10-Q 1 y42041e10-q.txt AMERADA HESS CORPORATION 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ COMMISSION FILE NUMBER 1-1204 ---------------------- AMERADA HESS CORPORATION (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 13-4921002 (I.R.S. employer identification number) 1185 AVENUE OF THE AMERICAS, NEW YORK, N.Y. (Address of principal executive offices) 10036 (Zip Code) (Registrant's telephone number, including area code is (212) 997-8500) Indicate by check mark whether the registrant (I) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---------- ---------- At September 30, 2000, 88,574,505 shares of Common Stock were outstanding. ================================================================================ 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT OF CONSOLIDATED INCOME (IN MILLIONS, EXCEPT PER SHARE DATA)
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30 ENDED SEPTEMBER 30 ----------------------- ----------------------- 2000 1999 2000 1999 -------- -------- -------- -------- REVENUES Sales (excluding excise taxes) and other operating revenues $ 2,833 $ 1,802 $ 8,308 $ 4,770 Non-operating income Gains on asset sales - - 165 - - 273 Equity in income of HOVENSA L.L.C 24 7 76 24 Other 30 3 87 95 -------- -------- -------- -------- Total revenues 2,887 1,977 8,471 5,162 -------- -------- -------- -------- COSTS AND EXPENSES Cost of products sold 1,768 1,073 5,361 2,935 Production expenses 139 111 401 327 Marketing expenses 157 108 385 288 Other operating expenses 60 52 168 168 Exploration expenses, including dry holes and lease impairment 65 45 217 186 General and administrative expenses 50 70 152 184 Interest expense 42 39 119 116 Depreciation, depletion and amortization 176 159 516 434 -------- -------- -------- -------- Total costs and expenses 2,457 1,657 7,319 4,638 -------- -------- -------- -------- Income before income taxes 430 320 1,152 524 Provision for income taxes 173 162 469 217 -------- -------- -------- -------- NET INCOME $ 257 $ 158 $ 683 $ 307 ======== ======== ======== ======== NET INCOME PER SHARE Basic $ 2.89 $ 1.77 $ 7.63 $ 3.42 ======== ======== ======== ======== Diluted $ 2.86 $ 1.75 $ 7.57 $ 3.40 ======== ======== ======== ======== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 89.8 90.5 90.2 90.2 COMMON STOCK DIVIDENDS PER SHARE $ .15 $ .15 $ .45 $ .45
See accompanying notes to consolidated financial statements. 1 3 PART I - FINANCIAL INFORMATION (CONT'D.) AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEET (in millions of dollars)
ASSETS SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------ ------------ CURRENT ASSETS Cash and cash equivalents $ 259 $ 41 Accounts receivable 1,848 1,175 Inventories 367 373 Other current assets 585 239 --------- --------- Total current assets 3,059 1,828 --------- --------- INVESTMENTS AND ADVANCES HOVENSA L.L.C 785 710 Other 236 282 --------- --------- Total investments and advances 1,021 992 --------- --------- PROPERTY, PLANT AND EQUIPMENT Total - at cost 11,621 11,065 Less reserves for depreciation, depletion, amortization and lease impairment 7,423 7,013 --------- --------- Property, plant and equipment - net 4,198 4,052 --------- --------- NOTE RECEIVABLE 539 539 --------- --------- DEFERRED INCOME TAXES AND OTHER ASSETS 252 317 --------- --------- TOTAL ASSETS $ 9,069 $ 7,728 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable - trade $ 1,389 $ 772 Accrued liabilities 923 625 Taxes payable 329 159 Notes payable 2 18 Current maturities of long-term debt 57 5 --------- --------- Total current liabilities 2,700 1,579 --------- --------- LONG-TERM DEBT 1,940 2,287 --------- --------- DEFERRED LIABILITIES AND CREDITS Deferred income taxes 516 442 Other 370 382 --------- --------- Total deferred liabilities and credits 886 824 --------- --------- STOCKHOLDERS' EQUITY Preferred stock, par value $1.00 Authorized - 20,000,000 shares for issuance in series 3% cumulative convertible series Authorized -- 330,000 shares Issued -- 326,805 shares in 2000 (liquidation preference of $16) - - - - Common stock, par value $1.00 Authorized - 200,000,000 shares Issued - 88,574,505 shares at September 30, 2000; 90,676,405 shares at December 31, 1999 89 91 Capital in excess of par value 825 782 Retained earnings 2,769 2,287 Accumulated other comprehensive income (140) (122) --------- --------- Total stockholders' equity 3,543 3,038 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,069 $ 7,728 ========= =========
See accompanying notes to consolidated financial statements. 2 4 PART I - FINANCIAL INFORMATION (CONT'D.) AMERADA HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT OF CONSOLIDATED CASH FLOWS Nine Months Ended September 30 (in millions)
2000 1999 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 683 $ 307 Adjustments to reconcile net income to net cash provided by operating activities Depreciation, depletion and amortization 516 434 Exploratory dry hole costs 91 34 Lease impairment 20 23 Gains on asset sales - - (273) Provision for deferred income taxes 181 45 Undistributed earnings of affiliates (69) (6) ------- ------- 1,422 564 Changes in operating assets and liabilities and other 9 (120) ------- ------- Net cash provided by operating activities 1,431 444 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (610) (617) Proceeds from asset sales and other (2) 413 ------- ------- Net cash used in investing activities (612) (204) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in notes payable (16) 30 Long-term borrowings - - 621 Repayment of long-term debt (394) (902) Cash dividends paid (54) (54) Common stock acquired (188) - - Stock options exercised 51 17 ------- ------- Net cash used in financing activities (601) (288) ------- ------- EFFECT OF EXCHANGE RATE CHANGES ON CASH - - - - ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 218 (48) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 41 74 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 259 $ 26 ======= =======
See accompanying notes to consolidated financial statements. 3 5 PART I - FINANCIAL INFORMATION (CONTD.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in millions) Note 1 - The financial statements included in this report reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the Corporation's consolidated financial position at September 30, 2000 and December 31, 1999, and the consolidated results of operations for the three- and nine-month periods ended September 30, 2000 and 1999 and the consolidated cash flows for the nine-month periods ended September 30, 2000 and 1999. The unaudited results of operations for the interim periods reported are not necessarily indicative of results to be expected for the full year. Certain notes and other information have been condensed or omitted from these interim financial statements. Such statements, therefore, should be read in conjunction with the consolidated financial statements and related notes included in the 1999 Annual Report to Stockholders, which have been incorporated by reference in the Corporation's Form 10-K for the year ended December 31, 1999. Note 2 - Inventories consist of the following:
September 30, December 31, 2000 1999 ------------- ------------ Crude oil and other charge stocks $ 119 $ 67 Refined and other finished products 469 393 Less: LIFO adjustment (310) (149) ------ ------ 278 311 Materials and supplies 89 62 ------ ------ Total inventories $ 367 $ 373 ====== ======
Note 3 - The Corporation accounts for its investment in HOVENSA L.L.C. using the equity method. Summarized income statement information for HOVENSA follows:
Three months Nine months ended September 30 ended September 30 --------------------- --------------------- 2000 1999 2000 1999 ------- ------- ------- ------- Total revenues $ 1,353 $ 873 $ 3,825 $ 2,142 Costs and expenses 1,304 858 3,671 2,091 ------- ------- ------- ------- Net income $ 49 $ 15 $ 154 $ 51 ======= ======= ======= ======= Amerada Hess Corporation's share $ 24 $ 7 $ 76 $ 24 ======= ======= ======= =======
4 6 PART I - FINANCIAL INFORMATION (CONTD.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in millions) In February 2000, HOVENSA reached agreement on a $600 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 this financing, the Corporation and PDVSA V.I. agreed to amend the note received by the Corporation at the formation of the joint venture. PDVSA V.I. deferred principal payments on the note until after completion of coker construction but not later than February 14, 2003. The interest rate on the note increased to 9.46%. In October 2000, PDVSA V.I. exercised its option to repay principal in accordance with the original amortization schedule and reduced the interest rate to the original rate of 8.46%. Note 4 - The provision for income taxes consisted of the following:
Three months Nine months ended September 30 ended September 30 ------------------- ------------------- 2000 1999 2000 1999 ------ ------ ------ ------ Current $ 81 $ 84 $ 288 $ 172 Deferred 92 78 181 45 ------ ------ ------ ------ Total $ 173 $ 162 $ 469 $ 217 ====== ====== ====== ======
Note 5 - Foreign currency gains (losses), after income tax effects, amounted to the following:
Three months Nine months ended September 30 ended September 30 ------------------------------------ ------------------------------------ 2000 1999 2000 1999 ---------------- --------------- --------------- ---------------- Foreign currency gains (losses) $ - - $ (24) $ 3 $ 12 ================ =============== =============== ================
Note 6 - The weighted average number of common shares used in the basic and diluted earnings per share computations are as follows:
Three months Nine months ended September 30 ended September 30 ------------------- ------------------- 2000 1999 2000 1999 ------ ------ ------ ------ Common shares - basic 88.8 89.8 89.5 89.6 Effect of dilutive securities (equivalent shares) Nonvested common stock .3 .4 .3 .5 Stock options .5 .3 .3 .1 Convertible preferred stock .2 - - .1 - - ------ ------ ------ ------ Common shares - diluted 89.8 90.5 90.2 90.2 ====== ====== ====== ======
5 7 PART I - FINANCIAL INFORMATION (CONTD.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in millions) Note 7 - The Corporation uses futures, forwards, options and swaps, individually or in combination, to reduce the effects of fluctuations in crude oil, natural gas and refined product prices. These contracts correlate to movements in the value of inventory and the prices of crude oil and natural gas, and as hedges, any resulting gains or losses are recorded as part of the hedged transaction. After-tax earnings from exploration and production activities were reduced by approximately $50 and $100 for the third quarter and nine months of 2000, due to hedging activities. At September 30, 2000, after-tax deferred losses on the Corporation's petroleum hedging contracts expiring through 2001 were approximately $190, including $145 of unrealized losses. Note 8 - Interest costs related to certain long-term construction projects have been capitalized in accordance with FAS No. 34 as follows:
Three months Nine months ended September 30 ended September 30 ------------------------------------ ------------------------------------ 2000 1999 2000 1999 ---------------- --------------- --------------- ---------------- Interest capitalized $ - - $ 3 $ 3 $ 14 ================ =============== =============== ================
Note 9 - Comprehensive income, which includes net income and the effects of foreign currency translation recorded directly in stockholders' equity, is as follows:
Three months Nine months ended September 30 ended September 30 ------------------------------------ ------------------------------------ 2000 1999 2000 1999 ---------------- --------------- --------------- ---------------- Comprehensive income $ 247 $ 165 $ 665 $ 306 ================ =============== =============== ================
Note 10 - On May 15, 2000, the Corporation acquired the 51% of The Meadville Corporation's outstanding stock that it did not already own for approximately $168 in cash, deferred payments and preferred stock. The deferred payments are non-interest bearing and have been discounted to $97 using a market interest rate. The Corporation accounted for this acquisition using the purchase method. The Meadville Corporation owned and operated 178 Merit retail gasoline stations located in the northeastern United States. This acquisition does not materially affect the Corporation's financial position or results of operations. 6 8 PART I - FINANCIAL INFORMATION (CONTD.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in millions) Note 11 - The Corporation's results by operating segment were as follows:
Three months Nine months ended September 30 ended September 30 ------------------------- ------------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Operating revenues Exploration and production (1) $ 973 $ 766 $ 2,893 $ 1,984 Refining, marketing and shipping 2,080 1,166 5,969 3,089 -------- -------- -------- -------- Total $ 3,053 $ 1,932 $ 8,862 $ 5,073 ======== ======== ======== ======== Net income (loss) Exploration and production (2) $ 238 $ 71 $ 634 $ 179 Refining, marketing and shipping (3) 62 128 174 240 Corporate, including interest (43) (41) (125) (112) -------- -------- -------- -------- Total $ 257 $ 158 $ 683 $ 307 ======== ======== ======== ========
(1) Includes transfers to affiliates of $220 and $554 during the three- and nine-month periods ended September 30, 2000, respectively, compared to $130 and $303 for the corresponding periods of 1999. (2) Includes after-tax gains on asset sales of $30 during the nine-months ended September 30, 1999. (3) Includes after-tax gains on asset sales of $106 and $146 in the three- and nine-month periods ended September 30, 1999, respectively. Note 12 - The Corporation will adopt FAS No. 133, Accounting for Derivative Instruments and Hedging Activity, on January 1, 2001. The Corporation has not yet determined what the effects of FAS No. 133 will be on its income and financial position. 7 9 PART I - FINANCIAL INFORMATION (CONT'D.) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION. RESULTS OF OPERATIONS Operating earnings for the third quarter of 2000 amounted to $257 million compared with earnings of $52 million in the third quarter of 1999. Operating earnings in the first nine months of 2000 were $683 million compared with earnings of $131 million in the first nine months of 1999. The after-tax results by major operating activity for the three- and nine-month periods ended September 30, 2000 and 1999 were as follows (in millions, except per share data):
Three months ended Nine months ended September 30 September 30 --------------------- --------------------- 2000 1999 2000 1999 ------ ------ ------ ------ Exploration and production $ 238 $ 71 $ 634 $ 149 Refining, marketing and shipping 62 22 174 94 Corporate (10) (11) (32) (26) Interest expense (33) (30) (93) (86) ------ ------ ------ ------ Operating earnings 257 52 683 131 Gains on asset sales - - 106 - - 176 ------ ------ ------ ------ Net income $ 257 $ 158 $ 683 $ 307 ====== ====== ====== ====== Net income per share (diluted) $ 2.86 $ 1.75 $ 7.57 $ 3.40 ====== ====== ====== ======
The net gain from asset sales in the third quarter of 1999 reflects the sale of the Corporation's Gulf Coast terminals and certain retail sites. The net gain from asset sales in the first nine months of 1999 also includes the sale of southeast pipeline terminals, additional retail sites and natural gas properties in California. Exploration and Production Operating earnings from exploration and production activities increased by $167 million in the third quarter of 2000 and $485 million in the first nine months of 2000 over the 1999 periods, reflecting higher worldwide crude oil and natural gas selling prices and increased sales volumes. 8 10 PART I - FINANCIAL INFORMATION (CONT'D.) RESULTS OF OPERATIONS (CONTINUED) The Corporation's average selling prices, including the effects of hedging, were as follows:
Three months ended Nine months ended September 30 September 30 ----------------------- ----------------------- 2000 1999 2000 1999 --------- --------- --------- --------- Crude oil (per barrel) United States $ 24.40 $ 18.93 $ 23.84 $ 15.10 Foreign 26.55 20.47 25.72 15.64 Natural gas liquids (per barrel) United States $ 23.81 $ 14.42 $ 21.22 $ 11.76 Foreign 24.54 16.44 22.50 12.02 Natural gas (per Mcf) United States $ 3.98 $ 2.39 $ 3.26 $ 2.07 Foreign 2.16 1.60 2.12 1.79
The Corporation's net daily worldwide production was as follows (in thousands):
Three months ended Nine months ended September 30 September 30 ------------------ ----------------- 2000 1999 2000 1999 ------ ------ ------ ------ Crude oil (barrels per day) United States 56 57 54 53 United Kingdom 123 111 116 108 Norway 23 26 24 25 Denmark 26 7 25 2 Gabon 7 10 8 11 Indonesia and Azerbaijan 8 4 7 4 --- --- --- --- Total 243 215 234 203 === === === === Natural gas liquids (barrels per day) United States 13 12 13 9 Foreign 8 7 9 7 --- --- --- --- Total 21 19 22 16 === === === === Natural gas (Mcf per day) United States 282 346 292 338 United Kingdom 239 219 294 242 Norway 21 31 23 31 Denmark 45 - - 35 - - Indonesia and Thailand 29 12 33 6 --- --- --- --- Total 616 608 677 617 === === === === Barrels of oil equivalent 367 335 369 322 === === === ===
9 11 PART I - FINANCIAL INFORMATION (CONT'D.) RESULTS OF OPERATIONS (CONTINUED) On a barrel of oil equivalent basis, the Corporation's oil and gas production increased by 10% in the third quarter and 15% in the first nine months of 2000 compared with the corresponding periods of 1999. The increase in United Kingdom crude oil production in the third quarter and first nine months of 2000 principally reflects production from new fields. Production commenced from the South Arne Field in Denmark in the third quarter of 1999 and was temporarily interrupted in the second quarter of 2000. Production from South Arne resumed in the third quarter. Increased natural gas production principally from new fields in the United Kingdom, Denmark and Thailand offset lower production from natural decline in the United States. Depreciation, depletion, and amortization charges relating to exploration and production activities were higher in the third quarter and first nine months of 2000 compared with the corresponding periods of 1999. The increases reflect higher production volumes and development drilling. Production expenses were also higher in the third quarter and first nine months of 2000 because of increased production volumes and higher workover costs. Exploration expenses were higher in the third quarter and nine months of 2000 reflecting increased activity in the Gulf of Mexico and international exploration areas outside of the North Sea. General and administrative expenses relating to exploration and production activities were lower, primarily as a result of cost reductions in the United Kingdom. Marketing expenses increased as a result of providing a reserve of $10 million for receivables in the United Kingdom. The effective income tax rate on exploration and production earnings in the first nine months of 2000 was 42%. This rate compares to an effective rate of 46% in the first nine months of 1999. In the third quarter of 1999, exploration and production earnings included net nonrecurring expenses of $29 million, principally reflecting losses on foreign currency translation. In the first nine months of 1999 nonrecurring expense of $12 million resulted primarily from charges for the renegotiation and termination of long-term contracts on drilling rigs and related service vessels, partially offset by gains on foreign currency translation. Pre-tax foreign currency gains or losses are included in non-operating income on the income statement. Crude oil and natural gas selling prices continue to be volatile. Exploration and production earnings would be adversely affected by lower selling prices in the future. 10 12 PART I - FINANCIAL INFORMATION (CONT'D.) RESULTS OF OPERATIONS (CONTINUED) Refining, Marketing and Shipping Operating earnings for refining, marketing and shipping activities amounted to $62 million and $174 million in the third quarter and first nine months of 2000, compared with $22 million and $94 million in the corresponding periods of 1999. The Corporation's downstream operations include its 50% equity share of HOVENSA, a refining joint venture. HOVENSA The Corporation's share of HOVENSA's income was $24 million in the third quarter of 2000 compared with $7 million in the third quarter of 1999. The Corporation's share of HOVENSA's income in the first nine months of 2000 was $76 million compared with $24 million in 1999. Refined product margins improved in the third quarter and first nine months of 2000, principally reflecting higher selling prices for gasoline and distillates. Throughout most of 1999 refined product margins were weak. The Corporation's share of HOVENSA's refining runs amounted to 209,000 barrels per day in the first nine months of 2000 compared with 214,000 barrels per day in the first nine months of 1999. Income taxes on HOVENSA's results are offset by available loss carryforwards. Operating earnings from refining, marketing and shipping activities in the first nine months of 2000 and 1999 also include interest income of $38 million and $35 million, respectively, on the note received from PDVSA V.I. in connection with the formation of the joint venture. Retail, energy marketing and other Results from retail gasoline operations were slightly higher in the third quarter but lower in the first nine months of 2000, compared with the corresponding periods of 1999. Selling prices did not generally keep pace with rising product costs. Results of energy marketing activities were comparable in the third quarter of each year but higher in the first nine months of 2000 due to a period of cold weather in the Corporation's marketing area. Total refined product sales volumes amounted to 98 million barrels in the first nine months of 2000 compared with 93 million barrels in the first nine months of 1999. Marketing expenses increased in the third quarter and first nine months of 2000, reflecting expanded retail operations. Other operating expenses were higher in the third quarter of 2000 compared to the same period of 1999 because of higher operating expenses on company owned vessels chartered to third parties. These costs are more than offset by higher operating revenues. 11 13 PART I - FINANCIAL INFORMATION (CONT'D.) RESULTS OF OPERATIONS (CONTINUED) The Corporation has a 50% voting interest in a consolidated partnership that trades energy commodities. The Corporation also periodically takes forward positions on energy contracts in addition to its hedging program. The Corporation's results from trading activities, including its share of the earnings of the trading partnership which was profitable in 2000 and 1999, amounted to a loss of $5 million in the first nine months of 2000 compared with income of $28 million in the first nine months of 1999. Expenses of the trading partnership are included in marketing expenses, including in the third quarter of 2000, a provision of $5 million after-tax for a potential loss on a receivable from a counterparty. The results of refining, marketing and shipping activities will continue to be volatile, reflecting competitive industry conditions and supply and demand factors, including the effects of weather. Corporate Corporate administrative expenses of $32 million for the first nine months of 2000 exceeded the comparable 1999 period by $6 million. Administrative expenses for the two periods were comparable; however, operating earnings of an insurance subsidiary and dividends from reinsurers were lower by $12 million pre-tax ($8 million after-tax). Consolidated Operating Revenues Sales and other operating revenues increased by approximately 57% in the third quarter and 74% in the first nine months of 2000 compared with the corresponding periods of 1999. The increases were primarily due to higher crude oil and refined product selling prices and sales volumes. The Corporation's cost of products sold also increased as a result of higher prices for purchased products. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities, including changes in operating assets and liabilities, amounted to $1,431 million in the first nine months of 2000 compared with $444 million in the first nine months of 1999. Excluding changes in operating assets and liabilities, the increase was $858 million and was mainly due to improved operating results. The sales of the southeast pipeline operations, Gulf Coast terminals, certain retail sites and natural gas properties in California generated proceeds of $394 million in the first nine months of 1999. 12 14 PART I - FINANCIAL INFORMATION (CONT'D.) LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) Total debt was $1,999 million at September 30, 2000 compared with $2,310 million at December 31, 1999. The debt to capitalization ratio decreased to 36% at September 30 compared with 43% at year-end. At September 30, 2000, the Corporation had $2 billion of additional borrowing capacity available under its revolving credit agreements and additional unused lines of credit under uncommitted arrangements with banks of $369 million. The Corporation's Board of Directors approved a $300 million stock repurchase program in March 2000. Through September 30, 2000, 2,957,000 shares have been repurchased for approximately $188 million. The Corporation uses futures, forwards, options and swaps to reduce the effects of changes in the selling prices of crude oil, natural gas and refined products. These instruments fix the selling prices of a portion of the Corporation's production and the related gains or losses are an integral part of the Corporation's selling prices. At September 30, 2000, the Corporation had open hedge positions equal to 35% of its estimated worldwide crude oil production over the next twelve months and approximately 11% of its production for the succeeding twelve months. As market conditions change, the Corporation will adjust its hedge positions. The Corporation uses value at risk to estimate the potential effects of changes in fair values of derivatives and other instruments used in hedging activities and derivatives and commodities used in trading activities. The Corporation estimates that at September 30, 2000, the value at risk was $25 million ($13 million at December 31, 1999) related to hedging activities and $18 million ($6 million at December 31, 1999) on trading activities. The Corporation reduces its exposure to fluctuating foreign exchange rates by using forward contracts to fix the exchange rate on a portion of the currency required in its North Sea operations. At September 30, 2000, the Corporation had $645 million of foreign currency exchange contracts outstanding. In addition, the Corporation uses interest-rate swaps to balance its exposure to interest rates. At September 30, the Corporation had substantially all fixed-rate debt and had $225 million of notional value, interest-rate swaps that increased its percentage of floating-rate debt to 12%. At September 30, 2000, the Corporation had a remaining reserve of $22 million for the decline in market value of drilling service fixed-price contracts. During the first nine months of 2000, $33 million of contract payments reduced the reserve. In May, the Corporation acquired the 51% of The Meadville Corporation's outstanding stock that it did not already own for approximately $168 million in cash, deferred payments and preferred stock. The purchase includes 178 Merit retail gasoline stations located in the northeastern United States. 13 15 PART I - FINANCIAL INFORMATION (CONT'D.) LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) In April, the Corporation reached an agreement with the Algerian National Oil Company to form a joint venture, 49% owned by the Corporation, to redevelop three Algerian oil fields. The fields currently produce 30,000 barrels of crude oil per day and the joint venture plans to increase their production. The Corporation will invest $55 million in 2000 and up to $500 million over the next five years for new wells, workovers of existing wells and water injection and gas compression facilities. A significant portion of the $500 million will be funded by the cash flows from these fields. In July, the Corporation announced an agreement to acquire an additional 2.08% interest in three fields in Azerbaijan. The total purchase price is $150 million in cash and notes. The purchase is subject to the consent of the government of Azerbaijan and to preemption rights of co-venturers in the fields. The Corporation currently owns a 1.68% interest in these fields. In October, the Corporation announced that it was exploring a potential joint venture with a company that owns and operates 120 gasoline stations and convenience stores and 21 travel centers. Capital expenditures in the first nine months of 2000 amounted to $610 million compared with $617 million in the first nine months of 1999. Capital expenditures for exploration and production activities were $492 million in the first nine months of 2000 and $560 million in the first nine months of 1999. For the remainder of 2000, capital expenditures, excluding acquisitions, are expected to be approximately $400 million and will be financed by internally generated funds. FORWARD LOOKING INFORMATION Certain sections of Management's Discussion and Analysis of Results of Operations and Financial Condition, including references to the Corporation's future results of operations and financial position, contain forward-looking information. These disclosures are based on the Corporation's current assessments and reasonable assumptions about the future. Actual results may differ from these disclosures because of changes in market conditions, government actions and other factors. 14 16 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits None (b) Reports on Form 8-K The Registrant filed no report on Form 8-K during the three months ended September 30, 2000. On October 25, 2000, the Registrant filed a Form 8-K including its third quarter earnings release and information related to its earnings teleconference. 15 17 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 thereunto duly authorized. AMERADA HESS CORPORATION (REGISTRANT) By s/s John B. Hess ------------------------------ JOHN B. HESS CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER By s/s John Y. Schreyer ------------------------------ JOHN Y. SCHREYER EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER Date: November 3, 2000 16