Hess 1999 Annual Report Download - page 39

The Corporation’s long-term debt agreements contain
various restrictions and conditions, including working capital
requirements and limitations on total borrowings and cash
dividends. At December 31, 1999, the Corporation meets the
required working capital ratio of 1 to 1. Under the agreements,
the Corporation is permitted to borrow an additional
$2,225,000,000 for the construction or acquisition of assets. In
addition, at December 31, 1999 it has $638,000,000 of retained
earnings free of dividend restrictions.
In 1999, the Corporation issued $1,000,000,000 of public
debentures, of which $300,000,000 bears interest at 73⁄8% and
is due in 2009 and the remainder bears interest at 77⁄8% and is
due in 2029. After discount and the effect of interest rate con-
version agreements, the effective borrowing rates are 6.48%
and 7.97%, respectively.
The Corporation has a $2,000,000,000 Global Revolving
Credit Facility (the “Facility”), of which $120,000,000 is out-
standing at December 31, 1999. Borrowings bear interest at a
margin above the London Interbank Offered Rate (“LIBOR”)
based on the Corporation’s capitalization ratio. The borrowing
rate at December 31, 1999 is .20% above LIBOR. Facility
fees of .125% per annum are payable on the amount of the
credit line.
In 1998, the Corporation entered into the sale and lease-
back of its interests in the production platforms and related
facilities 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 to
repay revolving credit debt. Accordingly, at December 31,
1998, $249,325,000 is included in deferred revenue on the
balance sheet. There was no comparable transaction in 1999.
At December 31, 1999, the Corporation has interest rate
conversion agreements, accounted for by the accrual method,
that effectively convert fixed rate debt to floating rate debt,
increasing the percentage of its floating rate debt to 24%.
In 1999, 1998 and 1997, the Corporation capitalized inter-
est of $15,754,000, $23,559,000 and $10,284,000 on major
development projects. The total amount of interest paid (net
of amounts capitalized), principally on short-term and long-
term debt, in 1999, 1998 and 1997 was $145,366,000,
$154,419,000 and $146,795,000, respectively.
8. Stock Based Compensation Plans
The Corporation has outstanding stock options and non-
vested common stock under its 1995 Long-Term Incentive
Plan (as amended, subject to stockholder approval) and its
Executive Long-Term Incentive Compensation and Stock
Ownership Plan (which expired in 1997). Generally, stock
options vest one year from the date of grant and the exercise
price equals or exceeds the market price on the date of grant.
Nonvested common stock vests three or five years from the
date of grant, depending on the terms of the award.
The Corporation’s stock option activity in 1999, 1998 and
1997 consisted of the following:
Weight ed-
average
Opt ions exercise price
(thousands) per share
Outstanding at January 1, 1997 1,421 $58.99
Granted 873 54.75
Exercised (27) 50.86
Forfeited (19) 59.52
Outstanding at December 31, 1997 2,248 57.43
Granted 873 53.05
Exercised (3) 49.75
Forfeited (23) 56.22
Outstanding at December 31, 1998 3,095 56.21
Granted* 1,804 55.66
Exercised (322) 53.22
Forfeited (70) 58.08
Outstanding at December 31, 1999 4,507 $56.18
Exercisable at December 31, 1997 1,376 $59.14
Exercisable at December 31, 1998 2,230 57.44
Exercisable at December 31, 1999 2,702 56.52
*1,118 stock options with an exercise price of $58.13 per share were granted in
December 1999 subject to approval of stockholders in 2000.
Exercise prices for employee stock options at December
31, 1999 ranged from $49.00 to $65.94 per share. The
weighted-average remaining contractual life of employee
stock options is 8.2 years.
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