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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):
October 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
- - ---------------------
1. On October 21, 1997, the Registrant issued an Earnings Press
Release entitled "Texaco Reports Strong Results: Third Quarter
1997 Earnings Total $490 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
- - ---------------------------------------------------------------------------
(c) Exhibits
99.1 Press Release issued by Texaco Inc. dated October 21,
1997, entitled "Texaco Reports Strong Results:
Third Quarter 1997 Earnings Total $490 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: October 21, 1997
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EXHIBIT 99.1
TEXACO REPORTS STRONG RESULTS;
------------------------------
THIRD QUARTER 1997 EARNINGS TOTAL $490 MILLION
----------------------------------------------
FOR IMMEDIATE RELEASE: TUESDAY, OCTOBER 21, 1997.
- - ----------------------------------------------------
WHITE PLAINS, N.Y., Oct. 21 - Significantly improved downstream results
and upstream production gains were key contributors to strong third quarter
1997 earnings, Texaco Chairman and Chief Executive Officer Peter Bijur
reported today.
Texaco's total reported net income for the third quarter of 1997 was
$490 million, or $.91 per share. Net income for the third quarter of 1996 was
$434 million, or $.80 per share. For the first nine months of 1997, total
reported net income was $2,041 million, or $3.84 per share, as compared with
$1,509 million, or $2.81 per share, for the first nine months of 1996. Per
share amounts reflect the two-for-one stock split, effective September 29,
1997. Commenting on the third quarter 1997, Bijur highlighted the following:
o Net income rose 13 percent to $490 million.
o Worldwide production rose three percent.
o Branded gasoline sales in the U. S. increased six percent.
o Quarterly dividend increased six percent to $.45 per share.
o Year-to-date capital and exploratory expenditures grew 34
percent to $3.0 billion.
Bijur further stated, "The solid third quarter performance reflects the
momentum we are building at Texaco. Downstream earnings significantly
improved in the third quarter this year. Increased refinery throughput and
higher gasoline sales volumes complimented higher margins. Upstream earnings for
the third quarter were below last year due to the impacts of lower crude
prices and higher exploratory activities. However, these factors were
partially offset by higher production in the Partitioned Neutral Zone, the
addition of production from the U.K. Captain field and higher U.S. natural
gas prices."
Bijur also pointed to two major upstream initiatives announced during
the third quarter which demonstrate Texaco's commitment to enhance
shareholder value. "We continue our efforts to strengthen our competitive
position in the global energy market. We acquired a 20 percent interest in the
giant Karachaganak field in Kazakstan and announced plans to acquire the
California heavy oil producer, Monterey Resources, Inc. Each will add
significantly to our growing worldwide production and reserve base." He also
stated, "Our two-for-one stock split and the six percent quarterly common
stock dividend increase are further evidence of our continued confidence in our
ability to grow earnings and cash flow."
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- 2 -
Bijur concluded, "We launched our `Texaco. A World of Energy'
advertising campaign that will capitalize on the relentless drive, commitment
and creativity of Texaco employees. This campaign and our new eight year
sponsorship of the U.S. Olympic team will strengthen our efforts to position
Texaco as a world-class, global energy company."
For the first nine months of 1997, net income before special items was
$1,422 million, or $2.65 per share, as compared with $1,285 million, or $2.38
per share, for the first nine months of 1996.
Third Quarter Nine Months
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Texaco Inc. (Millions): 1997 1996 1997 1996
- - -----------------------------------------------------------------------------------------------------------------
Net income before special items $490 $434 $1,422 $1,285
---- ---- ------ ------
Gains on major asset sales - - 174 224
Financial reserves for various issues - - (43) -
Tax issues - - 488 -
---- ---- ------ ------
- - 619 224
---- ---- ------ ------
Total reported net income $490 $434 $2,041 $1,509
==== ==== ====== ======
- - -----------------------------------------------------------------------------------------------------------------
The following functional analysis includes details on special items.
ANALYSIS OF OPERATING EARNINGS
EXPLORATION AND PRODUCTION
Third Quarter Nine Months
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UNITED STATES (Millions): 1997 1996 1997 1996
- - -------------------------------------------------------------------------------------------------------------------
Operating earnings before special items $232 $ 262 $775 $ 772
Special items - - (43) -
----- ------ ------ -----
Total operating net income $232 $262 $732 $772
- - -------------------------------------------------------------------------------------------------------------------
In the U.S. upstream, third quarter 1997 earnings were below last
year's level as the benefits of higher natural gas prices could not offset lower
crude oil prices and higher operating expenses associated with increased
activities. Average realized crude oil and natural gas prices for the third
quarter of 1997 were $16.56 per barrel and $2.13 per thousand cubic feet (MCF);
$1.37 per barrel lower and $.11 per MCF higher than 1996. Ample worldwide supply
levels led to the weaker crude oil prices.
Earnings before special items for nine months of 1997 were slightly
above 1996. Higher realized commodity prices offset lower gas trading results
and higher expenses associated with increased operating and exploratory
activities. Average realized crude oil and natural gas prices for nine months of
1997 were $17.71 per barrel and $2.28 per MCF; $.47 per barrel and $.20 per MCF
higher than 1996. Production gains from new and existing fields, particularly in
the Gulf of Mexico and Louisiana, offset declines from maturing fields.
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- 3 -
Results for 1997 included a second quarter special charge of $43
million for the establishment of financial reserves for royalty and severance
tax issues.
Third Quarter Nine Months
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INTERNATIONAL (Millions): 1997 1996 1997 1996
- - -------------------------------------------------------------------------------------------------------------------
Operating earnings before special items $103 $132 $338 $365
Special items - - 161 -
---- ---- ---- ----
Total operating net income $103 $132 $499 $365
- - -------------------------------------------------------------------------------------------------------------------
In the international upstream, third quarter and nine months 1997
earnings before special items were below 1996 levels. Improved production only
partly offset the cost of Texaco's expanded exploration programs, lower gas
trading results in the U.K. and lower crude prices. Average realized crude oil
prices were $16.88 per barrel for the third quarter and $17.79 per barrel for
the nine months 1997; $2.55 and $.85 per barrel below 1996 prices.
Production in 1997 increased 10 percent over last year. New production
from the Captain field in the U.K. North Sea and record production in the
Partitioned Neutral Zone contributed to the increase. Also, new activities
coming onstream late in 1996 in the Bagre field offshore Angola and in the
Danish North Sea led to higher liquids production this year. Natural gas
production in 1997 benefited from a full nine months of operations at the
Dolphin field in Trinidad and from the Chuchupa "B" field in Colombia.
Results for the third quarter and nine months of 1997 included noncash
currency benefits of $13 million and $26 million, due to the weakening of the
Pound Sterling versus the U.S. dollar relating to deferred income taxes,
compared to minimal charges in 1996.
Results for 1997 included second quarter 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.
MANUFACTURING, MARKETING AND DISTRIBUTION
Third Quarter Nine Months
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UNITED STATES (Millions): 1997 1996 1997 1996
- - --------------------------------------------------------------------------------------------------------------------
Operating earnings before special items $132 $94 $225 $242
Special items - - 13 -
---- --- ---- ----
Total operating net income $132 $94 $238 $242
- - --------------------------------------------------------------------------------------------------------------------
In the U.S. downstream, strong gasoline demand bolstered third quarter
1997 margins. Gulf Coast sour crude cracking margins also were higher in the
third quarter of 1997, maintaining the strength shown throughout the year.
Improved refinery operations and higher gasoline sales volumes also benefited
1997 results.
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- 4 -
During the first nine months of 1997, Gulf Coast sour crude cracking
margins were higher than last year. However, weaker West Coast margins in the
first half of the year contributed to the lower earnings for the nine months of
1997 versus the same period in 1996. Last year, regional refining problems and
new California gasoline formulation requirements caused a supply disruption
resulting in margin increases that peaked in the second quarter of 1996. In
1997, competitive pressures and increased costs dampened West Coast margins;
however, third quarter margin increases resulted in a modest recovery.
Additionally, the impact of refinery fires late in 1996 and early 1997 at the
Los Angeles, California, refinery resulted in property damage and processing
unit downtime in the first quarter of 1997. Lower crude oil trading margins and
clean-up costs from the May pipeline break in Lake Barre, Louisiana, also
contributed to the decline in 1997 earnings.
Results for 1997 included a second quarter special gain of $13
million from the sale of credit card operations.
Third Quarter Nine Months
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INTERNATIONAL (Millions): 1997 1996 1997 1996
- - ---------------------------------------------------------------------------------------------------------------
Operating earnings before special items $134 $37 $370 $209
Special items - - - 224
---- --- ---- ----
Total operating net income $134 $37 $370 $433
- - ---------------------------------------------------------------------------------------------------------------
In the international downstream, the strong 1997 earnings before
special items reflected higher manufacturing and marketing results. The refining
segment experienced improved margins and lower expenses. Improved U.K. marketing
results reflected a recovery from significantly depressed 1996 margins.
Increased sales volumes and stronger marketing margins in Latin America also
contributed to the higher earnings. Lower results in Scandinavia, primarily from
competitive pressures in the Norwegian marketplace, partly offset these
improvements.
In the Caltex area of operations, third quarter and nine months 1997
benefited from higher earnings in Korea through improved petrochemical results,
refining margins and higher refined product sales. Currency devaluations,
notably in Thailand, Malaysia and the Philippines, have caused an erosion in
third quarter marketing margins due to the inability to fully recover feedstock
costs. Prices are being raised to restore margins as quickly as market forces
and regulations permit. In the third quarter, favorable balance sheet currency
translations caused by the devaluations more than offset related product margin
declines.
Results for 1996 included a second quarter 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.
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CORPORATE/NONOPERATING RESULTS
Third Quarter Nine Months
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(Millions): 1997 1996 1997 1996
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Results before special items $(114) $(97) $(302) $(314)
Special items - - 488 -
----- ---- ----- -----
Total corporate/nonoperating $(114) $(97) $ 186 $(314)
- - -----------------------------------------------------------------------------------------------------------------
During the third quarter 1997, corporate expenses increased with the
introduction of the new advertising campaign.
Comparative nine months 1997 results benefited from reduced interest
expense due to lower debt levels and slightly lower interest rates.
Additionally, 1997 included higher gains on sales of marketable securities held
for investment by insurance operations.
Results for nine months 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 $3,023 million for the first nine months of
1997, as compared to $2,252 million for the same period of 1996.
Increased U.S. exploration and production expenditures in 1997
reflected the continued focus on strategic projects both onshore and offshore,
especially in the deepwater Gulf of Mexico. Platform construction and
development drilling is underway in the Petronius and Arnold fields while
delineation drilling continues in the Fuji and Gemini prospects. Additionally,
enhanced oil recovery efforts in California and drilling and development
programs in the traditional offshore shelf area and onshore increased
investments. Construction continued during the third quarter on a jointly-owned
natural gas pipeline and processing complex in the Gulf Coast area.
Internationally, exploration and production expenditures in 1997 were
30 percent higher than last year. During the third quarter 1997, Texaco acquired
a 20 percent interest in Kazakstan's giant Karachaganak oil and gas field. One
of the largest oil and gas fields in the world, the Karachaganak field holds
huge quantities of recoverable reserves. Development work in Indonesia
continued, including expenditures for enhanced oil recovery installations. In
the U.K., North Sea activities in the Galley and Mariner fields moved forward
while work in the Erskine field neared completion with start-up production
expected shortly. Exploration activities expanded with significant spending in
China, Indonesia and Nigeria.
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Downstream expenditures outside the U.S. showed a significant increase
in marketing investments for facilities and service station reimaging throughout
the Asia-Pacific area by Texaco's affiliate, Caltex Petroleum Corporation.
Marketing investments throughout Latin America also increased as compared to
1996.
- xxx -
CONTACTS: Chris Gidez 914-253-4042
Cynthia Michener 914-253-4743
Faye Cox 914-253-7745
Ken Sniffen 914-253-4114
Additional Texaco information is available on the World Wide Web at:
http://www.texaco.com
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Third Quarter Nine Months
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1997 1996 1997(a) 1996(a)
---- ---- ------- -------
FUNCTIONAL NET INCOME ($000,000)
- - --------------------------------
Operating Earnings
Petroleum and natural gas
Exploration and production
United States $ 232 $ 262 $ 732 $ 772
International 103 132 499 365
------ ------ ------ ------
Total 335 394 1,231 1,137
------ ------ ------ ------
Manufacturing, marketing and
distribution
United States 132 94 238 242
International 134 37 370 433
------ ------ ------ ------
Total 266 131 608 675
------ ------ ------ ------
Total petroleum and natural gas 601 525 1,839 1,812
Nonpetroleum 3 6 16 11
------ ------ ------ ------
Total operating earnings 604 531 1,855 1,823
Corporate/Nonoperating (114) (97) 186 (314)
------ ------ ------ ------
Total net income $ 490 $ 434 $2,041 $1,509
====== ====== ====== ======
Net income per common share (dollars)(b) $ .91 $ .80 $ 3.84 $ 2.81
Average number of common shares
outstanding for computation
of earnings per share (000,000)(b) 520.7 521.5 520.4 521.5
Provision for income taxes included in total
net income above $ 270 $ 348 $ 411 $ 968
(a) Includes special items as detailed in this release.
(b) Reflects two-for-one stock split effective 9/29/97.
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Third Quarter Nine Months
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OTHER FINANCIAL DATA ($000,000) 1997 1996 1997 1996
- - ------------------------------- ------ ------ --------- --------
Revenues $11,093 $11,097 $34,618 $32,629
Total assets as of September 30 $26,815 $25,696
Stockholders' equity as of September 30 $11,617 $10,236
Total debt as of September 30 $ 5,637 $ 5,628
Capital and exploratory expenditures
(includes equity in affiliates)
Exploration and production
United States $ 491 $ 273 $ 1,272 $ 894
International 444 312 990 762
------- ------- ------- -------
Total 935 585 2,262 1,656
------- ------- ------- -------
Manufacturing, marketing and
distribution
United States 94 78 246 234
International 178 144 486 345
------- ------- ------- -------
Total 272 222 732 579
------- ------- ------- -------
Other 18 8 29 17
------- ------- ------- -------
Total $ 1,225 $ 815 $ 3,023 $ 2,252
======= ======= ======= =======
Texaco Inc. and subsidiary companies
Exploratory expenses included above:
United States $ 46 $ 45 $ 122 $ 112
International 68 39 184 131
------- ------- ------- -------
Total $ 114 $ 84 $ 306 $ 243
======= ======= ======= =======
Dividends paid to common stockholders $ 235 $ 222 $ 676 $ 638
Dividends per common share (dollars)(b) $ .45 $ .425 $ 1.30 $ 1.225
Dividend requirements for preferred
stockholders $ 14 $ 14 $ 42 $ 43
(b) Reflects two-for-one stock split effective 9/29/97.
- 9 -
CONDENSED CONSOLIDATED
- - ----------------------
BALANCE SHEET ($000,000)
------------------------
As Of
------------------------------------
September 30, December 31,
1997 1996
---------------- ------------
(Unaudited)
ASSETS
- - ------
Current Assets
Cash and cash equivalents $ 451 $ 511
Other current assets 5,867 7,154
------- -------
Total current assets 6,318 7,665
Investments and Advances 5,439 4,996
Net Properties, Plant and Equipment 14,093 13,411
Deferred Charges 965 891
------- -------
Total $26,815 $26,963
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Current Liabilities
Short-term debt $ 521 $ 465
Other current liabilities 5,023 5,719
------- -------
Total current liabilities 5,544 6,184
Long-Term Debt and Capital Lease Obligations 5,116 5,125
Deferred Income Taxes 808 795
Other Noncurrent Liabilities 3,081 3,829
Minority Interest in Subsidiary Companies 649 658
Stockholders' Equity 11,617 10,372
------- -------
Total $26,815 $26,963
======= =======
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Third Quarter Nine Months
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OPERATING DATA - INCLUDING 1997 1996 1997 1996
- - -------------------------- --------- --------- --------- ------
INTERESTS IN AFFILIATES
-----------------------
Exploration and Production
--------------------------
United States
-------------
Net production of crude oil and
natural gas liquids (000 BPD) 391 393 387 388
Net production of natural gas -
available for sale (000 MCFPD) 1,722 1,708 1,686 1,680
Total net production (000 BOEPD) 678 678 668 668
Natural gas sales (000 MCFPD) 3,312 3,059 3,570 3,100
Natural gas liquids sales
(including purchased LPGs) (000 BPD) 189 191 189 208
Average U.S. crude (per bbl.) $16.56 $17.93 $17.71 $17.24
Average U.S. natural gas (per mcf) $ 2.13 $ 2.02 $ 2.28 $ 2.08
Average WTI (Spot) (per bbl.) $19.78 $22.41 $20.83 $21.30
Average Kern (Spot) (per bbl.) $14.30 $14.41 $14.81 $14.92
International
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Net production of crude oil and
natural gas liquids (000 BPD)
Europe 118 115 116 115
Indonesia 150 146 148 143
Partitioned Neutral Zone 97 79 94 75
Other 64 65 67 62
------- ------- ------ ------
Total 429 405 425 395
Net production of natural gas -
available for sale (000 MCFPD)
Europe 176 162 197 182
Colombia 190 124 168 117
Other 79 77 88 66
------- ------- ------ ------
Total 445 363 453 365
Total net production (000 BOEPD) 503 466 501 456
Natural gas sales (000 MCFPD) 536 450 562 456
Natural gas liquids sales
(including purchased LPGs) (000 BPD) 107 74 98 95
Average International crude (per bbl.) $16.88 $19.43 $17.79 $18.64
Average U.K. natural gas (per mcf) $ 2.55 $ 2.55 $ 2.68 $ 2.56
Average Colombia natural gas (per mcf) $ .95 $ .97 $ 1.04 $ .94
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Third Quarter Nine Months
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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 420 417 415 405
Affiliate - Star Enterprise 339 325 334 320
----- ----- ----- -----
Total 759 742 749 725
Refined product sales (000 BPD)
Gasolines 525 515 511 499
Avjets 103 122 95 127
Middle Distillates 222 217 217 214
Residuals 102 70 82 65
Other 109 132 115 133
----- ----- ----- -----
Total 1,061 1,056 1,020 1,038
International
-------------
Refinery input (000 BPD)
Europe 329 334 337 336
Affiliate - Caltex 379 340 400 368
Latin America/West Africa 60 68 59 64
----- ----- ----- -----
Total 768 742 796 768
Refined product sales (000 BPD)
Europe 508 496 496 481
Affiliate - Caltex 545 555 564 602
Latin America/West Africa 440 408 408 397
Other 66 39 62 61
----- ----- ----- -----
Total 1,559 1,498 1,530 1,541
