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1999 ANNUAL REPORT
Amerada Hess Corporation
1185 Avenue of the Americas
New York, New York 10036
AMERADA HESS ANNUAL REPORT 1999

Table of contents

  • Page 1
    AM ERADA HESS Amerada Hess Corporation 1185 Avenue of the Americas New York, New York 10036 AN N U AL REPORT 1999 1 9 9 9 A N N U A L R E P O R T

  • Page 2
    ... York Stock Exchange (ticker symbol: AHC) Refining and M arketing Amerada Hess Corporation 1 Hess Plaza Woodbridge, New Jersey 07095 Amerada Hess Internet Home Page www.hess.com Design: Inc Design, incdesign.com © 2000 Amerada Hess Corporation Cover Photo: Printed on Recycled Paper SOUTH ARNE...

  • Page 3
    ...,465 $2,643,412 Production-net Crude oil and natural gas liquids-barrels per day United States Foreign Total Natural gas-Mcf per day United States Foreign Total Refining and marketing-barrels per day Refining crude runs Amerada Hess Corporation HOVENSA L.L.C.(d) Refined products sold 64,605 167...

  • Page 4
    ... ents in his life. After his return from World War II, he m arried Norm a Wilentz, daughter of the prom inent law yer and form er New Jersey Attorney General, David Wilentz. M r. Wilentz had kindly offered to keep an eye on Leon's term inal property w hile he w as aw ay at w ar. David Wilentz becam...

  • Page 5
    ... 4,000 Virgin Islanders. It is the Virgin Islands' largest private employer, providing jobs to over 2,000 workers. Leon Hess was as proud of the jobs he created as he was of the facilities he built. Leon Hess had a special love for his football team, the New York Jets. A proud moment in his life was...

  • Page 6
    ...perform ance. That business plan resulted in the sale of over $2 billion of mature, low return assets and investments in higher return projects, including 15 crude oil and natural gas field developments. 1999 began with oil prices near an historical low of $12.34 per barrel. By year-end, prices had...

  • Page 7
    ... opportunities. We will seek reserve acquisition opportunities that offer low cost production and volumetric upside in strategic areas. Our goal is to increase to one third the portion of our oil and gas reserves that are outside the United States and the North Sea. Currently, 14% of our reserves...

  • Page 8
    ... Financial returns from our expanding retail marketing business showed considerable improvement in 1999. Our retail marketing initiatives emphasize Building new HESS EXPRESS stores to provide one-stop shopping, quality and convenience. Adding convenience stores to all retail locations. Acquisitions...

  • Page 9
    ... of Directors has authorized spending up to $300 m illion to repurchase shares of Com m on Stock. RES U LT S O F O PERAT I O N S Amerada Hess had operating earnings of $307 million in 1999 compared with an operating loss of $196 million in 1998. Excluding special items, exploration and production...

  • Page 10
    ...from the Baldpate Field on Garden Banks Blocks 259 and 260. The Corporation's net production from Baldpate reached peak levels of 26,800 barrels of crude oil and natural gas liquids per day and 77,000 Mcf of natural gas per day during the year. Amerada Hess is the operator of the Baldpate Field with...

  • Page 11
    GU LF OF M EX ICO

  • Page 12
    N ORTH SEA

  • Page 13
    ... for development in the second quarter of 2000. Amerada Hess Limited's share of production is expected to peak at 24,000 Mcf of natural gas per day late in 2001. Approval for developm ent of the Cook Field (AHL 28.46%) located on Block 21/20a in the central North Sea has been received. The field is...

  • Page 14
    ... Amerada Hess Norge's share of production from the Valhall Field by about 2,000 barrels of oil per day. Production for Am erada Hess Norge averaged 27,009 barrels of crude oil and natural gas liquids per day and 30,600 Mcf of natural gas per day in 1999. G A BO N Amerada Hess Production Gabon...

  • Page 15
    ... the sale of this natural gas to local markets. Further appraisal drilling is planned in 2000 on the Pangkah PSC, in w hich the Corporation has a 36% interest. An oil and gas discovery was made on this concession in 1998. In Indonesia, Amerada Hess has interests in five Production Sharing Contracts...

  • Page 16
    ... 14,000 barrels of oil per day, assum ing pipeline capacity is increased. Amerada Hess has acquired an interest in the Kursanga and Karabagly Fields onshore Azerbaijan and plans for the rehabilitation of these fi elds have been approved. The Corporation's share of production from these fields is...

  • Page 17
    PAILIN FIELD, THAILAN D

  • Page 18
    ORLAN DO, FLORIDA

  • Page 19
    ... Amerada Hess and Petroleos de Venezuela, S.A. that owns and operates the St. Croix refinery. Despite some of the worst refining margins in history, HOVENSA was profitable for the year. HOVENSA supplies refined petroleum products to both joint venture partners for markets primarily on the East...

  • Page 20
    ... retail gasoline stations located in the northeast. All of the stations will be rebranded HESS. This acquisition greatly strengthens the HESS brand in the New York City, Boston and Philadelphia metropolitan areas and is expected to close early in May. The reshaping of the Corporation's downstream...

  • Page 21
    Index to Financial Information Amerada Hess Corporation and Consolidated Subsidiaries 20. 27. Financial Review Statement of Consolidated Income; Statement of Consolidated Retained Earnings Consolidated Balance Sheet Statement of Consolidated Cash Flows Statement of Consolidated Changes in Common ...

  • Page 22
    ... sector of the North Sea. The 1999 increase in foreign natural gas production reï¬,ected increases in the North Sea, Indonesia and Thailand. In 1998, United States crude oil production was comparable to 1997 and foreign crude oil production declined, largely due to maintenance related interruptions...

  • Page 23
    ... is accounted for on the equity method. Additional refining and marketing operations include a ï¬,uid catalytic cracking facility in Port Reading, New Jersey, as well as retail gasoline stations, energy marketing, shipping and trading. HOVENSA: The Corporation' s share of HOVENSA's income was...

  • Page 24
    ... gasoline stations. The Corporation is also expanding its energy marketing activities. The costs of operating the retail and energy marketing businesses are included in marketing expenses. Refined product margins improved somewhat in early 2000 as a result of tight supplies for heating oil...

  • Page 25
    ... of two United Kingdom North Sea oil fields. These fields ceased production in 1999. Other 1997 special items included income of $38 million from a refund of United Kingdom Petroleum Revenue Taxes and a gain of $11 million on the sale of a United States natural gas field. Liquidity and Capital...

  • Page 26
    ...crude oil reserves and exploration licenses in Gabon. Acquisitions in 1997 principally represent purchases of developed and undeveloped oil and gas properties in the United Kingdom. Refining and marketing expenditures in 1997 include the purchase of a chain of retail marketing properties in Florida...

  • Page 27
    .... The Corporation' s production of reformulated gasolines from its Port Reading facility and HOVENSA can meet its marketing requirements. In addition, the HOVENSA refinery has desulfurization capabilities enabling it to produce low-sulfur diesel fuel that meets the requirements of the Clean Air Act...

  • Page 28
    ...1998 and $5 million in 1997. Year 2000 Stock M arket Information The common stock of Amerada Hess Corporation is traded principally on the New Y ork Stock Exchange (ticker symbol: AHC). High and low sales prices in 1999 and 1998 were as follows: 1999 Quart er Ended High Low High 1998 Low 3 March...

  • Page 29
    ... Income Amerada Hess Corporat ion and Consolidat ed Subsidiaries For t he Years Ended December 31 Thousands of dollars, except per share data 1999 1998 1997 Revenues Sales (excluding excise taxes) and other operating revenues Non-operating income Gain (loss) on asset sales Equity in income...

  • Page 30
    ...702,581 232,826 935,407 Exploration and production Refining and marketing Shipping Total-at cost Less reserves for depreciation, depletion, amortization and lease impairment Property, plant and equipment-net Note Receivable Deferred Income Taxes and Other Assets Total Assets 9,974,117 980,806 109...

  • Page 31
    At December 31 1999 1998 Liabilities and Stockholders' Equity Current Liabilities Accounts payable-trade Accrued liabilities Deferred revenue Taxes payable Notes payable Current maturities of long-term debt Total current liabilities Long-Term Debt Deferred Liabilities and Credits $ 771,797 621,...

  • Page 32
    ... (Gain) loss on asset sales Provision (benefit) for deferred income taxes Undistributed earnings of affiliates Changes in other operating assets and liabilities (Increase) decrease in accounts receivable Decrease in inventories Increase (decrease) in accounts payable, accrued liabilities and...

  • Page 33
    ...and Capital in Excess of Par Value Amerada Hess Corporat ion and Consolidat ed Subsidiaries Common st ock Number of shares Capit al in excess of par value Thousands of dollars Amount Balance at January 1, 1997 Awards of nonvested common stock to employees (net) Common stock acquired and retired...

  • Page 34
    ...-out inventory method. Inventories of materials and supplies are valued at or below cost. Explorat ion and Development Cost s: Oil and gas exploration statements include the accounts of Amerada Hess Corporation and subsidiaries. The Corporation' s interests in oil and gas exploration and production...

  • Page 35
    ... assets and liabilities. Trading: Commodity trading activities are marked to market, with gains and losses recorded in operating revenue. maintenance, including turnarounds at the Port Reading refining facility, are accrued. Other expenditures for maintenance and repairs are charged against income...

  • Page 36
    ... pipeline terminals, natural gas properties in California and certain retail sites. Exploration and production results include special income tax benefits of $54,600,000, reï¬,ecting actions taken in 1999 to realize the United States tax impact of certain prior year exploration activities and...

  • Page 37
    ...net income by $97,051,000 for the year ended December 31, 1999 ($1.08 per share basic and diluted). There is no cumulative effect adjustment as of the beginning of the year for this type of accounting change. On January 1, 1998, the Corporation began capitalizing the cost of internal use software in...

  • Page 38
    As part of the formation of the joint venture, PDVSA, V .I. purchased a 50% interest in the fixed assets of the Corporation' s Virgin Islands refinery for $62,500,000 in cash and a 10-year note from PDVSA V .I. for $562,500,000 bearing interest at 8.46% per annum and requiring principal payments ...

  • Page 39
    ... of two Gulf of Mexico producing properties. These transactions were accounted for as financings. At December 31, 1999, the outstanding obligations amount to $182,588,000, maturing through 2014. The Corporation sold a portion of its subsequent year crude oil production in 1998 and used the proceeds...

  • Page 40
    ...plan assets Fair value of plan assets at January 1 Actual return on plan assets Employer contributions Employee contributions Benefit payments Fair value of plan assets at December 31 Funded status at December 31 Funded status Unrecognized prior service cost Unrecognized (gain) loss Accrued pension...

  • Page 41
    ... 1998. The trust established to fund the supplemental plan held assets valued at $13,586,000 at December 31, 1999 and $6,209,000 at December 31, 1998. United States Foreign* Total *Foreign income includes the Corporation's Virgin Islands, shipping and other operations located outside of the United...

  • Page 42
    ... is also available to offset income of the HOVENSA joint venture partners. Net operating loss carryforwards relating to several foreign exploration and production areas amount to approximately $190 million at December 31, 1999. Income taxes paid (net of refunds) in 1999, 1998 and 1997 amounted to...

  • Page 43
    ... Stock options Common shares -diluted The Corporation and certain of its subsidiaries lease ï¬,oating production systems, drilling rigs, tankers, gasoline stations, office space and other assets for varying periods. At December 31, 1999, future minimum rental payments applicable to capital and...

  • Page 44
    ...,000 barrels of crude oil and natural gas liquids and 235,000,000 Mcf of natural gas in 1999, and had approximately 14,000,000 barrels of crude oil and refined products in its refining and marketing inventories at December 31, 1999. Since the contracts described above are designated as hedges and...

  • Page 45
    ...the exploration for and the production, purchase, transportation and sale of crude oil and natural gas. Refining, marketing and shipping operations include the manufacture, purchase, transportation, marketing and trading of petroleum and other energy products. *Includes 41 million barrels long and...

  • Page 46
    ...dollars Explorat ion and Product ion Refi ning, M arket ing and Shipping Corporat e Consolidat ed * 1999 Operating revenues Total operating revenues Less: Transfers between affiliates Operating revenues from unaffiliated customers Operating earnings (loss) Special items $2,719 222 $2,497 $ 324...

  • Page 47
    ... with generally accepted accounting principles and are, in part, based on estimates and judgements of management. Other information included in this Annual Report is consistent with that in the consolidated financial statements. The Corporation maintains a system of internal controls designed to...

  • Page 48
    ... position of Amerada Hess Corporation and consolidated subsidiaries at December 31, 1999 and 1998 and the consolidated results of their operations and their consolidated cash ï¬,ows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally...

  • Page 49
    ... produces crude oil and /or natural gas in the United States, Europe, Gabon, Indonesia, Thailand and Azerbaijan. Exploration activities are also conducted, or are planned, in additional countries. The Corporation also owns a 25% interest in an oil and gas exploration company that it accounts for on...

  • Page 50
    ...net income from exploration and production operations reported in management' s discussion and analysis of results of operations and in Note 15 to the financial statements. For the Years Ended December 31 (Millions of dollars) Tot al Unit ed St at es Europe Af rica, Asia and ot her 1999 Sales...

  • Page 51
    ...' s crude oil reserves** Natural Gas (Millions of Mcf) At January 1, 1997 At December 31, 1997 At December 31, 1998 At December 31, 1999 Share of equity investee' s natural gas reserves** *Excludes 373 million Mcf of carbon dioxide gas for sale or use in company operations. **Prior year reserves are...

  • Page 52
    ... are calculated by applying year-end oil and gas selling prices (adjusted for price changes provided by contractual arrangements, including hedges) to estimated Standardized M easure of Discounted Future Net Cash Flow s Relating to Proved Oil and Gas Reserves future production of proved oil and gas...

  • Page 53
    ... Oil and Gas Reserves For the years ended December 31 (Millions of dollars) 1999 $ 2,023 1998 $ 2,417 1997 $ 4,184 Standardized measure of discounted future net cash ï¬,ows at beginning of year Changes during the year Sales and transfers of oil and gas produced during year, net of production...

  • Page 54
    ... Amerada Hess Corporat ion and Consolidat ed Subsidiaries Thousands of dollars, except per share data 1999(a) 1998 1997 Statement of Consolidated Income Revenues Sales (excluding excise taxes) and other operating revenues Crude oil (including sales of purchased oil) Natural gas (including sales...

  • Page 55
    ...) $(4.26) (4.26) $ .60 92,509 $1,228,045 1,063,560 3,980,563 327,816 6,599,984 41,657 - 49,226 6,690,867 3,795,094 600,501 260,552 124,258 331,216 230,110 245,149 868,175 - 6,455,055 235,812 162,098 $ 73,714 $.80 .79 $.60 92,968 $1,219...

  • Page 56
    Ten-Year Summary of Financial Data Amerada Hess Corporat ion and Consolidat ed Subsidiaries Thousands of dollars, except per share data 1999 1998 1997 Selected Balance Sheet Data at Year-End Cash and cash equivalents Working capital Property, plant and equipment Exploration and production Refi...

  • Page 57
    1996 1995 1994 1993 1992 1991 1990 $ 112,522 689,864 $ 56,071 357,964 $ 53,135 520,247 $ 79,635 245,026 $ 141,014 551,459 $ 120,170 625,370 $ 129,914 603,244 $ 8,233,445 3,668,974 11,902,419 6,995,136 $ 4,907,283 $ 7,784,481 1,939,288 3,383,631 $36.35 $ 807,721 $ 9,392,184 3,...

  • Page 58
    ...-Year Summary of Operating Data Amerada Hess Corporat ion and Consolidat ed Subsidiaries 1999 Production Per Day (net) 1998 1997 Crude oil (barrels) United States United Kingdom Norway Denmark Gabon Indonesia and Azerbaijan Canada and Abu Dhabi Total Natural gas liquids (barrels) United States...

  • Page 59
    1996 1995 1994 1993 1992 1991 1990 41,020 134,726 27,603 - 9,725 - 5,929 219,003 9,105 6,628 1,585 - 476 17,794 337,653 253,983 30,445 - - - 62,585 684,666 39 25 40 854 455 1,309 891,000 7,455,000 8,346,000 13 1,236,000 396,000 - 412,000 83,000 495,000 86,986,000 9,085 52,284 135,429 25,576 ...

  • Page 60
    ...of the Cabinet; Former General Counsel United States Department of the Treasury Robert N. Wilson (2) (3) Vice Chairman of the Board of Directors, J ohnson & J ohnson Robert F. Wright (1) Former President and Chief Operating Officer Amerada Hess Corporation Senior Vice Presidents A. A. Bernstein...