Hess 2014 Annual Report Download - page 90

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HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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December 31, 2014, the Corporation is authorized to purchase up to approximately $1.24 billion of additional common stock under its
board approved plan. Due to the current oil price environment, the Corporation plans to significantly moderate stock repurchases in
2015 compared with 2014.
17. Leased Assets
The Corporation and certain of its subsidiaries lease drilling rigs, tankers, office space and other assets for varying periods under
contractual obligations accounted for as operating leases. Operating lease expenses for drilling rigs used to drill development wells
and successful exploration wells are capitalized. At December 31, 2014, future minimum rental payments applicable to non-cancelable
operating leases with remaining terms of one year or more (other than oil and gas property leases) are as follows (in millions):
2015 ....................................................................................................................................................................................... $ 773
2016 ....................................................................................................................................................................................... 627
2017 ....................................................................................................................................................................................... 422
2018 ....................................................................................................................................................................................... 348
2019 ....................................................................................................................................................................................... 303
Remaining years ..................................................................................................................................................................... 345
Total minimum lease payments ............................................................................................................................................. 2,818
Less: Income from subleases ................................................................................................................................................. 36
Net minimum lease payments ........................................................................................................................................... $ 2,782
Rental expense was as follows:
2014 2013 2012
(In millions)
Total rental expense ..................................................................................................................... $ 248 $ 355 $ 375
Less: Income from subleases ....................................................................................................... 17 15 15
Net rental expense ................................................................................................................... $ 231 $ 340 $ 360
18. Guarantees and Contingencies
At December 31, 2014, the Corporation has $54 million in letters of credit for which it is contingently liable. In addition, the
Corporation is subject to loss contingencies with respect to various lawsuits, claims and other proceedings, including environmental
matters. A liability is recognized in the Corporation’s consolidated financial statements when it is probable that a loss has been
incurred and the amount can be reasonably estimated. If the risk of loss is probable, but the amount cannot be reasonably estimated or
the risk of loss is only reasonably possible, a liability is not accrued; however, the Corporation discloses the nature of those
contingencies.
In July 2004, HOVIC and HOVENSA, each received a letter from the Commissioner of the Virgin Islands Department of Planning
and Natural Resources and Natural Resources Trustees, advising of the Trustee’s intention to bring suit against HOVIC and
HOVENSA under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). The letter alleges that
HOVIC and HOVENSA are potentially responsible for damages to natural resources arising from releases of hazardous substances
from the HOVENSA refinery, which had been operated by HOVIC until October 1998. An action was filed on May 5, 2005 in the
District Court of the Virgin Islands against HOVENSA, HOVIC and other companies that operated industrial facilities on the south
shore of St. Croix asserting that the defendants are liable under CERCLA and territorial statutory and common law for damages to
natural resources. In 2014 HOVIC, HOVENSA and the government of the U.S. Virgin Islands entered into a settlement agreement
pursuant to which HOVENSA paid $3.5 million and agreed to pay the government of the U.S. Virgin Islands an additional $40 million
no later than December 31, 2014. HOVENSA was unable to make this additional payment because the U.S.Virgin Islands legislature
did not approve a proposed operating agreement required to complete a proposed sale of HOVENSA, which would have provided
funds to make the settlement payment. Under the terms of the settlement agreement, the U.S. Virgin Islands government was granted a
first lien on HOVENSA’s assets to secure the settlement payment, and in January 2015 the government commenced a foreclosure
action to enforce this lien. HOVENSA intends to defend this action and may take other steps in response to the action, including the
sale of assets and/or the commencement of bankruptcy proceedings. The Registrant does not believe that the resolution of this matter
will have a material adverse effect on its financial condition.
In February 2015, the Pension Benefit Guaranty Corporation (PBGC) issued a notice of determination to terminate the HOVENSA
pension plan. HOVENSA had been in negotiations with the PBGC to make additional contributions to the plan with proceeds from a
proposed sale of HOVENSA, which was not completed for the reasons described above. The Registrant does not believe that the
resolution of this matter will have a material adverse effect on its financial condition.
The Corporation, along with many companies engaged in refining and marketing of gasoline, has been a party to lawsuits and
claims related to the use of methyl tertiary butyl ether (MTBE) in gasoline. A series of similar lawsuits, many involving water utilities