Hess 2002 Annual Report Download - page 36

The estimated fair values of assets acquired and liabilities assumed
at August 14, 2001 follow:
Millions of dollars
Current assets (net of cash acquired) $ 101
Investments and advances 447
Property, plant and equipment 2,605
Other assets 7
Goodwill 982
Total assets acquired 4,142
Current liabilities (282)
Long-term debt, average rate 6.3%,
due through 2007 (555)
Deferred liabilities and credits (585)
Total liabilities assumed (1,422)
Net assets acquired $ 2,720
The goodwill is assigned to the exploration and production reporting
unit and is not deductible for income tax purposes, but is taken into
account in the determination of foreign tax credits. Since the acquisi-
tion, goodwill has decreased by $5 million, mainly related to changes
in contingent liabilities.
The following pro forma results of operations present information as
if the Triton acquisition occurred at the beginning of each year:
Millions of dollars, except per share data 2001 2000
Pro forma revenue $13,936 $12,620
Pro forma income $ 914 $ 1,010
Pro forma earnings per share
Basic $ 10.38 $ 11.34
Diluted $ 10.25 $ 11.24
4. Inventories
Inventories at December 31 are as follows:
Millions of dollars 2002 2001
Crude oil and other charge stocks $99 $ 108
Refined and other finished products 497 440
Less: LIFO adjustment (261) (111)
335 437
Materials and supplies 157 113
Total $ 492 $ 550
2001: The Corporation recorded a pre-tax charge of $29 million for
estimated losses due to the bankruptcy of certain subsidiaries of
Enron Corporation. The charge reflected losses on less than 10% of
the Corporation’s crude oil and natural gas hedges. In addition, the
Corporation recorded a pre-tax charge of $18 million for severance
expenses resulting from cost reduction initiatives. The cost reduction
program reflected the elimination of approximately 150 positions,
principally in exploration and production operations. Substantially all
of the pre-tax cost of the special items are reflected in general and
administrative expense in the income statement.
2000: The Corporation recorded a pre-tax gain of $97 million from
the termination of its proposed acquisition of another oil company.
The income principally reflected foreign currency gains on pound
sterling contracts which were purchased in anticipation of the acqui-
sition. 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 included a pre-tax charge of $38 million for costs
associated with an alternative fuel research and development ven-
ture. Both of the special items are reflected in non-operating income
in the income statement.
3. Acquisition of Triton Energy Limited
In 2001, the Corporation acquired 100% of the outstanding ordinary
shares of Triton Energy Limited, an international oil and gas explo-
ration and production company. The Corporation’s consolidated finan-
cial statements include Triton’s results of operations from August 14,
2001.The acquisition of Triton increased the size and scope of the
Corporation’s exploration and production operations, providing access
to long-lived international reserves and exploration potential. The
purchase price resulted in the recognition of goodwill. Factors con-
tributing to the recognition of goodwill included the strategic value of
expanding global operations to access new growth areas outside of
the United States and the North Sea, obtaining critical mass in Africa
and Southeast Asia, and enabling cost savings and portfolio high
grading opportunities.
The Corporation accounted for the acquisition as a purchase using
the accounting standards established in Statements of Financial
Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets. The accounting standard
requires that the goodwill arising from the purchase method of
accounting not be amortized, however, it must be tested for
impairment at least annually.
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