Hess 2000 Annual Report Download - page 24

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Special Items
After-tax special items in 2000, 1999 and 1998 are summa-
rized below:
Refining,
Exploration Marketing
and and
Millions of dollars Total Production Shipping Corporate
2000
Gain on termination
of acquisition $ 60 $ — $ — $60
Costs associated with
research and devel-
opment venture (24) — (24) —
Total $ 36 $ — $ (24) $60
1999
Gain on asset sales $ 176 $ 30 $ 146 $ —
Income tax benefits 54 54 — —
Impairment of assets
and operating leases (99) (65) (34) —
Total $ 131 $ 19 $ 112 $ —
1998
Gain (loss) on
asset sales $ (50) $ 56 $(106) $ —
Impairment of assets
and operating leases (198) (154) (44) —
Severance (15) (15) — —
Total $(263) $(113) $(150) $ —
The 2000 gain on termination of the proposed acquisition
of another oil company principally reflects foreign cur-
rency gains on pound sterling contracts which were pur-
chased in anticipation of the acquisition. These contracts
were sold in the fourth quarter resulting in an after-tax
gain of $53 million. Also included in this special item is
income from a fee on termination of the acquisition, par-
tially offset by transaction costs. The charge of $24 million
reflects costs associated with an alternative fuel research
and development venture.
The gain on asset sales of $146 million in 1999 reflects
the sale of the Corporation’s Gulf Coast and Southeast
pipeline terminals and certain retail sites. The Corpora-
tion also sold natural gas properties in California, result-
ing in an after-tax gain of $30 million. Special income tax
benefits of $54 million represent the United States tax
impact of certain prior year foreign exploration activities
and the recognition of capital losses.
Asset impairments in 1999 included $34 million for the
Corporation’s crude oil storage terminal in St. Lucia as a
result of a storage contract that was not renewed. The car-
rying value of the terminal had been partially impaired in
1998 reflecting the reduced crude oil storage requirements
of the HOVENSA joint venture. Net charges of $38 million
were also recorded in 1999 for the write-down in book
value of the Corporation’s interest in the Trans Alaska
Pipeline System.
The Corporation also recorded a 1999 net charge of
$27 million for the additional decline in value of a drilling
service fixed-price contract, due to lower market rates.
The Corporation had previously impaired drilling service
contracts in 1998 by recording a charge of $77 million.
Payments on the drilling service contracts were com-
pleted by December 31, 2000 and the remaining reserve of
$14 million was reversed to income.
Liquidity and Capital Resources
Net cash provided by operating activities, including
changes in operating assets and liabilities amounted to
$1,843 million in 2000, $770 million in 1999 and $519 mil-
lion in 1998. The increases in 2000 and 1999 reflect
improved earnings and changes in operating assets and
liabilities. Excluding balance sheet changes, operating
cash flow was $1,948 million in 2000, $1,116 million in
1999 and $521 million in 1998.
In 1999 and 1998, the Corporation generated additional
cash of $395 million and $468 million, respectively, from
the proceeds of asset sales.
The amount of the Corporation’s cash and cash equiva-
lents increased to $312 million at December 31, 2000. Total
debt was $2,050 million at December 31, 2000 compared
with $2,310 million at December 31, 1999. The debt to
capitalization ratio decreased to 35% at December 31,
2000 from 43% at year-end 1999. At December 31, 2000,
substantially all of the Corporation’s outstanding debt
was fixed-rate debt. The Corporation had $2 billion of
additional borrowing capacity available under its revolv-
ing credit agreements and unused lines of credit under
uncommitted arrangements with banks of $216 million
at December 31, 2000.
In January 2001, the Corporation replaced its existing
revolving credit facilities with two new committed facili-
ties totalling $3 billion. These facilities provide $1.5 bil-
lion of short-term borrowing capacity and $1.5 billion
of five-year revolving credit.