Hess 2008 Annual Report Download - page 47

collateral of approximately $705 million from its hedging and trading counterparties. Changes in commodity prices
can have a material impact on collateral requirements under these agreements.
Credit Ratings
There are three major credit rating agencies that rate the Corporation’s debt. All three agencies have currently
assigned an investment grade rating to the Corporation’s debt. The interest rates and facility fees charged on the
Corporation’s credit facilities, as well as margin requirements from non-trading and trading counterparties, are
subject to adjustment if the Corporation’s credit rating changes.
Contractual Obligations and Contingencies
Following is a table showing aggregated information about certain contractual obligations at December 31, 2008:
Total 2009
2010 and
2011
2012 and
2013 Thereafter
Payments Due by Period
(Millions of dollars)
Long-term debt* ..................... $ 3,955 $ 143 $ 733 $ 907 $2,172
Operating leases...................... 3,561 551 725 638 1,647
Purchase obligations
Supply commitments ................ 24,252 8,602 8,204 7,344 102**
Capital expenditures . ................ 1,356 929 427 — —
Operating expenses. . ................ 1,011 486 321 77 127
Other long-term liabilities .............. 2,011 134 474 93 1,310
* At December 31, 2008, the Corporation’s debt bears interest at a weighted average rate of 6.7%.
** The Corporation intends to continue purchasing refined product supply from HOVENSA. Estimated future purchases amount to
approximately $4.0 billion annually using year-end 2008 prices.
In the preceding table, the Corporation’s supply commitments include its estimated purchases of 50% of
HOVENSA’s production of refined products, after anticipated sales by HOVENSA to unaffiliated parties. The value
of future supply commitments will fluctuate based on prevailing market prices at the time of purchase, the actual
output from HOVENSA, and the level of sales to unaffiliated parties. Also included are term purchase agreements at
market prices for additional gasoline necessary to supply the Corporation’s retail marketing system and feedstocks
for the Port Reading refining facility. In addition, the Corporation has commitments to purchase refined products,
natural gas and electricity to supply contracted customers in its energy marketing business. These commitments
were computed based on year-end market prices.
The table also reflects future capital expenditures, including a portion of the Corporation’s planned $3.2 billion
capital investment program for 2009 that is contractually committed at December 31, 2008. Obligations for
operating expenses include commitments for transportation, seismic purchases, oil and gas production expenses
and other normal business expenses. Other long-term liabilities reflect contractually committed obligations on the
balance sheet at December 31, 2008, including asset retirement obligations, pension plan liabilities and anticipated
obligations for uncertain income tax positions.
The Corporation and certain of its subsidiaries lease gasoline stations, drilling rigs, tankers, office space and
other assets for varying periods under leases accounted for as operating leases. During 2007, the Corporation
entered into a lease agreement for a new drillship and related support services for use in its global deepwater
exploration and development activities beginning in the middle of 2009. The total payments under this five year
contract are expected to be approximately $950 million.
The Corporation has a contingent purchase obligation, expiring in April 2010, to acquire the remaining interest
in WilcoHess, a retail gasoline station joint venture, for approximately $175 million as of December 31, 2008.
The Corporation guarantees the payment of up to 50% of HOVENSA’s crude oil purchases from certain
suppliers other than PDVSA. The amount of the Corporation’s guarantee fluctuates based on the volume of crude oil
31