Hess 2000 Annual Report Download

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2000 ANNUAL REPORT

Table of contents

  • Page 1
    2000 AN N UAL R E P O RT

  • Page 2
    CONTENTS 2 Letter to Stockholders 6 Exploration and Production 15 18 58 Refining and Marketing Index to Financial Information Directors and Officers C OV E R HESS EXPRESS Retail Facility in Florida

  • Page 3
    ... Amerada Hess Corporation and Consolidated Subsidiaries Dollar amounts in millions, except per share data 2000 1999 FINANCIAL - FOR THE YEAR Sales and other operating revenues Operating earnings Net income Net income per share (diluted) Return on average capital employed(b) Common stock...

  • Page 4
    ... exploration drilling, reserve development opportunities and acquisitions. We believe that increasing our international portfolio of lower-cost, long-life reserves and our exposure to natural gas in the United States is the best way to create value in our upstream business. Major milestones in 2000...

  • Page 5
    ... in 2001. Both acquisitions offer excellent financial returns, production upside and increased exposure to United States natural gas markets. We expect our daily production to increase by about 12% to 420,000 barrels of oil equivalent per day in 2001 as a result of past exploration successes, field...

  • Page 6
    ... independent convenience retail marketer on the East Coast. During 2000, we continued to expand our energy marketing business. Sales of distillates and residual fuel oil increased as a result of colder weather in the fourth quarter of 2000. Natural gas sales to industrial and commercial customers...

  • Page 7
    ... million in 1999. Exploration and production operating earnings were $868 million in 2000 compared with $324 million in 1999. Operating earnings from refining and marketing amounted to $288 million in 2000 versus $133 million in 1999. Interest expense and other corporate charges were $169 million...

  • Page 8
    ... into existing sub-sea facilities and processed at the Baldpate platform. Net production from this well is expected to be 2,000 barrels of oil per day and 4,800 Mcf of natural gas per day. Amerada Hess operates the Baldpate and Penn State Fields, which are located on Garden Banks Blocks 259/260 and...

  • Page 9
    CONGER FIELD - GULF OF MEXICO

  • Page 10
    BITTERN FIELD - NORTH SEA

  • Page 11
    ... of 2001. Production for Amerada Hess Limited will peak at 30,000 Mcf of natural gas per day in 2002. Further natural gas discoveries were made in 2000. On Block 47/4a, the Minerva discovery (AHL 35%) tested at rates exceeding 40,000 Mcf of natural gas per day. Minerva will be developed as part of...

  • Page 12
    ... as in 1999. DEN MARK The South Arne Field, operated by the Corporation's Danish subsidiary, Amerada Hess ApS, completed its first full-year of production in 2000. Production for Amerada Hess ApS averaged 25,300 barrels of oil per day and 37,300 Mcf of natural gas per day. Development of the field...

  • Page 13
    ... 2000. Phase two of the development of the field has been approved and is expected to be brought onstream in July 2002. Phase two will provide the Corporation with additional production of 25,000 Mcf of natural gas per day. M A L AY S I A In 2001, Amerada Hess acquired an 85% interest in the Block...

  • Page 14
    .... Amerada Hess also acquired exploration rights on Block 401/c, which is adjacent to the Hassi Berkine region of Algeria, a prolific oil production area. GABON The Atora Field came onstream in February 2001. Amerada Hess Production Gabon, a 77.50% owned Gabonese subsidiary of the Corporation, has...

  • Page 15
    PRODUCTION FACILITY - ALGERIA

  • Page 16
    CONSTRUCTION OF DELAYED COKING UNIT - ST. CROIX

  • Page 17
    ... Year." The annual award, in its eleventh year, recognizes excellence in convenience store chains in such areas as customer service, marketing innovation and market share growth. In 2000, Amerada Hess acquired 178 Merit retail gasoline stations which are concentrated in the New York City, Boston and...

  • Page 18
    ... company-operated retail facilities from Gibbs Oil Limited Partnership. The sites, most of which include convenience stores, are located primarily in the Boston metropolitan area and southern New Hampshire. All will be rebranded HESS after closing, expected in late April. Late in 2000, Amerada Hess...

  • Page 19
    HESS EXPRESS - KISSIMMEE, FLORIDA

  • Page 20
    ...Consolidated Changes in Preferred Stock, Common Stock and Capital in Excess of Par Value; Statement of Consolidated Comprehensive Income 32 Notes to Consolidated Financial Statements 45 Report of Management 46 Report of Ernst & Young LLP, Independent Auditors 47 Supplementary Oil and Gas Data 52 Ten...

  • Page 21
    ..., marketing and shipping Corporate Interest Operating earnings (loss) Special items Net income (loss) Net income (loss) per share (diluted) The Corporation's net daily worldwide production was as follows: 2000 Crude oil (thousands of barrels per day) United States Foreign Total Natural gas liquids...

  • Page 22
    .... Additional refining and marketing operations include a fluid catalytic cracking facility in Port Reading, New Jersey, as well as retail gasoline stations, energy marketing activities, shipping and trading. HOVENSA: The Corporation's share of HOVENSA's income was $121 million in 2000 compared with...

  • Page 23
    ... retail operations, including the cost of operating acquired gasoline stations and an increased number of convenience stores. Other operating expenses increased in 2000, largely reflecting higher fuel costs for the catalytic cracking facility in New Jersey and the Corporation's shipping operations...

  • Page 24
    ...: Refining, Marketing and Shipping Millions of dollars Total Exploration and Production Corporate 2000 Gain on termination of acquisition Costs associated with research and development venture Total 1999 Gain on asset sales Income tax benefits Impairment of assets and operating leases Total...

  • Page 25
    ... $168 million in cash, deferred payments and preferred stock. The purchase included 178 Merit retail gasoline stations located in the northeastern United States. During the year, the Corporation also purchased certain energy marketing operations. The decrease in capital expenditures in 1999 compared...

  • Page 26
    ... stations and 21 travel centers. The Corporation will also acquire a chain of 53 retail outlets that will be financed with operating leases. Derivative Instruments The Corporation is exposed to market risks related to volatility in the selling prices of crude oil, natural gas and refined products...

  • Page 27
    ..., the Corporation expects continuing expenditures for environmental assessment and remediation related primarily to existing conditions. Sites where corrective action may be necessary include gasoline stations, terminals, onshore exploration and production facilities, refineries (including solid...

  • Page 28
    ... its quarterly dividend to $.30 per share. Stock Market Information The common stock of Amerada Hess Corporation is traded principally on the New York Stock Exchange (ticker symbol: AHC). High and low sales prices in 2000 and 1999 were as follows: 2000 Quarter Ended March 31 June 30 September...

  • Page 29
    ...except per share data 2000 1999 1998 Revenues Sales (excluding excise taxes) and other operating revenues Non-operating income Gain (loss) on asset sales Equity in income (loss) of HOVENSA L.L.C. Other Total revenues Costs and Expenses Cost of products sold Production expenses Marketing expenses...

  • Page 30
    ...AT E D B A L A N C E S H E E T Amerada Hess Corporation and Consolidated Subsidiaries At December 31 Millions of dollars; thousands of shares 2000 1999 Assets Current Assets Cash and cash equivalents Accounts receivable Trade Other Inventories Other current assets Total current assets $ 312 2,949...

  • Page 31
    ... Accounts payable - trade Accrued liabilities Taxes payable Notes payable Current maturities of long-term debt Total current liabilities Long-Term Debt Deferred Liabilities and Credits Deferred income taxes Other Total deferred liabilities and credits Stockholders' Equity Preferred stock, par value...

  • Page 32
    ...) loss on asset sales Provision (benefit) for deferred income taxes Undistributed earnings of affiliates Changes in other operating assets and liabilities (Increase) decrease in accounts receivable (Increase) decrease in inventories Increase (decrease) in accounts payable, accrued liabilities and...

  • Page 33
    ...I TA L I N E X C E S S O F PA R VA L U E Amerada Hess Corporation and Consolidated Subsidiaries Preferred Stock Number of shares 327 327 $ Common stock Number of shares 91,451 (26) (1,071) 3 90,357 (3) 322 90,676 461 (3,475) 1,082 - 88,744 Capital in excess of par value $ 775 (2) (9) - 764 - 18 782...

  • Page 34
    ... manufactures, purchases, transports, trades and markets refined petroleum and other energy products. The Corporation owns 50% of HOVENSA L.L.C., a refinery joint venture in the United States Virgin Islands. An additional refining facility, terminals and retail gasoline stations are located...

  • Page 35
    ... refining facility, are accrued. Other expenditures for maintenance and repairs are charged against income as incurred. Renewals and improvements are treated as additions to property, plant and equipment, and items replaced are treated as retirements. Environmental Expenditures: The Corporation...

  • Page 36
    .... 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 properties in California and certain retail sites. Exploration and production results included special income tax benefits of $54...

  • Page 37
    ... 1999 $ 67 393 (149) 311 62 $ 373 Crude oil and other charge stocks Refined and other finished products Less: LIFO adjustment Materials and supplies Total (a) The Corporation's share of HOVENSA's income was $121 million in 2000 and $7 million in 1999 and its share of the 1998 loss was $16 million...

  • Page 38
    .... In February 2000, HOVENSA reached agreement on a $600 million bank financing for the construction of a 58 thousand barrel per day delayed coking unit and related facilities at its refinery and for general working capital requirements. In connection with the financing, the Corporation and PDVSA...

  • Page 39
    ... Plan (which expired in 1997). Generally, stock options vest one year from the date of grant and the exercise price equals or exceeds the market price on the date of grant. Nonvested common stock vests three or five years from the date of grant, depending on the terms of the award. The Corporation...

  • Page 40
    ... December 31, 2000, the number of common shares reserved for issuance is as follows (in thousands): 1995 Long-Term Incentive Plan Future awards Stock options outstanding Stock appreciation rights Warrants* Total 2,549 4,295 31 1,061 7,936 *Issued in connection with an insurance company financing...

  • Page 41
    ... greater of the benefit obligation and the market value of assets are amortized over the average remaining service period of active employees. The weighted-average actuarial assumptions used by the Corporation's pension plans at December 31 were as follows: 2000 Discount rate Expected long-term rate...

  • Page 42
    ... tax credits State income taxes, net of Federal income tax benefit Prior year adjustments Other Total 35.0% 3.5 .8 (.6) .1 38.8% 1999 35.0% 3.0 .6 (.8) (.2) 37.6% 1998 (35.0)% 24.2 .2 (.3) .2 (10.7)% *Foreign income includes the Corporation's Virgin Islands, shipping and other operations located...

  • Page 43
    ...of its subsidiaries lease floating production systems, drilling rigs, tankers, gasoline stations, office space and other assets for varying periods. Capital leases are not material. At December 31, 2000, future minimum rental payments applicable to noncancelable operating leases with remaining terms...

  • Page 44
    ... above are designated as hedges and correlate to price movements of crude oil, natural gas and refined products, any gains or losses resulting from market changes will be offset by losses or gains on the Corporation's hedged inventory or production. At December 31, 2000, after-tax deferred gains...

  • Page 45
    .... Exploration and production operations include the exploration for and the production, purchase, transportation and sale of crude oil and natural gas. Refining, marketing and shipping operations include the manufacture, purchase, transportation, trading and marketing of petroleum and other energy...

  • Page 46
    ... of dollars Exploration and Production Refining, Marketing and Shipping Corporate Consolidated* 2000 Operating revenues Total operating revenues Less: Transfers between affiliates Operating revenues from unaffiliated customers Operating earnings (loss) Special items Net income (loss) Earnings...

  • Page 47
    ... and such other matters required by generally accepted auditing standards. Ernst & Young LLP and the Corporation's internal auditors have unrestricted access to the Audit Committee. John B. Hess Chairman of the Board and Chief Executive Officer John Y. Schreyer Executive Vice President and...

  • Page 48
    ..., 2000, in conformity with accounting principles generally accepted in the United States. As discussed in Note 3 to the consolidated financial statements, in 1999 the Corporation adopted the last-in, first-out (LIFO) inventory method for valuing its refining and marketing inventories. New York, NY...

  • Page 49
    ... an oil and gas exploration company that it accounts for on the equity method. Costs Incurred in Oil and Gas Producing Activities For the Years Ended December 31 (Millions of dollars) Total United States Europe Africa, Asia and other 2000 Property acquisitions Exploration Development Share of...

  • Page 50
    ... before income taxes Provision (benefit) for income taxes Results of operations Share of equity investee's results of operations 1999 Sales and other operating revenues Unaffiliated customers Inter-company Total revenues Costs and expenses Production expenses, including related taxes Exploration...

  • Page 51
    ... development expenditures. The estimates of the Corporation's proved reserves of crude oil and natural gas (after deducting royalties and operating interests owned by others) follow: Crude Oil, Condensate and Natural Gas Liquids (Millions of barrels) United States Africa, Asia and other(a) Natural...

  • Page 52
    ... may not be representative of future selling prices. Total United States Europe Africa, Asia and other 2000 Future revenues Less: Future development and production costs Future income tax expenses Future net cash flows Less: Discount at 10% annual rate Standardized measure of discounted future...

  • Page 53
    ... in prices and production costs applicable to future production Net change in estimated future development costs Extensions and discoveries (including improved recovery) of oil and gas reserves, less related costs Revisions of previous oil and gas reserve estimates Purchases (sales) of minerals in...

  • Page 54
    ... ATA Amerada Hess Corporation and Consolidated Subsidiaries Millions of dollars, except per share data 2000 1999(b) 1998 Statement of Consolidated Income Revenues Sales (excluding excise taxes) and other operating revenues Crude oil (including sales of purchased oil) Natural gas (including sales...

  • Page 55
    1997 1996 1995 1994 1993 1992 1991 $ 1,436 1,414 4,961 413 8,224 16 - 120 8,360 5,578 557 329 422 232 236 136 663 80 8,233 127 119 $ $ $ 8 .08 .08 .60 $ 1,528 1,365 5,081 296 8,270 529(e) - 125 8,924 5,386 621 264 384 129 238 166 722 - 7,910 1,014 354 $ 660 $ 1,565 1,120 4,311 303 7,299 96 ...

  • Page 56
    ...D ATA Amerada Hess Corporation and Consolidated Subsidiaries Millions of dollars, except per share data 2000 1999 1998 Selected Balance Sheet Data at Year-End Cash and cash equivalents Working capital Property, plant and equipment Exploration and production Refining, marketing and shipping Total...

  • Page 57
    1997 1996 1995 1994 1993 1992 1991 $ 91 464 $ 113 690 $ 56 358 $ 53 520 $ 80 245 $ 141 551 $ 120 625 $ 8,780 3,842 12,622 7,431 $ 5,191 $ 7,935 2,127 3,216 $ 35.16 $ 1,250 $ 8,233 3,669 11,902 6,995 $ 4,907 $ 7,784 1,939 3,384 $ 36.35 $ 808 $ 9,392 3,672 13,064 7,694 $ 5,370 $...

  • Page 58
    ... ATA Amerada Hess Corporation and Consolidated Subsidiaries 2000 Production Per Day (net) Crude oil (thousands of barrels) United States United Kingdom Norway Denmark Gabon Indonesia Azerbaijan Algeria Canada and Abu Dhabi Total Natural gas liquids (thousands of barrels) United States United Kingdom...

  • Page 59
    1997 1996 1995 1994 1993 1992 1991 35 126 30 - 10 1 - - - 202 8 6 2 - - 16 312 226 30 - 1 - - 569 42 11 24 860 447 1,307 915 10,180 11,095 14 1,602 411 - 436 73 509 87,000 9,216 41 135 28 - 9 - - - 6 219 9 7 2 - - 18 338 254 30 - - - 63 685 39 25 40 854 455 1,309 891 7,455 8,346 13 1,236 396...

  • Page 60
    ... United States Department of the Treasury; Former Chairman, Dillon, Read & Co., Inc. J. Barclay Collins II Executive Vice President and General Counsel Peter S. Hadley (3) (4) Former Senior Vice President Metropolitan Life Insurance Company Edith E. Holiday (2) (4) (5) Attorney; Former Assistant to...

  • Page 61
    ... Stock Exchange (ticker symbol: AHC) CORPORATE HEADQUARTERS Amerada Hess Corporation 1185 Avenue of the Americas New York, New York 10036 (212) 997-8500 OPERATING OFFICES Exploration and Production Amerada Hess Corporation One Allen Center 500 Dallas Street Houston, Texas 77002 Amerada Hess Limited...

  • Page 62
    A M E R A DA H E S S C O R P O R AT I O N 1185 Avenue of the Americas New York, New York 10036 http://www.hess.com 4