Hess 2002 Annual Report Download - page 41

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Deferred income taxes arise from temporary differences between
the tax basis of assets and liabilities and their recorded amounts in
the financial statements. A summary of the components of deferred
tax liabilities and assets at December 31 follows:
Millions of dollars 2002 2001
Deferred tax liabilities
Fixed assets and investments $ 943 $1,168
Foreign petroleum taxes 256 209
Other 138 118
Total deferred tax liabilities 1,337 1,495
Deferred tax assets
Accrued liabilities 124 176
Net operating and capital loss
carryforwards 543 350
Tax credit carryforwards 61 32
Other 33 44
Total deferred tax assets 761 602
Valuation allowance (95) (93)
Net deferred tax assets 666 509
Net deferred tax liabilities $ 671 $ 986
The difference between the Corporation’s effective income tax rate
and the United States statutory rate is reconciled below:
2002 2001 2000
United States statutory rate (35.0)% 35.0% 35.0%
Effect of foreign operations,
including foreign tax credits 380.2* 1.1 3.5
Loss on repurchase of bonds (19.8)
——
State income taxes, net of
Federal income tax benefit 6.8 1.2 .8
Prior year adjustments (1.9) (1.4) (.6)
Other (.1) .5 .1
Total 330.2% 36.4% 38.8%
*Reflects high effective tax rates in certain foreign jurisdictions, including special taxes in
the United Kingdom and Norway, and losses in other jurisdictions which were benefited
at lower rates.
The Corporation has not recorded deferred income taxes applicable
to undistributed earnings of foreign subsidiaries that are expected to
be indefinitely reinvested in foreign operations. Undistributed earn-
ings amounted to approximately $1.9 billion at December 31, 2002
and include amounts which, if remitted, would result in U.S. income
taxes at less than the statutory rate, because of available foreign tax
credits. If the earnings of such foreign subsidiaries were not indefi-
nitely reinvested, a deferred tax liability of approximately $150 million
would have been required.
12. Provision for Income Taxes
The provision for income taxes consisted of:
Millions of dollars 2002 2001 2000
United States Federal
Current $4 $77 $92
Deferred (158) 50 62
State 527 22
(149) 154 176
Foreign
Current 416 356 371
Deferred (143) 14 102
273 370 473
Adjustment of deferred tax
liability for foreign
income tax rate change 43
——
Total $ 167 $524* $649
*Includes benefit of $48 million relating to prior year refunds of United Kingdom Advance Cor-
poration Taxes and deductions for exploratory drilling.
Income (loss) before income taxes consisted of the following:
Millions of dollars 2002 2001 2000
United States $(446) $ 385 $ 497
Foreign* 395 1,053 1,175
Total $ (51) $1,438 $1,672
*Foreign income includes the Corporation’s Virgin Islands, shipping and other operations
located outside of the United States.
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