Hess 2000 Annual Report Download - page 36

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2. Special Items
2000: The Corporation recorded a gain of $97 million
($60 million after income taxes) from the termination of
its proposed acquisition of another oil company. The
income principally reflects foreign currency gains on
pound sterling contracts which were purchased in
anticipation of the acquisition. These contracts were
subsequently liquidated at an after-tax gain of $53 million.
The Corporation also recorded income from a termination
payment which was received from the other company,
partially offset by transaction costs. The combined results
of this transaction were recorded as a special item in
the Corporate segment. Refining and marketing results
include a charge of $38 million ($24 million after income
taxes) for costs associated with an alternative fuel
research and development venture. Both of the special
items are reflected in non-operating income in the
income statement.
1999: The Corporation recorded a gain of $274 million
($176 million after income taxes) from the sale of its Gulf
Coast and Southeast pipeline terminals, natural gas prop-
erties in California and certain retail sites. Exploration
and production results included special income tax bene-
fits of $54 million, reflecting the timing of deductions for
certain prior year foreign drilling costs and capital losses.
Exploration and production earnings also included an
impairment of $59 million ($38 million after income
taxes) for the Corporation’s interest in the Trans Alaska
Pipeline System. The Corporation 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 market-
ing results included an asset impairment of $34 million
(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 ven-
ture. The Corporation also accrued $35 million ($27 mil-
lion after income taxes) for a further decline in the value
of a drilling service fixed-price contract due to lower
market rates. During 2000, $41 million of drilling contract
payments were charged against the reserve and the
remaining balance of $14 million was reversed to income.
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 million in
connection 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 million for the
reduction in carrying value of its crude oil storage termi-
nal in St. Lucia that was used less as a result of the joint
venture. No income tax benefit was recorded on either
charge. Exploration and production results included a
charge of $90 million ($77 million after income taxes) for
the reduction in market value of drilling service fixed-
price contracts. A charge of $54 million ($35 million after
income taxes) was also recorded for the impairment of
capitalized costs related to a North Sea oil discovery that
was uneconomic. The Corporation expensed $29 million
for its share of asset impairment of an equity affiliate and
$13 million for the reduction in carrying value of devel-
oped and undeveloped properties in the United States and
United Kingdom. In addition, the Corporation recorded
gains of $80 million ($56 million after income taxes) on
the sale of oil and gas assets in the United States and
Norway. The Corporation also recorded pre-tax charges of
$23 million ($15 million after income taxes) for severance
and related exit costs.