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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 21, 1996
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TEXACO INC.
(Exact name of registrant as specified in its charter)
Delaware 1-27 74-1383447
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation) Number) Identification Number)
2000 Westchester Avenue, 10650
White Plains, New York (Zip Code)
(Address of principal executive offices)
(914) 253-4000
(Registrant's telephone number, including area code)
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Item 5. Other Events
1. On October 21, 1996, the Registrant issued an Earnings Press Release
entitled "Texaco Reports Results for Third Quarter and Nine Months
1996," a copy of which is attached hereto as Exhibit 99.1 and made a
part hereof.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
99.1 Press Release issued by Texaco Inc. dated October 21, 1996,
entitled"Texaco Reports Results for the Third Quarter and Nine
Months 1996."
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TEXACO INC.
--------------------
(Registrant)
By: R. E. KOCH
---------------------
(Assistant Secretary)
Date: October 21,1996
EXHIBIT 99.1
TEXACO REPORTS RESULTS
----------------------
FOR THE THIRD QUARTER AND NINE MONTHS 1996
------------------------------------------
FOR IMMEDIATE RELEASE: MONDAY, OCTOBER 21, 1996.
- -------------------------------------------------
WHITE PLAINS, NY., Oct. 21 - Texaco announced today a 50 percent
increase in third quarter 1996 results over the same period last year. The
company cited increased worldwide crude oil and natural gas production and
higher commodity prices as major contributors to its earnings improvement.
Total Texaco worldwide net income for the third quarter of 1996 was
$434 million, or $1.61 per share, as compared with $290 million, or $1.06 per
share, for the third quarter of 1995. For the first nine months of 1996, net
income was $1,509 million, or $5.62 per share, as compared with $858 million, or
$3.13 per share, for the first nine months of 1995. Net income for both years
included special items.
Earnings before special items for nine months 1996 increased 64 percent
to $1,285 million, or $4.76 per share, as compared with $785 million, or $2.84
per share, for the nine months of 1995. Third quarter 1996 results had no
special items, while third quarter 1995 results before special items were $288
million, or $1.05 per share.
In commenting on 1996 results, Texaco Inc. Chairman and Chief Executive
Officer Peter I. Bijur stated, "Texaco's higher worldwide crude oil and natural
gas production and the continuing strength in commodity prices led our strong
third quarter and year-to-date results. We have been successful this year in
reversing previous production declines from maturing fields and non-core asset
sales. Our success was bolstered by increased production from new fields in the
Gulf of Mexico, China and Angola, and improved recovery from existing fields,
most notably in our Kern River, Calif., and Partitioned Neutral Zone operations.
"In the downstream, higher margins, increased branded gasoline sales
volumes and better operating performance at our refineries, particularly on the
West Coast, contributed to our improved results in the United States. However,
in the international sector, results were lower this year as the effects of
intense competitive pressure in Europe and poor margins in the Caltex operating
areas more than offset solid results achieved by our Latin American marketing
operations," Bijur said.
- more -
- 2 -
"While growing the business, we have continued our strict commitment to
cost containment throughout Texaco's worldwide operations as shown by this
year's decline in per barrel cash operating expenses. In addition, our strong
earnings and cash flow, both important measures of our plan for growth, enabled
us to increase our quarterly dividend rate to $.85 per share in July and to
maintain an aggressive capital expenditure program this year. Year-to-date
capital expenditures were $2,252 million, up $208 million or 10 percent from
last year, with the majority of funds targeted to key upstream opportunities."
Third Quarter Nine Months
------------- -----------
Texaco Inc. (Millions): 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Net income before special items $ 434 $ 288 $ 1,285 $ 785
-------- -------- -------- --------
Gain on sale of an interest in an affiliate - - 224 -
Gains on major asset sales - 27 - 232
Tax benefits on asset sales - 44 - 44
Employee separation costs - (56) - (56)
Other - (13) - (26)
Cumulative effect of accounting change
SFAS - 121 - - - (121)
-------- -------- -------- --------
- 2 224 73
-------- -------- -------- --------
Total net income $ 434 $ 290 $ 1,509 $ 858
======== ======== ======== ========
- -------------------------------------------------------------------------------------------------------------------
Details on special items are included in the following analysis of functional net income.
ANALYSIS OF FUNCTIONAL NET INCOME
OPERATING EARNINGS
PETROLEUM AND NATURAL GAS
EXPLORATION AND PRODUCTION
Third Quarter Nine Months
------------- -----------
United States (Millions): 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Operating earnings before special items $ 262 $ 162 $ 772 $ 483
Special items - - - 112
-------- -------- --------- --------
Total operating net income $ 262 $ 162 $ 772 $ 595
- -------------------------------------------------------------------------------------------------------------------
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- 3 -
In the U.S. upstream operations, the strong growth in earnings for both
the comparative third quarter and nine months of 1996 resulted from increased
crude oil and natural gas production and higher prices. Increased crude oil,
natural gas liquids (NGL), and natural gas production, which in total are up 2.5
percent for the year, reflects success in adding new production, most notably
from the Gulf of Mexico, and enhancing production from existing fields,
primarily in the Kern River, Calif., operations. This new production reverses
previous declines from maturing fields and non-core asset sales, and is in
contrast to U.S. oil industry statistics which indicate an overall decline in
U.S. crude oil production. Increased exploratory expenses for both the third
quarter and nine months reflect an increased level of exploration activity, and
complement this year's success in acquiring lease acreage and the discovery and
development of new prospects.
The Texaco U.S. average natural gas price for the third quarter of 1996
was $.50 per thousand cubic feet (MCF) higher than 1995, while the price for the
nine months of 1996 was $.48 per MCF higher than 1995. These price improvements
were primarily due to unusually cold weather earlier this year and the resulting
increase in industry demand to replenish depleted natural gas storage.
The 1996 average price for Texaco U.S. crude oil was $3.05 and $2.07
per barrel higher for the third quarter and nine months, respectively. These
higher prices reflect increased demand combined with historically low inventory
levels in 1996 and market uncertainty related to delays in the possible
resumption of Iraqi crude sales.
Results for 1995 included a special first quarter net gain of $112
million, principally resulting from the sale of non-core assets.
Third Quarter Nine Months
------------- -----------
International (Millions): 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Total operating net income $ 132 $ 87 $ 365 $ 253
- -------------------------------------------------------------------------------------------------------------------
In the international upstream, results for both the third quarter and
nine months of 1996 benefited from higher crude oil prices. Additionally, crude
oil production increased primarily from activity in Angola, China and the
Partitioned Neutral Zone, located between Saudi Arabia and Kuwait. In Angola,
the production increases were the result of new offshore fields as well as the
resumption of onshore production early this year. Production increased in China
due to new fields and in the Partitioned Neutral Zone due to continuing
development programs. Lower production from maturing fields in the United
Kingdom (U.K.) and Australia partly offset overall production improvements for
the third quarter and nine months of 1996. Third quarter 1996 natural gas
production reflected the continued development of the Dolphin field in Trinidad.
- more -
- 4 -
MANUFACTURING, MARKETING AND DISTRIBUTION
Third Quarter Nine Months
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United States (Millions): 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Operating earnings before special items $ 94 $ 70 $ 242 $ 81
Special items - (11) - (11)
-------- -------- -------- --------
Total operating net income $ 94 $ 59 $ 242 $ 70
- -------------------------------------------------------------------------------------------------------------------
In the U.S. downstream operations, results for the third quarter and
nine months of 1996 benefited primarily from higher West Coast refinery margins
as compared to the same period of 1995. Although third quarter 1996 refining
margins have steadily deteriorated from their peak in May, they exceeded the
depressed levels of the comparable period of 1995.
The significant improvement in West Coast refining margins this year
reflected product price increases due to shortages resulting from regional
refining problems and new California gasoline formulation requirements during
the first half of the year when the seasonal increase in market demand occurred.
Improved refinery operations and continued cost containment efforts also
contributed to the improved 1996 results.
For the third quarter and nine months of 1996, marketing margins for
most refined products were lower than the comparable period of 1995. This was
offset partially by the continued strength in gasoline and diesel sales volumes,
with Texaco branded gasoline sales up more than three percent for both the
comparative third quarter and nine months. Additionally, downstream results for
the nine months of 1996 benefited from improved profits in the distribution and
transportation businesses, particularly in the second quarter.
Third quarter 1995 results included special charges of $11 million
relating to employee separations.
Third Quarter Nine Months
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International (Millions): 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Operating earnings before special items $ 37 $ 58 $ 209 $ 241
Special items - (42) 224 38
-------- -------- -------- --------
Total operating net income $ 37 $ 16 $ 433 $ 279
- -------------------------------------------------------------------------------------------------------------------
In the international downstream, comparative third quarter and nine
months 1996 earnings reflected lower margins in both the Europe and Caltex
operating areas offset partially by improved results in Brazil from increased
volumes and higher product margins.
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- 5 -
In Europe, marketing margins were significantly depressed from excess
gasoline supply and a highly competitive market, especially in the U.K., and
only partially offset by higher refining margins. In the Caltex operating
markets, significantly lower margins in Korea and Thailand, primarily due to
higher crude costs not fully recovered in the market, were somewhat offset by
higher margins in Bahrain and Singapore. Additionally, earnings in Japan were
lower as a result of the April 1996 sale of the Nippon Petroleum Refining
Company, Limited (NPRC).
Results for nine months 1996 included a special second quarter gain of
$224 million relating to the sale by Caltex of its interest in NPRC. Nine months
1995 results included a $42 million third quarter special charge relating to
employee separations in subsidiary operations and Caltex restructuring charges,
and first quarter net special gains of $80 million, primarily relating to the
sale of land by a Caltex affiliate in Japan.
NONPETROLEUM
Third Quarter Nine Months
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(Millions): 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Operating earnings before special items $ 6 $ 9 $ 11 $ 20
Special items - 27 - 27
-------- -------- -------- --------
Total operating net income $ 6 $ 36 $ 11 $ 47
- -------------------------------------------------------------------------------------------------------------------
Nonpetroleum results for 1996 reflected higher gasification licensing
revenues, while 1995 mainly reflected improved loss experience of insurance
operations.
Third quarter 1995 results included a special gain of $27 million from
the sale of the company's interest in Pekin Energy Company.
CORPORATE/NONOPERATING RESULTS
Third Quarter Nine Months
(Millions): 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
Results before special items $ (97) $ (98) $ (314) $ (293)
Special items - 28 - 28
-------- -------- --------- --------
Total corporate/nonoperating $ (97) $ (70) $ (314) $ (265)
- -------------------------------------------------------------------------------------------------------------------
Corporate/Nonoperating results for 1995 included first quarter gains of
$25 million, principally from sales of equity securities held for investment by
insurance operations.
The third quarter 1995 results included $44 million of special gains
related to tax benefits realizable through the sale of an interest in a
subsidiary. In addition, special charges for employee separations totaled $16
million for the third quarter of 1995.
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- 6 -
The company has been notified that the United States Court of Appeals
for the Fifth Circuit affirmed the 1993 U.S. Tax Court decision in the so-called
"Aramco Advantage" case and upheld Texaco's position in this dispute with the
Internal Revenue Service (IRS).
From 1979 through 1981, as a result of a directive from the Saudi
Arabian Government, Texaco was limited as to what price it could receive for
crude oil it bought from Saudi Arabia and resold. In this case, the IRS claimed
that Texaco should be required to pay taxes on the sale of crude oil based on a
higher price than Texaco was actually permitted to receive for the oil. In its
decision, the Fifth Circuit affirmed the Tax Court's finding that the company
was not required to pay taxes on money that it was not able to receive.
In March 1988, prior to the commencement of the Tax Court action,
Texaco, as a condition of its emergence from Chapter 11 proceedings, made
certain cash deposits to the IRS in contemplation of potential tax claims. The
remaining portion of these deposits, together with interest, currently exceed
$700 million. Disposition of the deposit and interest will be determined when
the IRS has exhausted its legal options.
CAPITAL AND EXPLORATORY EXPENDITURES
Capital and exploratory expenditures, including equity in such
expenditures of affiliates, were $2,252 million for the first nine months of
1996, as compared to $2,044 million for the same period of 1995. Expenditures
for the third quarter of 1996 amounted to $815 million versus $772 million for
the third quarter of 1995.
Increased U.S. exploration and development expenditures during 1996
reflect solid opportunities in traditional offshore and key deepwater areas of
the Gulf of Mexico. Texaco continued its aggressive acquisition of acreage at
the latest Gulf of Mexico lease sale, adding to significant deepwater acreage
acquired at the federal lease sale earlier this year. Progress on design and
construction for the Petronius deepwater project continued during the third
quarter.
Aggressive international upstream investment also continued this year
as increased expenditures focused in Colombia, Australia, Nigeria, the
Partitioned Neutral Zone and Denmark, while development work continues in the
Captain and Erskine Fields in the U.K. North Sea and in Indonesia.
Comparative downstream expenditure levels decreased due to the
completion of major refinery construction projects in Thailand and Singapore by
Caltex and the completion of refinery upgrades in the U.S. and Panama. Increased
investments in 1996 relating to the Poseidon oil pipeline, which will service
new deepwater and subsalt oil production from the central Gulf of Mexico as well
as selected worldwide marketing investments particularly in Latin American
growth areas and by Caltex in Singapore, partially offset the decrease in
refinery spending.
- xxx -
CONTACTS: Jim Swords 914-253-4156
Yorick Fonseca 914-253-7034
Rachel Speltz 914-253-4175
Additional Texaco information is available on the World Wide Web at:
http://www.texaco.com
- 7 -
Third Quarter Nine Months
------------- -----------
1996 1995(a) 1996 1995 (a)
---- ------- ---- --------
FUNCTIONAL NET INCOME ($000,000)
- --------------------------------
Operating Earnings (Losses)
Petroleum and natural gas
Exploration and production
United States $ 262 $ 162 $ 772 $ 595 (b)
International 132 87 365 253
--------- --------- --------- ---------
Total 394 249 1,137 848
--------- --------- --------- ---------
Manufacturing, marketing and
distribution
United States 94 59 (b) 242 70 (b)
International 37 16 (b) 433 (b) 279 (b)
--------- --------- --------- ---------
Total 131 75 675 349
--------- --------- --------- ---------
Total petroleum and natural gas 525 324 1,812 1,197
Nonpetroleum 6 36 (b) 11 47 (b)
--------- --------- --------- ---------
Total operating earnings 531 360 1,823 1,244
Corporate/Nonoperating (97) (70)(b) (314) (265)(b)
--------- --------- --------- ---------
Net income before accounting change (c) 434 290 1,509 979
Cumulative effect of adoption of SFAS 121 -- -- -- (121)
--------- --------- --------- ---------
Total net income $ 434 $ 290 $ 1,509 $ 858
--------- --------- --------- ---------
EARNINGS (LOSS) PER COMMON SHARE (dollars)
- ------------------------------------------
Net income before cumulative effect of
accounting change $ 1.61 $ 1.06 $ 5.62 $ 3.60
Cumulative effect of accounting change -- -- -- (.47)
--------- --------- --------- ---------
Total net income $ 1.61 $ 1.06 $ 5.62 $ 3.13
--------- --------- --------- ---------
Average number of common shares
outstanding for computation
of earnings per share (000,000) 260.8 260.1 260.7 259.9
(a) Results for 1995 have been reclassified and restated for the adoption of SFAS 121
(b) Includes special items as detailed in news release text
(c) Includes provision for income taxes
($000,000) $ 348 $ 96 $ 968 $ 488
- 8 -
Third Quarter Nine Months
------------- -----------
OTHER FINANCIAL DATA ($000,000) 1996 1995 1996 1995
- ------------------------------- --------- --------- --------- ---------
Revenues $ 11,097 $ 8,814 $ 32,629 $ 27,140
Total assets as of September 30 (d) $ 25,600 $ 25,009
Stockholders' equity as of September 30 (d) $ 10,240 $ 9,997
Total debt as of September 30 (d) $ 5,650 $ 5,952
Capital and exploratory expenditures
(includes equity in affiliates)
Exploration and production
United States $ 273 $ 232 $ 894 $ 619
International 312 289 762 727
--------- ---------- ---------- ----------
Total 585 521 1,656 1,346
--------- ---------- ---------- ----------
Manufacturing, marketing and
distribution
United States 78 96 234 263
International 144 147 345 415
--------- ---------- ---------- ----------
Total 222 243 579 678
--------- ---------- ---------- ----------
Other 8 8 17 20
--------- ---------- ---------- ----------
Total $ 815 $ 772 $ 2,252 $ 2,044
--------- ---------- ---------- ----------
Texaco Inc. and subsidiary companies
Exploratory expenses included above:
United States $ 45 $ 30 $ 112 $ 63
International 39 36 131 117
--------- ---------- ---------- ----------
Total $ 84 $ 66 $ 243 $ 180
--------- ---------- ---------- ----------
Dividends paid to common stockholders $ 222 $ 208 $ 638 $ 624
Dividends per common share (dollars) $ .85 $ .80 $ 2.45 $ 2.40
Dividend requirements for preferred
stockholders $ 14 $ 15 $ 43 $ 46
(d) Preliminary
- 9 -
Third Quarter Nine Months
OPERATING DATA - INCLUDING 1996 1995 1996 1995
- -------------------------- --------- --------- --------- ------
INTERESTS IN AFFILIATES
-----------------------
Exploration and Production
--------------------------
United States
-------------
Net production of crude oil and
natural gas liquids (000 BPD) 393 373 388 381
Net production of natural gas -
available for sale (000 MCFPD) 1,708 1,618 1,680 1,627
Total net production (000 BOEPD) 678 643 668 652
Natural gas sales (000 MCFPD) 3,059 3,046 3,100 3,162
Natural gas liquids sales
(including purchased LPGs) (000 BPD) 191 207 208 214
Average U.S. crude (per bbl.) $ 17.93 $ 14.88 $ 17.24 $ 15.17
Average U.S. natural gas (per mcf) $ 2.02 $ 1.52 $ 2.08 $ 1.60
Average WTI (Spot) (per bbl.) $ 22.41 $ 17.85 $ 21.30 $ 18.52
Average Kern (Spot) (per bbl.) $ 14.41 $ 13.84 $ 14.92 $ 13.90
International
-------------
Net production of crude oil and
natural gas liquids (000 BPD):
Europe 115 118 115 117
Indonesia 146 153 143 149
Partitioned Neutral Zone 79 63 75 56
Other 65 56 62 55
-------- -------- -------- --------
Total 405 390 395 377
Net production of natural gas -
available for sale (000 MCFPD):
Europe 162 172 182 210
Colombia 124 117 117 118
Other 77 46 66 52
-------- -------- -------- --------
Total 363 335 365 380
Total net production (000 BOEPD) 466 446 456 440
Natural gas sales (000 MCFPD) 450 398 456 434
Natural gas liquids sales
(including purchased LPGs) (000 BPD) 74 86 95 79
Average International crude (per bbl.) $ 19.43 $ 15.45 $ 18.64 $ 16.32
Average U.K. natural gas (per mcf) $ 2.55 $ 2.55 $ 2.56 $ 2.63
Average Colombia natural gas (per mcf) $ .97 $ .92 $ .94 $ .87
- 10 -
Third Quarter Nine Months
------------- -----------
OPERATING DATA - INCLUDING 1996 1995 1996 1995
- -------------------------- --------- --------- --------- ------
INTERESTS IN AFFILIATES
-----------------------
Manufacturing, Marketing and Distribution
-----------------------------------------
United States
-------------
Refinery input (000 BPD)
Subsidiary 417 406 405 391
Affiliate - Star Enterprise 325 297 320 300
----- ----- ----- -----
Total 742 703 725 691
Refined product sales (000 BPD)
Gasolines 515 458 499 448
Avjets 122 94 127 89
Middle Distillates 217 195 214 193
Residuals 70 66 65 53
Other 132 129 133 130
----- ----- ----- -----
Total 1,056 942 1,038 913
International
-------------
Refinery input (000 BPD)
Europe 334 312 336 284
Affiliate - Caltex 340 451 368 441
Latin America/West Africa 68 43 64 37
----- ----- ----- -----
Total 742 806 768 762
Refined product sales (000 BPD)
Europe 431 487 453 453
Affiliate - Caltex 555 622 602 645
Latin America/West Africa 408 353 397 356
Other 39 54 61 75
----- ----- ----- -----
Total 1,433 1,516 1,513 1,529
