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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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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):
April 21, 1997
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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
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1. On April 21, 1997, the Registrant announced that it had
been notified that the U. S. Supreme Court has decided not to
review the decisions of the U. S. Court of Appeals for the
Fifth Circuit and the U. S. Tax Court in the so-called
"Aramco Advantage" case. This action ends the company's
long-standing dispute with the Internal Revenue Service (IRS).
This decision by the Supreme Court, affirming Texaco's
position, will result in an earnings benefit of $488 million
in the first quarter 1997, representing the after-tax effect
of the expected refund of payments, with associated interest,
made to the IRS in previous years for potential tax claims.
Texaco expects a refund, including interest, exceeding $700 of
which a significant portion is expected to be received in
1997.
On April 21, 1997, the Registrant issued a Press Release
entitled "Texaco Advised Supreme Court Will Let Stand
Favorable Decision in `Aramco Advantage' Case," a copy of
which is attached hereto as Exhibit 99.1 and made a part
hereof.
2. On April 22, 1997, the Registrant issued an Earnings Press
Release entitled "Texaco Reports Significant Increase In Net
Income: First Quarter 1997 Earnings Reach $980 Million," a
copy of which is attached hereto as Exhibit 99.2 and made a
part hereof.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(c) Exhibits
99.1 Press Release issued by Texaco Inc. dated April 21, 1997,
entitled "Texaco Advised Supreme Court Will Let Stand
Favorable Decision in `Aramco Advantage' Case."
99.2 Press Release issued by Texaco Inc. dated April 22, 1997,
entitled "Texaco Reports Significant Increase In Net Income:
First Quarter 1997 Earnings Reach $980 Million."
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.
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(Registrant)
By: R. E. KOCH
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(Assistant Secretary)
Date: April 22, 1997
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FDeB:bbm
(8Kapr21)
EXHIBIT 99.1
TEXACO ADVISED SUPREME COURT WILL LET STAND FAVORABLE
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DECISION IN "ARAMCO ADVANTAGE" CASE
-----------------------------------
FOR RELEASE: MONDAY, APRIL 21, 1997.
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WHITE PLAINS, N.Y., April 21 - Texaco Inc. has been notified that the
United States Supreme Court has decided not to review the decisions of the
United States Court of Appeals for the Fifth Circuit and the U.S.
Tax Court in the so-called "Aramco Advantage" case.
From 1979 through 1981, as a result of a directive from the Saudi Arab
Government, Texaco was limited in the amount that it could charge for crude oil
purchased from Saudi Arabia. The IRS claimed that Texaco should pay taxes on the
sale of crude oil based on higher prices than Texaco actually received for the
oil.
By rejecting the IRS's request for review, the Court precluded further
challenges to the Fifth Circuit and Tax Court decision.
In previous years Texaco made payments to the IRS for potential tax
claims. As a result of the Supreme Court action, Texaco expects a refund,
including interest, of $700 million. A significant portion of this amount is
expected in 1997. An associated earnings benefit of $488 million will be
included in Texaco's first quarter 1997 results.
- xxx -
CONTACT: Jim Swords 914-253-4156
EXHIBIT 99.2
TEXACO REPORTS SIGNIFICANT INCREASE IN NET INCOME;
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FIRST QUARTER 1997 EARNINGS REACH $980 MILLION
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FOR IMMEDIATE RELEASE: TUESDAY, APRIL 22, 1997.
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WHITE PLAINS, N.Y., April 22 - Texaco achieved a significant increase
in net income for the first quarter of 1997, Chairman and Chief Executive
Officer Peter I. Bijur reported today. "We are off to a good start this year as
we continue to align our operations for growth. We are also gratified that our
long-standing dispute with the Internal Revenue Service in the `Aramco
Advantage' case has ended," Bijur said.
Total net income for the first quarter of 1997 was $980 million, or
$3.72 per share, including the benefit associated with the resolution of the
"Aramco Advantage" case. Net income before this benefit was $492 million, or
$1.84 per share, up significantly from first quarter 1996 net income of $386
million, or $1.42 per share. In the first quarter of 1997:
* Net income from operations increased 27 percent -- representing
the 11th consecutive quarter that earnings from operations
exceeded previous years' levels.
* Worldwide daily production rose 4 percent.
* Capital and exploratory expenditures grew 25 percent to $799
million.
* Total debt to total borrowed and invested capital was 32 percent,
at the low end of our target range.
* Expenses continue to be managed at levels less than inflation.
Commenting on first quarter 1997 results, Bijur said, "Our upstream
business had another strong quarter, as higher commodity prices were enhanced by
increased daily crude oil and natural gas production. In the downstream
business, earnings continued to grow in our expanding Latin American marketing
operations and margins in Europe improved over last year's depressed levels.
However, earnings in the Caltex operating areas were lower, and U.S. downstream
results were level with last year.
"During the first quarter, we increased capital and exploratory
spending, focusing on upstream growth opportunities in the U.S., as appraisal
and development work continued in the Gulf of Mexico. After some unexpected
operating delays, first oil flowed from the U.K. North Sea Captain field in
March and production is increasing rapidly. Also, government approval was
secured for developing the U.K. Galley field, and we announced natural gas
discoveries in Australia and Thailand.
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- 2 -
"In the downstream, we moved forward in March with the signing of a
memorandum of understanding with Shell to combine major elements of our U.S.
operations, and we completed the sale of our remaining chemical business," Bijur
said.
On April 21, 1997, Texaco was notified that the United States Supreme
Court decided not to review the favorable decisions of the United States Court
of Appeals for the Fifth Circuit and the United States Tax Court in the "Aramco
Advantage" case. This decision by the Supreme Court, affirming Texaco's
position, resulted in an earnings benefit of $488 million, or $1.88 per share.
This benefit represents the after-tax effect of the expected refund of payments,
with associated interest, made to the Internal Revenue Service in previous years
for potential tax claims. The total refund from the IRS, including interest,
will exceed $700 million. A significant portion of this amount is expected to be
received in 1997.
ANALYSIS OF OPERATING EARNINGS
EXPLORATION AND PRODUCTION
UNITED STATES
First quarter 1997 earnings were $311 million, compared with $267 million
for the first quarter of 1996. The 16-percent earnings improvement was due to
higher prices and continuing success in enhancing production from existing
fields, particularly in the Gulf of Mexico and Louisiana.
Texaco's average realized crude oil price for the first quarter 1997 was
$19.62, an increase of $3.11 per barrel over 1996. Average realized natural gas
price was $2.66 per thousand cubic feet (MCF), an increase of $.51 per MCF over
1996. A price spike late in 1996, attributed to lean stock levels at a time of
seasonally strong demand, extended into January 1997. Prices retreated in
February and March, due to abnormally mild weather and increasing worldwide
supplies.
Partially offsetting the favorable factors were lower gas trading results
and higher exploratory expenses. Exploratory expenses in the first quarter of
1997 were $42 million before tax versus $23 million in the first quarter of
1996. This sharp increase is attributed to higher seismic and exploratory
drilling activity of promising prospects, mostly in the Gulf of Mexico.
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- 3 -
INTERNATIONAL
First quarter 1997 earnings were $156 million, as compared with $130
million for the first quarter of 1996. The 20-percent improvement in earnings
included the effects of higher crude oil prices, up 8 percent, and increased
liquids and natural gas production.
Total daily production increased 9 percent as a result of new production in
the Wafra field in the Partitioned Neutral Zone between Saudi Arabia and Kuwait,
the Bagre field offshore Angola, and in the Danish North Sea coming onstream
late in 1996. Additionally, natural gas production benefited from a full
quarter's operations at the Dolphin field in Trinidad. These production
increases, as well as continued field development programs, more than offset the
impact of maturing fields. Higher exploratory expenses associated with Texaco's
aggressive exploration program, as well as lower gas trading results in the
U.K., partially offset these favorable results.
Operating results for the first quarter 1997 included a non-cash currency
benefit of $19 million due to the weakening of the Pound Sterling versus the
U.S. dollar relating to deferred income taxes, compared with a benefit of $4
million for the first quarter 1996.
MANUFACTURING, MARKETING AND DISTRIBUTION
UNITED STATES
First quarter 1997 earnings were $6 million, compared with $4 million for
the first quarter of 1996. Earnings in 1997 reflected improved refining results
due to increased throughput and higher wholesale product prices. This
improvement was somewhat reduced by the impact of refinery fires late in 1996
and early 1997 that resulted in property damage and adversely affected product
yields in the first quarter. The refining system returned to normal operations
by the middle of March.
Improved refining earnings were largely offset by lower West Coast
marketing margins due to intense competition in the marketplace. Results in the
distribution and transportation business and chemicals were also lower than the
first quarter of 1996.
INTERNATIONAL
First quarter 1997 earnings were $104 million, compared to $92 million for
the first quarter of 1996. The earnings were driven by improved results in
Europe and Latin America. Caltex' results were below the first quarter of last
year, but reflect a significant improvement over the latter half of 1996.
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- 4 -
Higher refining earnings in Europe and Latin America in the first quarter
of 1997 were primarily due to the improved recovery of crude costs in the U.K.
and Panama. Marketing margins in Latin America also improved in the first
quarter 1997 versus the same quarter in 1996 due to higher prices.
Caltex' improved operating margins in Korea were more than offset by
unfavorable refining margins in Thailand, and higher currency losses of $26
million, mostly from the significant weakening of the Korean Won.
Refined product sales decreased due to Caltex' April 1, 1996, sale of its
interest in refining operations in Japan and reduced purchase/sale activity to
balance the system.
Operating results for the first quarter 1997 included a non-cash currency
benefit of $5 million due to the weakening of the Pound Sterling versus the U.S.
dollar relating to deferred income taxes, compared with a benefit of $4 million
for the first quarter 1996.
CORPORATE/NONOPERATING RESULTS
Corporate and nonoperating results for the first quarter of 1997 included a
$488 million benefit associated with the resolution of the "Aramco Advantage"
case. Excluding this benefit, corporate and nonoperating charges were $97
million as compared with $109 million for the first quarter of 1996. The
comparative improvement of $12 million was primarily attributable to reduced
interest expense due to lower debt levels and slightly lower interest rates.
CAPITAL AND EXPLORATORY EXPENDITURES
Capital and exploratory expenditures, including equity in such expenditures
of affiliates, were $799 million for the first quarter of 1997 as compared with
$641 million for the same period of 1996.
In the U.S., Texaco's aggressive 1997 exploration and development
drilling program is focused on strategic opportunities onshore and offshore.
Offshore development continued in the deepwater Gulf of Mexico where Texaco
holds a strong lease-acreage position. Platform construction and development
drilling is underway in the Petronius and Arnold fields while delineation
drilling continues in the Fuji and Gemini prospects. Texaco also continues an
aggressive drilling and development program in traditional offshore shelf areas
and onshore. Expenditures in 1997 reflect enhanced oil recovery projects using
advanced thermal and CO2 techniques to increase production and lower per-barrel
operating expenses. Thermal steam-flooding has been particularly successful at
Kern River in Bakersfield, California.
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- 5 -
Internationally, higher expenditures reflect development work in the
U.K. North Sea, including the Erskine and Galley fields and drilling and
development expenditures for the Mariner project. Development work was completed
in the Captain field which came onstream late in the first quarter of 1997.
Additionally, exploration and development work continued in Nigeria, China,
Indonesia, and the Partitioned Neutral Zone.
Downstream expenditures in the U.S. declined somewhat, reflecting the
completion of refinery upgrades. Internationally, expenditures increased due to
marketing expenditures in the Pacific Rim by Texaco's affiliate, Caltex
Petroleum Corporation.
- xxx -
CONTACTS: Chris Gidez 914-253-4042
Jim Swords 914-253-4156
Yorick Fonseca 914-253-7034
Additional Texaco information is available on the World Wide Web at:
http://www.texaco.com
- 6 -
First Quarter
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1997 1996
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FUNCTIONAL NET INCOME ($000,000)
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Operating Earnings
Petroleum and natural gas
Exploration and production
United States $ 311 $ 267
International 156 130
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Total 467 397
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Manufacturing, marketing and
distribution
United States 6 4
International 104 92
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Total 110 96
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Total petroleum and natural gas 577 493
Nonpetroleum 12 2
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Total operating earnings 589 495
Corporate/Nonoperating (a) 391 (109)
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Total net income (b) $ 980 $ 386
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Net income per common share (dollars) $3.72 $1.42
Average number of common shares
outstanding for computation
of earnings per share (000,000) 260.1 260.7
(a) Includes "Aramco Advantage" benefit as detailed in
news release text
(b) Includes (benefit) provision for income taxes ($000,000) $(194) $ 278
- 7 -
First Quarter
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OTHER FINANCIAL DATA ($000,000) 1997 1996
- ------------------------------- ---------- --------
Revenues $12,029 $10,271
Total assets as of March 31 $27,008 $24,639
Stockholders' equity as of March 31 $11,062 $ 9,653
Total debt as of March 31 $ 5,495 $ 5,633
Capital and exploratory expenditures
(includes equity in affiliates)
Exploration and production
United States $ 352 $ 266
International 282 207
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Total 634 473
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Manufacturing, marketing and
distribution
United States 60 77
International 101 87
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Total 161 164
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Other 4 4
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Total $ 799 $ 641
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Texaco Inc. and subsidiary companies
Exploratory expenses included above:
United States $ 42 $ 23
International 57 46
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Total $ 99 $ 69
======= =======
Dividends paid to common stockholders $ 221 $ 208
Dividends per common share (dollars) $ .85 $ .80
Dividend requirements for preferred
stockholders $ 14 $ 15
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CONDENSED CONSOLIDATED
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BALANCE SHEET ($000,000)
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As Of
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March 31, December 31,
1997 1996
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(Unaudited)
ASSETS
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Current Assets
Cash and cash equivalents $ 619 $ 511
Other current assets 6,742 7,154
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Total current assets 7,361 7,665
Investments and Advances 5,301 4,996
Net Properties, Plant and Equipment 13,402 13,411
Deferred Charges 944 891
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Total $27,008 $26,963
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Short-term debt $ 466 $ 465
Other current liabilities 5,276 5,719
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Total current liabilities 5,742 6,184
Long-Term Debt and Capital Lease Obligations 5,029 5,125
Deferred Income Taxes 769 795
Other Noncurrent Liabilities 3,737 3,829
Minority Interest in Subsidiary Companies 669 658
Stockholders' Equity 11,062 10,372
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Total $27,008 $26,963
- 9 -
First Quarter
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1997 1996
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OPERATING DATA - INCLUDING
- --------------------------
INTERESTS IN AFFILIATES
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Exploration and Production
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United States
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Net production of crude oil and
natural gas liquids (000 BPD) 384 382
Net production of natural gas -
available for sale (000 MCFPD) 1,656 1,648
Total net production (000 BOEPD) 660 657
Natural gas sales (000 MCFPD) 3,841 3,235
Natural gas liquids sales
(including purchased LPGs) (000 BPD) 203 245
Average U.S. crude (per bbl.) $19.62 $16.51
Average U.S. natural gas (per mcf) $ 2.66 $ 2.15
Average WTI (Spot) (per bbl.) $22.76 $19.75
Average Kern (Spot) (per bbl.) $15.98 $14.90
International
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Net production of crude oil and
natural gas liquids (000 BPD)
Europe 114 119
Indonesia 140 137
Partitioned Neutral Zone 90 72
Other 69 62
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Total 413 390
Net production of natural gas -
available for sale (000 MCFPD)
Europe 241 205
Colombia 132 115
Other 102 53
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Total 475 373
Total net production (000 BOEPD) 492 452
Natural gas sales (000 MCFPD) 620 475
Natural gas liquids sales
(including purchased LPGs) (000 BPD) 83 116
Average International crude (per bbl.) $19.48 $18.02
Average U.K. natural gas (per mcf) $ 2.85 $ 2.63
Average Colombia natural gas (per mcf) $ 1.05 $ .94
- 10 -
First Quarter
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1997 1996
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OPERATING DATA - INCLUDING
- --------------------------
INTERESTS IN AFFILIATES
-----------------------
Manufacturing, Marketing and Distribution
-----------------------------------------
United States
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Refinery input (000 BPD)
Subsidiary 409 395
Affiliate - Star Enterprise 336 316
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Total 745 711
Refined product sales (000 BPD)
Gasolines 497 476
Avjets 89 131
Middle Distillates 214 219
Residuals 85 61
Other 120 134
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Total 1,005 1,021
International
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Refinery input (000 BPD)
Europe 348 334
Affiliate - Caltex 407 499
Latin America/West Africa 62 59
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Total 817 892
Refined product sales (000 BPD)
Europe 467 475
Affiliate - Caltex 586 712
Latin America/West Africa 366 389
Other 44 71
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Total 1,463 1,647
