisiana.......................... 232 202 199 212 208
Odessa, Texas............................. 26 25 25 26 26
Wilmington, California**.................. -- -- 120 119 131
Wood River, Illinois...................... 243 252 234 224 222
----- ----- ----- ----- -----
TOTAL................................ 918 972 1,002 965 990
----- ----- ----- ----- -----
----- ----- ----- ----- -----
OTHER REFINERY STATISTICS*
Operable capacity of crude oil
distillation units at beginning of
year.................................... 892*** 967 1,083 1,079 1,083
Refinery intakes to crude oil distillation
units .................................. 854 900 949 904 927
Refinery crude oil distillation unit
intakes as a percent of operable
capacity at beginning of year........... 95.7% 93.1% 87.6% 83.8% 85.6%
Own net produced crude oil and natural gas
liquids as a percent of intakes to crude
oil distillation units.................. 54.3% 56.7% 56.6% 59.8% 62.0%
- ---------------
* Reflects the Company's 50% equity interest in the Deer Park Refinery,
effective April 1, 1993.
** The Wilmington, California refinery was sold in December, 1991.
*** Weighted average capacity. Adjusted to reflect the Company's 50% equity
interest in the Deer Park Refinery, effective April 1, 1993.
Transportation
At December 31, 1993, Shell Oil's wholly owned pipeline system consisted of
approximately 6,091 miles of pipelines of various sizes, of which 2,946 miles
were crude oil gathering and trunk lines, 2,765 miles were products lines, 142
miles were natural gas lines and 238 miles were carbon dioxide lines. In
addition, Shell Oil had varying stock, partnership or undivided interests in
pipelines consisting of approximately 2,857 miles of crude lines, 7,415 miles of
products lines and 784 miles of carbon dioxide lines. Shell Oil also engages
tankers and barges by a variety of methods, including spot charters, short-term
and long-term charters, contracts of affreightment and other contractual
arrangements for transportation of crude oil and products. Oil products are also
delivered to customers by truck and rail.
Marketing
Shell Oil distributes oil products principally under the "Shell" symbol or
other trademarks in which the word "Shell" appears. Oil marketing operations are
carried out through transportation systems, terminals, bulk distributing plants
and, at the end of 1993, approximately 8,700 service stations displaying Shell
trademarks. These stations are located in 39 states and the District of
Columbia.
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The number of bulk distributing plants and service stations was as follows
at the end of the periods indicated:
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
BULK DISTRIBUTING PLANTS
Leased or owned.......................... 57 61 65 67 77
------ ------ ------ ------ ------
------ ------ ------ ------ ------
SERVICE STATIONS*
Leased or owned.......................... 3,900 3,900 3,900 4,000 4,100
Jobber and other......................... 4,800 4,800 5,000 5,400 5,700
------ ------ ------ ------ ------
TOTAL............................... 8,700 8,700 8,900 9,400 9,800
------ ------ ------ ------ ------
------ ------ ------ ------ ------
----------------------
* Rounded to nearest hundred.
Shell Oil's refined product revenues and sales volumes were as follows for
the periods indicated:
1993 1992 1991 1990 1989
------- ------- ------- ------- -------
(millions of dollars)
REFINED PRODUCT REVENUES
Automotive gasoline.................... $ 6,687 $ 6,713 $ 7,172 $ 8,499 $ 7,216
Jet fuel............................... 1,242 1,173 1,387 1,673 1,280
Kerosene, heating and diesel oils...... 449 368 480 570 506
Heavy fuel oils........................ 423 469 495 483 495
Propane and other LPG.................. 419 408 390 375 278
Asphalt................................ 230 168 185 230 196
Lubricants, grease, process oils and
wax................................. 551 575 584 592 545
Coke................................... 22 16 42 52 41
All other products..................... 763 753 885 912 746
------- ------- ------- ------- -------
TOTAL............................. $10,786 $10,643 $11,620 $13,386 $11,303
------- ------- ------- ------- -------
------- ------- ------- ------- -------
(thousands of barrels daily)
REFINED PRODUCT SALES VOLUMES
Automotive gasoline.................... 638 596 636 663 660
Jet fuel............................... 143 128 141 142 142
Kerosene, heating and diesel oils...... 54 42 52 55 58
Heavy fuel oils........................ 103 108 113 84 98
Propane and other LPG.................. 89 87 74 68 76
Asphalt................................ 37 35 32 35 32
Lubricants, grease, process oils and
wax................................. 17 18 17 19 18
Coke................................... 6 6 15 16 15
All other products..................... 113 100 115 106 108
------- ------- ------- ------- -------
TOTAL............................. 1,200 1,120 1,195 1,188 1,207
------- ------- ------- ------- -------
------- ------- ------- ------- -------
CHEMICAL PRODUCTS
The Company is a major producer in the United States of olefins, aromatics,
detergent alcohols, ethylene oxide and derivatives, thermoplastic elastomers,
epoxy resins, polypropylene, oxygenated and hydrocarbon solvents, polyester
resin, and ethylene oxide catalysts. These basic chemical products are used in
many consumer and industrial products and processes. They are sold primarily to
industrial markets in the United States through Shell Oil's own sales force;
some products are also sold through distributors. Chemical products are
delivered to customers principally by rail, truck and pipeline. In addition,
petrochemicals are manufactured by a joint venture with Saudi Basic Industries
Corporation and sold in worldwide markets. To
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further improve long-term profitability, Shell Oil continues to pursue new
business ventures and growth opportunities in areas that complement its
strengths in technology and feedstocks.
Total revenues, operating profit and segment net income for Chemical
Products' activities for each of the past three years, together with capital
expenditures and related identifiable assets at the end of each year, were as
set out below. For additional information, see Note 18 of the Notes to
Consolidated Financial Statements included in Item 14a.
1993 1992 1991
------ ------ ------
(millions of dollars)
REVENUES
Sales and other operating revenue................. $3,687 $3,354 $3,378
Other revenue..................................... 16 39 50
Intersegment transfers............................ 172 129 157
------ ------ ------
TOTAL REVENUES.......................... 3,875 3,522 3,585
COSTS AND EXPENSES
Costs and operating expenses...................... 3,315 3,133 3,090
Depreciation, depletion, amortization and
retirements..................................... 232 216 221
------ ------ ------
OPERATING PROFIT........................ 328 173 274
Allocated corporate expenses...................... 24 30 31
Allocated income taxes............................ 119 48 53
Equity in net (income) loss of others............. (35) 2 27
------ ------ ------
INCOME FROM ONGOING OPERATIONS.......... 220 93 163
Other charges*.................................... 185 81 6
------ ------ ------
SEGMENT NET INCOME...................... $ 35 $ 12 $ 157
------ ------ ------
------ ------ ------
CAPITAL EXPENDITURES................................... $ 319 $ 424 $ 199
------ ------ ------
------ ------ ------
IDENTIFIABLE ASSETS AT DECEMBER 31..................... $4,312 $4,131 $3,989
------ ------ ------
------ ------ ------
- ------------
* Amounts associated with major product classifications for which there has been
no revenue stream or investment in the last five years. For 1993, includes
certain environmental and litigation provisions previously reported as
"Nonallocated costs." Amounts for 1992 and 1991 have been reclassified from
"Costs and operating expenses."
Chemical sales revenues were as follows for the periods indicated:
1993 1992 1991 1990 1989
------- ------- ------- ------- -------
(millions of dollars)
Primaries (olefins, aromatics)................ $ 869 $ 980 $ 967 $ 1,167 $ 1,130
Intermediates and solvents.................... 1,211 1,152 1,290 1,395 1,558
Polymers...................................... 1,434 1,013 942 965 976
Other......................................... 84 133 98 127 112
------- ------- ------- ------- -------
$ 3,598 $ 3,278 $ 3,297 $ 3,654 $ 3,776
------- ------- ------- ------- -------
------- ------- ------- ------- -------
The Company owns and operates chemical manufacturing facilities located at
Martinez, California; Lakeland, Florida; Argo and Wood River, Illinois; Geismar,
Norco, Taft and Reserve, Louisiana; Belpre, Ohio; Deer Park, Texas; and Pt.
Pleasant, West Virginia. The Lakeland, Florida plant was acquired in April 1993
from Schering Berlin Polymers Inc. The annual capacity of the polyester resin
manufacturing plant in Point Pleasant, West Virginia is being increased by 30%
and is due on stream by mid-1994.
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OTHER BUSINESSES
Coal
Shell Oil holds a 25% interest in Zeigler Coal Holding Company ("Zeigler").
Additionally, Shell Oil holds certain undeveloped reserves of coal. These
reserves are leased to Zeigler, which has the right to develop the reserves in
exchange for a royalty to be paid to Shell Oil.
Other
In connection with its oil and gas exploration and production business,
Shell Oil has reserves of, and produces, sulfur and carbon dioxide. Sulfur is
recovered in some of its natural gas plants and refinery operations. Estimated
year-end proved reserves and production of sulfur and carbon dioxide for each of
the periods indicated were as follows:
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
SULFUR (thousands of long tons)
Estimated proved reserves................... 4,075 4,304 4,681 5,574 6,196
Production.................................. 228 245 284 310 326
Recovered in refinery operations............ 255 207 241 218 211
Average price per ton....................... $30.04 $54.37 $84.44 $82.96 $91.24
CARBON DIOXIDE (billions of cubic feet)
Estimated proved reserves................... 4,250 4,315 4,788 4,944 5,096
Production.................................. 100 109 111 130 123
Average price per thousand cubic feet....... $ .37 $ .47 $ .46 $ .50 $ .41
OTHER MATTERS
General
The business affairs, operations and earnings of Shell Oil continue to be
affected by political developments and by legislation, regulation and other
actions taken by federal, state, and local governments, and by governmental
entities outside the United States, particularly those directly or indirectly
affecting oil and natural gas production, transportation, purchase or sale; the
refining, manufacture, transportation or marketing of petroleum and chemical
products; environmental issues related to all of the preceding (as discussed in
"Environmental Matters" following); or restrictions or requirements imposed on
companies because of foreign ownership or affiliations. As such matters could
subject Shell Oil to changes in operations, as well as to litigation and claims
of a character which have not existed in the past, Shell Oil is unable to
predict the overall effect of the preceding on its operations and earnings.
Environmental Matters
Federal environmental laws and regulations including the National
Environmental Policy Act; the Clean Air Act; the Clean Water Act; the Safe
Drinking Water Act; the Resource Conservation and Recovery Act; the Toxic
Substances Control Act; the Comprehensive Environmental Response, Compensation
and Liability Act; and their implementing regulations, as well as numerous state
and local environmental laws, continue to have an increasing impact on Shell
Oil's operations. Additional information concerning the effect that compliance
with such environmental requirements may have on capital expenditures, earnings
and competitive position, including information concerning allegations or claims
received regarding site cleanup obligations, is incorporated herein by reference
from Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations, Environmental Matters (pages 27-30), and Item 3. Legal
Proceedings (pages 18-21).
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Competition
All phases of the businesses in which Shell Oil is engaged are highly
competitive. Shell Oil competes at various levels with both petroleum and
non-petroleum companies in providing energy and other products to the consumer.
The Oil and Gas Exploration and Production segment competes with numerous
other companies in the industry to locate and to obtain new sources of supply
and to produce oil and gas in a cost-effective and efficient manner. The
principal methods of competition include geological, geophysical and engineering
research and technology, experience and expertise, and economic analysis in
connection with property acquisitions.
Competitive methods in the Oil and Chemical Products segments consist of
product improvement and new product development through research and technology,
and efficient manufacturing and distribution systems. In the marketing phase of
the business, competitive factors include product quality and reliability,
price, advertising and sales promotion, and development of customer loyalty to
Shell products.
Research
Total research and development expenses charged to income (including
applicable operating taxes and depreciation) in 1993 amounted to $192 million,
compared with $206 million in 1992 and $220 million in 1991. In 1993, about 65
percent was spent on Shell Oil sponsored research and development activities
relating to the improvement of existing, and the development of new, products
and processes, as compared to 67 percent in 1992 and 69 percent in 1991. The
remainder in each period was spent primarily on oil and gas exploration and
production activities.
The Company and another company of the Royal Dutch/Shell Group of Companies
have an arrangement whereby each will perform for, and exchange with, the other,
research services in petroleum technology, chemicals and other fields. In
addition, certain subsidiaries of the Company have technology sharing agreements
with certain other affiliates.
ITEM 3. LEGAL PROCEEDINGS.
In March 1983, the United States Environmental Protection Agency (EPA)
named the Company as one of several potentially responsible parties under the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)
for the costs of cleanup of the McColl Site, a site in Southern California used
for the disposal of refinery waste from 1942 to 1946. In April 1991, the
Company, Unocal, Arco and Texaco filed a counterclaim for contribution against
agencies of the United States government since the waste disposal at the McColl
Site arose primarily from the production of fuel for the U.S. military during
World War II. In June 1993, the EPA selected Soft Material Solidification as the
remedy, with a contingency for RCRA-equivalent closure. The EPA states that the
cost of its remedy is expected to be approximately $79 million but could go as
high as $120 million. In September 1993 the court ruled that the Company and
other defendants were liable for the costs of cleanup. The court has yet to rule
on the Company's counterclaim for contribution. The Company is also seeking a
declaratory judgment in Superior Court, San Mateo County, California that it has
insurance coverage.
In December 1983, the United States filed a civil action in the United
States District Court for the District of Colorado against the Company alleging
environmental damage and other liabilities based primarily upon CERCLA and upon
alleged breaches of lease obligations and other common law claims resulting from
the Company's operations at the United States Army's Rocky Mountain Arsenal near
Denver, Colorado. The State of Colorado contemporaneously filed in the same
court an action under CERCLA against the United States, the United States Army
and the Company alleging in part that, under CERCLA, the State is trustee of the
natural resources in question. The United States and the Company entered into a
Consent Decree effective February 12, 1993. Under the Decree, the Company would
pay 50 percent of any amount expended for remedial costs and natural resource
damages up to $500 million. The Company would also pay 35 percent of such
expenditures between $500 million and $700 million and 20 percent of any amount
expended in excess
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of $700 million. Based on its proposed remediation alternative, the Company has
accrued $500 million before tax for its share of related costs, including
provisions of $215 million in 1993 and $105 million in 1992. The Company's share
of expenditures through December 31, 1993 was approximately $213 million. Future
provisions may be required as the scope and nature of remediation programs and
related cost estimates are clarified. A final decision as to the plan of cleanup
is not expected prior to 1995. The Company is attempting to establish insurance
coverage at the RMA through 1969.
Since 1984, the Company has been named as a defendant in numerous product
liability cases, including class actions, involving the failure of plumbing
systems in the United States constructed with polybutylene plastic pipe.
Numerous claims seeking reimbursement for repairs to leaking polybutylene
plumbing systems have also been received. The components of such plumbing
systems were manufactured primarily by United States Brass Corporation and
Vanguard Plastics, Inc. using polybutylene resin supplied by the Company to
fabricate the pipe and initially polyacetal resin supplied by E.I. DuPont de
Nemours and Company (DuPont) and Hoeschst Celanese Corporation (Hoeschst
Celanese) to fabricate the pipe fittings. The suits claim property damages,
principally from leaking residential plumbing systems and, in some cases, fraud
and intentional misrepresentation. The fabricators of the plumbing systems and
the manufacturers of the resin for the fittings, as well as the builders and
installers of the systems in various locations, are also defendants in these
cases. The Company's position and most of the judgments to date have confirmed
that most of the leaks have occurred due to the failure of the polyacetal insert
fitting system. Polyacetal is no longer used to manufacture insert fittings for
these systems. Current rough estimates are that claims of leaks have been made
concerning about 2-3% of the polybutylene plumbing systems installed with such
fittings. In late 1993, the Company with various other defendants had open
claims concerning leaks in approximately 70,000 of these systems, about 30,000
of which were the subject of litigation. These numbers exclude claims arising as
a part of class actions since the number of plumbing systems involved in such
actions has not been ascertained. Class actions are pending in California,
Nevada, and Arizona (involving potentially 50,000 site built units), and in
Texas, an attempt has been made to certify a nation-wide class. The number of
new claims received increased significantly during 1993. The judgments in the
polybutylene cases are generally joint and several. In Texas and California, the
juries allocate percentage liability in joint defendant negligence cases which
provides a basis for contribution among the liable co-defendants. Some of the
smaller co-defendant installers are no longer in business and other co-defendant
fabricators and installers may have problems paying their share of costs
assessed in these cases. It is not clear as to the insurance coverage of certain
co-defendants. The Company believes it has insurance and is seeking a
declaratory judgment action in federal court in the northern district of
Illinois that it had coverage through mid-1985. Punitive damages have been
awarded against the Company in only two cases and the Company is appealing those
decisions. Almost all of the current claims outside litigation involve claims
made to the Plumbing Claims Group, Inc. ("PCG"), a corporation owned by the
Company, DuPont and Hoechst Celanese which employs approximately 60 people to
take claims and arrange repairs concerning leaking polybutylene pipe systems.
Costs of the PCG are billed based on interim sharing ratios which vary depending
on the component part manufacturer and whose polyacetal resin was used to make
the fittings.
The Company is a party to litigation in California and in Texas regarding
Nemagon, an agricultural chemical containing DBCP manufactured and sold by the
Company from 1955 to 1978. A 1989 decrease in the maximum contamination level
for DBCP resulted in residual traces of DBCP present in the groundwater in the
area of certain water wells exceeding the EPA maximum level. The claims in the
litigation seek the cost of cleanup and future monitoring of such water wells.
The Company is a co-defendant in these cases with other substantial
manufacturers and suppliers of the same chemical. The final number of wells
involved and the extent and manner of appropriate cleanup will be resolved in
the litigation. In Texas, ten cases, including three alleged class actions,
involving approximately 17,000 named plaintiffs were filed in 1993 against the
Company, other substantial manufacturers and suppliers of DBCP and various
banana growers. These actions allege that the plaintiffs suffer fertility
problems arising from exposure to DBCP while working on banana plantations
outside the United States. The Company is contesting whether any injury has in
fact been incurred by plaintiffs, whether DBCP was in fact the cause of any such
injury as may exist, and in any case if the Company was a supplier or otherwise
had liability in connection with any such injury. The Company believes
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that it has insurance coverage regarding DBCP claims and has filed a declaratory
judgment action in a California Superior Court seeking to confirm the same.
In December 1993, a Los Angeles County Superior Court jury, in two
consolidated lawsuits against the Company and its subsidiary, returned a verdict
for the plaintiffs in the amount of $46.9 million compensatory damages and $173
million punitive damages. Both cases involve the condition of the Dominguez oil
field. Plaintiffs alleged they were defrauded, that the oil and gas lease was
breached, and that soil contamination on the property constitutes a continuing
trespass. Final resolution through the appeals process could take two or more
years. The Company and its subsidiary believe the verdict was wrong and expect
ultimately to prevail in the litigation.
In August 1990, the EPA and certain Louisiana state agencies conducted an
inspection of the Company's Norco, Louisiana Manufacturing Complex. As a result,
the Company has received notices alleging violations of the Safe Drinking Water
Act, the Resource Conservation and Recovery Act and other environmental statutes
arising out of waste handling and related practices at the complex. In April
1991, the EPA and the Company commenced negotiating an appropriate range of
penalties.
In February 1991, the Nevada Division of Environmental Protection brought
an action against the Company and others for alleged violations of the
provisions of the Nevada Water Pollution Control Law, the Nevada Storage Tank
Law and the Nevada Hazardous Waste Disposal Law. The action arises out of
alleged discharges that have resulted in an underground plume of fuel in Sparks,
Nevada and seeks payment of civil penalties and the performance of remedial
work. In August 1991, the EPA issued a Comprehensive Environmental Response,
Compensation and Liability Act Section 106 order to the Company and other
companies to develop and implement a removal action. In February 1992, the state
action was amended to include a claim for nuisance abatement. On June 29, 1992
the Company notified the EPA that it would participate in the action required by
the Section 106 order.
In June 1992, the Attorney General of the State of Rhode Island filed an
action against the Company in the United States District court for the District
of Rhode Island under the Rhode Island Clean Water, Oil Pollution Control and
Hazardous Waste Management Acts. The action arose out of alleged hydrocarbon
seepage under a roadway adjacent to a Company service station and sought
penalties in excess of $1,000,000. In November 1993, a jury awarded the State of
Rhode Island $450,000 in damages. No penalties were imposed on the Company.
On October 5, 1992, the California Public Interest Research Group and two
of its individual members filed a citizens' suit under the Clean Water Act
against the Company in the United States District court for the Northern
District of California, alleging violations by the Company's Martinez,
California Manufacturing Complex of its National Pollutant Discharge Elimination
System permit by numerous exceedances of certain effluent discharge limits. A
similar suit was filed on February 18, 1993 by the Pacific Coast Federation of
Fisherman's Association. The suits seek, among other things, civil penalties. In
January 1992, the Company received a notice from attorneys for another local
interest group and six individual residents of Contra Costa County, California
informing the Company of their intention to file a citizens' suit under the
Clean Water Act, alleging similar basis, but no such suit has been filed.
Additionally, on January 19, 1994, the California Regional Water Quality Control
Board, San Francisco Bay Region, adopted a Cease and Desist Order directed to
Shell's Martinez Manufacturing Complex and two other Bay Area refineries
addressing compliance with NPDES permit provisions. Issuance of this order was a
part of a tentative settlement of a lawsuit filed by Shell, other Bay Area
refiners and an industry association challenging, among other things, said
permit provisions. Under the terms of this settlement, Shell will, over a
two-year period, pay to the state the sum of $1,040,000, principally into a
Selenium Mitigation Fund.
In December 1992, the United States EPA, Region V, filed an Administrative
Complaint against the Company pertaining to its Wood River Manufacturing Complex
located in Wood River, Illinois. The Administrative Complaint contains 57 counts
alleging reporting violations under Section 103 of the Comprehensive
Environmental Response, Compensation and Liability Act, and Section 304 of the
Emergency Planning and Community Right to Know Act. The Complaint contains a
proposed penalty of $914,650.
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In January 1993 the U.S. EPA, Region VI, filed an Administrative Complaint
against the Company pertaining to the Deer Park Manufacturing Complex located at
Deer Park, Texas. The Complaint relates to the multi-media inspection conducted
by the EPA and State of Texas at the Deer Park Complex during December 1991 and
January 1992. The Complaint alleges four counts under the Resource Conservation
and Recovery Act, six counts under the Comprehensive Environmental Response,
Compensation and Liability Act, and one count under the Emergency Planning and
Community Right to Know Act. The Complaint contains a proposed penalty of
$136,500. This Complaint has been consolidated with a complaint filed on March
31, 1993 alleging four counts under the Toxic Substances Control Act with a
proposed penalty of $35,000 and a Complaint filed September 30, 1993 alleging
two counts under the Toxic Substances Control Act with a proposed penalty of
$102,000.
In August 1993, Shell Oil was notified by the Santa Clara County,
California District Attorney that the Santa Clara Valley Water District had
referred two former Shell service station sites for enforcement action. The
District Attorney is investigating alleged soil and groundwater contamination at
these sites. It is anticipated there will be a civil suit and penalties in
excess of $100,000.
Also, numerous federal, state and local income, property and excise tax
returns of Shell Oil are being examined by the respective taxing authorities,
and certain interpretations by Shell Oil of the complex tax statutes,
regulations and practices are being challenged in administrative proceedings and
in federal and state actions.
It is not possible for the Company to predict with precision what the final
effect of the foregoing litigation will be on the Company. However, while
periodic results may be significantly affected by costs in excess of provisions
related to one or more of these proceedings, based on developments to date, the
Company anticipates that Shell Oil will be able to meet related obligations
without material adverse effect on its financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is not publicly traded.
Cash dividends were paid quarterly as follows:
1993 1992
---------------------------- ----------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
---- ---- ---- ---- ---- ---- ---- ----
(millions of dollars)
Cash dividends.............. $188 $187 $188 $200 $188 $187 $188 $187
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data is presented below for the periods indicated.
1993 1992 1991 1990 1989
------- ------- ------- ------- -------
(millions of dollars)
STATEMENT OF INCOME DATA
Revenues.............................. $21,092 $21,702 $22,411 $24,790 $21,948
Costs and expenses.................... 20,311 21,257 22,391 23,754 20,543
------- ------- ------- ------- -------
Income from operations................ 781 445 20 1,036 1,405
Cumulative effect of accounting
changes............................. -- (635) -- -- --
------- ------- ------- ------- -------
Net income (loss)..................... $ 781 $ (190) $ 20 $ 1,036 $ 1,405
------- ------- ------- ------- -------
------- ------- ------- ------- -------
BALANCE SHEET DATA
Total assets.......................... $26,851 $26,970 $27,998 $28,496 $27,599
Gross investment*..................... 39,822 39,971 39,672 38,882 38,635
Total debt............................ 3,014 3,703 4,288 3,489 3,500
Deferred income taxes................. 3,754 3,541 4,115 4,355 4,651
Shareholder's equity.................. 14,624 14,608 15,605 16,335 16,049
STATEMENT OF CASH FLOWS
Cash provided by operating
activities.......................... $ 3,172 $ 2,446 $ 1,878 $ 3,133 $ 3,406
Capital expenditures.................. 1,981 2,239 2,615 2,344 2,033
Cash dividends........................ 763 750 750 750 737
- ------------
* Gross investment consists of gross assets less current liabilities.
The above financial results and historical data should not be construed as
necessarily indicative of future financial results; see Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
KEY FINANCIAL RESULTS
-- Net income in 1993 was $781 million, compared with a net loss of $190
million in 1992 and net income of $20 million in 1991. The net loss in 1992
resulted from charges of $635 million related to the cumulative effect of
accounting changes.
-- Cash flows from operating activities were $3,172 million, compared with
$2,446 million in 1992 and $1,878 million in 1991.
-- Revenues in 1993 were $21.1 billion, down from $21.7 billion in 1992 and
$22.4 billion in 1991.
-- Shareholder's equity of $14.6 billion at the end of 1993 remained
unchanged compared with 1992, but declined from $15.6 billion at the end of
1991.
-- Net income as a percent of net investment increased to 4.1 percent, from
0.9 percent in 1991.
-- Total debt decreased in 1993 to $3,014 million, down $689 million from
year-end 1992. At that level, it represented 17.1 percent of total capital,
compared with 20.2 percent at year-end 1992 and 21.6 percent at the end of 1991.
(Segment net income for the year 1993 has been restated since our results
announcement on January 28, 1994. Certain costs which were classified as
nonallocated corporate costs in previous reporting concerning the third and
fourth quarters of 1993 have been allocated to the operating segments as "Other
Charges.")
OIL AND GAS EXPLORATION AND PRODUCTION
Oil and Gas Exploration and Production income from ongoing operations was
$478 million in 1993, compared with $469 million in 1992 and $242 million in
1991.
Income from ongoing operations increased in 1993 from 1992 mainly due to
lower production operating costs and reduced exploration activity. Domestic
crude oil prices in 1993 averaged $14.08 per barrel, down $1.70 from 1992 and
$1.98 from 1991. In the fourth quarter of 1993, domestic crude oil prices
averaged $12.19 per barrel, the lowest for any quarter in the past five years.
The average selling price of net marketable natural gas produced in 1993 was
$2.12 per thousand cubic feet, up 43 cents from 1992 and 53 cents from 1991.
Net special items increased income from ongoing operations by $26 million
in 1993 and $11 million in 1992, while reducing 1991 earnings by $15 million.
Special items in 1993 included benefits from prior-year tax adjustments of $113
million, partially offset by the effect from the tax rate change of $68 million,
and a work-force reduction charge of $12 million. Special items in 1992 included
asset write-offs and property provisions of $169 million, litigation provisions
of $54 million and a work-force reduction charge of $49 million. The negative
impact of these charges in 1992 was offset by benefits from tax adjustments
totaling $236 million and a natural gas contract settlement of $50 million. In
1991, special items consisted of a $46 million work-force reduction charge and
asset write-offs of $37 million, partially offset by positive tax adjustments of
$68 million. Other charges reduced segment net income in both 1993 and 1991 by
$1 million.
Cash provided by operating activities was $2,184 million in 1993, compared
with $1,690 million in 1992, and $1,693 million in 1991.
Crude Oil Production -- Domestic net crude oil production, on a barrels per
day basis, averaged 349,000 in 1993, 388,000 in 1992 and 400,000 in 1991. The
lower production was due to normal decline in older fields, primarily in
California, and to the sale of a number of fields.
International net production, on a barrels per day basis, was essentially
unchanged from 1992 at 61,000, but lower than 1991 by 20,000, primarily due to
the disposition of our Malaysian operations. In late 1993, Shell Oil exchanged
the assets of subsidiaries which had production rights in Syria for an interest
in a Dutch affiliate. Our equity interest in the newly formed company is 25
percent.
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Gas Production -- Average net natural gas production of 1,514 million cubic
feet per day in 1993 increased slightly from 1992 and about 8 percent over 1991.
The increase in 1993 over 1992 was due to new and increased production in the
Gulf of Mexico, and new wells in the Cadre and Javelina fields in South Texas,
partially offset by property sales.
Natural Gas Liquids -- Net natural gas liquids production, on a barrels per
day basis, was 54,000 in 1993, down 5,000 from 1992 and 2,000 from 1991. The
1993 average price of $12.93 was $.18 lower than 1992 and $1.91 lower than 1991.
Costs and Expenses -- Production costs in 1993 totaled $1,235 million, down
$250 million from 1992 and $426 million from 1991, primarily due to the
continuing success of cost reduction programs in producing operations.
Exploration expenses of $298 million in 1993, including dry hole costs of $111
million, declined $38 million from 1992 and $124 million from 1991, reflecting
cost containment measures and a lower level of activity.
Depreciation, depletion and amortization costs were $1,225 million in 1993,
a decrease of $314 million from 1992 and $146 million from 1991. The decrease in
1993 was primarily due to the write-offs of certain producing properties and
other property provisions in 1992. The decrease in 1993 from 1991 resulted from
lower unit of production depreciation as a result of lower crude oil production.
Property sales in 1993 resulted in a gain of $10 million compared with a loss in
1992 of $34 million and a minimal loss in 1991.
Capital Expenditures -- Capital spending for Oil and Gas Exploration and
Production was $877 million in 1993, the same as 1992, compared with $1,421
million in 1991. The decrease from 1991 was due to overall lower domestic
drilling, both development and exploratory.
Hydrocarbon Reserves -- In 1993, reserve additions, mainly from
discoveries, extensions and improved recovery techniques, were 353 million
barrels on a crude oil equivalent basis. These additions were offset by the
disposal and sale of certain oil and gas properties reducing reserves 209
million barrels, revisions to previous reserve estimates of 99 million
equivalent barrels, and production. In 1992 and 1991, reserves also declined.
Net wells drilled in 1993 totaled 244, a slight decline from 250 in 1992,
but down from 585 in 1991. The decreases in both 1993 and 1992 from 1991 were
due primarily to reduced domestic drilling activity.
OIL PRODUCTS
Oil Products income from ongoing operations was $285 million in 1993,
compared with earnings of $8 million in 1992 and a loss of $161 million in 1991.
Operating results showed a marked improvement from 1992 levels due to lower
overall operating costs and higher margins and sales volumes. Cost-management
activities and lower scheduled refinery turnaround expenses resulted in
substantially lower fixed operating costs and overheads. Higher margins resulted
from hydrocarbon costs declining faster than product sales prices, modestly
offset by higher refinery processing costs. Refined product sales volumes
increased in 1993 over 1992 in almost all categories, and were essentially
unchanged from 1991.
Special items in 1993 reduced income from ongoing operations $23 million
from net tax effects of $14 million, including $24 million from the tax-rate
change, work-force reduction charges of $9 million, and an $8 million charge for
the partial liquidation of crude oil and refined product inventories valued on a
last-in, first-out (LIFO) basis. Partially offsetting these charges were gains
from asset sales totaling $8 million. Included in 1992 special items was a $34
million charge for work-force reductions, offset by $30 million in gains on
asset sales. In 1991, special items impaired results by a net of $133 million,
including charges of $97 million for future environmental remediation, primarily
service station sites, $60 million attributable to the restructuring of
operations at the Wilmington Manufacturing Complex and $32 million for
work-force reductions. These charges were partially offset by benefits totaling
$56 million, consisting of the sale of a pipeline equity interest and favorable
prior-period tax adjustments. Other charges reduced segment net income in 1993,
1992 and 1991 by $5 million, $2 million and $3 million, respectively.
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Cash flow provided by operating activities was $749 million in 1993, up
$230 million and $461 million from 1992 and 1991, respectively. Capital
expenditures in 1993 of $704 million were down $86 million and $101 million from
1992 and 1991, respectively. The decline in 1993 was primarily attributable to
spending for the Norco, Louisiana refinery's catalytic cracking unit, which
commenced operations in December 1992. Marketing capital expenditures in 1993
were higher than 1992 due mainly to increased environmental activities.
Refined Product Sales Volumes -- Total 1993 refined product sales volumes
were 1,200,000 barrels per day, up from 1,120,000 in 1992 and 1,195,000 in 1991.
Automotive gasoline sales volumes in 1993 were up approximately 7 percent
over 1992, while virtually unchanged from 1991. Volumes through service stations
were up 1 percent over 1992, but declined 3 percent from 1991.
Jet fuel sales increased 12 percent compared with 1992 and were 1 percent
above 1991. Kerosene, heating and diesel oils sales increased 29 percent from
1992 and 4 percent from 1991.
Residuals sales volumes in 1993 were down 5 percent from 1992 and 9 percent
from 1991. Lubricants sales volumes in 1993 decreased 6 percent from 1992 and
were unchanged from 1991.
Refined Product Prices -- Average refined product selling prices decreased
3 cents per gallon from 1992, and were 4 cents lower than in 1991. Prices
declined in 1993 in almost all product categories, but principally in the
lighter products. Average automotive gasoline selling prices decreased 5 cents
per gallon from both 1992 and 1991.
CHEMICAL PRODUCTS
Chemical Products income from ongoing operations in 1993 was $220 million,
compared with $93 million in 1992 and $163 million in 1991.
Results in downstream chemical businesses in 1993 were improved versus 1992
and 1991, primarily due to significant cost structure improvements, modest
margin improvements and the 1992 acquisition of Goodyear's polyester resins
business. In commodity chemicals, earnings improved relative to 1992, but were
lower than 1991. Earnings in 1993 benefited from improved margins primarily due
to lower feedstock costs; however, margins remained low due to industry
overcapacity.
Income from ongoing operations in 1993 was impaired $23 million for future
claims and litigation settlements, $5 million for work-force reductions, and a
net $13 million from tax items, including $19 million for the tax-rate change.
Partially offsetting these impairments were gains from asset sales of $22
million. In 1992, income from ongoing operations was reduced by $17 million for
work-force reductions and $10 million from litigation provisions. Partially
offsetting these impacts was $15 million in gains from asset sales. In 1991,
however, these items benefited income $25 million from an asset sale and $30
million from prior-year tax adjustments. Partially offsetting these benefits was
a $20 million after-tax provision for future claims and litigation settlements,
and $14 million for work-force reductions.
Other charges reduced segment net income in 1993, 1992 and 1991 by $185
million, $81 million and $6 million, respectively. Included in these charges for
1993 and 1992 were environmental remediation provisions of $140 million and $70
million, on an after-tax basis, respectively, related to the Rocky Mountain
Arsenal in Colorado.
Cash provided by operating activities in 1993 was $447 million, compared
with $242 million in 1992 and $339 million in 1991.
Results of the Saudi Arabian petrochemical venture were similar to 1992 and
improved over 1991 due to higher product sales volumes and slightly higher
margins. Worldwide overcapacity continued to impact earnings.
Total chemical sales volumes in 1993 improved 6 percent over 1992 and 13
percent over 1991, reflecting the 1992 acquisition of the polyester resins
business and higher demand across almost all product lines.
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Capital spending for Chemical Products was $319 million in 1993, compared
with $424 million in 1992 and $199 million in 1991. Expansions of the ethylene
oxide/ethylene glycol and the polyester resins businesses, as well as the
acquisitions of portions of Rhone-Poulenc's and Schering Berlin's resins
businesses, represent the major portion of 1993 capital spending. The purchase
of Goodyear's polyester resins business was a major outlay in 1992.
OTHER SEGMENT
The Other operating segment incurred a net loss of $27 million in 1993,
compared with a net loss of $70 million in 1992, and earnings of $24 million in
1991. In 1993, the operating loss was mainly attributable to equity interests in
coal mining. Of the 1992 loss, about $60 million was due to the sale of the
mining subsidiary and the balance reflected lower earnings from operations prior
to its disposition.
NONALLOCATED CORPORATE COSTS
Corporate costs not allocated to the segments contributed $16 million to
earnings in 1993 and $28 million in 1992, while reducing earnings $238 million
in 1991.
In 1993, special items included a favorable prior-year tax adjustment of
$161 million, partially offset by a $5 million litigation settlement. Special
items in 1992 benefited corporate costs $193 million, including $207 million in
interest related to prior-year tax adjustments, partially offset by a $14
million charge related to a litigation settlement. An after-tax charge of about
$30 million related to a litigation settlement in California adversely affected
1991 costs. Excluding these effects, corporate costs, primarily related to
financing, declined in 1993 compared with both previous years, due primarily to
lower interest expense.
CAPITAL RESOURCES AND LIQUIDITY
Cash provided by operating activities continued to be the primary source of
funding for Shell Oil's capital investment program, dividends and other needs.
In 1993, cash provided by operating activities totaled $3,172 million, up
$726 million over 1992, exceeding cash used for investing activities in 1993 by
$1,814 million. Similarly, cash provided by operating activities in 1992 totaled
$2,446 million and exceeded cash used for investing activities by $1,037
million. In 1991, however, cash used for investing activities exceeded operating
cash flow by $361 million. As a result of the 1993 improvement in cash flow,
total debt declined $689 million to $3,014 million, further strengthening
Shell's strong debt-to-total-capital ratio.
Cash Provided by Operating Activities -- In 1993, cash provided by
operating activities amounted to $3,172 million, compared with $2,446 million in
1992 and $1,878 million in 1991. Higher earnings and significantly lower
operating working capital requirements in 1993 accounted for the improvement
over both 1992 and 1991.
Cash Used for Investing Activities -- The major use of cash flows from
operating activities was for capital expenditures, which amounted to $1,981
million in 1993, $2,239 million in 1992, and $2,615 million in 1991. Proceeds
from property sales in 1993 totaled $539 million, including sales of producing
properties and 50 percent of the Deer Park refining assets. In 1992, proceeds
totaled $779 million, reflecting the sale of Shell's coal mining subsidiary and
the disposition of several producing properties. Net cash used for investing
activities in 1993 and 1992 was about the same. In 1991, higher capital
expenditures and lower proceeds from property sales increased cash usage.
Debt Obligations -- In 1993, Shell Oil decreased its total debt $689
million, compared with a decrease of $585 million in 1992 and an increase of
$799 million in 1991.
Shell Oil's ratio of total debt to total capital decreased to 17.1 percent
at the end of 1993, compared with 20.2 percent at the end of 1992 and 21.6
percent at the end of 1991.
Capital Spending -- Shell Oil's capital spending of $2.0 billion in 1993
was about $600 million less than planned at the beginning of the year. This
reduction reflects the sustained efforts throughout the year in
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achieving more cost-effective ways to complete projects and fully meet
environmental compliance objectives. In 1993, exploration and production
activities accounted for 44 percent of total capital, compared with 42 percent
in 1992 and 57 percent in 1991. These outlays were primarily in the United
States. Oil and Chemical Products accounted for 52 percent of total spending in
1993, compared with 54 percent in 1992 and 38 percent in 1991. Capital
expenditures decreased in 1993 compared to 1992 due to lower spending in
manufacturing and the acquisition of the polyester resins business and sale of
the mining subsidiary late in 1992. The higher expenditures in 1991 resulted
from increased production drilling and development activity and costs associated
with the construction of the Norco catalytic cracking unit.
Capital and exploratory expenditures of $3.1 billion are budgeted for 1994.
About $1.5 billion is allocated for exploration and production activities, an
increase of $300 million over the 1993 level. These expenditures include funds
for additional development activities in the Gulf of Mexico. Oil Products
expenditures are budgeted to reach $1.1 billion in 1994, reflecting spending
associated with the upgrading of our Martinez, California refinery and increased
spending for environmental projects. Chemical Products expenditures are expected
to be about the same at $400 million.
Dividends -- Cash dividends were $763 million in 1993, an increase of $13
million over the prior two years. In 1992, $217 million of net assets,
representing Canadian tar sands and Malaysian operations, were transferred to
affiliates of the Royal Dutch/Shell Group of Companies.
Liquidity -- Internally generated cash, access to outside financing based
on strong credit ratings, and prudent management of working capital are the
essential components of Shell Oil's liquidity position. Cash and cash
equivalents amounted to $1,296 million at year-end 1993, an increase of $562
million over 1992 and $744 million over 1991.
Shell Oil's strategy continues to rely mainly on internally generated cash
to finance routine operating requirements and capital spending. Short-term
borrowings will generally be used to fund interim working capital needs and
unusual requirements. As of December 31, 1993, unused backup credit facilities
of $500 million were available for general corporate purposes, including support
of commercial notes. The Company plans to manage the level of backup facilities
consistent with its cash and cash equivalents balances. During 1993, Shell Oil
redeemed all of the existing $250 million of 8 3/8 percent Notes Due 1996 and
retired $250 million of 7 5/8 percent Notes Due 1993. As of the end of 1993,
$500 million of a $1.0 billion shelf registration remained, allowing future
flexibility in the markets.
The Company utilizes financial derivatives from time to time to manage its
financial risk exposure to interest rates and certain commodity prices. During
1993 Shell Oil entered into interest rate swaps related to existing long term
debt. At December 31, 1993, the notional amount of such swaps was $250 million
with maturities extending into 1996. In the future, the Company may increase the
level of financial derivatives activities as business conditions warrant.
Working capital at the end of 1993 increased $185 million over a year
earlier due primarily to higher cash and cash equivalents, offset in part by
lower receivables and inventories. Shell Oil's liquidity position is
considerably stronger than indicated by these working capital levels because of
relatively lower historical costs assigned to inventories under LIFO accounting
procedures. The year-end inventory values included in working capital were below
their current costs by $648 million at the end of 1993, $1,049 million in 1992
and $1,104 million in 1991. Current assets exceeded current liabilities by $273
million at the end of 1993, $88 million at the end of 1992, while current
liabilities exceeded current assets by $1,262 million at the end of 1991.
ENVIRONMENTAL MATTERS
Shell Oil continues to make substantial capital and operating expenditures
relating to the environment, including expenditures associated with compliance
with federal, state and local environmental regulations. Included within such
expenditures are costs of compliance with the various laws, regulations and
permit requirements concerning reduction of releases into air and water and
disposal and handling of wastes at ongoing operating locations. Also included
within such overall environmental expenditures are the costs of
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remedial orders, corrective action requirements and other cleanup obligations
under federal, state and local law and by contract both at operating locations
and at previously owned or operated properties, as well as remediation costs at
off-premises sites.
Discussions are ongoing with governmental agencies as to the scope and
magnitude of Shell Oil's present closure and post-closure Resource Conservation
and Recovery Act (RCRA) and similar state or local remediation obligations at
operating locations. Such discussions are part of the normal RCRA regulatory
process. Shell Oil anticipates that those discussions will result in corrective
action being required currently at its manufacturing locations. The complexity
of the fact issues and the evolving legal requirements, coupled with the many
choices made available by diverse technologies that may be used in such
corrective action, make it difficult to estimate with great reliability the
total costs of such action. However, Shell Oil currently estimates the costs of
implementing corrective action at its Martinez, California Manufacturing Complex
to be about $20 million, of which approximately $16 million has been expended
and the remainder has been provided for in the accounts. This estimate is down
approximately $10 million from previous estimates because investigations to date
have uncovered less contamination than expected and more cost-effective
remediation methods have been utilized. Expenditures at Martinez have taken
place over five years with the maximum expenditure in any year being about $7
million. Corrective action at Shell Oil's Carson Plant (part of the former
Wilmington Refinery) is expected to cost about $13 million, which amount is also
provided for in the accounts. We are not aware that any state in which Shell Oil
has manufacturing facilities has stricter cleanup requirements than California
and at this point, there is no reason to believe that conditions requiring
corrective action are more extensive at other manufacturing locations. Thus, it
is currently reasonable to assume that the costs estimated to be incurred at
these two facilities are indicative of the costs which can be expected at other
manufacturing locations. Based upon these facts and expectations as to the final
content of still emerging regulations, Shell Oil does not expect that the costs
of taking corrective action over time under RCRA and similar state and local
regulations at operating facilities will be material to Shell Oil's financial
position or operating income in any year. All such expenditures are included in
the expenditures reported below and this matter is under continual review.
RCRA also imposes obligations with respect to closure of a RCRA covered
facility (i.e., a facility at which certain wastes are stored, treated or
disposed of) and in certain cases for a 30-year post-closure period. The costs
associated with such RCRA obligations are subject to a number of uncertainties
including when such facilities will actually close and the time period over
which closure/post-closure activity may take place. In 1993, as required by
federal regulations, Shell Oil confirmed its ability to pay $200 million for
RCRA-related closure and post-closure costs. The calculation of Shell Oil's
potential exposure in this area was made pursuant to the requirements of
applicable federal and state law. Approximately $120 million of this $200
million relates to postclosure obligations over a 30-year period beginning at a
still to be determined point, in most cases well into the future. As to the $80
million for RCRA closure costs, it is reasonable to anticipate that all
facilities will not incur closure costs at the same time. Thus, such amounts
will almost certainly be spent over a period of many years as the various
facilities in fact close, and post-closure costs follow. While the ultimate
closure and post-closure costs as required by RCRA cannot be precisely estimated
at this time, management does not currently anticipate that they will materially
adversely affect Shell Oil's financial position or operating income in any year.
Regarding off-premises sites, Shell Oil has received allegations or claims
under the Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA) or similar state statutes that it is involved at 189 sites, including
the Rocky Mountain Arsenal (RMA) in Colorado and the McColl site in Southern
California, as further discussed in Note 16 of the Notes to Consolidated
Financial Statements. As of December 1993, discussions or activities concerning
110 of these sites were active involving Shell Oil, other potentially
responsible parties and relevant agencies or claimants. A site is considered
active where discussion or activity is in progress between Shell Oil and the
agency or claimant. At a number of these sites, matters remain in the early
investigation stages. Forty-one sites were considered inactive, meaning that no
discussions or activities were pending or had occurred for more than one year
and 38 sites are considered settled. In 1992 Shell Oil reported 173 such sites,
91 of which were active, 46 inactive and 36 settled.
28
29
In 1993, recorded expenses under CERCLA or similar state statutes relating
to the 189 sites were approximately $250 million, which includes an increase to
the RMA reserve of $215 million as discussed in Note 16 of the Notes to
Consolidated Financial Statements. Reserves established for other sites during
1993 totaled approximately $15 million. During 1993, charges against reserves
established prior to 1993, including the RMA, were approximately $50 million. In
the case of the RMA, the $215 million increase to the reserve brings the total
RMA reserve to $500 million and represents Shell Oil's share of an estimated
$1.6 billion remediation cost, which is Shell Oil's best estimate at this time
of the total costs to be incurred at the RMA. Included in the $1.6 billion
estimate are costs of cleanup and monitoring and, to a much lesser degree,
administrative costs. Other reserves have similar components. All reserve
calculations by Shell Oil are made consistently with Shell Oil's articulated
"Accounting Policies -- Environmental Costs," as set forth in Note 1 of the
Notes to Consolidated Financial Statements. No reserve reflects any insurance
reimbursement, although Shell Oil believes at least certain coverage exists and
expects to ultimately obtain some recovery. At certain third party sites where
Shell Oil has only a small dollar exposure, Shell Oil may accept the cleanup
cost estimates of the parties managing the site and reserve on that basis; such
increases to environmental reserves would be immaterial in the aggregate. The
complexities of CERCLA regulations, particularly in relation to joint and
several liability and multiple cleanup options, as well as the incomplete
factual data at some sites, make it impossible to predict with certainty the
total cleanup costs Shell Oil will incur for the 110 active sites referenced
above. However, Shell Oil believes the following to be true: at the majority of
the above referenced sites, Shell Oil should have responsibility for only a
small percentage share of the total cleanup costs (and other viable potentially
responsible parties (PRP's) have already been identified to lessen the potential
burden of joint and several liability at such sites); the CERCLA sites will be
cleaned up over time and not simultaneously; and Shell Oil is not aware of any
sites which represent, individually, a reasonably possible material exposure
except the RMA and to a much lesser extent possibly the McColl site, and Shell
Oil has established appropriate reserves for such sites. Shell Oil manages these
matters closely to help assure prudent and cost effective cleanup in full
compliance with all legal requirements. Basis the preceding, while operating
income may be significantly adversely affected in a particular period, Shell Oil
does not currently believe costs related to CERCLA cleanup will materially
adversely affect Shell Oil's financial position.
While certain environmental expenditures are discrete and readily
identifiable, others must be reasonably estimated or allocated based on
technical and financial judgments as developed over time, affecting comparisons
in certain years. Consistent with the preceding, Shell Oil estimates that
environmental capital expenditures in 1993 amounted to about $335 million, about
$15 million above 1992 expenditures of $320 million due mainly to clean air
regulations. Approximately 70% of 1993 capital expenditures related to clean air
regulations. Environmental capital expenditures are expected to be about $410
million in 1994 and $275 million in 1995. Expenditures to comply with clean air
standards are expected to comprise the largest portion of 1994 environmental
capital spending and by year end 1995, Shell Oil anticipates that it will have
completed a substantial portion of such expenditures, if current understandings
of regulations which continue to emerge prove correct. Shell Oil's operating,
maintenance and administrative costs related to environmental protection and
remediation of waste disposal sites were approximately $1,030 million in 1993 as
compared with $905 million in 1992 and $1,060 million in 1991. The increase was
due mainly to the recording of increased reserves of about $280 million for
environmental remediation, including the reserve increase at the RMA as
discussed above. These reserve additions are approximately $155 million more
than 1992. Shell Oil also incurred increased expenses for clean fuels and for
environmental taxes which were offset by lower waste processing costs due in
part to a reduction in wastes produced, fewer refinery turnarounds and less
hydrotesting in pipelines versus the prior year.
During the next several years, total environmental expenditures are
expected to approximate 1993 levels as Shell Oil complies with requirements
under existing laws, as well as with regulations yet to be promulgated or
finalized. The federal Clean Air Act and related state laws such as the
California air emission standards, the federal Oil Pollution Act,
reauthorization of RCRA and CERCLA, underground produced water injection
regulations under the Safe Drinking Water Act, and numerous related state and
local laws affecting all aspects of the environment are expected to have a
pronounced, but as yet not fully understood, effect on all areas of Shell Oil's
operations over the next decade as we and those with whom we do business strive
to adapt to such evolving requirements. Compliance with such laws, such as the
requirement to add oxygenates to fuels, will
29
30
add to the cost of doing business. However, Shell Oil intends to continue its
efforts to implement process redesign and operating efficiencies to comply with
these laws in the most efficient and cost-effective manner.
Shell Oil is unable to predict with certainty the effect that compliance
with above described environmental requirements, particularly laws and
regulations not yet finalized, may have upon its competitive position or future
earnings. However, while operating income may be materially adversely affected
in particular periods as the result of environmental expenses, based on the
facts currently known to Shell Oil and the law and technology in existence as of
this date, Shell Oil believes that it can comply fully without material adverse
impact on its financial position.
OTHER MATTERS
In addition to economic conditions and other matters discussed above
affecting Shell Oil, the operations, earnings and financial condition of Shell
Oil may be affected by the matters discussed in Note 16 of the Notes to
Consolidated Financial Statements, as well as by political developments;
litigation; and legislation, regulation and other actions taken by federal,
state and local governmental entities and by governments outside the United
States.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Financial Statements, the Notes to Consolidated Financial
Statements and the Report of Independent Accountants are included in Item 14a of
this report. The Quarterly Results of Operations are reported in Note 20 of the
Notes to Consolidated Financial Statements included in Item 14a. Information on
Oil and Gas producing activities is included in Items 1 and 2.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Not applicable.
ITEM 11. EXECUTIVE COMPENSATION.
Not applicable.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Not applicable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
30
31
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
A. CERTAIN DOCUMENTS FILED AS PART OF THIS REPORT
PAGE
Report of Independent Accountants........................................ 32
Consolidated Statement of Income and Earnings Reinvested for the years
1993, 1992 and 1991.................................................... 33
Consolidated Balance Sheet at December 31, 1993 and 1992................. 34
Consolidated Statement of Cash Flows for the years 1993, 1992 and 1991... 35
Notes to Consolidated Financial Statements............................... 36
Schedule V --Consolidated property, plant and equipment................. 51
Schedule VI --Consolidated accumulated depreciation, depletion and
amortization of property, plant and equipment.............. 52
Schedule VII --Guarantees of securities of other issuers.................. 53
Schedule IX --Consolidated short-term borrowings......................... 53
Schedule X --Consolidated supplementary income statement information.... 54
B. REPORTS ON FORM 8-K
During the quarter ending December 31, 1993, the Company filed a Current
Report on Form 8-K dated November 23, 1993 which included various documents in
connection with the commencement of the offering of its Medium Term Notes.
C. EXHIBITS*
3. Copy of Restated Articles of Incorporation of the Registrant
effective December 8, 1986 and Copy of By-Laws of the Registrant, as
amended through December 8, 1986, are incorporated by reference to
Item 14c of the Company's Annual Report on Form 10-K for the year
ended December 31, 1986.
4. The Registrant will provide to the Securities and Exchange
Commission, upon request, copies of instruments defining the rights of
holders of long-term debt listed in Note 9 of the Notes to
Consolidated Financial Statements.
10. Material Contracts:
(i) Copy of letter agreement dated December 7, 1993 between the
Company and Shell Internationale Research Maatschappij, B.V.
continuing for the calendar year 1994 the Agreement for Research
Services dated January 1, 1960, as amended.
(ii) Composite copy of the Agreement for Research Services dated
January 1, 1960, as amended through August 19, 1982.
12. Computation of Ratio of Earnings to Fixed Charges.
21. Subsidiaries of the Registrant
23. Consent of Independent Accountants
24. Powers of Attorney
- ------------
* Copies of Exhibits may be obtained for 25 cents per page, prepaid, by writing
to the Corporate Secretary.
D. FINANCIAL STATEMENT SCHEDULES
The schedules filed by the Company are listed in Item 14a above. No
separate financial statements are required to be included because reporting
tests are not met. Certain schedules have been omitted because the required
information is shown in the financial statements or notes thereto.
31
32
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND
SHAREHOLDER OF SHELL OIL COMPANY
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14a on page 31 present fairly, in all material respects,
the financial position of Shell Oil Company and its subsidiaries at December 31,
1993 and 1992, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for postretirement benefits other than pensions
and for income taxes in 1992.
PRICE WATERHOUSE
Houston, Texas
February 9, 1994
32
33
SHELL OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND EARNINGS REINVESTED
(Millions of dollars)
YEARS ENDED DECEMBER 31
-----------------------------------
1993 1992 1991
------- ------- -------
REVENUES
Sales and other operating revenue.................... $23,581 $23,711 $24,700
Less: Consumer excise and sales taxes................ 2,728 2,551 2,499
------- ------- -------
20,853 21,160 22,201
Equity earnings, interest and other income........... 239 542 210
------- ------- -------
Total........................................... 21,092 21,702 22,411
COSTS AND EXPENSES
Purchases and operating expenses..................... 16,368 16,618 17,582
Selling, general and administrative expenses......... 894 1,146 1,139
Exploration, including exploratory dry holes......... 289 325 410
Research expenses.................................... 149 161 172
Depreciation, depletion, amortization and
retirements........................................ 1,739 2,082 2,062
Interest and discount amortization................... 198 250 276
Operating taxes...................................... 540 643 731
------- ------- -------
Total........................................... 20,177 21,225 22,372
------- ------- -------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES...................................... $ 915 $ 477 $ 39
Federal and other income taxes....................... 134 32 19
------- ------- -------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES..... $ 781 $ 445 $ 20
Cumulative effect of accounting changes.............. -- (635) --
------- ------- -------
NET INCOME (LOSS)......................................... $ 781 $ (190) $ 20
------- ------- -------
------- ------- -------
EARNINGS REINVESTED
Balance at beginning of year......................... $12,403 $13,560 $14,290
Net Income (Loss).................................... 781 (190) 20
Dividends -- Cash.................................... (763) (750) (750)
-- Other................................... (2) (217) --
------- ------- -------
Balance at end of year............................. $12,419 $12,403 $13,560
------- ------- -------
------- ------- -------
The accompanying notes are an integral part of these statements.
33
34
SHELL OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of dollars, except per share amounts)
AS OF DECEMBER 31
--------------------
1993 1992
------- -------
ASSETS
Current Assets
Cash and cash equivalents...................................... $ 1,296 $ 734
Receivables and prepayments, less allowance for doubtful
accounts...................................................... 2,429 2,683
Owing by related parties....................................... 117 159
Inventories of oils and chemicals.............................. 686 814
Inventories of materials and supplies.......................... 228 267
------- -------
Total Current Assets...................................... 4,756 4,657
Investments, Long-Term Receivables and Deferred Charges............. 3,015 2,359
Property, Plant and Equipment at cost, less accumulated
depreciation, depletion and amortization........................... 19,080 19,954
------- -------
Total..................................................... $26,851 $26,970
------- -------
------- -------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Accounts payable -- trade...................................... $ 1,689 $ 1,723
Other payables and accruals.................................... 797 821
Income, operating and consumer taxes........................... 596 710
Owing to related parties....................................... 85 119
Short-term debt................................................ 1,316 1,196
------- -------
Total Current Liabilities................................. 4,483 4,569
Long-Term Debt...................................................... 1,698 2,507
Deferred Income Taxes............................................... 3,754 3,541
Long-Term Liabilities............................................... 2,292 1,745
Shareholder's Equity
Common stock -- 1,000 shares of $10 per share par value
authorized and outstanding.................................... -- --
Capital in excess of par value................................. 2,205 2,205
Earnings reinvested............................................ 12,419 12,403
------- -------
Total Shareholder's Equity................................ 14,624 14,608
------- -------
Total..................................................... $26,851 $26,970
------- -------
------- -------
The accompanying notes are an integral part of these statements.
34
35
SHELL OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of dollars)
YEARS ENDED DECEMBER 31
---------------------------------
1993 1992 1991
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income......................................... $ 781 $ (190) $ 20
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of Accounting Changes....... -- 635 --
Depreciation, depletion, amortization and
retirements................................. 1,739 2,082 2,062
Dividends in excess of equity income.......... 8 32 34
(Increases) decreases in working capital:
Receivables and prepayments.............. 296 107 498
Inventories.............................. 167 72 (38)
Payables and accruals.................... (206) (181) (407)
Deferred income taxes......................... 122 (270) (249)
Other non-current items....................... 265 159 (42)
------- ------- -------
Net Cash Provided by Operating
Activities............................. 3,172 2,446 1,878
CASH FLOWS PROVIDED BY (USED FOR) INVESTING ACTIVITIES
Capital expenditures............................... (1,981) (2,239) (2,615)
Proceeds from property sales and salvage........... 539 779 272
Other investments and advances..................... 84 51 104
------- ------- -------
Net Cash Used for Investing Activities... (1,358) (1,409) (2,239)
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES
Proceeds from issuance of long-term debt........... 21 1,013 1,027
Principal payments on long-term debt............... (542) (130) (314)
Proceeds from sales of redeemable securities
of subsidiaries.................................. 200 164 --
Contributed capital................................ -- 160 --
Dividends.......................................... (763) (750) (750)
Increase (decrease) in short-term obligations...... (168) (1,312) 86
------- ------- -------
Net Cash Provided by (Used for) Financing
Activities............................. (1,252) (855) 49
NET CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents... $ 562 $ 182 $ (312)
------- ------- -------
------- ------- -------
CASH AND CASH EQUIVALENTS
Balance at beginning of year....................... $ 734 $ 552 $ 864
Increase (decrease) in cash and cash equivalents... 562 182 (312)
------- ------- -------
Balance at end of year................... $ 1,296 $ 734 $ 552
------- ------- -------
------- ------- -------
The accompanying notes are an integral part of these statements.
35
36
SHELL OIL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Shell Oil Company (the Company) is wholly owned by Shell Petroleum Inc., a
Delaware corporation, whose shares are directly or indirectly owned 60 percent
by Royal Dutch Petroleum Company, The Hague, The Netherlands, and 40 percent by
The "Shell" Transport and Trading Company, public limited company, London,
England.
This summary of the major accounting policies of Shell Oil Company and its
consolidated subsidiaries (Shell Oil) is presented to assist the reader in
evaluating Shell Oil's financial statements and other data contained in this
report.
Cash Equivalents -- Cash equivalents consist of highly liquid investments
that are readily convertible into cash and have a maturity of three months or
less.
Inventories -- Inventories of oils and chemicals are valued at cost
predominantly on a last-in, first-out (LIFO) basis which is lower than market.
Materials and supplies are carried at average cost or less.
Exploration and Development -- Exploration and development expenditures are
accounted for according to the "successful efforts" method of accounting.
Property Acquisition Costs -- Direct costs of acquiring developed or
undeveloped leasehold acreage including lease bonus, brokerage and other
fees are capitalized. The cost of undeveloped properties which become
productive is transferred to a producing property account.
Exploratory Costs -- Exploratory expenses, including geological and
geophysical expenses and annual delay rentals on oil and gas leases, are
charged to income as incurred. Exploratory drilling costs are initially
capitalized, but should the efforts be determined to be unsuccessful, they
are then charged against income.
Development Costs -- Costs incurred to drill and equip development
wells, including dry holes, platform costs, well equipment costs and
attendant production facilities costs are capitalized.
Depreciation, Depletion and Amortization -- Depreciation, depletion and
amortization of the capitalized cost of producing properties, both tangible and
intangible, are provided for on a unit of production basis. Developed reserves
are used in computing unit rates for drilling and development costs, and total
proved reserves are used for depletion of leasehold costs. The predominant basis
for unit determination is by field. Amortization of unproven leasehold costs
from date of acquisition is based primarily upon experience in establishing
rates to fully amortize over the holding period those leases that may be
unproductive. Estimated dismantlement, restoration and abandonment costs and
estimated residual salvage values are taken into account in determining
amortization and depreciation provisions.
Other plant and equipment are depreciated on a straight-line basis over
their estimated useful lives. On a cycle basis, asset lives are reviewed for
propriety of estimated useful life. Changes in depreciation rates, if any, are
applied prospectively.
Environmental Costs -- Environmental costs relating to current operations
are expensed or capitalized, as appropriate, depending on whether such costs
provide future economic benefits. Liabilities are recognized when the costs are
considered probable and can be reasonably estimated. Measurement of liabilities
is based on currently enacted laws and regulations, existing technology and
undiscounted site-specific costs. Such recognition occurs no later than the
Company's commitment to a formal plan of action. Environmental liabilities in
connection with properties which are either sold or closed are realized upon
such sale or closure, to the extent they are probable and estimable at that
date. In assessing environmental liabilities, no set-off is made for potential
insurance recoveries. Recognition of any joint and several liability is made
based upon the
36
37
best estimate as to Shell Oil's final pro rata share of the liability. All
liabilities are monitored and adjusted regularly as new facts or changes in law
or technology make appropriate.
2. ACCOUNTING CHANGES
Shell Oil adopted Statement of Financial Accounting Standards (SFAS) No.
106, "Employers' Accounting for Postretirement Benefits Other than Pensions," in
1992. In contrast to previous years when Shell Oil's portion of premium payments
was recorded as retiree health care expense and charged against income, SFAS No.
106 requires the accrual of the expected cost of providing retiree health care
benefits during the period the employees rendered the necessary service to be
entitled to such benefits. Shell Oil elected to immediately recognize the
cumulative effect of adopting SFAS No. 106 as of January 1, 1992. As shown
below, this resulted in the recognition of an accumulated postretirement health
care benefit obligation of $950 million ($627 million after deferred income
taxes).
Shell Oil also adopted SFAS No. 109, "Accounting for Income Taxes," in
1992. This statement superseded SFAS No. 96, which was adopted by Shell Oil in
1988. SAFS No. 109 prescribes an asset and liability approach in accounting for
income taxes, requiring that deferred tax assets and liabilities be determined
using the tax rate expected to apply to taxable income in the periods in which
the deferred tax asset or liability is expected to be realized or settled. Under
this method, future financial results will be impacted by the effect of changes
in income tax rates on cumulative deferred income tax balances. The one-time
effect of adopting this standard as of January 1, 1992 is shown below.
A summary of the cumulative effect of these 1992 accounting changes is as
follow:
INCREASE (DECREASE)
-----------------------------------------
OTHER DEFERRED NET
POSTRETIREMENT INCOME INCOME
ACCOUNTING CHANGE BENEFIT EXPENSE TAXES 1992
- ----------------- --------------- -------- ------
(millions of dollars)
Implementation of SFAS No. 106.................. $ 950 $ (323) $(627)
Implementation of SFAS No. 109.................. -- 8 (8)
----- ------- ------
Total................................. $ 950 $ (315) $(635)
----- ------- ------
----- ------- ------
3. INTEREST
Interest costs were as follows:
1993 1992 1991
---- ---- ----
(millions of dollars)
Interest expensed or incurred............................ $198 $250 $276
Interest paid............................................ 206 225 263
4. FOREIGN CURRENCY TRANSACTIONS
The U.S. Dollar is the functional currency for each of Shell Oil's foreign
operations. The net after-tax effect of foreign currency transactions was a loss
of $3 million in 1993, a gain of $1 million in 1992, and a loss of $2 million in
1991.
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38
5. TRANSACTIONS WITH RELATED PARTIES
Shell Oil had transactions, including the purchase, sale and transportation
of crude oil, petroleum and chemical products, in the ordinary course of
business with related parties, including companies affiliated with the Royal
Dutch Petroleum Company and The "Shell" Transport and Trading Company, public
limited company. Such transactions were as follows:
1993 1992 1991
------ ------ -----
(millions of dollars)
Sales and other operating revenue.................... $ 554 $ 787 $ 740
Purchases and transportation......................... 1,057 1,161 1,083
The revenues and costs related to these transactions are commingled with
other revenues and costs and the amount of profit thereon is not accurately
determinable without effort and expense disproportionate to the relative
importance of such amount.
Transactions with related companies also included certain foreign venture
arrangements with respect to the exploration for and development and production
of crude oil and natural gas, and an arrangement whereby the Company and another
company of the Royal Dutch/Shell Group of Companies each will perform for, and
exchange with, the other, research services in petroleum technology, chemicals
and other fields.
In 1993, Shell Oil exchanged the assets of subsidiaries which held
production rights in Syria for an interest in a Dutch affiliate which had also
acquired rights in the Danish North Sea from another affiliate. Shell Oil's
investment in the Dutch affiliate of $389 million is accounted for using the
equity method.
Effective at the beginning of 1992, oil and gas producing assets in
Malaysia and a subsidiary which held interests in a tar sands project in Canada,
were transferred to companies affiliated with the Royal Dutch/Shell Group of
Companies. The transfers of the Malaysian and Canadian assets were accounted for
as dividends in the amounts of $159 million and $58 million, respectively.
6. INVENTORIES OF OILS AND CHEMICALS
Inventories are carried predominantly on a LIFO basis which was lower than
current cost by $648 million at December 31, 1993, $1,049 million at December
31, 1992, and $1,104 million at December 31, 1991. Partial liquidation of
inventories valued on a LIFO basis in 1993 impaired net income $10 million
compared with an improvement of $2 million in 1992, and an impairment of $4
million in 1991.
7. RECEIVABLES AND PREPAYMENTS
Receivables, prepayments and allowances for doubtful accounts as of
December 31, 1993 and 1992, and the provisions for those years consisted of the
following:
1993 1992
------ ------
(millions of dollars)
Trade receivables.............................................. $1,745 $1,932
Other receivables.............................................. 406 573
Prepayments.................................................... 309 212
------ ------
2,460 2,717
Less Allowance for Doubtful Accounts
Balance beginning of year................................. 34 35
Provision............................................ 38 37
Net write-offs....................................... (41) (38)
------ ------
Balance end of year....................................... 31 34
------ ------
Total........................................... $2,429 $2,683
------ ------
------ ------
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8. SHORT-TERM DEBT
Debt due within one year from December 31 consisted of the following:
1993 1992
------ ------
(millions of dollars)
Commercial notes............................................. $ 502 $ 502
Bank loans................................................... 50 218
Industrial Revenue Bonds..................................... 197 172
------ ------
749 892
Add: Long-term debt due within one year.................... 567 304
------ ------
Total................................................. $1,316 $1,196
------ ------
------ ------
9. LONG-TERM DEBT
Debt due after one year from December 31 consisted of the following:
1993 1992
------ ------
(millions of dollars)
Shell Oil Company --
8 1/2% Debentures Due 2000................................ $ 18 $ 26
7 1/4% Debentures Due 2002................................ 21 21
8% Debentures Due 2007.................................... 50 50
7.70% Notes Due 1996...................................... 250 250
7 1/8% Notes Due 1994..................................... 250 250
7% Notes Due 1995......................................... 250 250
6 1/8% Notes Due 1994..................................... 250 250
7 5/8% Notes Due 1993..................................... -- 250
8 3/8% Notes Due 1996..................................... -- 250
6% Notes Due 1997......................................... 250 250
6.95% Notes Due 1998...................................... 250 250
6 5/8% Notes Due 1999..................................... 250 250
6.70% Notes Due 2002...................................... 250 250
7.65% to 8.5% Notes Due 1994-1996........................... 18 24
Industrial Revenue Bonds.................................... 16 32
Other....................................................... 144 161
------ ------
Total including long-term term debt due within one
year.............................................. 2,267 2,814
Less: Unamortized discount................................. 2 3
Long-term debt due within one year................... 567 304
------ ------
Total................................................ $1,698 $2,507
------ ------
------ ------
Shell Oil had $500 million of unused variable rate revolving credit
agreements in place as of December 31, 1993, which were available for general
corporate purposes, including support of commercial notes. Customary commitment
fees were paid for $150 million of these facilities with the remainder supported
by compensating bank balances resulting from operating funds flowing through
banks. None of these balances are restricted as to withdrawal nor are they
material in relation to Shell Oil's liquidity position.
The amount of long-term debt maturing during each of the next five years is
$567 million in 1994, $282 million in 1995, $282 million in 1996, $270 million
in 1997, and $258 million in 1998.
In previous years, the Company purchased U.S. government securities and
deposited them in irrevocable trusts to be used to fund the scheduled principal
and interest payments on certain portions of the Company's long-term debt. These
government securities and long-term issues were removed from the balance sheet,
and at December 31, 1993, $286 million of such debt remained outstanding.
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10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of Shell Oil's financial instruments are as
follows:
1993 1992
------------------- -------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE* VALUE VALUE*
-------- ------ -------- ------
(millions of dollars)
Investments............................ $ 109 $ 112 $ 102 $ 103
Long-term debt......................... 1,698 1,772 2,507 2,556
Foreign currency contracts............. -- -- 29 26
- ---------------
* Fair value determined primarily by market quotations.
Market value is not readily determinable for certain investments in equity
securities and long-term receivables with a carrying value of $216 million and
$149 million at December 31, 1993 and 1992, respectively.
11. TAXES
Operating and income taxes incurred by Shell Oil were as follows:
1993 1992 1991
----- ---- ----
(millions of dollars)
OPERATING TAXES
Real and personal property............................. $ 196 $209 $221
Sales and use.......................................... 154 176 191
Oil and gas production................................. 64 116 126
Payroll................................................ 81 92 103
Franchise.............................................. 34 34 56
Import and export duties............................... 8 13 30
Other.................................................. 3 3 4
----- ---- ----
TOTAL........................................ $ 540 $643 $731
----- ---- ----
----- ---- ----
FEDERAL AND OTHER INCOME TAXES
Current
U.S. Federal...................................... $(100) $130 $186
Investment tax credit........................ (1) -- (1)
Foreign........................................... 108 144 92
State and local................................... 5 27 10
----- ---- ----
12 301 287
----- ---- ----
Deferred
U.S. Federal...................................... (4) (314) (287)
U.S. Federal tax rate change...................... 95 -- --
State and other................................... 31 45 19
----- ---- ----
122 (269) (268)
----- ---- ----
TOTAL........................................ $ 134 $ 32 $ 19
----- ---- ----
----- ---- ----
40
41
Deferred income taxes are provided for the temporary differences between
the tax basis of Shell Oil's assets and liabilities and their reported amounts.
Significant components of deferred tax liabilities and assets as of December 31,
1993 and 1992 are as follows:
1993 1992
------ ------
(millions of dollars)
Deferred tax liabilities:
Items associated with capitalized costs and write-offs...... $4,189 $3,987
Other....................................................... 271 293
------ ------
Total deferred tax liabilities......................... $4,460 $4,280
------ ------
------ ------
Deferred tax assets:
Other postretirement obligations............................ $ 334 $ 318
Property restoration........................................ 240 142
Other....................................................... 256 348
------ ------
Total deferred tax assets.............................. $ 830 $ 808
------ ------
Valuation allowance.............................................. -- --
------ ------
Net deferred tax assets.......................................... $ 830 $ 808
------ ------
Net deferred tax liabilities..................................... $3,630 $3,472
------ ------
Receivables and prepayments included $124 million and $69 million of net
current deferred tax assets as of December 31, 1993 and 1992, respectively.
Shell Oil has assessed the need for establishing a valuation allowance for its
deferred tax assets and has determined that such an allowance is unnecessary.
Total income taxes paid in the years 1993, 1992 and 1991 were $50 million,
$337 million and $439 million, respectively. Total income tax expense for the
years 1993, 1992 and 1991 was equivalent to effective tax rates of 14.7, 6.7 and
48.8 percent, respectively, of earnings before income taxes and accounting
changes of $915 million, $477 million and $39 million, respectively.
Reconciliation to the expected tax at the U.S. statutory rate (35 percent in
1993; 34 percent in 1992 and 1991) is as follows:
1993 1992 1991
----- ---- ----
(millions of dollars)
Expected tax at U.S. statutory rate......................... $ 320 $ 162 $ 13
State and foreign tax....................................... 76 136 65
Prior year adjustment....................................... (279) (100) (54)
Investment and other tax credits............................ (55) (51) (13)
Benefit of tax losses....................................... (10) (101) --
Tax rate change............................................. 95 -- --
Other....................................................... (13) (14) 8
----- ---- ----
TOTAL........................................ $ 134 $ 32 $ 19
----- ----- ----
----- ----- ----
Shell Oil has tax net operating loss carryforwards of $10 million expiring
in 1997 ($3 million) and 1998 ($7 million).
Shell Oil Company joins in the filing of a consolidated federal income tax
return with its parent, Shell Petroleum Inc. Federal income tax amounts are
allocated among members of the consolidated tax group based on separate return
calculations. Federal income tax related balances owing by/(to) Shell Petroleum
Inc. at December 31, 1993, 1992 and 1991 were $14 million, $(16) million and $12
million, respectively.
41
42
In addition to the operating and income taxes above, Shell Oil is also
responsible for collecting various excise taxes on the sale of products to its
customers and for remitting these taxes to the various federal, state and local
government agencies. A summary of these taxes, along with the operating and
incomes taxes incurred by Shell Oil, is shown below:
1993 1992 1991
------ ------ ------
(millions of dollars)
Operating taxes..................................... $ 540 $ 643 $ 731
Federal and other income taxes...................... 134 32 19
Consumer excise and sales taxes..................... 2,728 2,551 2,499
12. INVESTMENTS
Investments in companies in which Shell Oil has a voting stock interest of
20 percent, but not more than 50 percent, and certain partnerships, are
accounted for on an equity basis. These include Saudi Petrochemical Company, a
petrochemical company in Saudi Arabia; Syria Shell Holdings, B.V.,* a Dutch
holding company with oil and gas producing operations in Syria and the Danish
North Sea; Deer Park Refining Limited Partnership, a domestic refining
operation; Zeigler Coal Holding Company,** a domestic coal mining operation; and
investments in several pipeline companies. The investment in equity companies
amounted to $1,486 million, $966 million and $638 million at December 31, 1993,
1992 and 1991, respectively. Shell Oil received dividends from these investments
amounting to $63 million, $62 million and $32 million in 1993, 1992 and 1991,
respectively. Summarized financial information for the companies and Shell Oil's
equity share thereof is as follows:
1993 1992 1991
---------------- ---------------- ---------------
EQUITY EQUITY EQUITY
TOTAL SHARE TOTAL SHARE TOTAL SHARE
------ ------ ------ ------ ------ ------
(millions of dollars)
COMPANIES ACCOUNTED FOR ON AN
EQUITY BASIS
Current assets.................... $1,199 $ 402 $ 982 $ 401 $ 761 $ 355
Noncurrent assets................. 5,712 2,162 3,566 1,529 2,704 1,330
Current liabilities............... 1,250 501 803 326 608 279
Noncurrent liabilities............ 2,890 1,095 2,623 1,040 1,909 896
Deferred income taxes............. 229 57 55 14 57 15
Revenues.......................... 2,600 894 1,280 515 1,115 462
Net income........................ 143 50 135 51 45 11
- ------------
* Shell Oil's investment in 1993 of $389 million in a Dutch affiliate, as
discussed in Note 5, includes an amortizable acquisition premium of $219
million.
** In connection with the sale of Shell Mining Company in 1992, Shell Oil
acquired a 25% equity interest in Zeigler Coal Holding Company. Shell Oil's
investment of $328 million, includes an amortizable acquisition premium of
$317 million.
42
43
13. PROPERTY, PLANT AND EQUIPMENT
Investments in property, plant and equipment, including capitalized lease
assets, were as follows:
INVESTMENT
-------------------------------------------------------------------
DECEMBER 31, 1993 DECEMBER 31, 1992
------------------------------- -------------------------------
COST RESERVE* NET COST RESERVE* NET
------- ------- ------- ------- ------- -------
(millions of dollars)
PROPERTY, PLANT AND EQUIPMENT
Exploration and Production
Oil and gas............. $22,918 $11,679 $11,239 $23,948 $11,770 $12,178
Other energy............ 151 4 147 161 5 156
Oil and Chemical
manufacturing
facilities.............. 8,719 3,947 4,772 8,949 4,058 4,891
Marketing facilities...... 2,831 697 2,134 2,552 637 1,915
Transportation
facilities.............. 983 576 407 965 570 395
Other..................... 932 551 381 949 530 419
------- ------- ------- ------- ------- -------
TOTAL........... $36,534 $17,454 $19,080 $37,524 $17,570 $19,954
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
- ------------
* Accumulated depreciation, depletion and amortization.
14. POSTRETIREMENT BENEFITS
The Company and certain of its subsidiaries currently provide health care
benefits for retired employees and their dependents. Eligibility for such
benefits requires retirement from the Company with entitlement to an immediate
pension generally upon the earlier of the attainment of age 50, when such age
plus years of service equals 80, or the attainment of age 65. The Company also
has life insurance plans in effect which provide for postretirement benefits.
These plans are primarily funded by employees; as a result, the cost of such
plans to the Company is not material.
The health care plans for retired employees and their dependents are
unfunded defined benefit plans, with the defined benefit being the amounts of
the Company's contributions to such plans. Annually, retirees are advised of the
amount of the Company's monthly contribution to the plans for the following year
and the monthly amount such retirees must pay for the particular coverage
desired. Coverage under the plans is arranged through insurance companies. The
Company's portion of premium payments was $44 million in 1993, $38 million in
1992 and $30 million in 1991.
The assumed annual health care cost trend rate used in measuring the
accumulated postretirement benefit obligation (APBO) was 10% in 1993, and 8% in
1994, gradually declining to 5% by the year 2003, and remaining at that level
thereafter. Increasing the assumed health care cost trend rate by one percentage
point in each year would increase the APBO by approximately $127 million and the
aggregate of the 1993 service cost and interest cost components of expense by
$13 million. The APBO as of December 31, 1993 and 1992 was based on discount
rates of 7.5% and 8.5%, respectively. Unrecognized net gains or losses in excess
of 10% of the APBO (corridor) are amortized over three years.
43
44
Net postretirement benefits cost consisted of the following:
1993 1992
--- ----
(millions of dollars)
Service cost for benefits earned........................... $12 $ 22
Interest cost on the APBO.................................. 67 79
Net amortization and deferral.............................. (35) --
Plan curtailment........................................... 21 14
--- ----
TOTAL............................................... $65 $115
--- ----
--- ----
The postretirement benefit plan status at December 31 was as follows:
1993 1992
---- ----
(millions of dollars)
Accumulated postretirement benefit obligation
Retirees................................................... $651 $565
Fully eligible active plan participants.................... 35 119
Other active plan participants............................. 252 292
---- ----
TOTAL................................................. $938 $976
Plan assets at fair value.................................... -- --
---- ----
Accumulated postretirement benefit obligation in excess of
plan
assets..................................................... $938 $976
Unrecognized gain from past experience different from that
assumed and from changes in assumptions.................... 34 --
Prior service gain not yet recognized in net periodic
postretirement benefit cost................................ 20 --
---- ----
ACCRUED POSTRETIREMENT BENEFIT COST................... $992 $976
---- ----
---- ----
15. PENSION PLANS AND PROVIDENT FUND
The Shell Pension Plan covers employees of the Company and certain
subsidiaries. Benefits are based on years of service and the employee's average
final compensation. Contributions to the Shell Pension Trust of $75 million in
1992 were determined based on utilization of the projected unit credit actuarial
method, on rates determined to be reasonable by an independent actuary, and a
methodology that meets the requirements of the Employee Retirement Income
Security Act. There were no contributions to the Shell Pension Trust in 1993 due
to the full-funding limitation of the applicable tax law.
44
45
The plan's funded status at December 31 was as follows:
1993 1992
------ ------
(millions of dollars)
Actuarial present value:
Accumulated benefit obligation including vested benefits of
$3,530 and $2,990 for 1993 and 1992, respectively......... $3,849 $3,257
------ ------
Projected benefit obligation................................. $4,453 $3,718
Plan assets at fair value, primarily common stocks and fixed
income investments........................................... 4,483 4,200
------ ------
Plan assets in excess of projected benefit obligation.......... $ 30 $ 482
Remaining unrecognized net asset existing at date of initial
application of SFAS No. 87................................... (66) (77)
Unrecognized net (gain) loss from past experience different
from that assumed and effects of changes in assumptions...... 537 52
Prior service cost not yet recognized in net periodic pension
cost......................................................... 89 98
------ ------
NET PREPAID PENSION EXPENSE.......................... $ 590 $ 555
------ ------
------ ------
Shell Oil also has a Benefit Restoration Plan and a Senior Staff Plan. The
Benefit Restoration Plan generally provides for payments of amounts in excess of
limits imposed by federal tax law on benefit payments under the Shell Pension
Plan. The Senior Staff Plan provides for defined monthly supplemental pension
payments to members of the senior staff (consisting of certain officers and
other high-ranking employees). Both of these plans are unfunded. The accumulated
benefit obligation for these plans totaled $175 million and $160 million at
December 31, 1993 and 1992, respectively. The projected benefit obligation for
these plans totaled $211 million and $173 million at December 31, 1993 and 1992,
respectively. Of the 1993 projected benefit obligation amount, $135 million will
be expensed in the future and $76 million of unfunded accrued pension cost is
included in liabilities on the Consolidated Balance Sheet. The estimated
additional minimum pension liability on December 31, 1993 and 1992 was $83
million and $68 million, respectively.
The components of net pension expense for the Shell Pension Plan, Benefit
Restoration Plan and Senior Staff Plan were:
1993 1992 1991
---- ---- ----
(millions of dollars)
Service cost -- benefits earned during the period....... $ 87 $ 82 $ 77
Interest cost on projected benefit obligation........... 311 300 288
Actual return on plan assets*........................... (538) (203) (704)
Net amortization and deferral*.......................... 134 (176) 349
----- ----- -----
NET PENSION EXPENSE.............................. $ (6) $ 3 $ 10
----- ----- -----
----- ----- -----
- ------------
* Estimated long-term rates of return on plan assets of 10 percent in 1993, 1992
and 1991 were used in determining pension expense for the period. The
difference between actual return and estimated return is included in Net
amortization and deferral.
Current year pension expense is based on measurements of the projected
benefit obligation and the market-related value of plan assets as of the end of
the previous year. The projected benefit obligation as of December 31, 1993 and
1992 was based on discount rates of 7 percent and 8.25 percent, respectively,
and an average long-term rate of compensation growth of 5 percent for 1993 and
1992.
The Shell Provident Fund covers employees of the Company and certain
subsidiaries after stated periods of service, and provides for contributions
into the Fund by the employing company of a stated percentage of the employees'
salaries and wages. Employees may contribute amounts up to the stated
percentage.
45
46
Total cost of these plans was as follows:
1993 1992 1991
---- ---- ----
(millions of dollars)
Pension plans.............................................. $ (6) $ 3 $ 10
Provident Fund............................................. 96 103 106
---- ---- ----
TOTAL............................................... $ 90 $106 $116
---- ---- ----
---- ---- ----
In addition, several subsidiary companies have separate pension plans using
actuarial rates and assumptions determined to be appropriate to these companies.
These plans are relatively small and have not been included above.
16. CONTINGENCIES
Shell Oil is subject to a number of possible loss contingencies. These
include actions based upon environmental laws involving present and past
operating and waste disposal locations, private claims, and product liability
actions. In addition, federal, state and local income, property and excise tax
returns are being examined and certain interpretations by Shell Oil of complex
tax statutes, regulations and practices are being challenged.
Shell Oil has received allegations or claims under the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA) or similar state
statutes that it is involved at 189 sites, including the Rocky Mountain Arsenal
(RMA) and the McColl site as discussed below. As of December 1993, discussions
or activities were ongoing concerning 110 of these sites, in some cases in the
early stages. During 1993, expenses recorded under CERCLA and such state
statutes relating to the 189 sites were approximately $250 million. Shell Oil
also has certain obligations under the Resource Conservation and Recovery Act
(RCRA) and similar state laws regarding corrective action at manufacturing
locations and provides assurances regarding its financial ability to meet
certain closure and post-closure obligations that will arise in the future at
such locations under such laws.
The United States and the Company have entered into a consent decree to
settle environmental claims at the RMA whereby the Company would pay 50 percent
of amounts expended for remedial costs and natural resource damages up to $500
million; 35 percent of expenditures between $500 million and $700 million; and
20 percent of expenditures in excess of $700 million. Based on its proposed
remediation alternative, the Company has accrued $500 million for its share of
related costs including the provision of $215 million in 1993 and $105 million
in 1992. The Company's share of expenditures through December 31, 1993 was
approximately $213 million. A final remediation plan is not expected before
1995.
In 1983 the Company was named as one of several potentially responsible
parties for the costs of cleanup of the McColl site which was used for the
disposal of refining waste from 1942 to 1946. The Environmental Protection
Agency (EPA) and the State of California sued the Company and others in February
1991. In April 1991 the Company and others filed a counterclaim for contribution
naming the United States Department of Defense and others, since the waste
disposal at the McColl site arose primarily from the production of fuel for the
United States military during World War II. In June 1993 the EPA selected Soft
Material Solidification as the remedy, with a contingency for RCRA equivalent
closure. The EPA states that the cost of its remedy is expected to be $79
million but could go as high as $120 million. In September 1993 the court ruled
the Company and other defendants liable for the costs of remediation but has yet
to rule on the counterclaim for contribution.
In December 1993 a Los Angeles Superior Court jury, in two consolidated
lawsuits against the Company and its subsidiary, returned a verdict for the
plaintiffs in the amount of $46.9 million compensatory damages and $173 million
punitive damages. Both cases involve the condition of the Dominguez oil field.
Plaintiffs alleged they were defrauded, that the oil and gas lease was breached,
and that soil contamination on the property constitutes a continuing trespass.
Final resolution through the appeals' process could take two or more years. The
Company and its subsidiary believe the verdict was wrong and expect ultimately
to prevail in the litigation.
46
47
The Company is a party to litigation regarding Nemagon(R), an agricultural
chemical containing DBCP manufactured and sold by it from 1955 to 1978. In
California, the claims involve alleged contamination of water wells based on
recent revisions to governmental standards. The claims in the litigation seek
the cost of cleanup and future monitoring of such water wells. The Company is a
co-defendant in these cases with other substantial manufacturers and suppliers
of the same chemical. In Texas, ten cases, including three alleged class
actions, were filed in 1993 against the Company, other substantial manufacturers
and suppliers of DBCP and various banana growers. These actions allege that the
plaintiffs suffer fertility problems arising from exposure to DBCP while working
on banana plantations outside the United States. The Company is contesting
whether any injury has in fact been incurred by plaintiffs, whether DBCP was in
fact the cause of any such injury as may exist, and in any case if the Company
was a supplier or otherwise has liability in connection with any such injury.
Since 1984 the Company has been named as a defendant in numerous product
liability cases, including class actions, involving the failure of plumbing
systems in the U.S. constructed with polybutylene plastic pipe. The Company
manufactured the resin used to make the pipe in these systems. Two other
substantial manufacturers made the resin for the polyacetal fittings used in
these systems and are also defendants in these cases, as are the fabricators and
installers of the systems. The plaintiffs in the litigation claim actual and
punitive damages arising primarily from leaking residential plumbing systems.
The Company's position and most of the judgments to date have confirmed that
most of the leaks have occurred due to failure of the polyacetal fitting system,
which is no longer used. Almost all the current claims outside of litigation are
handled through a joint venture established by the Company and two other
co-defendants. The joint venture makes arrangements for the repair of leaking
polybutylene pipe systems, the costs of which are allocated on a variable basis
depending on the component part manufacturer and the producer of the polyacetal
resin used.
The Company is attempting to establish insurance coverage at the RMA
through 1969 and for the McColl site and other environmental claims. Declaratory
judgment actions have also been filed to confirm insurance covering polybutylene
through 1985 and insurance covering Nemagon(R) claims.
The Company's assessment of these matters is continuing. Future provisions
may be required as administrative and judicial proceedings progress and the
scope and nature of remediation programs and related costs estimates are
clarified. However, while periodic results may be significantly affected by
these matters, based upon developments to date, the management of the Company
anticipates that the Company will be able to meet related obligations without
material adverse effect on its financial position.
17. COMMITMENTS
Shell Oil conducts a portion of its operations using leased facilities
which include service stations, barges and tankers, and other facilities. Future
minimum payments under operating and capital leases with initial or remaining
terms of one year or more consisted of the following at December 31, 1993:
OPERATING CAPITALIZED
LEASES LEASES
(millions of dollars)
1994.......................................................... $ 159 $ 1
1995.......................................................... 119 1
1996.......................................................... 94 --
1997.......................................................... 74 --
1998.......................................................... 51 --
Thereafter.................................................... 806 --
------ -----
Total minimum lease payments*....................... $1,303 2
Estimated executory costs (such as taxes, maintenance,
insurance, operating costs)................................. --
-----
Net minimum lease payments.......................... 2
Imputed interest.............................................. (1)
-----
Present value of net minimum lease payments**....... $ 1
-----
-----
(See notes on following page)
47
48
- ------------
* Minimum lease payments have not been reduced by minimum sublease rentals of
$4 million due in the future under noncancelable subleases for operating
leases. There were no contingent rentals applicable to capital leases.
** Of the amount shown, substantially all is reflected in Long-term debt on the
Consolidated Balance Sheet.
The composition of total rental expense for all operating leases, except
those with terms of a month or less that were not renewed, was as follows:
1993 1992 1991
---- ---- ----
(millions of dollars)
Minimum rentals........................................... $336 $351 $405
Contingent rentals
(Based on sales volumes)................................ 2 3 3
Less sublease rentals..................................... (42) (45) (46)
---- ---- ----
Total........................................... $296 $309 $362
---- ---- ----
---- ---- ----
Under long-term agreements with an offshore port and certain pipeline
companies in which stock interests are held, Shell Oil may be required to
advance funds against future transportation charges in the event such companies
are unable to meet their financial obligations. In addition, at December 31,
1993, Shell Oil had substantial commitments including those related to
agreements for the purchase of materials and services, and to the acquisition
and building of facilities, all made in the normal course of business.
18. OPERATING SEGMENTS INFORMATION
Operating segments information for the years 1993, 1992 and 1991 is
presented below. Income taxes are allocated to segments on the basis of
contributions to taxable income reduced by applicable tax credits. Shell Oil's
activity outside the United States has not reached a level warranting separate
geographical reporting.
OIL AND
GAS
EXPLORATION
AND OIL CHEMICAL
PRODUCTION PRODUCTS PRODUCTS OTHER TOTAL
------- ------- -------- ------ -------
(millions of dollars)
1993 SUMMARY STATEMENT OF INCOME
Sales and other operating revenue...... $ 1,418 $15,462 $ 3,687 $ 282 $20,849
Other revenue.......................... 96 8 16 -- 120
Intersegment transfers................. 2,492 949 172 -- --
------- ------- -------- ------ -------
TOTAL REVENUE................ 4,006 16,419 3,875 282 20,969(1)
Costs and operating expenses........... 2,110 15,708 3,315 299 17,819(1)
Depreciation, amortization, etc........ 1,225 253 232 11 1,721
------- ------- -------- ------ -------
OPERATING PROFIT (LOSS)...... 671 458 328 (28) 1,429
Corporate expense--allocated........... 53 25 24 1 103
Income tax expense--allocated.......... 163 163 119 (20) 425
Equity in net (income) loss of
others............................... (23) (15) (35 ) 18 (55)
------- ------- -------- ------ -------
INCOME (LOSS) FROM ONGOING
OPERATIONS................. 478 285 220 (27) 956
Other charges(4)....................... 1 5 185 -- 191*
------- ------- -------- ------ -------
SEGMENT NET INCOME (LOSS).... $ 477 $ 280 $ 35 $ (27) $ 765
Nonallocated costs..................... (16)(5)
-------
NET INCOME................... $ 781
-------
-------
(Table continued on following page)
48
49
OIL AND
GAS
EXPLORATION
AND OIL CHEMICAL
PRODUCTION PRODUCTS PRODUCTS OTHER TOTAL
------- ------- -------- ------ -------
(millions of dollars)
1993 CAPITAL EXPENDITURES................... $ 877 $ 704 $ 319 $ 20 $ 1,981(2)
IDENTIFIABLE ASSETS DECEMBER 31, 1993....... $12,697 $ 7,232 $ 4,312 $ 659 $26,851(3)
1992 SUMMARY STATEMENT OF INCOME
Sales and other operating revenue...... $ 1,280 $15,650 $ 3,354 $ 869 $21,153
Other revenue.......................... 113 11 39 5 168
Intersegment transfers................. 3,032 1,007 129 -- --
------- ------- -------- ------ -------
TOTAL REVENUE................ 4,425 16,668 3,522 874 21,321(1)
Costs and operating expenses........... 2,404 16,347 3,133 888 18,604(1)
Depreciation, amortization, etc........ 1,539 259 216 53 2,067
------- ------- -------- ------ -------
OPERATING PROFIT (LOSS)...... 482 62 173 (67) 650
Corporate expense--allocated........... 62 70 30 7 169
Income tax expense--allocated.......... (29) 3 48 (3) 19
Equity in net (income) loss of
others............................... (20) (19) 2 (1) (38)
------- ------- -------- ------ -------
INCOME (LOSS) FROM ONGOING
OPERATIONS................. 469 8 93 (70) 500
Other charges(4)....................... -- 2 81 -- 83
------- ------- -------- ------ -------
SEGMENT NET INCOME (LOSS).... $ 469 $ 6 $ 12 $ (70) $ 417
-------
Nonallocated costs..................... (28)(5)
Cumulative effect of accounting
changes.............................. (635)
-------
NET INCOME (LOSS)............ $ (190)
-------
-------
1992 CAPITAL EXPENDITURES................... $ 877 $ 790 $ 424 $ 70 $ 2,239(2)
IDENTIFIABLE ASSETS DECEMBER 31, 1992....... $13,525 $ 7,107 $ 4,131 $ 740 $26,970(3)
See footnotes following the remainder of the segment report on next page.
OIL AND
GAS
EXPLORATION
AND OIL CHEMICAL
PRODUCTION PRODUCTS PRODUCTS OTHER TOTAL
------- ------- -------- ------ -------
(millions of dollars)
1991 SUMMARY STATEMENT OF INCOME
Sales and other operating revenue...... $ 1,021 $16,798 $ 3,378 $ 996 $22,193
Other revenue.......................... 49 38 50 8 145
Intersegment transfers................. 3,268 1,047 157 -- --
------- ------- -------- ------ -------
TOTAL REVENUE................ 4,338 17,883 3,585 1,004 22,338(1)
Costs and operating expenses........... 2,558 17,717 3,090 917 19,810(1)
Depreciation, amortization, etc........ 1,371 401 221 55 2,048
------- ------- -------- ------ -------
OPERATING PROFIT (LOSS)...... 409 (235) 274 32 480
Corporate expense--allocated........... 71 70 31 5 177
Income tax expense--allocated.......... 111 (128) 53 3 39
Equity in net (income) loss of
others............................... (15) (16) 27 -- (4)
------- ------- -------- ------ -------
INCOME (LOSS) FROM ONGOING
OPERATIONS................. 242 (161) 163 24 268
Other charges(4)....................... 1 3 6 -- 10
------- ------- -------- ------ -------
SEGMENT NET INCOME (LOSS).... $ 241 $ (164) $ 157 $ 24 $ 258
Nonallocated costs..................... 238
-------
NET INCOME................... $ 20
-------
-------
1991 CAPITAL EXPENDITURES................... $ 1,421 $ 805 $ 199 $ 84 $ 2,615(2)
IDENTIFIABLE ASSETS DECEMBER 31, 1991....... $14,487 $ 6,812 $ 3,989 $1,620 $27,998(3)
(See notes on following page)
49
50
- ------------
(1) After elimination of intersegment transfers of $3,613 million in 1993,
$4,168 million in 1992, and $4,472 million in 1991, which are based on
estimated market-related values.
(2) Includes non-segment capital expenditures of $61 million in 1993, $78
million in 1992 and $106 million in 1991.
(3) Includes non-segment assets of $1,951 million in 1993, $1,467 million in
1992 and $1,090 million in 1991.
(4) Amounts associated with major product classifications for which there has
been no revenue stream or investment in the last 5 years. For 1992 and 1991,
these costs have been reclassified from "Costs and operating expenses."
(5) Nonallocated costs in 1993 includes a favorable prior-year tax adjustment of
$161 million. Nonallocated costs in 1992 includes interest income of $207
million related to a prior-year tax adjustment.
* Certain 1993 environmental and litigation provisions previously reported as
"Nonallocated costs" have been reclassified to segment costs.
19. SUMMARIZED FINANCIAL INFORMATION -- SHELL PIPE LINE CORPORATION
The following summarized financial information for Shell Pipe Line
Corporation, a wholly owned subsidiary of Shell Oil Company, is presented here
for the information of holders of Shell Pipe Line Corporation's 7 1/2%
Guaranteed Sinking Fund Debentures Due 1999, which are fully guaranteed by Shell
Oil Company.
1993 1992* 1991*
---- ---- ----
(millions of dollars)
SHELL PIPE LINE CORPORATION
Current assets......................................... $115 $ 50 $ 55
Noncurrent assets...................................... 299 286 249
Current liabilities.................................... 58 82 62
Noncurrent liabilities................................. 71 65 56
Revenue................................................ 271 281 248
Operating income....................................... 120 103 77
Net income............................................. 97 103 81
- ---------------
* Certain balances have been restated to conform with Shell Oil's consolidated
financial reporting.
20. QUARTERLY CONSOLIDATED RESULTS OF OPERATIONS (UNAUDITED)
1993 1992
--------------------------------- ---------------------------------
FIRST SECOND THIRD FOURTH FIRST* SECOND* THIRD* FOURTH
------ ------ ------ ------ ------ ------ ------ ------
(millions of dollars)
Sales and other operating
revenue.................. $4,999 $5,404 $5,314 $5,136 $4,765 $5,275 $5,621 $5,499
Revenues, less purchases
and operating expenses... 1,319 1,261 1,058 1,088 1,296 1,333 1,338 1,116
Income before income
taxes.................... 391 281 90 153 207 265 86 (81)
------ ------ ------ ------ ------ ------ ------ ------
Income from operations..... 239 203 187 152 183 173 18 71
Cumulative effect of
accounting changes....... -- -- -- -- (635) -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Net income................. $ 239 $ 203 $ 187 $ 152 $ (452) $ 173 $ 18 $ 71
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
- ---------------
* Restated for Accounting Changes as discussed in Note 2 of the Notes to
Consolidated Financial Statements.
50
51
SHELL OIL COMPANY AND SUBSIDIARIES
SCHEDULE V -- CONSOLIDATED PROPERTY, PLANT AND EQUIPMENT
(MILLIONS OF DOLLARS)
BALANCE BALANCE
AT TRANSFERS AT
BEGINNING RETIREMENTS BETWEEN CLOSE
OF ADDITIONS OR CLASSI- OTHER OF
CLASSIFICATION PERIOD AT COST SALES FICATIONS CHANGES PERIOD
- ------------------------------ ------- ------- ------- ------- ------- -------
YEAR ENDED DECEMBER 31, 1993
Exploration and Production
Oil and gas................. $23,948 $ 877 $ 1,922 $ 16 $ -- $22,919
Other....................... 161 -- 10 -- -- 151
Oil and Chemical manufacturing
facilities.................. 8,949 639 851 5 (23) 8,719
Marketing facilities.......... 2,552 340 65 4 -- 2,831
Transportation facilities..... 965 44 23 1 (4) 983
Other......................... 949 81 62 (19) (18) 931
------- ------- ------- ------- ------- -------
Total............... $37,524 $ 1,981 $ 2,933 $ 7(2) $ (45)(1) $36,534
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
YEAR ENDED DECEMBER 31, 1992
Exploration and Production
Oil and gas................. $24,973 $ 877 $ 1,903 $ 1 $ -- $23,948
Other....................... 1,600 60 1,499 -- -- 161
Oil and Chemical manufacturing
facilities.................. 8,244 874 60 (104) (5) 8,949
Marketing facilities.......... 2,290 282 108 88 -- 2,552
Transportation facilities..... 919 51 37 32 -- 965
Other......................... 1,002 95 130 (9) (9) 949
------- ------- ------- ------- ------- -------
Total............... $39,028 $ 2,239 $ 3,737 $ 8(2) $ (14)(1) $37,524
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
YEAR ENDED DECEMBER 31, 1991
Exploration and Production
Oil and gas................. $24,339 $ 1,421 $ 801 $ 21 $ (7) $24,973
Other....................... 1,538 72 10 -- -- 1,600
Oil and Chemical manufacturing
facilities.................. 8,102 740 595 5 (8) 8,244
Marketing facilities.......... 2,140 217 64 (3) -- 2,290
Transportation facilities..... 898 47 26 -- -- 919
Other......................... 997 118 80 (13) (20) 1,002
------- ------- ------- ------- ------- -------
Total............... $38,014 $ 2,615 $ 1,576 $ 10(2) $ (35)(1) $39,028
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
- ------------
(1) Reclassification to Investments, Long-Term Receivables and Deferred Charges
of certain capital stock, realty purchases and other items included as
capital expenditures under Additions at Cost.
(2) Net amount is capitalization of depreciation which is offset on Schedule VI.
51
52
SHELL OIL COMPANY AND SUBSIDIARIES
SCHEDULE VI -- CONSOLIDATED ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
(MILLIONS OF DOLLARS)
BALANCE RETIREMENTS BALANCE
AT ADDITIONS RENEWALS TRANSFERS AT
BEGINNING CHARGED AND BETWEEN CLOSE
OF TO REPLACE- CLASSI- OTHER OF
DESCRIPTION PERIOD INCOME(1) MENTS FICATIONS CHANGES PERIOD
- ----------------------------------- ------- ------- ------- ------- ------- -------
YEAR ENDED DECEMBER 31, 1993
Exploration and Production
Oil and gas...................... $11,770 $ 1,210 $ 1,310 $ 9 $ -- $11,679
Other............................ 5 7 8 -- -- 4
Oil and Chemical manufacturing
facilities....................... 4,058 354 468 3 -- 3,947
Marketing facilities............... 637 105 45 -- -- 697
Transportation facilities.......... 570 29 22 (1) -- 576
Other.............................. 530 80 55 (4) -- 551
------- ------- ------- ------- ------- -------
Total.................... $17,570 1,785 $ 1,908 $ 7(2) $ -- $17,454
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Net gain on retirements..... (46)
-------
Amount per Statement of
Income................... $ 1,739
-------
-------
YEAR ENDED DECEMBER 31, 1992
Exploration and Production
Oil and gas...................... $11,727 $ 1,338 $ 1,303 $ 8 $ -- $11,770
Other............................ 345 49 389 -- -- 5
Oil and Chemical manufacturing
facilities....................... 3,813 333 56 (32) -- 4,058
Marketing facilities............... 569 96 60 32 -- 637
Transportation facilities.......... 577 27 35 1 -- 570
Other.............................. 559 83 111 (1) -- 530
------- ------- ------- ------- ------- -------
Total.................... $17,590 1,926 $ 1,954 $ 8(2) $ -- $17,570
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Net loss on retirements..... 156
-------
Amount per Statement of
Income................... $ 2,082
-------
-------
YEAR ENDED DECEMBER 31, 1991
Exploration and Production
Oil and gas...................... $11,119 $ 1,240 $ 643 $ 11 $ -- $11,727
Other............................ 302 50 7 -- -- 345
Oil and Chemical manufacturing
facilities....................... 3,774 343 307 3 -- 3,813
Marketing facilities............... 527 86 42 (2) -- 569
Transportation facilities.......... 564 32 18 (1) -- 577
Other.............................. 536 94 70 (1) -- 559
------- ------- ------- ------- ------- -------
Total.................... $16,822 $ 1,845 $ 1,087 $ 10(2) $ -- $17,590
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Net loss on retirements..... 217
-------
Amount per Statement of
Income................... $ 2,062
-------
-------
- ------------
(1) Policies governing depreciation, depletion, amortization and dry hole costs
are stated in Note 1 of the Notes to Consolidated Financial Statements.
(2) Refer to Schedule V.
52
53
SHELL OIL COMPANY AND SUBSIDIARIES
SCHEDULE VII -- GUARANTEES OF SECURITIES OF OTHER ISSUERS
(MILLIONS OF DOLLARS)
DECEMBER 31, 1993
TOTAL AMOUNT
GUARANTEED
NAME OF ISSUER OF SECURITIES AND
GUARANTEED TITLE OF ISSUE OUTSTANDING
- ------------------------------ -------------- -----------
Notes at various interest rates, due
Plantation Pipe Line Company 1994-2001....................................... $ 3
Variable rate tax-exempt Industrial Revenue
Zeigler Coal Holding Company Bonds........................................... $146
None of the guaranteed securities were owned by Shell Oil or held by
issuer. All guaranteed securities are guaranteed as to principal and interest.
None of the guaranteed securities were in default as of December 31, 1993.
SCHEDULE IX -- CONSOLIDATED SHORT-TERM BORROWINGS
(MILLIONS OF DOLLARS)
YEARS ENDED DECEMBER 31
----------------------------
1993 1992 1991
------ ------ ------
COMMERCIAL NOTES
Balance at end of year........................................... $ 502 $ 502 $1,723
Weighted average interest rate.............................. 3.2% 3.5% 4.6%
Maximum amount outstanding during the period..................... $ 558 $1,720 $2,333
Average amount outstanding during the period..................... $ 493 $1,137 $1,924
Weighted average interest rate.............................. 3.1% 3.9% 5.7%
BANK LOANS
Balance at end of year........................................... $ 50 $ 218 $ 309
Weighted average interest rate.............................. 3.2% 3.5% 4.9%
Maximum amount outstanding during the period..................... $ 233 $ 388 $ 375
Average amount outstanding during the period..................... $ 163 $ 309 $ 350
Weighted average interest rate.............................. 3.1% 3.8% 5.9%
INDUSTRIAL REVENUE BONDS
Balance at end of year........................................... $ 197 $ 172 $ 292
Weighted average interest rate.............................. 4.3% 3.6% 5.3%
Maximum amount outstanding during the period..................... $ 197 $ 297 $ 292
Average amount outstanding during the period..................... $ 178 $ 283 $ 188
Weighted average interest rate.............................. 2.2% 2.6% 4.2%
53
54
SCHEDULE X -- CONSOLIDATED SUPPLEMENTARY INCOME
STATEMENT INFORMATION
(MILLIONS OF DOLLARS)
YEARS ENDED DECEMBER 31
----------------------------
1993 1992 1991
------ ------ ------
AMOUNTS CHARGED TO COSTS AND EXPENSES
Maintenance and repairs.......................................... $ 846 $1,092 $1,403
54
55
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 24, 1994.
SHELL OIL COMPANY
(Registrant)
By PHILIP J. CARROLL
------------------------------------
(Philip J. Carroll, President)
------------------------
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Philip
J. Carroll, S. A. Lackey, and Jack B. Edrington, and each of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Annual Report on Form 10-K,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 24, 1994 by the following persons on
behalf of the Registrant in the capacities indicated.
SIGNATURE TITLE
--------- -----
PHILIP J. CARROLL President and Director
- --------------------------------------------- (Principal Executive Officer)
(Philip J. Carroll)
P. G. TURBERVILLE Vice President -- Finance
- --------------------------------------------- (Principal Financial Officer)
(P. G. Turberville)
HENRY E. BLECHL Controller and General Auditor
- --------------------------------------------- (Principal Accounting Officer)
(Henry E. Blechl)
Director
- ---------------------------------------------
(Joseph E. Antonini)
RAND V. ARASKOG Director
- ---------------------------------------------
(Rand V. Araskog)
(Signatures continued on next page)
55
56
(Signatures continued from preceding page)
SIGNATURE TITLE
ROBERT F. DANIELL Director
- ---------------------------------------------
(Robert F. Daniell)
C. A. J. HERKSTRoTER Director
- ---------------------------------------------
(C. A. J. Herkstroter)
JOHN S. JENNINGS Director
- ---------------------------------------------
(John S. Jennings)
JACK E. LITTLE Director
- ---------------------------------------------
(Jack E. Little)
HAROLD A. POLING Director
- ---------------------------------------------
(Harold A. Poling)
JOHN F. WOODHOUSE Director
- ---------------------------------------------
(John F. Woodhouse)
56
57
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION PAGE NO.
- ------- ----------- --------
3 Articles of Incorporation and By-Laws..................................... *
10 Material Contracts:
(i) Letter Agreement between Registrant and Shell Internationale
Research Maatschappij B. V..................................... 58
(ii) Agreement for Research Services................................ 59
12 Computation of Ratio of Earnings to Fixed Charges......................... 64
21 Subsidiaries of the Registrant............................................ 65
23 Consent of Independent Accountants........................................ 66
24 Powers of Attorney........................................................ 55
- ------------
* Incorporated by reference; see Item 14c, page 31.
57