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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):
July 22, 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 July 22, 1997, the Registrant issued an Earnings Press Release
entitled "Texaco Reports Strong Results - Second Quarter 1997 Earnings
Total $571 Million," 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
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(c) Exhibits
99.1 Press Release issued by Texaco Inc. dated July 22, 1997,
entitled "Texaco Reports Strong Results - Second Quarter 1997
Earnings Total $571 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: July 22, 1997
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FDeb:bbm
(8KJUL22)
EXHIBIT 99.1
TEXACO REPORTS STRONG RESULTS;
------------------------------
SECOND QUARTER 1997 EARNINGS TOTAL $571 MILLION
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FOR IMMEDIATE RELEASE: TUESDAY, JULY 22, 1997.
- ---------------------------------------------------
WHITE PLAINS, N.Y., July 22 - Volume growth in both the upstream and
downstream and a continuing commitment to manage per barrel operating expenses
were key drivers of Texaco's strong second quarter performance Chairman and
Chief Executive Officer Peter I. Bijur reported today. However, he added,
abundant supplies of crude oil and products have put downward pressure on
commodity prices and downstream margins.
Texaco's total reported net income for the second quarter of 1997 was
$571 million, or $2.14 per share. The quarter included special items amounting
to a net gain of $131 million. Net income for the second quarter of 1996, which
included special items amounting to a net gain of $224 million, was $689
million, or $2.59 per share. For the first half of 1997, total reported net
income was $1,551 million, or $5.86 per share, as compared with $1,075 million,
or $4.01 per share for the first half of 1996. In commenting on 1997 second
quarter results, Bijur highlighted the following:
o Net income before special items totaled $440 million.
o Worldwide daily production rose four percent.
o Branded gasoline sales in the U. S. increased two percent.
o Year-to-date capital and exploratory expenditures grew 25
percent to $1.8 billion.
o Expenses per barrel continued to be managed at levels below
inflation.
Bijur further stated, "In the upstream, the successful push to
increase production, especially in the United Kingdom and Partitioned Neutral
Zone, is key to our results. But, while production rose in this year's second
quarter, unanticipated start-up problems slowed expected production in the U.K.
Captain Field. Overall, earnings for this year's second quarter were slightly
below last year. Commodity prices this year were lower, and we increased
exploratory spending focused on expanding our reserve base. International
downstream results were higher this year. Earnings grew in Latin America and
margins in Europe improved over depressed 1996 levels. However, in the U. S.
downstream, 1997 results were significantly lower. A surplus of refined
products, especially on the West Coast, and lackluster demand in the marketplace
drove prices downward, negating the effects of improved refining operations and
higher gasoline sales volumes.
- more -
- 2 -
"In this year's second quarter, increased capital and exploratory
spending accompanied our announcements of natural gas discoveries in Oklahoma
and New Mexico, government approval of our Hamaca heavy oil project in
Venezuela, the completion of a significant geothermal well in Indonesia and
expansions of our natural gas liquids and refined products pipeline systems.
Also, negotiations with Shell continued to combine major elements of our U. S.
downstream operations," Bijur said.
Net income before special items for the second quarter of 1997 was
$440 million, or $1.64 per share, as compared with $465 million, or $1.73 per
share, for the second quarter of 1996. For the first half of 1997, net income
before special items was $932 million, or $3.48 per share, as compared with $851
million, or $3.15 per share, for the first half of 1996.
Second Quarter First Half
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Texaco Inc. (Millions): 1997 1996 1997 1996
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Net income before special items $440 $465 $ 932 $ 851
---- ---- ------ ------
Gains on major asset sales 174 224 174 224
Financial reserves for various issues (43) - (43) -
U. S. tax issue - - 488 -
---- ---- ------ ------
131 224 619 224
----- ----- ------ ------
Total reported net income $571 $689 $1,551 $1,075
==== ==== ====== ======
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Details on special items are included in the following functional analysis.
ANALYSIS OF OPERATING EARNINGS
EXPLORATION AND PRODUCTION
Second Quarter First Half
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UNITED STATES (Millions): 1997 1996 1997 1996
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Operating earnings before special items $ 232 $ 243 $ 543 $ 510
Special items (43) - (43) -
----- ----- ----- -----
Total operating net income $ 189 $ 243 $ 500 $ 510
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In the U.S. upstream, lower commodity prices caused second quarter 1997
earnings to be below last year's level. Excess supplies in the global market led
to the price declines. Average realized crude oil and natural gas prices for the
second quarter of 1997 were $16.95 per barrel and $2.02 per thousand cubic feet
(MCF), $.35 per barrel and $.05 per MCF lower than the same period last year.
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- 3 -
Earnings for the first half of 1997 were six percent above 1996. The
effects of higher commodity prices in the first quarter significantly exceeded
the second quarter price declines. Lower gas trading results and higher
exploratory activity, mostly in the Gulf of Mexico, partly negated the impact of
higher prices.
Liquids and natural gas production in 1997 was maintained at prior-year
levels. Continued success in enhancing liquids production from existing fields,
particularly in the Gulf of Mexico and Louisiana, offset declines from maturing
fields.
Results for 1997 included a second quarter special charge of $43 million
for the establishment of financial reserves for royalty and severance tax
issues.
Second Quarter First Half
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INTERNATIONAL (Millions): 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------
Operating earnings before special items $ 79 $ 103 $ 235 $ 233
Special items 161 - 161 -
----- ----- ----- -----
Total operating net income $ 240 $ 103 $ 396 $ 233
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In the international upstream, higher production had a favorable impact
on 1997 results. Total daily production in 1997 increased 11 percent over last
year. New production from the Captain Field in the U.K. North Sea contributed to
the increase. Also, new activities coming onstream late in 1996 in the Wafra
field in the Partitioned Neutral Zone between Saudi Arabia and Kuwait, in the
Bagre Field offshore Angola and in the Danish North Sea led to higher liquids
production. Natural gas production in 1997 benefited from a full six months
operations at the Dolphin Field in Trinidad and from the Chuchupa "B" Field in
Colombia. Crude oil prices were lower in 1997. Average crude oil prices were
$16.91 per barrel for the second quarter, $1.50 per barrel below comparative
1996 prices.
Significantly higher activity levels associated with Texaco's
aggressive exploration program contributed to lower overall results for the
second quarter of 1997. Additionally, earnings for 1997 included lower gas
trading results in the U.K.
The second quarter of 1997 included special gains of $161 million from
the sales of a 15 percent interest in the Captain Field in the U.K. North Sea,
an interest in Canadian gas properties and an interest in an Australian pipeline
system.
-more -
- 4 -
MANUFACTURING, MARKETING AND DISTRIBUTION
Second Quarter First Half
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UNITED STATES (Millions): 1997 1996 1997 1996
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Operating earnings before special items $ 87 $ 144 $ 93 $ 148
Special items 13 - 13 -
----- ----- ----- -----
Total operating net income $ 100 $ 144 $ 106 $ 148
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In the U. S. downstream, weak West Coast margins caused lower earnings
in the second quarter and first half of 1997. West Coast product prices were
higher in 1996 from shortages caused by regional refining problems and new
California gasoline formulation requirements. Throughout the first half of 1997
branded gasoline sales volumes increased; however, surplus supplies led to a
squeeze on West Coast gasoline margins. Additionally, while refinery operations
improved this year, refinery upsets in late 1996 and early 1997 caused higher
repair costs and lower product yields in the first quarter of 1997. Lower crude
oil trading margins, clean up costs associated with the Lake Barre, Louisiana,
pipeline break and the absence of earnings from a PO/MTBE business sold on March
1, 1997, also lowered 1997 results. Partially offsetting these negative factors
were improved Gulf Coast sour crude cracking margins.
Results for 1997 included a $13 million special gain from the sale of
credit card operations.
Second Quarter First Half
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INTERNATIONAL (Millions): 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------
Operating earnings before special items $ 132 $ 80 $ 236 $ 172
Special items - 224 - 224
----- ----- ----- -----
Total operating net income $ 132 $ 304 $ 236 $ 396
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In the international downstream, both second quarter and first half
1997 operating earnings were higher. Improved refining margins in the U.K. and
Panama drove earnings upward this year. In addition, expense control at all
refineries coupled with improved marketing margins and increased sales volumes
in Latin America and the U.K. contributed to the higher earnings. Competitive
pressures in the Norwegian marketplace led to lower results in Scandinavia.
Lower results in the Caltex area of operations partially offset the
improved earnings in Latin America and Europe. Higher operating earnings in
Korea were more than offset by currency impacts attributable to the South
African Rand, and operational difficulties at the Thailand refinery that
adversely affected product yields.
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- 5 -
Results for 1996 included a special gain of $224 million for Caltex's
sale of its interest in a Japanese affiliate, including the tax on the portion
of the sale proceeds distributed to the shareholders.
CORPORATE/NONOPERATING RESULTS
Second Quarter First Half
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(Millions): 1997 1996 1997 1996
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Results before special items $ (91) $(108) $(188) $(217)
Special items - - 488 -
----- ----- ----- -----
Total corporate/nonoperating $ (91) $(108) $ 300 $(217)
- ---------------------------------------------------------------------------------------------------------------
Reduced interest expense due to lower debt levels and slightly lower
interest rates led to a comparative improvement in second quarter and first half
1997 results. Additionally, these results included higher gains on sales of
marketable securities held for investment by insurance operations.
Results for the first half of 1997 included a first quarter special
benefit of $488 million associated with the "Aramco Advantage" U.S. tax case.
CAPITAL AND EXPLORATORY EXPENDITURES
Capital and exploratory expenditures, including equity in such
expenditures of affiliates, were $1,798 million for the first half of 1997, as
compared to $1,437 million for the same period of 1996. Expenditures for the
second quarter of 1997 amounted to $999 million versus $796 million for the
second quarter of 1996.
Texaco's continued focus on high impact projects in the U.S. upstream,
both onshore and offshore, generated increased exploration and development
expenditures in the first half of 1997. In the deepwater Gulf of Mexico,
platform construction and development drilling continued in the Arnold and
Petronius fields while delineation drilling is underway in the Fuji and Gemini
prospects. Aggressive drilling and development programs in the traditional
offshore shelf area and onshore, as well as enhanced oil recovery efforts in
California also increased investments. Construction continued during the second
quarter on a jointly owned natural gas pipeline and processing complex in the
Gulf Coast area. There was, however, reduced spending this year on lease
acquisitions compared to significant expenditures in 1996.
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- 6 -
Internationally, upstream investments for the first half of 1997
exceeded the aggressive activity level of 1996. Higher expenditures reflected
development work in the U.K. North Sea, principally for continuing activities in
the Mariner and Galley fields. Exploration and development activities continued
in China and Indonesia.
Downstream expenditures in the U.S. declined slightly in 1997. While
spending for refinery upgrades and marketing investment decreased, construction
continued on a major crude oil pipeline that will service new deepwater and
subsalt production in the Gulf of Mexico.
Internationally, downstream spending increased due to marketing
investments and initiatives in the Asia-Pacific area by Texaco's affiliate,
Caltex Petroleum Corporation, principally in Hong Kong. Texaco also continued to
invest in selected Latin American growth markets.
- xxx -
CONTACTS: Chris Gidez 914-253-4042
Jim Swords 914-253-4156
Cynthia Michener 914-253-4743
Additional Texaco information is available on the World Wide Web at:
http://www.texaco.com
- 7 -
Second Quarter First Half
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FUNCTIONAL NET INCOME ($000,000) 1997 1996 1997 1996
- -------------------------------- ---- ----- ---- ----
Operating Earnings
Petroleum and natural gas
Exploration and production (a)
United States $ 189 $ 243 $ 500 $ 510
International 240 103 396 233
-------- -------- -------- -------
Total 429 346 896 743
-------- -------- -------- -------
Manufacturing, marketing and
distribution (a)
United States 100 144 106 148
International 132 304 236 396
-------- -------- -------- -------
Total 232 448 342 544
-------- -------- -------- -------
Total petroleum and natural gas 661 794 1,238 1,287
Nonpetroleum 1 3 13 5
-------- -------- -------- -------
Total operating earnings 662 797 1,251 1,292
Corporate/Nonoperating (a) (91) (108) 300 (217)
-------- -------- -------- -------
Total net income (b) $ 571 $ 689 $ 1,551 $ 1,075
======== ======== ======== =======
Net income per common share (dollars) $ 2.14 $ 2.59 $ 5.86 $ 4.01
Average number of common shares
outstanding for computation
of earnings per share (000,000) 260.1 260.8 260.1 260.7
(a) Includes special items as detailed in news release.
(b) Includes provision for income taxes
($000,000) $ 335 $ 342 $ 141 $ 620
- 8 -
Second Quarter First Half
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OTHER FINANCIAL DATA ($000,000) 1997 1996 1997 1996
- ------------------------------- ------ ------ --------- ------
Revenues $11,496 $11,261 $23,525 $21,532
Total assets as of June 30 $27,134 $25,241
Stockholders' equity as of June 30 $11,415 $10,026
Total debt as of June 30 $ 5,539 $ 5,525
Capital and exploratory expenditures
(includes equity in affiliates)
Exploration and production
United States $ 429 $ 355 $ 781 $ 621
International 264 243 546 450
------- ------- -------- -------
Total 693 598 1,327 1,071
------- ------- -------- -------
Manufacturing, marketing and
distribution
United States 92 79 152 156
International 207 114 308 201
------- ------- -------- -------
Total 299 193 460 357
------- ------- -------- -------
Other 7 5 11 9
------- ------- -------- -------
Total $ 999 $ 796 $ 1,798 $ 1,437
======= ======= ======= =======
Texaco Inc. and subsidiary companies
Exploratory expenses included above:
United States $ 34 $ 44 $ 76 $ 67
International 59 46 116 92
------- ------- -------- -------
Total $ 93 $ 90 $ 192 $ 159
======= ======= ======= =======
Dividends paid to common stockholders $ 220 $ 208 $ 441 $ 416
Dividends per common share (dollars) $ .85 $ .80 $ 1.70 $ 1.60
Dividend requirements for preferred
stockholders $ 14 $ 14 $ 28 $ 29
- 9 -
As Of
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CONDENSED CONSOLIDATED June 30, December 31,
- ----------------------
BALANCE SHEET ($000,000) 1997 1996
------------------------ ----------- ------------
(Unaudited)
ASSETS
- ------
Current Assets
Cash and cash equivalents $ 657 $ 511
Other current assets 6,491 7,154
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Total current assets 7,148 7,665
Investments and Advances 5,438 4,996
Net Properties, Plant and Equipment 13,584 13,411
Deferred Charges 964 891
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Total $27,134 $26,963
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Short-term debt $ 472 $ 465
Other current liabilities 5,052 5,719
------- -------
Total current liabilities 5,524 6,184
Long-Term Debt and Capital Lease Obligations 5,067 5,125
Deferred Income Taxes 809 795
Other Noncurrent Liabilities 3,663 3,829
Minority Interest in Subsidiary Companies 656 658
Stockholders' Equity 11,415 10,372
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Total $27,134 $26,963
======= =======
- 10 -
Second Quarter First Half
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OPERATING DATA - INCLUDING 1997 1996 1997 1996
- -------------------------- --------- --------- --------- ------
INTERESTS IN AFFILIATES
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Exploration and Production
--------------------------
United States
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Net production of crude oil and
natural gas liquids (000 BPD) 385 391 385 387
Net production of natural gas -
available for sale (000 MCFPD) 1,677 1,685 1,666 1,666
Total net production (000 BOEPD) 665 672 663 665
Natural gas sales (000 MCFPD) 3,561 3,007 3,700 3,120
Natural gas liquids sales
(including purchased LPGs) (000 BPD) 172 188 188 216
Average U.S. crude (per bbl.) $16.95 $17.30 $18.29 $16.90
Average U.S. natural gas (per mcf) $ 2.02 $ 2.07 $ 2.36 $ 2.11
Average WTI (Spot) (per bbl.) $19.97 $21.73 $21.38 $20.74
Average Kern (Spot) (per bbl.) $14.11 $15.46 $15.07 $15.18
International
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Net production of crude oil and
natural gas liquids (000 BPD)
Europe 118 110 116 115
Indonesia 153 144 147 140
Partitioned Neutral Zone 94 75 92 74
Other 68 60 67 60
------ ------ ------ ------
Total 433 389 422 389
Net production of natural gas -
available for sale (000 MCFPD)
Europe 172 180 207 192
Colombia 173 111 156 113
Other 83 66 93 60
------ ------ ------ ------
Total 428 357 456 365
Total net production (000 BOEPD) 504 449 498 450
Natural gas sales (000 MCFPD) 528 442 574 459
Natural gas liquids sales
(including purchased LPGs) (000 BPD) 104 95 93 106
Average International crude (per bbl.) $16.91 $18.41 $18.22 $18.25
Average U.K. natural gas (per mcf) $ 2.59 $ 2.48 $ 2.73 $ 2.56
Average Colombia natural gas (per mcf) $ 1.12 $ .92 $ 1.09 $ .93
- 11 -
Second Quarter First Half
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OPERATING DATA - INCLUDING 1997 1996 1997 1996
- -------------------------- --------- --------- --------- ------
INTERESTS IN AFFILIATES
-----------------------
Manufacturing, Marketing and Distribution
-----------------------------------------
United States
Refinery input (000 BPD)
Subsidiary 418 403 413 399
Affiliate - Star Enterprise 328 318 332 317
----- ----- ----- -----
Total 746 721 745 716
Refined product sales (000 BPD)
Gasolines 512 507 505 491
Avjets 94 127 92 129
Middle Distillates 216 205 215 212
Residuals 59 62 72 62
Other 117 133 119 133
----- ----- ----- -----
Total 998 1,034 1,003 1,027
International
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Refinery input (000 BPD)
Europe 335 340 341 337
Affiliate - Caltex 414 266 411 383
Latin America/West Africa 55 66 59 62
----- ----- ----- -----
Total 804 672 811 782
Refined product sales (000 BPD)
Europe 494 467 495 473
Affiliate - Caltex 561 539 574 626
Latin America/West Africa 406 396 391 391
Other 74 73 55 74
----- ----- ----- -----
Total 1,535 1,475 1,515 1,564
