Hess 2008 Annual Report Download - page 43

Download and view the complete annual report

Please find page 43 of the 2008 Hess annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 116

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116

Marketing: Marketing operations, which consist principally of retail gasoline and energy marketing
activities, generated income of $240 million in 2008, $59 million in 2007 and $108 million in 2006, excluding
income from the liquidation of LIFO inventories in 2007 totaling $38 million before income taxes ($24 million after
income taxes).
The increase in 2008 primarily reflects higher margins on refined product sales, including sales of retail
gasoline operations. Refined product margins were lower in 2007 compared with 2006. Total refined product sales
volumes were 472,000 barrels per day in 2008, 451,000 barrels per day in 2007 and 459,000 barrels per day in 2006.
Total energy marketing natural gas sales volumes, including utility and spot sales, were approximately 2.0 million
mcf per day in 2008, 1.9 million mcf per day in 2007 and 1.8 million mcf per day in 2006. In addition, energy
marketing sold electricity volumes at the rate of 3,200, 2,800 and 1,400 megawatts (round the clock) in 2008, 2007
and 2006, respectively.
The Corporation has a 50% voting interest in a consolidated partnership that trades energy commodities and
energy derivatives. The Corporation also takes trading positions for its own account. The Corporation’s after-tax
results from trading activities, including its share of the earnings of the trading partnership, amounted to a loss of
$36 million in 2008, compared with earnings of $24 million in 2007 and $46 million in 2006.
Marketing expenses increased in 2008, principally reflecting growth in energy marketing activities, higher
credit card fees in retail gasoline operations, and increased transportation costs.
The Corporation’s future Marketing and Refining earnings may be impacted by external factors, including
volatility in margins, competitive industry conditions, government regulations, credit risk, and supply and demand
factors, including the effects of weather.
Corporate
The following table summarizes corporate expenses:
2008 2007 2006
(Millions of dollars)
Corporate expenses (excluding the item described below) . .............. $260 $187 $156
Income taxes (benefits) on the above .............................. (87) (62) (46)
173 125 110
Item affecting comparability between periods, after tax
Estimated MTBE litigation ................................... — 25 —
Net corporate expenses..................................... $173 $150 $110
Excluding the item affecting comparability between periods, the increase in corporate expenses in 2008
compared with 2007 primarily reflects losses on pension related investments, higher employee costs, and higher
professional fees. The increase in net corporate expenses in 2007 compared with 2006 principally reflects higher
employee costs, including stock based compensation. Recurring after-tax corporate expenses in 2009 are estimated
to be in the range of $165 to $175 million.
In 2007, Corporate expenses include a charge of $25 million ($40 million before income taxes) related to
MTBE litigation. The pre-tax amount of this charge is recorded in general and administrative expenses.
27