Hess 1999 Annual Report Download - page 36

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2. Special Items
1999: The Corporation recorded a gain of $274,100,000
($176,000,000 after income taxes) from the sale of its Gulf
Coast and Southeast pipeline terminals, natural gas properties
in California and certain retail sites. Exploration and produc-
tion results include special income tax benefits of $54,600,000,
reflecting actions taken in 1999 to realize the United States
tax impact of certain prior year exploration activities and
capital losses.
Exploration and production earnings also include an
impairment of $58,700,000 ($38,200,000 after income taxes)
for the Corporation’s interest in the Trans Alaska Pipeline Sys-
tem. The Corporation currently has no crude oil production
in Alaska and there has been a significant reduction in crude
oil volumes shipped through the Corporation’s share of
the pipeline. Refining and marketing results include an asset
impairment of $34,000,000 (with no income tax benefit) for
the Corporation’s crude oil storage terminal in St. Lucia, due
to the nonrenewal of a major third party storage contract. The
terminal had been partially impaired in 1998 as a result of the
reduced crude oil storage requirements of the HOVENSA
joint venture. The Corporation also accrued $35,300,000
($27,300,000 after income taxes) for a further decline in the
value of a drilling service fixed-price contract due to lower
market rates. At December 31, 1999, the Corporation’s reserve
for drilling service contracts was $54,600,000, including
amounts provided in 1998. During the year, $70,700,000 of
contract payments were charged against the reserve.
Gains on asset sales are included on a separate line in non-
operating income in the income statement. The impairment
of carrying values of the Alaska pipeline and the crude oil
storage terminal and the loss on the drilling service contract
are reflected in a separate impairment line in the income
statement.
1998: The Corporation recorded a loss of $106,000,000 in con-
nection with the sale of the 50% interest in the fixed assets of
its Virgin Islands refinery. The Corporation also recorded an
additional charge of $44,000,000 for the reduction in carrying
value of its crude oil storage terminal in St. Lucia that is being
used less as a result of the joint venture. No income tax bene-
fit was recorded on either charge. Exploration and production
results included a charge of $90,000,000 ($77,000,000 after
income taxes) for the reduction in market value of drilling
service fixed-price contracts due to the decline in worldwide
crude oil prices. A charge of $54,000,000 ($35,000,000 after
income taxes) was also recorded for the impairment of capi-
talized costs related to a North Sea oil discovery that was
uneconomic. The Corporation expensed $29,000,000
for its share of asset impairment of an equity affiliate and
$13,000,000 for the reduction in carrying value of developed
and undeveloped properties in the United States and United
Kingdom. In addition, the Corporation recorded gains of
$80,300,000 ($56,200,000 after income taxes) on the sale of
oil and gas assets in the United States and Norway.
In 1998, the Corporation recorded pre-tax charges of
$23,000,000 ($15,000,000 after income taxes) for severance
costs. The severance costs covered approximately 400 explo-
ration and production employees (of which approximately
200 had been terminated at December 31, 1998). Approxi-
mately $2,000,000 of severance was paid in 1998 and the
remainder was paid in 1999. The Corporation also recorded
$8,000,000 of exit costs (accrued office lease costs). Approxi-
mately $3,400,000 of this reserve was used in 1999 and the
remainder was reversed to income as a result of current plans
for use of the office space.
1997: The Corporation recorded a charge of $80,600,000
($55,000,000 after income taxes) for impairment of long-lived
assets and a long-term operating lease, as a result of reserve
revisions on two oil fields in the United Kingdom North Sea.
The Corporation also recorded income of $38,200,000 from a
refund of United Kingdom Petroleum Revenue Taxes. In 1997,
the Corporation sold its interest in a United States natural gas
field resulting in an after-tax gain of $10,700,000.