Exploration & Production

Amerada Hess made acquisitions in 2001 that provide both immediate production and significant growth opportunities internationally and domestically. The transformational event of 2001 was the acquisition of Triton Energy Limited, which added high-impact growth opportunities to the Corporation’s upstream portfolio. Drilling successes in 2001 and early in 2002 spanned the globe and were made both on properties acquired during the year and on previously identified prospects.

At the end of 2001, proved reserves exceeded 1.4 billion barrels of oil equivalent, the largest reserve base in the Corporation’s history. Production increased 16% on a barrel of oil equivalent basis in 2001. The primary reasons for the increase were the Triton and Gulf of Mexico natural gas acquisitions, a full yer of production from the Amerada Hess operated Conger and Northwestern Fields in the Gulf of Mexico and production from the Gassi El Agreb redevelopment project in Algeria.

Ceiba Field production operations onboard the FPSO Sendje Ceiba.

4 Amerada Hess Corporation 2001 Annual Report

Successful appraisal well being drilled on the Oveng Field.

Equatorial Guinea

A new floating production, storage and offloading vessel (FPSO), the Sendje Ceiba, was installed and commenced operation late in January 2002 on the Ceiba Field (AHC 85%), offshore Equatorial Guinea, replacing an existing FPSO in a safe, cost-efficient operation that was completed in just 14 days, minimizing field downtime.

The Sendje Ceiba has expanded production facilities and water injection capability which will extend field life and maximize oil recovery. Gross oil production from the Ceiba Field resumed at a rate in excess of 50,000 barrels of oil per day. Water injection has begun, additional wells are being tied in and artificial lift pumps will be installed late in 2002.

Amerada Hess Corporation 2001 Annual Report 5

Successful appraisal wells were drilled on the Okume and Oveng prospects in 2001. These wells identified substantial hydrocarbon accumulations. Amerada Hess drilled its first exploration well offshore Equatorial Guinea in the Rio Muni Basin and made the Ebano discovery. The second exploration well drilled by Amerada Hess made the Akom discovery. Preliminary reserve estimates indicate that Ebano and Akom are commercial developments. Amerada Hess has an 85% working interest in Okume, Oveng, Ebano and Akom. Development plans encompassing these four discoveries will be submitted to the Government of Equatorial Guinea in the second half of 2002.

Geologists studying data relating to Equatorial Guinea prospects in the Corporation’s Dallas office.

United States

In the United States, production increased to 148,000 barrels of oil equivalent per day in 2001 from 115,000 barrels per day in 2000, primarily driven by the acquisition of LLOG and other Gulf of Mexico reserves as well as a full year of production from the Conger Field (AHC 37.50%) and the Northwestern Field (AHC 50%). Early in 2002, Amerada Hess brought the Tulane Field (AHC 100%) into production.

The 2001 acquisitions have achieved a 20% reserve increase to date, meeting the Corporation’s performance targets. The Corporation drilled 23 successful wells on these properties in 2001, rapidly bringing natural gas to market. The Breton Sound Block 51 production facility (AHC 100%), with a capacity of 40,000 Mcf of natural gas per day and 3,000 barrels of oil per day, is scheduled for startup in April 2002. Eight wells will be brought onstream through that facility.

6 Amerada Hess Corporation 2001 Annual Report

Drilling rig in the Northwestern Field, Gulf of Mexico.

Amerada Hess acquired a 27.50% interest in the Llano Field in 2001. A subsequent appraisal well encountered about 400 feet of net pay. Development plans are expected to be finalized in 2002.

On Garden Banks Block 244, in which Amerada Hess has a 27% interest, an exploration well encountered 347 feet of net pay. Development options are being analyzed. Exploration wells on East Breaks Block 599 (AHC 33%) and Green Canyon Block 507 (AHC 50%) encountered 85 and 130 feet of net pay, respectively, and are being evaluated for development potential.

United Kingdom

The Corporation’s production in the United Kingdom averaged 174,500 barrels of oil equivalent per day in 2001, the same as in 2000. Increased production from the Bittern Field and several other areas contributed to maintaining production levels.

The Juno Field will be brought onstream late in 2002. Peak production for Amerada Hess is expected to reach 90,000 Mcf of natural gas per day in 2004. The Skene Field came onstream late in 2001. The Corporation’s share of production will average about 25,000 Mcf of natural gas equivalent per day.

Amerada Hess Corporation 2001 Annual Report 7

The Clair Field (AHC 9.29%) also is being developed; production is expected to begin in 2004. The York Field, operated by Amerada Hess with a 71% interest, is likely to be developed with first production late in 2003. Other fields being evaluated for development include Atlantic and Cromarty.

Norway

In Norway, the large scale waterflood project for the Valhall Field, in which Amerada Hess has a 28.09% interest, is proceeding. Initial water injection is scheduled for 2003. When fully operational, the waterflood project should increase the Corporation’s share of production to 30,000 barrels of crude oil and natural gas liquids per day from 22,200 barrels per day in 2001.

Denmark

Net production from the South Arne Field, operated by Amerada Hess with a 57.48% interest, averaged 20,000 barrels of oil per day and 43,000 Mcf of natural gas per day in 2001. Two exploration wells will be drilled in Denmark in 2002.

Faroe Islands

Amerada Hess drilled an exploration well in the Faroe Islands (AHC 42.96%) that encountered significant hydrocarbons and may open up a new oil producing province. The Corporation will drill an appraisal well on an offsetting block (AHC 42.96%) in United Kingdom waters in 2002.

Colombia

The Corporation’s share of production from the Cusiana and Cupiagua Fields averaged 26,000 barrels of oil per day in the fourth quarter of 2001. Net production in 2002 is forecast at about 23,000 barrels of oil per day.

Gabon

Production in Gabon averaged 9,800 barrels of oil per day in December 2001, up from 6,300 barrels per day in December 2000, due to production from the recently developed Atora Field. The Toucan discovery (AHC 38.75%) was made during 2001 and is being appraised. The possibility of bringing Toucan into production through the facilities of the nearby Rabi Kounga Field (AHC 7.75%) is being evaluated.

Indonesia

Amerada Hess is now the operator in the Pangkah Block. Development of the Pangkah discovery is being evaluated. Development of the Sungai Kenawang discovery (AHC 25%) also is being assessed, possibly in conjunction with Pulau Gading (AHC 25%). Amerada Hess obtained 40% interests in Tanjung Aru Blocks A and D, both of which offer high-impact potential exploration prospects. Exploration wells are likely to be drilled in 2002.

Amerada Hess drilling the first oil discovery in the Faroe Islands.

8 Amerada Hess Corporation 2001 Annual Report

Production of natural gas from the Pailin Field will increase in 2002 when phase two comes onstream.

Malaysia

Drilling in 2002 in Malaysia will concentrate on Block SB 302 (AHC 50%). The Cendor discoveries on Block PM 304 (AHC 41%) are being evaluated. In the joint development area (AHC 25%) between Malaysia and Thailand, pipeline approval was received in 2001 and development is proceeding. Natural gas sales are scheduled to commence late in 2003 or early in 2004.

Thailand

Amerada Hess’ share of production from the Pailin Field (AHC 15%) averaged 26,500 Mcf of natural gas equivalent per day in 2001. Phase two of the development of the Pailin Field proceeded with several successful wells in 2001. Phase two is expected to come onstream in mid-2002 and will increase the Corporation’s production to about 50,000 Mcf per day of natural gas equivalent.

Amerada Hess Corporation 2001 Annual Report 9

Refining

HOVENSA, the joint venture between Amerada Hess and Petroleos de Venezuela, operates a world class merchant refinery, strategically located in the Caribbean for both crude oil imports and product shipments. With a crude oil processing capacity of 495,000 barrels per day and a 140,000 barrel per day fluid catalytic cracking unit, the refinery supplies the joint venture partners with refined products for the East Coast. HOVENSA also markets products in the Caribbean and in California where it is able to meet California’s strict environmental standards. A delayed coking unit is being constructed and will enhance the refinery’s profitability.

Construction of the 58,000 barrel per day coking unit will be completed in the second quarter and start up will begin immediately thereafter.

The economics of the coker are underpinned by a 115,000 barrel per day supply contract with Petroleos de Venezuela for heavy Merey crude oil, which sells at a discount to crude oils now being purchased by the refinery. HOVENSA currently purchases about 155,000 barrels per day of Mesa crude oil. Upon completion of the coker, about two-thirds of the crude oil processed at the Virgin Islands refinery will come from Venezuela.

The Corporation’s other refining facility is the Port Reading, New Jersey fluid catalytic cracking unit. That unit runs at a rate of about 55,000 barrels per day and supplies gasoline for HESS retail facilities in the New York metropolitan area.

The Port Reading fluid catalytic cracking unit in New Jersey produces high-quality, clean-burning gasoline for northeast markets.

10 Amerada Hess Corporation 2001 Annual Report

The 58,000 barrel per day delayed coking unit at the HOVENSA refinery in the Virgin Islands will enable the refinery to process lower cost, heavy crude oil while producing products that meet the highest environmental standards for Amerada Hess and its joint venture partner, Petroleos de Venezuela.

Amerada Hess Corporation 2001 Annual Report 11

Marketing

The Corporation’s HESS retail network grew to 1,158 facilities at year-end 2001 from 929 at year-end 2000. HESS EXPRESS stores with several fast food offerings, a proprietary coffee, fountain service and convenience items are pacesetters in the industry.

Our vision is to be the leading independent convenience retailer on the East Coast.

The growth in HESS retail marketing facilities continued in 2001 with the formation of the WilcoHess joint venture that owns and operates 141 retail facilities, primarily in North Carolina, South Carolina and Virginia and the acquisition of 53 retail facilities in the Boston metropolitan area and southern New Hampshire.

The WilcoHess joint venture introduced the HESS brand in North Carolina and Virginia and strengthened the brand in South Carolina. The New England acquisition established HESS as the leading independent retailer in the Boston metropolitan area. These transactions and the annual building program of new HESS EXPRESS retail facilities solidified HESS as the leading independent convenience retailer on the East Coast.

During 2002, HESS will further expand its retail network by building 25 new facilities that will include HESS EXPRESS stores and upgrading 30 existing retail sites to add HESS EXPRESS stores.

12 Amerada Hess Corporation 2001 Annual Report

Amerada Hess Corporation 2001 Annual Report 13

Financial Review

Amerada Hess Corporation and Consolidated Subsidiaries

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Consolidated Results of Operations

Net income amounted to $914 million in 2001, $1,023 million in 2000 and $438 million in 1999. Operating earnings (income excluding special items) amounted to $945 million in 2001, $987 million in 2000 and $307 million in 1999.

The after-tax results by major operating activity for 2001, 2000 and 1999 are summarized below:

Millions of dollars	2001			2000			1999
Exploration and production	$	923		$	868		$	324
Refining, marketing and shipping		235			288			133
Corporate		(78	)		(43	)		(31	)
Interest		(135	)		(126	)		(119	)
Operating earnings		945			987			307
Special items		(31	)		36			131
Net income	$	914		$	1,023		$	438
Net income per share (diluted)	$	10.25		$	11.38		$	4.85

Comparison of Results

Exploration and Production: Operating earnings from exploration and production activities increased by $55 million in 2001, primarily due to higher crude oil and natural gas sales volumes, partially offset by lower average crude oil selling prices and higher exploration expenses. Operating earnings increased by $544 million in 2000, largely due to significantly higher selling prices for crude oil and United States natural gas.

The Corporation’s average selling prices, including the effects of hedging,were as follows:

		2001		2000		1999
Crude oil (per barrel)
	United States	$	23.29	$	23.97	$	16.71
	Foreign		24.58		25.53		18.07
Natural gas liquids (per barrel)
	United States		18.64		22.30		13.59
	Foreign		18.91		23.41		14.29
Natural gas (per Mcf)
	United States		3.99		3.74		2.14
	Foreign		2.54		2.20		1.79

The Corporation’s net daily worldwide production was as follows:

				2001		2000		1999
Crude oil
	(thousands of barrels per day)
		United States			63		55		55
		Foreign			212		185		159
			Total		275		240		214
Natural gas liquids
	(thousands of barrels per day)
		United States			14		12		10
		Foreign			9		9		8
			Total		23		21		18
Natural gas
	(thousands of Mcf per day)
		United States			424		288		338
		Foreign			388		391		305
			Total		812		679		643
Barrels of oil equivalent
	(thousands of barrels per day)				433		374		339

Amerada Hess Corporation 2001 Annual Report 17

On a barrel of oil equivalent basis, the Corporation’s oil and gas production increased by 16% in 2001 and 10% in 2000. The increase in United States crude oil and natural gas production in 2001 was primarily due to the acquisition of producing properties in the Gulf of Mexico and production from the Conger and Northwestern fields which commenced in late 2000. The increase in foreign crude oil production reflects production from fields acquired in the purchase of Triton Energy Limited in August 2001. Increased foreign crude oil production also includes the first full year of production from the Corporation’s interest in a redevelopment project in Algeria. Crude oil equivalent production is expected to increase to 475,000 barrels per day in 2002, largely from increased production from the Ceiba Field in Equatorial Guinea.

Increased production in 2000 compared with 1999 primarily resulted from a full year of production from the South Arne Field in Denmark and new production from the Bittern Field in the United Kingdom. Increased natural gas production in 2000 resulted from new and existing fields in the United Kingdom, Denmark and Thailand and offset lower natural gas production in the United States.

Production expenses were higher in 2001 and 2000, primarily reflecting increased oil and gas production volumes. In both years, production expense per barrel also increased due to the mix of producing fields. Depreciation, depletion and amortization charges increased in 2001, principally reflecting higher per-barrel costs and production volumes in fields acquired in the Gulf of Mexico and in the Triton acquisition. Depreciation and related costs were also higher in 2000 compared with 1999, reflecting higher production volumes, while per barrel costs were comparable. Exploration expense was higher in 2001 and 2000, reflecting increased drilling and seismic purchases. The 2001 increase principally reflects exploration activity in the North Sea and on Triton properties in West Africa. General and administrative expenses related to exploration and production operations were comparable in each of the last three years. The total cost per barrel (production, depreciation, exploration and administrative expenses) was $13.30 in 2001, $11.70 in 2000 and $11.75 in 1999.

Exploration and production earnings in 2001 include income of $48 million from the resolution of a United Kingdom income tax dispute. The tax settlement relates to refunds of Advance Corporation Taxes and deductions for non-United Kingdom exploratory drilling. Excluding the settlement, the effective income tax rate on exploration and production earnings was 40%, compared with 41% in 2000 and 44% in 1999. Generally, this rate will exceed the U.S. statutory rate because of special petroleum taxes in certain foreign countries.

Crude oil and natural gas selling prices continue to be volatile and are below the average selling prices received in 2001. The negative effect of lower selling prices on the Corporation’s 2002 earnings will be partially mitigated by its hedging program.

Refining, Marketing and Shipping: Operating earnings from refining, marketing and shipping activities amounted to $235 million in 2001, $288 million in 2000 and $133 million in 1999. The Corporation’s downstream operations include HOVENSA L.L.C. (HOVENSA), a refining joint venture 50% owned with a subsidiary of Petroleos de Venezuela S.A. (PDVSA), accounted for on the equity method. Additional refining and marketing operations include a fluid catalytic cracking facility in Port Reading, New Jersey, retail gasoline stations, an energy marketing group, shipping and trading.

         HOVENSA:The Corporation’s share of HOVENSA’s income was $58 million in 2001, $121 million in 2000 and $7 million in 1999. The decrease in 2001 was primarily due to lower charge rates at crude oil processing units and the fluid catalytic cracking unit, as well as increased operating expenses and slightly lower refined product margins. Turnarounds at the fluid catalytic cracking unit and at a crude unit contributed to the lower volumes and higher costs. The significant increase in the Corporation’s share of HOVENSA’s earnings in 2000 compared with 1999 reflected improved refining margins. The Corporation’s share of HOVENSA’s refining crude runs amounted to 202,000 barrels per day in 2001, 211,000 in 2000 and 209,000 in 1999. Income taxes on the Corporation’s share of HOVENSA’s results are offset by available loss carryforwards.

18 Amerada Hess Corporation 2001 Annual Report

Operating earnings from refining, marketing and shipping activities also include interest income on the note received from PDVSA at the formation of the joint venture. Interest on the PDVSA note amounted to $39 million in 2001, $48 million in 2000 and $47 million in 1999. Interest is reflected in non-operating income in the income statement.

         Retail, energy marketing and other: Earnings from retail gasoline operations improved significantly in 2001, reflecting higher margins and increased sales volumes. Retail results in 2000 were lower than in 1999 as selling prices generally did not keep pace with rising product costs. Results from energy marketing activities were lower in 2001 largely reflecting losses on the sale of purchased natural gas. Energy marketing results were higher in 2000 than in 1999. Earnings from the Corporation’s catalytic cracking facility in New Jersey were higher in 2001, reflecting improved margins and a shutdown for scheduled maintenance in 2000. Earnings from the catalytic cracking facility were also higher in 2000 compared with 1999 reflecting higher refining margins.

Marketing expenses increased in 2001 and 2000 compared with the prior years, principally reflecting expanded retail and energy marketing activities. Total refined product sales volumes increased to 141 million barrels from 134 million barrels in 2000 and 126 million barrels in 1999.

The Corporation has a 50% voting interest in a consolidated partnership which trades energy commodities and derivatives. The Corporation also takes trading positions in addition to its hedging program. The Corporation’s after tax income from trading activities, including its share of the earnings of the trading partnership, amounted to $45 million in 2001, $22 million in 2000 and $19 million in 1999. Expenses of the trading partnership are included in marketing expenses in the income statement.

Refining and marketing results will continue to be volatile, reflecting competitive industry conditions and supply and demand factors, including the effects of weather. Refining margins were weak in the third and fourth quarters of 2001 and continue to be depressed.

Corporate: Net corporate expenses amounted to $78 million in 2001, $43 million in 2000 and $31 million in 1999. The increase in 2001 reflects increases in certain administrative expenses, including officer severance, charitable contributions, professional fees and bank fees, as well as an increased provision for United States taxes on foreign source income. The increase in 2000 compared with 1999 principally reflects lower earnings of an insurance subsidiary and higher compensation and related costs.

Interest: After-tax interest was $135 million in 2001, $126 million in 2000 and $119 million in 1999. The increase in 2001 reflects increased borrowings related to acquisitions, partially offset by lower interest rates. The increase in 2000 compared with 1999 reflects higher interest rates. Capitalized interest, before income taxes, was $44 million, $3 million and $16 million in 2001, 2000 and 1999. Interest expense is expected to continue to increase in 2002, due to higher average outstanding debt.

Consolidated Operating Revenues: Sales and other operating revenues increased by 12% in 2001 compared with 2000. The increase was primarily due to higher sales volumes of purchased natural gas related to energy marketing activities, as well as increased refined products sold. Crude oil and natural gas production volumes were also higher. Sales and other operating revenues increased by 70% in 2000, principally reflecting significantly higher crude oil, natural gas and refined product selling prices.

Amerada Hess Corporation 2001 Annual Report 19

Special Items

After-tax special items in 2001, 2000 and 1999 are summarized below:

								Refining,
					Exploration			Marketing
					and			and
Millions of dollars		Total			Production			Shipping			Corporate
2001
Charge related to Enron bankruptcy		$	(19	)	$	(19	)	$	—		$	—
Severance accrual			(12	)		(10	)		(2	)		—
	Total	$	(31	)	$	(29	)	$	(2	)	$	—
2000
Gain on termination of acquisition		$	60		$	—		$	—		$	60
Cost associated with research and development venture			(24	)		—			(24	)		—
	Total	$	36		$	—		$	(24	)	$	60
1999
Gain on asset sales		$	176		$	30		$	146		$	—
Income tax benefits			54			54			—			—
Impairment of assets and operating leases			(99	)		(65	)		(34	)		—
	Total	$	131		$	19		$	112		$	—

In 2001, the Corporation recorded an after-tax charge of $19 million for estimated losses due to the bankruptcy of certain subsidiaries of Enron Corporation. The accrual principally reflects losses on receivables representing less than 10% of the Corporation’s crude oil and natural gas hedges. In addition, the Corporation recorded a net charge of $12 million for severance expenses resulting from cost reduction initiatives. The cost reduction program principally relates to exploration and production operations and reflects the elimination of approximately 150 positions. Substantially all of the severance will be paid in 2002 and early 2003. The expected future annual benefit is approximately $15 million after income taxes.

In 2000, the gain on termination of a proposed acquisition of another oil company principally reflects foreign currency gains on pound sterling contracts which were purchased in anticipation of the acquisition. These contracts were sold resulting in an after-tax gain of $53 million. Also included in this special item is income from a fee on termination of the acquisition, partially offset by transaction costs. The charge of $24 million reflects costs associated with an alternative fuel research and development venture.

In 1999, the gain on asset sales of $146 million reflects the sale of the Corporation’s Gulf Coast and Southeast pipeline terminals and certain retail sites. The Corporation also sold natural gas properties in California, resulting in an after-tax gain of $30 million. Special income tax benefits of $54 million represent the United States tax impact of certain prior year foreign exploration activities and the recognition of capital losses.

Asset impairments in 1999 include $34 million for the Corporation’s crude oil storage terminal in St. Lucia. Net charges of $38 million were also recorded in 1999 for the write-down in book value of the Corporation’s interest in the Trans Alaska Pipeline System. The Corporation also recorded a 1999 net charge of $27 million for the additional decline in value of a drilling service fixedprice contract due to lower market rates.

Liquidity and Capital Resources

On August 14, 2001, the Corporation acquired Triton Energy Limited, a publicly held international oil and gas exploration and production company. The cost of the acquisition was approximately $3.2 billion, including the assumption of Triton debt. The Corporation financed the acquisition principally with new borrowings and existing credit lines. The Corporation accounted for the acquisition as a purchase and consolidated Triton’s results from August 14, 2001.

Net cash provided by operating activities, including changes in operating assets and liabilities amounted to $1,960 million in 2001, $1,795 million in 2000 and $746 million in 1999. The changes principally reflect improved operating results and working capital changes in 2000 compared with 1999. Excluding changes in balance sheet items, operating cash flow was $2,135 million, $1,948 million and $1,116 million in 2001, 2000 and 1999, respectively.

20 Amerada Hess Corporation 2001 Annual Report

During 2001, the Corporation completed its $300 million stock repurchase program. Since inception of the program in March 2000, the Corporation repurchased 4,521,900 shares.

Principally as a result of the Triton acquisition, total debt increased to $5,665 million at December 31, 2001 from $2,050 million at December 31, 2000. The Corporation’s debt to capitalization ratio increased to 53.6% at December 31 compared with 34.6% at year-end 2000. In connection with the acquisition, the Corporation issued $2.5 billion of public debentures on August 15, 2001. Of the total, $500 million bears interest at 5.3% and is due in 2004, $500 million bears interest at 5.9% and is due in 2006, $750 million bears interest at 6.65% and is due in 2011 and $750 million bears interest at 7.3% and is due in 2031. The Corporation has set a goal to reduce debt by $600 million by the end of 2002. In connection with achieving that goal, the Corporation may sell certain non-core assets. In the first quarter of 2002, the Corporation sold its gas marketing business in the United Kingdom for approximately $150 million.

Loan agreement covenants allow the Corporation to borrow an additional $2.5 billion for the construction or acquisition of assets at December 31, 2001. At December 31, the Corporation has $929 million of additional borrowing capacity available under its revolving credit agreements and has additional unused lines of credit for $214 million under uncommitted arrangements with banks. In the first quarter of 2002, the Corporation issued $600 million of public debentures, due in 2033, to refinance existing debt.

Following is a table showing aggregated information about certain contractual obligations at December 31, 2001:

			Payments due by Period
					2003 and		2005 and
Millions of dollars	Total		2002		2004		2006		Thereafter
Short-term notes	$	106	$	106	$	—	$	—	$	—
Long-term debt, including capital leases		5,559		276		537		1,320		3,426
Operating leases		1,118		98		195		110		715

The Corporation has off-balance sheet financings primarily related to retail gasoline station leases. The commitments under these leases are included in the operating lease obligations shown in the accompanying table. The net present value of the off-balance sheet financings is $380 million at December 31, 2001, using interest rates inherent in the leases. The Corporation’s December 31, 2001 debt to capitalization ratio would increase from 53.6% to 55.2% if the off-balance sheet financings were included.

None of the Corporation’s debt or lease obligations would be terminated, nor would principal or interest payments be accelerated, solely as a result of a credit rating downgrade. However, if the Corporation’s credit rating were reduced below investment grade, certain fees and interest rates would increase and the Corporation could no longer issue commercial paper but could replace commercial paper borrowings with borrowings under its revolving credit facility. This would result in increased annual interest and related costs of approximately $10 million, based on commercial paper outstanding at December 31, 2001. The Corporation may be required to provide additional security under a lease with aggregate payments of $54 million and to comply with more stringent financial covenants contained in debt instruments assumed in the Triton acquisition. The Corporation would have been in compliance with such covenants as of December 31, 2001, even if its credit rating were below investment grade. In addition, certain contracts with trading counterparties would require cash margin or collateral. The amount of potential margin fluctuates depending on trading volumes and market prices and at December 31, 2001 was estimated to be approximately $90 million.

In the normal course of business, the Corporation guarantees the payment of up to 50% of the value of HOVENSA’s crude oil purchases from suppliers other than PDVSA.At December 31, 2001, the Corporation’s contingent obligations under such guarantees totaled $77 million. The Corporation has agreed to purchase 50% of HOVENSA’s refined products at market prices, after any sales by HOVENSA to unaffiliated parties.After completion of the HOVENSA coker project, the Corporation has an obligation to provide funding of up to $15 million to meet HOVENSA’s senior debt obligations, if required.

Amerada Hess Corporation 2001 Annual Report 21

The Corporation has commitments to purchase goods and services in the normal course of business. The Corporation’s estimated 2002 capital expenditures are $1,450 million, of which approximately 30% is contractually committed.

At December 31, the Corporation is contingently liable under letters of credit and under guarantees of the debt of other entities directly related to its business, as follows:

Millions of dollars	Total
Letters of credit	$	37
Guarantees		28
	$	65

The Corporation conducts exploration and production activities in many foreign countries, including the United Kingdom, Norway, Denmark, Gabon, Indonesia,Thailand,Azerbaijan, Algeria, Malaysia, Colombia and Equatorial Guinea. The Corporation also has a note due from a Venezuelan company. Therefore, the Corporation is subject to the risks associated with foreign operations. These exposures may include political risk, credit risk and currency risk. There have not been any material adverse effects on the Corporation’s results of operations or financial condition as a result of its dealings with foreign entities.

Capital Expenditures

The following table summarizes the Corporation’s capital expenditures in 2001, 2000 and 1999:

Millions of dollars			2001		2000		1999
Exploration and production
	Exploration		$	171	$	167	$	101
	Production and development			1,250		536		626
	Acquisitions			3,640		80		—
				5,061		783		727
Refining, marketing and shipping
	Operations			110		109		70
	Acquisitions			50		46		—
				160		155		70
		Total	$	5,221	$	938	$	797

Capital expenditures in 2001 include $2,720 million for the Triton acquisition, excluding the assumption of debt. In addition, $920 million was spent on purchases of crude oil and natural gas reserves in the Gulf of Mexico and onshore Louisiana. Capital expenditures above do not include an investment of $86 million in 2001 for a 50% interest in a retail marketing and gasoline station joint venture in the southeastern United States.

During 2000, the Corporation acquired from the Algerian National Oil Company a 49% interest in three producing Algerian oil fields. The Corporation paid $55 million in 2000 for the redevelopment project and will invest in excess of $400 million in future years for new wells,workovers of existing wells and water injection and gas compression facilities. A significant portion of the future expenditures will be funded by the cash flows from these fields. The Corporation also purchased an additional 1.04% interest in three fields in Azerbaijan.

During 2000, the Corporation acquired the remaining outstanding stock of the Meadville Corporation for $168 million in cash, deferred payments and preferred stock. The Corporation also purchased certain energy marketing operations for approximately $30 million in 2000.

Capital expenditures in 2002, are currently expected to be approximately $1,450 million. It is anticipated that these expenditures will be financed by internally generated funds.

Derivative Instruments

The Corporation is exposed to market risks related to volatility in the selling prices of crude oil, natural gas and refined products, as well as to changes in interest rates and foreign currency values. Derivative instruments are used to reduce these price and rate fluctuations. The Corporation has guidelines for, and controls over, the use of derivative instruments.

22 Amerada Hess Corporation 2001 Annual Report

The Corporation uses futures, forwards, options and swaps to reduce the effects of changes in the selling prices of crude oil and natural gas. These instruments fix the selling prices of a portion of the Corporation’s products and the related gains or losses are an integral part of the Corporation’s selling prices. At December 31, the Corporation has open hedge positions equal to 25% of its estimated 2002 worldwide crude oil production. The Corporation also has hedges covering 60% of its 2002 United States natural gas production and 40% of 2003 production. The Corporation also uses derivatives in its energy marketing activities to fix the purchase prices of energy products sold under fixed-price contracts. As market conditions change, the Corporation may adjust its hedge positions.

The Corporation owns an interest in a partnership that trades energy commodities and energy derivatives. The accounts of the partnership are consolidated with those of the Corporation. The Corporation also takes trading positions for its own account.

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. This method determines the maximum potential negative one-day change in fair value with 95% confidence. The analysis is based on historical simulation and other assumptions. The value at risk is summarized below:

		Hedging		Trading
Millions of dollars		Activities		Activities
2001
	At December 31	$	35	$	13
	Average for the year		33		17
	High during the year		45		22
	Low during the year		17		12
2000
	At December 31	$	36	$	16
	Average for the year		25		15
	High during the year		36		18
	Low during the year		17		9

The Corporation may use interest-rate swaps to balance exposure to interest rates. At December 31, 2001, the interest rate on 87% of the Corporation’s debt is fixed and there are no interest rate swaps. The Corporation’s outstanding debt of $5,665 million has a fair value of $5,800 million at December 31, 2001 (debt of $2,050 million at December 31, 2000 had a fair value of $2,149 million). A 10% change in interest rates would change the fair value of debt at December 31, 2001 by $230 million. The impact of a 10% change in interest rates on the fair value at December 31, 2000 would have been $110 million.

The Corporation uses foreign exchange contracts to reduce its exposure to fluctuating foreign exchange rates, principally the pound sterling. At December 31, 2001, the Corporation has $136 million of notional value foreign exchange contracts ($438 million at December 31, 2000). Generally, the Corporation uses these foreign exchange contracts to fix the exchange rate on net monetary liabilities of its North Sea operations. The change in fair value of the foreign exchange contracts from a 10% change in the exchange rate is estimated to be $14 million at December 31, 2001 ($40 million at December 31, 2000).

The Corporation’s trading activities consist of a consolidated trading partnership, in which the Corporation owns a 50% voting interest, and its proprietary trading accounts. Trading transactions are marked-to-market and are reflected in income currently. The information that follows represents 100% of the trading partnership and the Corporation’s proprietary accounts. The fair values of unrealized positions related to these trading activities amounted to net losses of $58 million at December 31, 2001 and $92 million at December 31, 2000. Changes in fair value reflect new positions added, contracts settled and changes in market prices of existing positions. There was no material change in fair value related to changes in valuation techniques and assumptions. Net gains recorded in income for 2001 amounted to $218 million, of which $34 million was unrealized.After expenses and income taxes, the Corporation’s share of net trading income was $45 million.

Amerada Hess Corporation 2001 Annual Report 23

         The table below summarizes the sources used in determining fair values for trading activities at December 31, 2001:

						Percentage of total fair value
						by year of maturity
			Total			2002			2003			2004
Source of fair value
	Prices actively quoted			73	%		66	%		5	%		2	%
	Other external sources			18			18			—			—
	Internal estimates			9			8			1			—
		Total		100	%		92	%		6	%		2	%

The following table summarizes the fair values of net receivables relating to the Corporation’s trading activities and the credit rating of counterparties at December 31:

	At Dec. 31
Millions of dollars	2001
Investment grade determined by outside sources	$	260
Investment grade determined internally*		110
Less than investment grade		24
Not determined		4
	$	398

* Based on information provided by counterparties and other available sources.

Critical Accounting Policies

Accounting policies affect the recognition of assets and liabilities on the Corporation’s balance sheet and revenues and expenses on the income statement. The accounting methods used can affect net income, stockholders’ equity and various financial statement ratios. However, the Corporation’s accounting policies generally do not change cash flows or liquidity.

The Corporation uses the successful efforts method of accounting for oil and gas producing activities. Costs to acquire or lease unproved oil and gas properties are capitalized. Costs incurred in connection with the drilling and equipping of successful exploratory wells are also capitalized. If proved reserves are not found, these costs are charged to expense. Other exploration costs, including seismic, are charged to expense as incurred. Development costs, which include the costs of drilling and equipping development wells, are capitalized. Depreciation, depletion, and amortization of capitalized costs of proved oil and gas properties are computed on the unit-of-production method on a field-by-field basis.

As required by FAS No. 121, the carrying values of significant assets are reviewed for indications of impairment whenever events or circumstances indicate that the entire carrying values may not be recoverable. To determine whether an impairment has occurred, the Corporation estimates the undiscounted future cash flows from the assets and compares them to their carrying values. For oil and gas properties, the future cash flows are based on estimates of reserves and future oil and gas prices. Assets that have carrying amounts in excess of undiscounted future cash flows are impaired by reducing their book value to fair value based on discounted cash flows. There were asset impairments totaling $72 million, after income taxes, in 1999 and no material impairments in 2000 or 2001.

In accordance with FAS No. 142, goodwill can no longer be amortized and must be tested for impairment annually. The impairment test is calculated at the reporting unit level, which for the Corporation is the exploration and production segment. The Corporation has recorded $982 million of goodwill in connection with the purchase of Triton. No impairment of goodwill is required if the fair value of the exploration and production segment exceeds its recorded value.

The determination of asset and goodwill impairment depends on judgements about oil and gas reserves, future prices and timing of future cash flows. Significant long-term declines in crude oil and natural gas prices could lead to asset and goodwill impairments.

24 Amerada Hess Corporation 2001 Annual Report

The Corporation has hedged a portion of its future crude oil and natural gas production. The hedging contracts correlate to the selling prices of crude oil or natural gas and are designated as hedges. Therefore, gains or losses on these instruments are recorded in income in the period in which the production is sold. At December 31, the Corporation has $249 million of deferred hedging gains after income taxes.

Environment and Safety

Improvement in environmental and safety performance continues to be a goal of the Corporation. In addition, the Corporation is committed to complying with all laws and regulations covering environment, health and safety wherever it operates.Where existing laws and regulations may not provide an adequate standard of care, the Corporation has developed internal standards of performance to protect the environment, its employees and the communities in which it operates. The Corporation’s awareness of its environmental responsibilities and environmental regulations at the federal, state and local levels have led to programs on energy conservation, pollution control and waste minimization and treatment. To ensure that the Corporation meets its goals and the requirements of regulatory authorities, the Corporation also has programs for compliance evaluation, facility auditing and employee training to monitor operational activities. The trend toward environmental performance improvement raises the Corporation’s operating costs and requires increased capital investments.

The Port Reading refining facility and the HOVENSA refinery manufacture both conventional and reformulated gasolines that are cleaner burning than required under U.S. regulations. In addition, the Corporation’s gasoline is cleaner than the national average (excluding California). The benzene and sulfur content in the Corporation’s gasoline is approximately one-half and one-third, respectively, of the national average. The HOVENSA refinery also has desulfurization capabilities enabling it to produce low-sulfur diesel fuel.

The regulation of motor fuels in the United States and elsewhere continues to be an area of considerable change and will require large capital expenditures in future years. In December 1999, the United States Environmental Protection Agency (“EPA”) adopted rules that phase in limitations on the sulfur content of gasoline beginning in 2004. In December 2000, EPA adopted regulations to reduce substantially the allowable sulfur content of diesel fuel by 2006. The EPA and individual states are also considering restrictions or a prohibition on the use of MTBE, a gasoline additive that is produced by Port Reading and HOVENSA and is used primarily to meet United States regulations requiring oxygenation of reformulated gasolines. New York, Connecticut and several other states have already adopted bans on MTBE use beginning in 2003.

The Corporation and HOVENSA continue to review options to determine the most cost effective compliance strategies for these upcoming fuel regulations. The costs to comply will depend on a variety of factors, including the availability of suitable technology and contractors, the outcome of anticipated litigation regarding the diesel sulfur rule and whether the minimum oxygen content requirement for reformulated gasoline remains in place if MTBE is banned. Other fuel regulations are also under consideration, which could result in additional capital expenditures. Capital expenditures necessary to comply with the low sulfur gasoline requirements at Port Reading are expected to be approximately $70 million over the next three years. Capital expenditures to comply with low-sulfur gasoline and diesel fuel requirements at HOVENSA are presently expected to be $460 million over the next four years. HOVENSA expects to finance these capital expenditures through cash flow and, if necessary, future borrowings.

The Corporation expects continuing expenditures for environmental assessment and remediation related primarily to existing conditions. Sites where corrective action may be necessary include gasoline stations, terminals, onshore exploration and production facilities, refineries (including solid waste management units under permits issued pursuant to the Resource Conservation and Recovery Act) and, although not significant, “Superfund” sites where the Corporation has been named a potentially responsible party. The Corporation expects that existing reserves for environmental liabilities will adequately cover costs to assess and remediate known sites.

Amerada Hess Corporation 2001 Annual Report 25

The Corporation spent $8 million in 2001, $7 million in 2000 and $8 million in 1999 for remediation. Capital expenditures for facilities, primarily to comply with federal, state and local environmental standards,were $6 million in 2001, $5 million in 2000 and $2 million in 1999.

The Corporation’s environmental programs were reinforced in 2001 with the establishment of environmental management systems based on the ISO-14001 model throughout all of the Corporation’s operations. In addition, the Corporation’s Environmental, Health and Safety Council and Advisory Groups continued to establish objectives and targets, monitor performance, and perform strategic reviews.

The Corporation strives to provide a safe working environment for its employees, contractors, customers and the public. To achieve this goal, the Corporation sets performance objectives and targets for continual improvement. Programs are in place to enhance safety awareness and knowledge of safety policies. Inspections and audits are used to monitor performance.

Forward Looking Information

Certain sections of the Financial Review, including references to the Corporation’s future results of operations and financial position, liquidity and capital resources, capital expenditures, oil and gas production, debt repayment and derivative and environmental disclosures, represent forward looking information. Forward looking disclosures are based on the Corporation’s current understanding and assessment of these activities and reasonable assumptions about the future. Actual results may differ from these disclosures because of changes in market conditions, government actions and other factors.

Dividends

Cash dividends on common stock totaled $1.20 per share ($.30 per quarter) during 2001 and $.60 per share ($.15 per quarter) during 2000.

Stock Market Information

The common stock of Amerada Hess Corporation is traded principally on the New York Stock Exchange (ticker symbol: AHC). High and low sales prices in 2001 and 2000 were as follows:

	2001				2000
Quarter Ended	High		Low		High		Low
March 31	$	79.45	$	66.25	$	65.75	$	47.81
June 30		90.40		73.40		70.13		61.06
September 30		82.39		59.07		74.94		57.25
December 31		68.96		53.75		76.25		58.13

Quarterly Financial Data

Quarterly results of operations for the years ended December 31, 2001 and 2000 follow:

			Sales									Net
Millions of			and other									income
dollars, except			operating		Operating		Special			Net		per share
per share data			revenues		earnings		items			income		(diluted)
2001
	First		$	4,183	$	337	$	—		$	337	$	3.79
	Second			3,461		357		—			357		3.98
	Third			2,888		166		—			166		1.86
	Fourth			2,881		85		(31	)(a)		54		.61
		Total	$	13,413	$	945	$	(31	)	$	914
2000
	First		$	2,831	$	224	$	—		$	224	$	2.47
	Second			2,644		202		—			202		2.24
	Third			2,833		257		—			257		2.86
	Fourth			3,685		304		36	(b)		340		3.83
		Total	$	11,993	$	987	$	36		$	1,023

(a)	Reflects after tax charges of $19 million for estimated losses resulting from the bankruptcy of certain subsidiaries of Enron Corporation and $12 million for accrued severance costs.
(b)	Includes a net gain of $60 million on termination of an acquisition, partially offset by a charge of $24 million for costs associated with a research and development venture.

The results of operations for the periods reported herein should not be considered as indicative of future operating results.

26 Amerada Hess Corporation 2001 Annual Report

Statement of Consolidated Income

Amerada Hess Corporation and Consolidated Subsidiaries

				For the Years Ended December 31
Millions of dollars, except per share data				2001		2000		1999
Revenues
	Sales (excluding excise taxes) and other operating revenues			$	13,413	$	11,993	$	7,039
	Non-operating income
		Gain on asset sales			—		—		273
		Equity in income of HOVENSA L.L.C			58		121		7
		Other			142		163		142
			Total revenues		13,613		12,277		7,461
Costs and Expenses
	Cost of products sold				8,735		7,883		4,240
	Production expenses				711		557		487
	Marketing expenses				663		542		387
	Exploration expenses, including dry holes and lease impairment				368		289		261
	Other operating expenses				224		234		217
	General and administrative expenses				313		224		232
	Interest expense				194		162		158
	Depreciation, depletion and amortization				967		714		649
	Impairment of assets and operating leases				—		—		128
			Total costs and expenses		12,175		10,605		6,759
	Income before income taxes				1,438		1,672		702
	Provision for income taxes				524		649		264
Net Income				$	914	$	1,023	$	438
Net Income Per Share
	Basic			$	10.38	$	11.48	$	4.88
	Diluted				10.25		11.38		4.85

Statement of Consolidated Retained Earnings

		For the Years Ended December 31
Millions of dollars, except per share data		2001			2000			1999
Balance at Beginning of Year		$	3,069		$	2,287		$	1,904
	Net income		914			1,023			438
	Dividends declared — common stock ($1.20 per share in 2001; $.60 per share in 2000 and 1999)		(107	)		(54	)		(55	)
	Common stock acquired and retired		(69	)		(187	)		—
Balance at End of Year		$	3,807		$	3,069		$	2,287

See accompanying notes to consolidated financial statements.

Amerada Hess Corporation 2001 Annual Report 27

Consolidated Balance Sheet

Amerada Hess Corporation and Consolidated Subsidiaries

			At December 31
Millions of dollars; thousands of shares			2001		2000
Assets
Current Assets
	Cash and cash equivalents		$	37	$	312
	Accounts receivable
		Trade		2,889		2,949
		Other		73		47
	Inventories			550		401
	Other current assets			397		406
		Total current assets		3,946		4,115
Investments and Advances
	HOVENSA L.L.C			889		831
	Other			747		219
		Total investments and advances		1,636		1,050
Property, Plant and Equipment
	Exploration and production			15,194		10,499
	Refining, marketing and shipping			1,433		1,399
		Total — at cost		16,627		11,898
	Less reserves for depreciation, depletion, amortization and
		lease impairment		8,462		7,575
		Property, plant and equipment — net		8,165		4,323
Note Receivable				395		443
Goodwill				982		—
Deferred Income Taxes and Other Assets				245		343
Total Assets			$	15,369	$	10,274

28 Amerada Hess Corporation 2001 Annual Report

			At December 31
			2001		2000
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable — trade			$	1,807	$	1,875
	Accrued liabilities			1,115		1,158
	Taxes payable			414		440
	Notes payable			106		7
	Current maturities of long-term debt			276		58
		Total current liabilities		3,718		3,538
Long-Term Debt				5,283		1,985
Deferred Liabilities and Credits
Deferred income taxes				1,111		510
Other				350		358
		Total deferred liabilities and credits		1,461		868
Stockholders’ Equity
	Preferred stock, par value $1.00, 20,000 shares authorized
	3% cumulative convertible series
		Authorized — 330 shares
		Issued — 327 shares in 2001 and 2000 ($16 million liquidation preference)		—		—
	Common stock, par value $1.00
		Authorized — 200,000 shares
		Issued — 88,757 shares in 2001; 88,744 shares in 2000		89		89
	Capital in excess of par value			903		864
	Retained earnings			3,807		3,069
	Accumulated other comprehensive income			108		(139	)
		Total stockholders’ equity		4,907		3,883
Total Liabilities and Stockholders’ Equity			$	15,369	$	10,274

The consolidated financial statements reflect the successful efforts method of accounting for oil and gas
exploration and producing activities. See accompanying notes to consolidated financial statements.

Amerada Hess Corporation 2001 Annual Report 29

Statement of Consolidated Cash Flows

Amerada Hess Corporation and Consolidated Subsidiaries

					For the Years Ended December 31
Millions of dollars					2001			2000			1999
Cash Flows From Operating Activities
	Net income				$	914		$	1,023		$	438
	Adjustments to reconcile net income to net cash
		provided by operating activities
			Depreciation, depletion and amortization			967			714			649
			Impairment of assets and operating leases			—			—			128
			Exploratory dry hole costs			204			133			69
			Lease impairment			38			33			36
			Gain on asset sales			—			—			(273	)
			Provision for deferred income taxes			64			164			62
			Undistributed earnings of affiliates			(52	)		(119	)		7
						2,135			1,948			1,116
			Changes in other operating assets and liabilities
				(Increase) decrease in accounts receivable		650			(1,792	)		(155	)
				(Increase) decrease in inventories		(131	)		(23	)		80
				Increase (decrease) in accounts payable and accrued liabilities		(553	)		1,617			(175	)
				Increase (decrease) in taxes payable		(185	)		272			53
				Changes in prepaid expenses and other		44			(227	)		(173	)
				Net cash provided by operating activities		1,960			1,795			746
Cash Flows From Investing Activities
	Capital expenditures
		Exploration and production				(2,341	)		(783	)		(727	)
		Refining, marketing and shipping				(160	)		(155	)		(70	)
			Total capital expenditures			(2,501	)		(938	)		(797	)
	Acquisition of Triton Energy Limited, net of cash acquired					(2,720	)		—			—
	Payment received on note					48			48			24
	Investment in affiliates					(86	)		(38	)		(59	)
	Proceeds from asset sales and other					54			26			432
				Net cash used in investing activities		(5,205	)		(902	)		(400	)
Cash Flows From Financing Activities
	Issuance (repayment) of notes					99			(11	)		15
	Long-term borrowings					3,060			—			990
	Repayment of long-term debt					(54	)		(396	)		(1,348	)
	Cash dividends paid					(94	)		(54	)		(54	)
	Common stock and warrants acquired					(100	)		(220	)		—
	Stock options exercised					59			59			18
				Net cash provided by (used in) financing activities		2,970			(622	)		(379	)
Net Increase (Decrease) in Cash and Cash Equivalents						(275	)		271			(33	)
Cash and Cash Equivalents at Beginning of Year						312			41			74
Cash and Cash Equivalents at End of Year					$	37		$	312		$	41

See accompanying notes to consolidated financial statements.

30 Amerada Hess Corporation 2001 Annual Report

Statement of Consolidated Changes in Preferred Stock, Common Stock and Capital in Excess of Par Value

Amerada Hess Corporation and Consolidated Subsidiaries

			Preferred Stock				Common stock
													Capital in
			Number of				Number of						excess of
Millions of dollars; thousands of shares			shares		Amount		shares			Amount			par value
Balance at January 1, 1999				—	$	—		90,357		$	90		$	764
	Cancellations of nonvested common
		stock awards (net)		—		—		(3	)		—			—
	Employee stock options exercised			—		—		322			1			18
Balance at December 31, 1999				—		—		90,676			91			782
	Distributions to trustee of nonvested
		common stock awards (net)		—		—		461			—			28
	Common stock acquired and retired			—		—		(3,475	)		(3	)		(31	)
	Employee stock options exercised			—		—		1,082			1			69
	Issuance of preferred stock			327		—		—			—			16
Balance at December 31, 2000				327		—		88,744			89			864
	Distributions to trustee of nonvested
		common stock awards (net)		—		—		38			—			1
	Common stock acquired and retired			—		—		(1,078	)		(1	)		(11	)
	Employee stock options exercised			—		—		1,053			1			69
	Warrants purchased			—		—		—			—			(20	)
Balance at December 31, 2001				327	$	—		88,757		$	89		$	903

Statement of Consolidated Comprehensive Income

			For the Years Ended December 31
Millions of dollars			2001			2000			1999
Components of Comprehensive Income
	Net income		$	914		$	1,023		$	438
	Change in foreign currency translation adjustment			(2	)		(17	)		(7	)
	Unrealized gains on oil and gas hedges, after tax
		FAS 133 transition adjustment		100			—			—
		Reclassification of deferred hedging gains to income		(74	)		—			—
		Net change in fair value of hedges		223			—			—
				249			—			—
Comprehensive Income			$	1,161		$	1,006		$	431

See accompanying notes to consolidated financial statements.

Amerada Hess Corporation 2001 Annual Report 31

Notes to Consolidated Financial Statements

Amerada Hess Corporation and Consolidated Subsidiaries

1. Summary of Significant Accounting Policies

Nature of Business: Amerada Hess Corporation and subsidiaries (the “Corporation”) engage in the exploration for and the production, purchase, transportation and sale of crude oil and natural gas. These activities are conducted primarily in the United States, United Kingdom, Norway, Denmark and Equatorial Guinea. The Corporation also has oil and gas activities in Algeria, Azerbaijan, Colombia, Gabon, Indonesia, Malaysia,Thailand and other countries. In addition, the Corporation manufactures, purchases, transports, trades and markets refined petroleum and other energy products. The Corporation owns 50% of HOVENSA L.L.C., a refinery joint venture in the United States Virgin Islands.An additional refining facility, terminals and retail gasoline stations are located on the East Coast of the United States.

In preparing financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses in the income statement. Actual results could differ from those estimates. Among the estimates made by management are: oil and gas reserves, asset valuations and depreciable lives, pension liabilities, environmental obligations, dismantlement costs and income taxes.

Principles of Consolidation: The consolidated financial statements include the accounts of Amerada Hess Corporation and subsidiaries. The Corporation’s interests in oil and gas exploration and production ventures are proportionately consolidated.

Investments in affiliated companies, 20% to 50% owned, including HOVENSA, are stated at cost of acquisition plus the Corporation’s equity in undistributed net income since acquisition, except as stated below. The change in the equity in net income of these companies is included in non-operating income in the income statement. The Corporation consolidates a trading partnership in which it owns a 50% voting interest and over which it exercises control.

Intercompany transactions and accounts are eliminated in consolidation.

Revenue Recognition: The Corporation recognizes revenues from the sale of crude oil, natural gas, petroleum products and other merchandise when title passes to the customer.

The Corporation recognizes revenues from the production of natural gas properties in which it has an interest based on sales to customers. Differences between natural gas volumes sold and the Corporation’s share of natural gas production are not material.

Cash and Cash Equivalents: Cash equivalents consist of highly liquid investments, which are readily convertible into cash and have maturities of three months or less.

Inventories: Crude oil and refined product inventories are valued at the lower of cost or market, except for inventories held for trading purposes which are marked to market. For inventories valued at cost, the Corporation uses principally the last-in, firstout (LIFO) inventory method.

Inventories of materials and supplies are valued at or below cost.

Exploration and Development Costs: Oil and gas exploration and production activities are accounted for using the successful efforts method. Costs of acquiring undeveloped oil and gas leasehold acreage, including lease bonuses, brokers’ fees and other related costs, are capitalized.

Annual lease rentals and exploration expenses, including geological and geophysical expenses and exploratory dry hole costs, are charged against income as incurred.

Costs of drilling and equipping productive wells, including development dry holes, and related production facilities are capitalized.

The Corporation does not carry the capitalized costs of exploratory wells as assets for more than one year, unless oil and gas reserves are found and classified as proved, or additional exploration is underway or planned. If exploratory wells do not meet these conditions, the costs are charged to expense.

Depreciation, Depletion and Amortization: Depreciation, depletion and amortization of oil and gas production equipment, properties and wells are determined on the unit-of-production method based on estimated recoverable oil and gas reserves. Depreciation of all other plant and equipment is determined on the straight-line method based on estimated useful lives.

32 Amerada Hess Corporation 2001 Annual Report

Provisions for impairment of undeveloped oil and gas leases are based on periodic evaluations and other factors.

The estimated costs of dismantlement, restoration and abandonment, less estimated salvage values, of offshore oil and gas production platforms and certain other facilities are taken into account in determining depreciation.

Retirement of Property, Plant and Equipment: Costs of property, plant and equipment retired or otherwise disposed of, less accumulated reserves, are reflected in net income.

Impairment of Long-Lived Assets: The Corporation reviews longlived assets, including oil and gas properties, for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recovered. If the carrying amounts are not expected to be recovered by undiscounted future cash flows, the assets are impaired and an impairment loss is recorded. The amount of impairment is based on the estimated fair value of the assets determined by discounting anticipated future net cash flows. The net present value of future cash flows is based on the Corporation’s estimates, including future oil and gas prices applied to projected production profiles, discounted at a rate commensurate with the risks involved. Oil and gas prices used for determining asset impairments may differ from those used at year-end in the standardized measure of discounted future net cash flows.

Impairment of Goodwill: In accordance with FAS No. 142, Goodwill and Other Intangible Assets, goodwill cannot be amortized, however, it must be tested annually for impairment. This impairment test is calculated at the reporting unit level, which is the exploration and production segment for the Corporation’s goodwill. The goodwill impairment test has two steps. The first, identifies potential impairments by comparing the fair value of a reporting unit with its book value, including goodwill. If the fair value of the reporting unit exceeds the carrying amount, goodwill is not impaired and the second step is not necessary. If the carrying value exceeds the fair value, the second step calculates the possible impairment loss by comparing the implied fair value of goodwill with the carrying amount. If the implied goodwill is less than the carrying amount, a write-down is recorded.

Maintenance and Repairs: The estimated costs of major maintenance, including turnarounds at the Port Reading refining facility, are accrued. Other expenditures for maintenance and repairs are charged against income as incurred. Renewals and improvements are treated as additions to property, plant and equipment, and items replaced are treated as retirements.

Environmental Expenditures: The Corporation capitalizes environmental expenditures that increase the life or efficiency of property or that reduce or prevent environmental contamination. The Corporation accrues for environmental expenses resulting from existing conditions related to past operations when the future costs are probable and reasonably estimable.

Employee Stock Options and Nonvested Common Stock Awards: The Corporation uses the intrinsic value method to account for employee stock options. Because the exercise prices of employee stock options equal or exceed the market price of the stock on the date of grant, the Corporation does not recognize compensation expense. The Corporation records compensation expense for nonvested common stock awards ratably over the vesting period.

Foreign Currency Translation: The U.S. dollar is the functional currency (primary currency in which business is conducted) for most foreign operations. For these operations, adjustments resulting from translating foreign currency assets and liabilities into U.S. dollars are recorded in income. For operations that use the local currency as the functional currency, adjustments resulting from translating foreign functional currency assets and liabilities into U.S. dollars are recorded in a separate component of stockholders’ equity entitled “Accumulated other comprehensive income.” Gains or losses resulting from transactions in other than the functional currency are reflected in net income.

Hedging: 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. The Corporation also uses derivatives in its energy marketing activities to fix the purchase and selling prices of energy products. Related hedge gains or losses are an integral part of the selling or purchase prices. Generally, these derivatives are designated as hedges of expected future cash flows or forecasted transactions (cash flow hedges), and the gains or losses are recorded in other comprehensive income. These transactions meet the requirements for hedge accounting, including correlation. The Corporation reclassifies hedging gains and losses included in other comprehensive income to earnings at the time the hedged transactions are recognized. The ineffective portion of hedges is included in current earnings. The Corporation’s remaining derivatives, including foreign currency contracts, are not designated as hedges and the change in fair value is included in income currently.

Trading: Energy trading activities are marked to market, with gains and losses recorded in operating revenue.

Amerada Hess Corporation 2001 Annual Report 33

2. Acquisition of Triton Energy Limited

In 2001, the Corporation acquired 100% of the outstanding ordinary shares of Triton Energy Limited, an international oil and gas exploration and production company. The Corporation’s consolidated financial statements include Triton’s results of operations from August 14, 2001. The acquisition of Triton increases the size and scope of the Corporation’s exploration and production operations, providing access to long-lived international reserves and exploration potential.

The Corporation accounted for the acquisition as a purchase using the accounting standards established in Statements of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. The accounting rules require that the goodwill arising from the purchase method of accounting not be amortized, however, it must be tested for impairment at least annually.

The estimated fair values of assets acquired and liabilities assumed at August 14, 2001 follow:

Millions of dollars

Current assets (net of cash acquired)			$	101
Investments and advances				447
Property, plant and equipment				2,605
Other assets				7
Goodwill				982
	Total assets acquired			4,142
Current liabilities				(282	)
Long-term debt, average rate 6.3%, due through 2007				(555	)
Deferred liabilities and credits				(585	)
	Total liabilities assumed			(1,422	)
		Net assets acquired	$	2,720

The goodwill is assigned to the exploration and production segment and is not deductible for tax purposes. Since the acquisition, goodwill has increased $4 million, mainly related to minor changes in contingent liabilities. Additional adjustments to the purchase price allocation, including estimated assumed liabilities, may still be required.

The following pro forma results of operations present information as if the Triton acquisition occurred at the beginning of each year:

Millions of dollars, except per share data		2001		2000
Pro forma revenue		$	13,936	$	12,620
Pro forma income		$	914	$	1,010
Pro forma earnings per share
	Basic	$	10.38	$	11.34
	Diluted	$	10.25	$	11.24

3. Special Items

2001: The Corporation recorded a charge of $29 million ($19 million after income taxes) for estimated losses due to the bankruptcy of certain subsidiaries of Enron Corporation. The charge reflects losses on less than 10% of the Corporation’s crude oil and natural gas hedges. In addition, the Corporation recorded $18 million ($12 million after income taxes) for severance expenses resulting from cost reduction initiatives. The cost reduction program reflects the elimination of approximately 150 positions, principally in exploration and production operations. The severance will be paid primarily in 2002 with the remainder in early 2003. Substantially all of the pre-tax cost of the special items is reflected in general and administrative expense in the income statement.

2000: The Corporation recorded a gain of $97 million ($60 million after income taxes) from the termination of its proposed acquisition of another oil company. The income principally reflects foreign currency gains on pound sterling contracts which were purchased in anticipation of the acquisition. These contracts were subsequently liquidated at an after-tax gain of $53 million. The Corporation also recorded income from a termination payment which was received from the other company, partially offset by transaction costs. The combined results of this transaction were recorded as a special item in the Corporate segment. Refining and marketing results included a charge of $38 million ($24 million after income taxes) for costs associated with an alternative fuel research and development venture. Both of the special items are reflected in non-operating income in the income statement.

34 Amerada Hess Corporation 2001 Annual Report

1999: The Corporation recorded a gain of $274 million ($176 million after income taxes) from the sale of its Gulf Coast and Southeast pipeline terminals, natural gas properties in California and certain retail sites. Exploration and production results included special income tax benefits of $54 million, reflecting the timing of deductions for certain prior year foreign drilling costs and capital losses.

Exploration and production earnings also included an impairment of $59 million ($38 million after income taxes) for the Corporation’s interest in the Trans Alaska Pipeline System. Refining and marketing results included an asset impairment of $34 million (with no income tax benefit) for the Corporation’s crude oil storage terminal in St. Lucia, due to the nonrenewal of a major third party storage contract. The Corporation also accrued $35 million ($27 million after income taxes) for a further decline in the value of a drilling service fixed-price contract due to lower market rates. During 2000, $41 million of drilling contract payments were charged against the reserve and the remaining balance of $14 million was reversed to income.

Gains on asset sales are included on a separate line in non-operating income in the income statement. The impairment of carrying values of the Alaska pipeline and the crude oil storage terminal and the loss on the drilling service contract are reflected in a separate impairment line in the income statement.

4. Inventories

Inventories at December 31 are as follows:

Millions of dollars		2001			2000
Crude oil and other charge stocks		$	108		$	103
Refined and other finished products			440			502
Less: LIFO adjustment			(111	)		(281	)
			437			324
Materials and supplies			113			77
	Total	$	550		$	401

5. Refining Joint Venture

The Corporation has an investment in HOVENSA L.L.C., a 50% joint venture with Petroleos de Venezuela, S.A. (PDVSA). HOVENSA owns and operates a refinery in the Virgin Islands, previously wholly owned by the Corporation.

The Corporation accounts for its investment in HOVENSA using the equity method. Summarized financial information for HOVENSA as of December 31, 2001, 2000 and 1999 and for the years then ended follows:

Millions of dollars			2001			2000			1999
Summarized Balance Sheet
At December 31
	Current assets		$	491		$	523		$	433
	Net fixed assets			1,846			1,595			1,328
	Other assets			35			37			27
	Current liabilities			(294	)		(425	)		(282	)
	Long-term debt			(365	)		(131	)		(150	)
	Deferred liabilities and credits			(23	)		(22	)		(26	)
		Partners’ equity	$	1,690		$	1,577		$	1,330
Summarized Income Statement
For the periods ended December 31
	Total revenues		$	4,209		$	5,243		$	3,082
	Costs and expenses			(4,089	)		(4,996	)		(3,064	)
		Net income(a)	$	120		$	247		$	18

(a) The Corporation’s share of HOVENSA’s income was $58 million in 2001, $121 million in 2000 and $7 million in 1999.

Amerada Hess Corporation 2001 Annual Report 35

The Corporation has agreed to purchase 50% of HOVENSA’s production of refined products at market prices, after sales by HOVENSA to unaffiliated parties. Such purchases amounted to approximately $1,500 million during 2001, $2,080 million during 2000 and $1,196 million during 1999. The Corporation sold crude oil to HOVENSA for approximately $110 million during 2001, $98 million during 2000 and $81 million during 1999. The Corporation guarantees the payment of up to 50% of the value of HOVENSA’s crude oil purchases from suppliers other than PDVSA. At December 31, 2001, this amount was $77 million.

At formation of the joint venture, PDVSA,V.I., a wholly-owned subsidiary of PDVSA, purchased a 50% interest in the fixed assets of the Corporation’s Virgin Islands refinery for $63 million in cash and a 10-year note from PDVSA V.I. for $563 million bearing interest at 8.46% per annum and requiring principal payments over its term. At December 31, 2001 and December 31, 2000, the principal balance of the note was $443 million and $491 million, respectively. In addition, there is a $125 million, 10-year, contingent note, which was not valued for accounting purposes. PDVSA V.I.’s payment obligations under both notes are guaranteed by PDVSA and secured by a pledge of PDVSA V.I.’s interest in the joint venture.

6. Short-Term Notes and Related Lines of Credit

Short-term notes payable to banks amounted to $106 million at December 31, 2001 and $7 million at December 31, 2000. The weighted average interest rates on these borrowings were 2.5% and 6.8% at December 31, 2001 and 2000, respectively. At December 31, 2001, the Corporation has uncommitted arrangements with banks for unused lines of credit aggregating $214 million.

7. Long-Term Debt

Long-term debt at December 31 consists of the following:

Millions of dollars		2001		2000
Fixed rate debentures, weighted average rate 6.8%, due through 2031		$	3,483	$	990
Fixed rate debentures, weighted average rate 6.3%, due through 2007			503		—
6.1% Marine Terminal Revenue Bonds—Series 1994— City of Valdez, Alaska, due 2024			20		20
Pollution Control Revenue Bonds, weighted average rate 6.6%, due through 2022			53		53
Fixed rate notes, payable principally to insurance companies, weighted average rate 8.5%, due through 2014			645		645
Revolving Credit Facility with banks, weighted average rate 2.5%, due through 2006			32		—
Commercial paper, weighted average rate 2.8%			539		—
Project lease financing, weighted average rate 5.1%, due through 2014			174		178
Notes payable for asset purchases, weighted average rate 6.3%, due through 2003			98		147
Capitalized lease obligations, weighted average rate 5.9%, due through 2009			7		7
Other loans, weighted average rate 9.1%, due through 2019			5		3
			5,559		2,043
Less amount included in current maturities			276		58
	Total	$	5,283	$	1,985

36 Amerada Hess Corporation 2001 Annual Report

The aggregate long-term debt maturing during the next five years is as follows (in millions): 2002—$276 (included in current liabilities); 2003—$28; 2004—$509; 2005—$223 and 2006— $1,097.

The Corporation’s long-term debt agreements contain restrictions on the amount of total borrowings and cash dividends allowed. At December 31, 2001, the Corporation is permitted to borrow an additional $2.5 billion for the construction or acquisition of assets. At year-end, the amount available for payment of dividends is $943 million.

In August 2001, the Corporation issued $2.5 billion of public debentures of which $500 million bears interest at 5.30% and is due in 2004, $500 million bears interest at 5.90% and is due in 2006, $750 million bears interest at 6.65% and is due in 2011 and $750 million bears interest at 7.30% and is due in 2031. In the first quarter of 2002, the Corporation issued $600 million of public debentures bearing interest at 7.125%, due in 2033.

The Corporation has a $1.5 billion revolving credit agreement, which expires in January 2006 and bears interest at .725% above the London Interbank Offered Rate. A facility fee of .15% per annum is currently payable on the amount of the credit line. The interest rate and facility fee are increased if the Corporation’s public debt rating is lowered. At December 31, 2001, the Corporation had $929 million of additional borrowing capacity available under its revolving credit agreement. Outstanding commercial paper of $539 million is supported by this credit line and therefore is classified as long-term.

In 2001, 2000 and 1999, the Corporation capitalized interest of $44 million, $3 million and $16 million, respectively, on major development projects. The total amount of interest paid (net of amounts capitalized), principally on short-term and long-term debt, in 2001, 2000 and 1999 was $121 million, $173 million and $145 million, respectively.

8. Stock Based Compensation Plans

The Corporation has outstanding stock options and nonvested common stock under its 1995 Long-Term Incentive Plan (as amended) and its Executive Long-Term Incentive Compensation and Stock Ownership Plan (which expired in 1997). Generally, stock options vest one year from the date of grant and the exercise price equals or exceeds the market price on the date of grant. Nonvested common stock vests five years from the date of grant.

The Corporation’s stock option activity in 2001, 2000 and 1999 consisted of the following:

				Weighted-
				average
	Options			exercise price
	(thousands)			per share
Outstanding at January 1, 1999		3,095		$	56.21
Granted		1,804			55.66
Exercised		(322	)		53.22
Forfeited		(70	)		58.08
Outstanding at December 31, 1999		4,507			56.18
Granted		870			60.39
Exercised		(1,082	)		54.41
Outstanding at December 31, 2000		4,295			57.47
Granted		1,674			60.91
Exercised		(1,053	)		56.28
Forfeited		(42	)		61.79
Outstanding at December 31, 2001		4,874		$	58.87
Exercisable at December 31, 1999		2,702		$	56.52
Exercisable at December 31, 2000		3,425			56.73
Exercisable at December 31, 2001		3,216			57.85

Exercise prices for employee stock options at December 31, 2001 ranged from $49.19 to $84.61 per share. The weighted-average remaining contractual life of employee stock options is 8 years.

Amerada Hess Corporation 2001 Annual Report 37

The Corporation uses the Black-Scholes model to estimate the fair value of employee stock options for pro forma disclosure of the effects on net income and earnings per share. The Corporation used the following weighted-average assumptions in the Black-Scholes model for 2001, 2000 and 1999, respectively: risk-free interest rates of 4.1%, 5.4% and 5.9%; expected stock price volatility of .244, .225 and .207; dividend yield of 2.0%, 1.0% and 1.1%; and an expected life of seven years. The Corporation’s net income would have been reduced by approximately $13 million in 2001, $17 million in 2000 and $6 million in 1999 ($.15 per share in 2001, $.19 per share in 2000 and $.07 per share in 1999, diluted) if option expense were recorded using the fair value method.

The weighted-average fair values of options granted for which the exercise price equaled the market price on the date of grant were $16.20 in 2001, $20.04 in 2000 and $18.45 in 1999.

Total compensation expense for nonvested common stock was $12 million in 2001, $7 million in 2000 and $10 million in 1999. Awards of nonvested common stock were as follows:

	Shares of
	nonvested		Weighted-
	common stock		average
	awarded		price on date
	(thousands)		of grant
Granted in 1999		24	$	56.07
Granted in 2000		519		59.65
Granted in 2001		108		67.25

At December 31, 2001, the number of common shares reserved for issuance is as follows (in thousands):

1995 Long-Term Incentive Plan Future awards			872
	Stock options outstanding		4,874
	Stock appreciation rights		15
		Total	5,761

9. Foreign Currency Translation

Foreign currency gains amounted to $7 million after income taxes in 2001. In 2000, after-tax foreign currency gains amounted to $45 million, including the gain of $53 million related to the termination of the proposed acquisition of another oil company. After-tax foreign currency gains amounted to $17 million in 1999.

The balance in accumulated other comprehensive income related to foreign currency translation was a reduction of $141 million at December 31, 2001 compared with a reduction of $139 million at December 31, 2000.

10. Pension Plans

The Corporation has defined benefit pension plans for substantially all of its employees. The following table reconciles the benefit obligation and fair value of plan assets and shows the funded status:

Millions of dollars			2001			2000
Reconciliation of pension benefit obligation
	Benefit obligation at January 1		$	589		$	501
	Service cost			20			18
	Interest cost			41			37
	Actuarial (gain) loss			(5	)		34
	Acquisition of business			7			25
	Benefit payments			(29	)		(26	)
Pension benefit obligation at December 31				623			589
Reconciliation of fair value of plan assets
	Fair value of plan assets at January 1			543			534
	Actual return on plan assets			(39	)		(13	)
	Employer contributions			12			14
	Acquisition of business			8			34
	Benefit payments			(29	)		(26	)
		Fair value of plan assets at December 31		495			543
Funded status at December 31
	Funded status			(128	)		(46	)
	Unrecognized prior service cost			5			6
	Unrecognized loss (gain)			76			(5	)
		Accrued pension liability	$	(47	)	$	(45	)

38 Amerada Hess Corporation 2001 Annual Report

Pension expense consisted of the following:

Millions of dollars		2001			2000			1999
Service cost		$	20		$	18		$	22
Interest cost			41			37			34
Expected return on plan assets			(48	)		(45	)		(41	)
Amortization of prior service cost			1			2			1
Amortization of net gain			—			(1	)		—
	Pension expense	$	14		$	11		$	16

Prior service costs and gains and losses in excess of 10% of the greater of the benefit obligation or the market value of assets are amortized over the average remaining service period of active employees.

The weighted-average actuarial assumptions used by the Corporation’s pension plans at December 31 were as follows:

	2001			2000
Discount rate		7.0	%		7.0	%
Expected long-term rate of return on plan assets		9.0	%		8.7	%
Rate of compensation increases		4.5	%		4.5	%

The Corporation also has a nonqualified supplemental pension plan covering certain employees. The supplemental pension plan provides for incremental pension payments from the Corporation’s funds so that total pension payments equal amounts that would have been payable from the Corporation’s principal pension plan were it not for limitations imposed by income tax regulations. The benefit obligation related to this unfunded plan totaled $59 million at December 31, 2001 and $47 million at December 31, 2000. Pension expense for the plan was $9 million in 2001 and $7 million in 2000 and 1999. The Corporation has accrued $44 million for this plan at December 31, 2001 ($35 million at December 31, 2000). The trust established to fund the supplemental plan held assets valued at $23 million at December 31, 2001 and $19 million at December 31, 2000.

11. Provision for Income Taxes

The provision (benefit) for income taxes consisted of:

Millions of dollars			2001			2000		1999
United States Federal
	Current		$	78		$	92	$	6
	Deferred			49			62		82
State				27			22		6
				154			176		94
Foreign
	Current			356			371		189
	Deferred			14			102		(15	)
				370			473		174
Adjustment of deferred tax liability for foreign income tax rate change				—			—		(4	)
		Total	$	524	(a)	$	649	$	264	(b)

(a)	Includes benefit of $48 million relating to prior year refunds of United Kingdom Advance Corporation Taxes and deductions for exploratory drilling.
(b)	Includes a benefit of $54 million representing deductions for certain prior year foreign drilling costs and capital losses.

Income before income taxes consisted of the following:

Millions of dollars		2001		2000		1999
United States		$	385	$	497	$	397
Foreign*			1,053		1,175		305
	Total	$	1,438	$	1,672	$	702

* Foreign income includes the Corporation’s Virgin Islands, shipping and other operations located outside of the United States.

Amerada Hess Corporation 2001 Annual Report 39

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their recorded amounts in the financial statements. A summary of the components of deferred tax liabilities and assets at December 31 follows:

Millions of dollars			2001			2000
Deferred tax liabilities
	Fixed assets and investments		$	1,168		$	350
	Foreign petroleum taxes			209			202
	Other			118			97
		Total deferred tax liabilities		1,495			649
Deferred tax assets
	Accrued liabilities			176			99
	Net operating and capital loss carryforwards			350			171
	Tax credit carryforwards			32			122
	Other			44			28
		Total deferred tax assets		602			420
	Valuation allowance			(93	)		(111	)
		Net deferred tax assets		509			309
		Net deferred tax liabilities	$	986		$	340

The difference between the Corporation’s effective income tax rate and the United States statutory rate is reconciled below:

		2001			2000			1999
United States statutory rate			35.0	%		35.0	%		35.0	%
Effect of foreign operations, including foreign tax credits			1.1			3.5			3.0
State income taxes, net of Federal income tax benefit			1.2			.8			.6
Prior year adjustments			(1.4	)		(.6	)		(.8	)
Other			.5			.1			(.2	)
	Total		36.4	%		38.8	%		37.6	%

The Corporation has not recorded deferred income taxes applicable to undistributed earnings of foreign subsidiaries that are indefinitely reinvested in foreign operations. Undistributed earnings amounted to approximately $2 billion at December 31, 2001, excluding amounts which, if remitted, generally would not result in any additional U.S. income taxes because of available foreign tax credits. If the earnings of such foreign subsidiaries were not indefinitely reinvested, a deferred tax liability of approximately $160 million would have been required.

For income tax reporting at December 31, 2001, the Corporation has alternative minimum tax credit carryforwards of approximately $32 million, which can be carried forward indefinitely. At December 31, 2001, a net operating loss carryforward of approximately $780 million is also available to offset income of the HOVENSA joint venture partners. In addition, a foreign exploration and production subsidiary has a net operating loss carryforward of approximately $560 million.

Income taxes paid (net of refunds) in 2001, 2000 and 1999 amounted to $605 million, $249 million and $141 million, respectively.

12. Net Income Per Share

The weighted average number of common shares used in the basic and diluted earnings per share computations are summarized below:

Thousands of shares		2001		2000		1999
Common shares—basic			88,031		89,063		89,692
Effect of dilutive securities
	Stock options		468		339		152
	Nonvested common stock		425		358		436
	Convertible preferred stock		205		118		—
Common shares—diluted			89,129		89,878		90,280

Diluted common shares include shares that would be outstanding assuming the exercise of stock options, the fulfillment of restrictions on nonvested shares and the conversion of preferred stock. The table excludes the effect of out-of-the-money options on 139,000 shares, 1,063,000 shares and 1,609,000 shares in 2001, 2000 and 1999, respectively.

40 Amerada Hess Corporation 2001 Annual Report

13. Leased Assets

The Corporation and certain of its subsidiaries lease floating production systems, drilling rigs, tankers, gasoline stations, office space and other assets for varying periods.At December 31, 2001, future minimum rental payments applicable to noncancelable operating leases with remaining terms of one year or more (other than oil and gas leases) are as follows:

	Operating
Millions of dollars	Leases
2002	$	98
2003		100
2004		95
2005		57
2006		53
Remaining years		715
Total minimum lease payments		1,118
Less income from subleases		21
Net minimum lease payments	$	1,097

Certain operating leases provide an option to purchase the related property at fixed prices.

Rental expense for all operating leases, other than rentals applicable to oil and gas leases, was as follows:

Millions of dollars	2001		2000		1999
Total rental expense	$	206	$	199	$	156
Less income from subleases		63		86		51
Net rental expense	$	143	$	113	$	105

14. Financial Instruments, Hedging and Trading Activities

On January 1, 2001, the Corporation adopted FAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement requires that the Corporation recognize all derivatives on the balance sheet at fair value and establishes criteria for using derivatives as hedges.

The January 1, 2001 transition adjustment resulting from adopting FAS No. 133 was a cumulative increase in other comprehensive income of $100 million after income taxes ($145 million before income taxes). Substantially all of the transition adjustment results from crude oil and natural gas cash flow hedges. The transition adjustment did not have a material effect on net income or retained earnings. The accounting change also affected current assets and liabilities.

Hedging: 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 selling prices. The Corporation also uses derivatives in its energy marketing activities to fix the purchase and selling prices of energy products. Related hedge gains or losses are an integral part of the selling or purchase prices. Generally, these derivatives are designated as hedges of expected future cash flows or forecasted transactions (cash flow hedges), and the gains or losses are recorded in other comprehensive income. The Corporation’s use of fair value hedges is not material.

The Corporation reclassifies hedging gains and losses from accumulated other comprehensive income to earnings at the time the hedged transactions are recognized. Results from exploration and production activities in 2001 were increased $74 million after income taxes ($106 million before income taxes) by reclassified hedge gains. This included $53 million after income taxes ($82 million before income taxes) associated with the transition adjustment at the beginning of the year. The impact of hedging on refining and marketing results was immaterial. The ineffective portion of hedges is included in current earnings in cost of products sold. The amount of hedge ineffectiveness was not material during the year ended December 31, 2001.

The Corporation produced 109 million barrels of crude oil and natural gas liquids and 296 million Mcf of natural gas in 2001.At December 31, 2001, the Corporation’s crude oil and natural gas hedging activities included commodity futures, option and swap contracts. Crude oil hedges mature in 2002 and cover 29 million barrels of crude oil production (88 million barrels of crude oil in 2000). The Corporation has natural gas hedges covering 143 million Mcf of natural gas production at December 31, 2001, which mature in 2002 and 2003 (20 million Mcf of natural gas at December 31, 2000).

Amerada Hess Corporation 2001 Annual Report 41

Since the contracts described above are designated as hedges and correlate to price movements of crude oil and natural gas, any gains or losses resulting from market changes will be offset by losses or gains on the Corporation’s production. At December 31, 2001, after-tax deferred gains in accumulated other comprehensive income from the Corporation’s crude oil and natural gas hedging contracts expiring through 2003 were $249 million ($374 million before income taxes), including $164 million of unrealized gains. Of the total amount, $226 million matures during 2002. Creditworthiness of counterparties to hedging transactions is reviewed regularly and full performance is expected. Deferred gains were $100 million at December 31, 2000, of which $131 million represented unrealized gains.

In its energy marketing business, the Corporation has entered into fixed-price sales contracts with a fair value of $115 million, offset by financial instruments which fix the future purchase price. These contracts mature generally through 2003. There is no significant concentration of credit risk with counterparties.

Commodity Trading: The Corporation, principally through a consolidated partnership, trades energy commodities, including futures, forwards, options and swaps, based on expectations of future market conditions. The Corporation’s net income from trading activities, including its share of the earnings of the trading partnership amounted to $45 million in 2001, $22 million in 2000 and $19 million in 1999.

Financial Instruments: Foreign currency contracts are used to protect the Corporation from fluctuations in exchange rates. The Corporation enters into foreign currency contracts, which are not designated as hedges, and the change in fair value is included in income currently. The Corporation has $136 million of notional value foreign currency forward and purchased option contracts maturing in 2002 ($438 million at December 31, 2000) and $225 million in letters of credit outstanding ($365 million at December 31, 2000). Of the total letters of credit outstanding at December 31, 2001, $37 million represents contingent liabilities; the remaining $188 million relates to liabilities recorded on the balance sheet. Notional amounts do not quantify risk or represent assets or liabilities of the Corporation, but are used in the calculation of cash settlements under the contracts.

Fair Value Disclosure: The carrying amounts of cash and cash equivalents, short-term debt and long-term, variable-rate debt approximate fair value. The Corporation estimates the fair value of its long-term, fixed-rate note receivable and debt generally using discounted cash flow analysis based on current interest rates for instruments with similar maturities. Interest-rate swaps and foreign currency exchange contracts are valued based on current termination values or quoted market prices of comparable contracts. The Corporation’s valuation of commodity contracts considers quoted market prices, where applicable. In the absence of quoted market prices, the Corporation values contracts at fair value considering time value, volatility of the underlying commodities and other factors.

The following table presents the year-end fair values of energy commodities and derivative instruments used in hedging and trading activities:

		Fair Value
		At Dec. 31
Millions of dollars,
asset (liability)		2001			2000
Commodities		$	54		$	6
Futures and forwards
	Assets		154			374
	Liabilities		(323	)		(436	)
Options
	Held		420			1,069
	Written		(466	)		(1,096	)
Swaps
	Assets		1,472			1,752
	Liabilities		(1,109	)		(1,442	)

The carrying amounts of the Corporation’s financial instruments and commodity contracts, including those used in the Corporation’s hedging and trading activities, generally approximate their fair values at December 31, 2001 and 2000, except as follows:

	2001						2000
	Balance						Balance
Millions of dollars,	Sheet			Fair			Sheet			Fair
asset (liability)	Amount			Value			Amount			Value
Long-term, fixed-rate note receivable	$	443		$	440		$	491		$	467
Fixed-rate debt		(4,936	)		(5,070	)		(1,991	)		(2,090	)

Market and Credit Risks: The Corporation’s financial instruments expose it to market and credit risks and may at times be concentrated with certain counterparties or groups of counterparties. The credit worthiness of counterparties is subject to continuing review and full performance is anticipated. In its trading activities, the Corporation reduces its risk related to certain counterparties by requiring collateral, generally cash.

42 Amerada Hess Corporation 2001 Annual Report

In its trading activities, the Corporation has net receivables of $398 million at December 31, 2001, which are concentrated with counterparties, as follows: domestic and foreign trading companies— 33%, banks and major financial institutions—23%, gas and power marketers—18% and integrated energy companies—16%.

15. Future Accounting Changes

The Corporation adopted FAS No. 141, Business Combinations, and FAS No. 142, Goodwill and Other Intangible Assets, for the Triton acquisition and related goodwill. The remaining provisions of these standards apply in 2002. The Corporation has not determined what the future effect of the remaining provisions will be.

The Financial Accounting Standards Board also recently issued FAS No. 143, Accounting for Asset Retirement Obligations. This statement significantly changes the method of accruing for costs associated with the retirement of fixed assets for which a legal retirement obligation exists, such as the dismantlement of oil and gas production facilities. This standard becomes effective in 2003. The Corporation has not yet determined what the future effect of adopting this new accounting standard will be on its income and financial position.

16. Litigation and Contingencies

In 1998, Triton Energy Limited (Triton) became a defendant in a lawsuit filed against it and Thomas G. Finck and Peter Rugg, in their capacities as former officers of Triton. The Corporation acquired Triton in August of 2001. The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, in connection with disclosures concerning Triton’s properties, operations, and value relating to a prospective sale in 1998 of Triton or all or a part of its assets. The lawsuits seek recovery of an unspecified amount of compensatory damages, fees and costs. Triton filed a motion to dismiss that was denied. Discovery is proceeding. A motion for class certification is pending. Triton believes its disclosures were accurate and intends to vigorously defend these actions but can make no assurance that the litigation will be resolved in its favor.

The Corporation is subject to other contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings. The Corporation considers these routine and incidental to its business and not material to its financial position or results of operations. The Corporation accrues liabilities when the future costs are probable and reasonably estimable.

17. Segment Information

Financial information by major geographic area for each of the three years ended December 31, 2001 follows:

		United				Africa, Asia		Consoli-
Millions of dollar		States*		Europe		and other		dated
2001
	Operating revenues	$	9,824	$	3,138	$	451	$	13,413
	Property, plant and equipment (net)		2,469		2,322		3,374		8,165
2000
	Operating revenues	$	8,953	$	2,825	$	215	$	11,993
	Property, plant and equipment (net)		1,558		2,269		496		4,323
1999
	Operating revenues	$	4,948	$	1,944	$	147	$	7,039
	Property, plant and equipment (net)		1,289		2,396		367		4,052

* Includes shipping operations.

The Corporation operates principally in the petroleum industry and its operating segments are (1) exploration and production and (2) refining, marketing and shipping. Exploration and production operations include the exploration for and the production, purchase, transportation and sale of crude oil and natural gas. Refining, marketing and shipping operations include the manufacture, purchase, transportation, trading and marketing of petroleum and other energy products.

Amerada Hess Corporation 2001 Annual Report 43

17. Segment Information (Continued)

The following table presents financial data by operating segment for each of the three years ended December 31, 2001:

				Exploration			Refining,
				and			Marketing
Millions of dollars				Production			and Shipping			Corporate			Consolidated*
2001
	Operating revenues
		Total operating revenues		$	4,812		$	9,454		$	2
		Less: Transfers between affiliates			855			—			—
			Operating revenues from unaffiliated customers	$	3,957		$	9,454		$	2		$	13,413
	Operating earnings (loss)			$	923		$	235		$	(213	)	$	945
	Special items				(29	)		(2	)		—			(31	)
			Net income (loss)	$	894		$	233		$	(213	)	$	914
	Earnings of equity affiliates			$	(2	)	$	54		$	—		$	52
	Interest income				6			45			8			59
	Interest expense				—			—			194			194
	Depreciation, depletion, amortization and lease impairment				951			51			3			1,005
	Provision (benefit) for income taxes				528			65			(69	)		524
	Investments in equity affiliates				580			1,052			—			1,632
	Identifiable assets				10,412			4,797			160			15,369
	Capital employed				7,534			2,999			39			10,572
	Capital expenditures				5,061			155			5			5,221
2000
	Operating revenues
		Total operating revenues		$	3,970		$	8,813		$	2
		Less: Transfers between affiliates			792			—			—
			Operating revenues from unaffiliated customers	$	3,178		$	8,813		$	2		$	11,993
	Operating earnings (loss)			$	868		$	288		$	(169	)	$	987
	Special items				—			(24	)		60			36
			Net income (loss)	$	868		$	264		$	(109	)	$	1,023
	Earnings of equity affiliates			$	1		$	121		$	6		$	128
	Interest income				7			59			11			77
	Interest expense				—			—			162			162
	Depreciation, depletion, amortization and lease impairment				700			39			8			747
	Provision (benefit) for income taxes				612			50			(13	)		649
	Investments in equity affiliates				147			894			—			1,041
	Identifiable assets				4,688			4,976			610			10,274
	Capital employed				2,817			2,747			369			5,933
	Capital expenditures				783			154			1			938
1999
	Operating revenues
		Total operating revenues		$	2,947		$	4,541		$	1
		Less: Transfers between affiliates			450			—			—
			Operating revenues from unaffiliated customers	$	2,497		$	4,541		$	1		$	7,039
	Operating earnings (loss)			$	324		$	133		$	(150	)	$	307
	Special items				19			112			—			131
			Net income (loss)	$	343		$	245		$	(150	)	$	438
	Earnings of equity affiliates			$	(9	)	$	11		$	7		$	9
	Interest income				12			50			1			63
	Interest expense				—			—			158			158
	Depreciation, depletion, amortization and lease impairment				641			42			2			685
	Provision (benefit) for income taxes				184			118			(38	)		264
	Investments in equity affiliates				148			778			61			987
	Identifiable assets				4,396			2,993			339			7,728
	Capital employed				3,137			1,974			237			5,348
	Capital expenditures				727			68			2			797

* After elimination of transactions between affiliates, which are valued at approximate market prices.

44 Amerada Hess Corporation 2001 Annual Report

Report of Management

Amerada Hess Corporation and Consolidated Subsidiaries

The consolidated financial statements of Amerada Hess Corporation and consolidated subsidiaries were prepared by and are the responsibility of management. These financial statements conform with generally accepted accounting principles and are, in part, based on estimates and judgements of management. Other information included in this Annual Report is consistent with that in the consolidated financial statements.

The Corporation maintains a system of internal controls designed to provide reasonable assurance that assets are safeguarded and that transactions are properly executed and recorded. Judgements are required to balance the relative costs and benefits of this system of internal controls.

The Corporation’s consolidated financial statements have been audited by Ernst & Young LLP, independent auditors, who have been selected by the Audit Committee and the Board of Directors and approved by the stockholders. Ernst & Young LLP assesses the Corporation’s system of internal controls and performs tests and procedures that they consider necessary to arrive at an opinion on the fairness of the consolidated financial statements.

The Audit Committee of the Board of Directors consists solely of independent directors. The Audit Committee meets periodically with the independent auditors, internal auditors and management to review and discuss the annual audit scope and plans, the adequacy of staffing, the system of internal controls and the results of examinations. At least annually, the Audit Committee meets with the independent auditors and with the internal auditors without management present. The Audit Committee also reviews the Corporation’s financial statements with management and the independent auditors. This review includes a discussion of accounting principles, significant judgements inherent in the financial statements, disclosures and such other matters required by generally accepted auditing standards. Ernst & Young LLP and the Corporation’s internal auditors have unrestricted access to the Audit Committee.

John B. Hess
Chairman of the Board and Chief Executive Officer

John Y. Schreyer
Executive Vice President and Chief Financial Officer

Amerada Hess Corporation 2001 Annual Report 45

Report of Ernst & Young LLP, Independent Auditors

The Board of Directors and Stockholders
Amerada Hess Corporation

We have audited the accompanying consolidated balance sheet of Amerada Hess Corporation and consolidated subsidiaries as of December 31, 2001 and 2000 and the related consolidated statements of income, retained earnings, cash flows, changes in preferred stock, common stock and capital in excess of par value and comprehensive income for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Amerada Hess Corporation and consolidated subsidiaries at December 31, 2001 and 2000 and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

As discussed in Note 14 to the consolidated financial statements, the Corporation adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, effective January 1, 2001.

New York, NY
February 22, 2002

46 Amerada Hess Corporation 2001 Annual Report

Supplementary Oil and Gas Data

Amerada Hess Corporation and Consolidated Subsidiaries

The supplementary oil and gas data that follows is presented in accordance with Statement of Financial Accounting Standards (FAS) No. 69, Disclosures about Oil and Gas Producing Activities, and includes (1) costs incurred, capitalized costs and results of operations relating to oil and gas producing activities, (2) net proved oil and gas reserves, and (3) a standardized measure of discounted future net cash flows relating to proved oil and gas reserves, including a reconciliation of changes therein.

The Corporation produces crude oil and/or natural gas in the United States, Europe, Gabon, Indonesia, Thailand, Azerbaijan and Algeria. With the acquisition of Triton Energy Limited in August 2001, the Corporation acquired producing properties and exploration interests in Equatorial Guinea, Colombia, and through an equity investee, the joint development area of Malaysia and Thailand. Exploration activities are also conducted, or are planned, in additional countries.

The Corporation also owns a 25% interest in an oil and gas exploration and production company that it accounts for on the equity method.

Costs Incurred in Oil and Gas Producing Activities

					United				Africa, Asia
For the Years Ended December 31 (Millions of dollars)			Total		States		Europe		and other
2001
	Property acquisitions
		Proved	$	2,772	$	831	$	—	$	1,941
		Unproved		820		121		1		698
	Exploration			297		107		87		103
	Development			1,182		322		516		344
	Share of equity investees’ costs incurred			14		—		9		5
2000
	Property acquisitions
		Proved	$	80	$	—	$	—	$	80
		Unproved		38		22		8		8
	Exploration			252		119		49		84
	Development			536		155		321		60
	Share of equity investee’s costs incurred			49		—		9		40
1999
	Property acquisitions
		Proved	$	—	$	—	$	—	$	—
		Unproved		24		7		—		17
	Exploration			232		72		76		84
	Development			626		137		451		38
	Share of equity investee’s costs incurred			38		—		11		27

Capitalized Costs Relating to Oil and Gas Producing Activities

At December 31 (Millions of dollars)		2001		2000
Unproved properties		$	1,099	$	321
Proved properties			3,804		1,736
Wells, equipment and related facilities			10,291		8,442
	Total costs		15,194		10,499
Less: Reserve for depreciation, depletion, amortization and lease impairment			7,907		7,006
	Net capitalized costs	$	7,287	$	3,493
	Share of equity investees’ capitalized costs	$	655	$	196

Amerada Hess Corporation 2001 Annual Report 47

The results of operations for oil and gas producing activities shown below exclude sales of purchased natural gas, non-operating income (including gains on sales of oil and gas properties), interest expense and gains and losses resulting from foreign currency exchange transactions. Therefore, these results are on a different basis than the net income from exploration and production operations reported in management’s discussion and analysis of results of operations and in Note 17 to the financial statements.

Results of Operations for Oil and Gas Producing Activities

							United					Africa, Asia
For the Years Ended December 31 (Millions of dollars)				Total			States		Europe			and other
2001
	Sales and other operating revenues
		Unaffiliated customers		$	2,519		$	378	$	1,706		$	435
		Inter-company			1,032			856		176			—
			Total revenues		3,551			1,234		1,882			435
	Costs and expenses
		Production expenses, including related taxes			711			213		374			124
		Exploration expenses, including dry holes and lease impairment			368			156		103			109
		Other operating expenses			153			80		25			48
		Depreciation, depletion and amortization			913			368		446			99
			Total costs and expenses		2,145			817		948			380
		Results of operations before income taxes			1,406			417		934			55
		Provision for income taxes			523			143		320			60
	Results of operations			$	883		$	274	$	614		$	(5	)
	Share of equity investees’ results of operations			$	17		$	—	$	12		$	5
2000
	Sales and other operating revenues
		Unaffiliated customers		$	2,153		$	146	$	1,813		$	194
		Inter-company			944			792		152			—
			Total revenues		3,097			938		1,965			194
	Costs and expenses
		Production expenses, including related taxes			557			147		361			49
		Exploration expenses, including dry holes and lease impairment			289			141		51			97
		Other operating expenses			86			44		20			22
		Depreciation, depletion and amortization			667			175		450			42
			Total costs and expenses		1,599			507		882			210
		Results of operations before income taxes			1,498			431		1,083			(16	)
		Provision for income taxes			613			158		442			13
	Results of operations			$	885		$	273	$	641		$	(29	)
	Share of equity investee’s results of operations			$	2		$	—	$	(3	)	$	5
1999
	Sales and other operating revenues
		Unaffiliated customers		$	1,548		$	192	$	1,242		$	114
		Inter-company			450			450		—			—
			Total revenues		1,998			642		1,242			114
	Costs and expenses
		Production expenses, including related taxes			487			126		336			25
		Exploration expenses, including dry holes and lease impairment			261			96		91			74
		Other operating expenses			101			47		34			20
		Depreciation, depletion and amortization			604			194		385			25
		Impairment of assets and operating leases			94			59		—			35
			Total costs and expenses		1,547			522		846			179
		Results of operations before income taxes			451			120		396			(65	)
		Provision for income taxes			152			43		160			(51	)
	Results of operations			$	299		$	77	$	236		$	(14	)
	Share of equity investee’s results of operations			$	(6	)	$	—	$	(11	)	$	5

48 Amerada Hess Corporation 2001 Annual Report

The Corporation’s net oil and gas reserves have been estimated by independent consultants DeGolyer and MacNaughton, except for reserves in Equatorial Guinea that are estimated by Netherland, Sewell and Associates, Inc. The reserves in the tabulation below include proved undeveloped crude oil and natural gas reserves that will require substantial future development expenditures. The estimates of the Corporation’s proved reserves of crude oil and natural gas (after deducting royalties and operating interests owned by others) follow:

Oil and Gas Reserves

		Crude Oil, Condensate and
		Natural Gas Liquids																		Natural Gas
		(Millions of barrels)																		(Millions of Mcf)
								Africa,																		Africa,
		United						Asia and						Equity			World-			United						Asia and						Equity			World-
		States			Europe			other(a)			Total			Investees			wide			States			Europe			other(a)			Total			Investees			wide
Net Proved Developed and Undeveloped Reserves
	At January 1, 1999		169			434			92			695			16			711			780			1,009			266			2,055			280			2,335
	Revisions of previous estimates		13			10			(2	)		21			—			21			(32	)		35			31			34			—			34
	Extensions, discoveries and other additions		5			49			14			68			—			68			25			60			9			94			—			94
	Purchases of minerals in-place		—			—			4			4			—			4			4			—			—			4			—			4
	Sales of minerals in-place		—			—			(5	)		(5	)		—			(5	)		(48	)		—			—			(48	)		(1	)		(49	)
	Production		(24	)		(55	)		(6	)		(85	)		(2	)		(87	)		(124	)		(106	)		(5	)		(235	)		(2	)		(237	)
	At December 31, 1999		163			438			97			698			14			712			605			998			301			1,904			277			2,181
	Revisions of previous estimates		9			31			5			45			(1	)		44			2			33			7			42			2			44
	Extensions, discoveries and other additions		7			16			4			27			—			27			43			47			14			104			44			148
	Purchases of minerals in-place		1			4			83			88			—			88			8			2			—			10			—			10
	Sales of minerals in-place		—			(5	)		(2	)		(7	)		—			(7	)		—			(4	)		—			(4	)		—			(4	)
	Production		(24	)		(65	)		(7	)		(96	)		(2	)		(98	)		(106	)		(131	)		(12	)		(249	)		(3	)		(252	)
	At December 31, 2000		156			419			180			755			11			766			552			945			310			1,807			320			2,127
	Revisions of previous estimates		3			33			4			40			(1	)		39			31			2			(17	)		16			46			62
	Extensions, discoveries and other additions		9			18			8			35			—			35			62			196			33			291			—			291
	Purchases of minerals in-place		22			1			190			213			13			226			227			—			10			237			493			730
	Sales of minerals in-place		—			—			—			—			—			—			—			(1	)		—			(1	)		(25	)		(26	)
	Production		(28	)		(63	)		(18	)		(109	)		(2	)		(111	)		(155	)		(131	)		(10	)		(296	)		(7	)		(303	)
	At December 31, 2001		162			408			364			934			21			955			717	(b)		1,011			326			2,054			827	(c)		2,881
Net Proved Developed Reserves
	At January 1, 1999		132			293			27			452			12			464			525			753			52			1,330			90			1,420
	At December 31, 1999		136			351			26			513			10			523			477			841			119			1,437			87			1,524
	At December 31, 2000		140			353			80			573			9			582			476			842			111			1,429			199			1,628
	At December 31, 2001		144			318			196			658			7			665			580			709			111			1,400			220			1,620

(a)	Includes estimates of reserves under production sharing contracts.
(b)	Excludes 444 million Mcf of carbon dioxide gas for sale or use in company operations.
(c)	Substantially all of these reserves are outside of the United States and Europe.

Amerada Hess Corporation 2001 Annual Report 49

The standardized measure of discounted future net cash flows relating to proved oil and gas reserves required to be disclosed by FAS No. 69 is based on assumptions and judgements. As a result, the future net cash flow estimates are highly subjective and could be materially different if other assumptions were used. Therefore, caution should be exercised in the use of the data presented below.

Future net cash flows are calculated by applying year-end oil and gas selling prices (adjusted for price changes provided by contractual arrangements, including hedges) to estimated future production of proved oil and gas reserves, less estimated future development and production costs and future income tax expenses. Future net cash flows are discounted at the prescribed rate of 10%. No recognition is given in the discounted future net cash flow estimates to depreciation, depletion, amortization and lease impairment, exploration expenses, interest expense, general and administrative expenses and changes in future prices and costs. The selling prices of crude oil and natural gas have decreased during 2001 and are highly volatile. The year-end prices which are required to be used for the discounted future net cash flows may not be representative of future selling prices.

Standardized Measure of Discounted Future Net Cash Flows
Relating to Proved Oil and Gas Reserves

					United				Africa,Asia
At December 31 (Millions of dollars)			Total		States		Europe		and other
2001
	Future revenues		$	23,040	$	5,066	$	10,630	$	7,344
	Less:
		Future development and production costs		10,335		1,817		4,889		3,629
		Future income tax expenses		4,114		750		2,515		849
				14,449		2,567		7,404		4,478
	Future net cash flows			8,591		2,499		3,226		2,866
	Less: Discount at 10% annual rate			3,299		816		1,134		1,349
	Standardized measure of discounted future net cash flows		$	5,292	$	1,683	$	2,092	$	1,517
	Share of equity investees’ standardized measure		$	543	$	—	$	28	$	515
2000
	Future revenues		$	25,986	$	9,290	$	12,537	$	4,159
	Less:
		Future development and production costs		8,672		1,551		4,808		2,313
		Future income tax expenses		6,750		2,565		3,597		588
				15,422		4,116		8,405		2,901
	Future net cash flows			10,564		5,174		4,132		1,258
	Less: Discount at 10% annual rate			3,669		1,923		1,132		614
	Standardized measure of discounted future net cash flows		$	6,895	$	3,251	$	3,000	$	644
	Share of equity investee’s standardized measure		$	305	$	—	$	44	$	261
1999
	Future revenues		$	19,858	$	5,133	$	12,810	$	1,915
	Less:
		Future development and production costs		6,500		1,396		4,484		620
		Future income tax expenses		5,457		1,167		3,753		537
				11,957		2,563		8,237		1,157
	Future net cash flows			7,901		2,570		4,573		758
	Less: Discount at 10% annual rate			2,814		1,027		1,441		346
	Standardized measure of discounted future net cash flows		$	5,087	$	1,543	$	3,132	$	412
	Share of equity investee’s standardized measure		$	237	$	—	$	71	$	166

50 Amerada Hess Corporation 2001 Annual Report

Changes in Standardized Measure of Discounted Future Net
Cash Flows Relating to Proved Oil and Gas Reserves

For the years ended December 31 (Millions of dollars)			2001			2000			1999
Standardized measure of discounted future net cash flows at beginning of year			$	6,895		$	5,087		$	2,023
Changes during the year
	Sales and transfers of oil and gas produced during year, net of production costs			(2,840	)		(2,540	)		(1,511	)
	Development costs incurred during year			1,182			536			626
	Net changes in prices and production costs applicable to future production			(4,346	)		3,349			5,002
	Net change in estimated future development costs			(838	)		(931	)		28
	Extensions and discoveries (including improved recovery) of oil and gas reserves, less related costs			521			551			678
	Revisions of previous oil and gas reserve estimates			231			396			244
	Purchases (sales) of minerals in-place, net			1,186			230			(112	)
	Accretion of discount			1,087			832			288
	Net change in income taxes			1,943			(840	)		(2,289	)
	Revision in rate or timing of future production and other changes			271			225			110
		Total		(1,603	)		1,808			3,064
Standardized measure of discounted future net cash flows at end of year			$	5,292		$	6,895		$	5,087

Amerada Hess Corporation 2001 Annual Report 51

Ten-Year Summary of Financial Data

Amerada Hess Corporation and Consolidated Subsidiaries

Millions of dollars, except per share data					2001			2000			1999(c)
Statement of Consolidated Income
	Revenues
		Sales (excluding excise taxes) and other operating revenues
			Crude oil (including sales of purchased oil)		$	2,343		$	2,177		$	1,407
			Natural gas (including sales of purchased gas)			4,762			3,470			1,856
			Petroleum products			5,160			5,394			3,003
			Other operating revenues			1,148			952			773
				Total		13,413			11,993			7,039
		Non-operating income
			Gain on asset sales			—			—			273
			Equity in income of HOVENSA L.L.C.			58			121			7
			Other			142			163			142
				Total revenues		13,613			12,277			7,461
	Costs and expenses
		Cost of products sold				8,735			7,883			4,240
		Production expenses				711			557			487
		Marketing expenses				663			542			387
		Exploration expenses, including dry holes and lease impairment				368			289			261
		Other operating expenses				224			234			217
		General and administrative expenses				313			224			232
		Interest expense				194			162			158
		Depreciation, depletion and amortization				967			714			649
		Impairment of assets and operating leases				—			—			128
				Total costs and expenses		12,175			10,605			6,759
	Income (loss) before income taxes					1,438			1,672			702
	Provision (benefit) for income taxes					524			649			264
	Net income (loss)				$	914	(a)	$	1,023	(b)	$	438	(d)
	Net income (loss) per share
		Basic			$	10.38		$	11.48		$	4.88
		Diluted				10.25			11.38			4.85
Dividends Per Share of Common Stock					$	1.20		$	.60		$	.60
Weighted Average Diluted Shares Outstanding (thousands)						89,129			89,878			90,280

(a)	Reflects after-tax special charges aggregating $31 million for losses related to the bankruptcy of certain subsidiaries of Enron and accrued severance.
(b)	Includes an after-tax gain of $60 million on termination of acquisition, partially offset by a $24 million charge for costs associated with a research and development venture.
(c)	On January 1, 1999, the Corporation adopted the last-in, first-out (LIFO) inventory
	method for refining and marketing inventories.
(d)	Includes after-tax gains on asset sales of $176 million and special tax benefits of $54 million, partially offset by impairment of assets and operating leases of $99 million (after income taxes).
(e)	Reflects after-tax special charges aggregating $263 million representing impairments of assets and operating leases, a net loss on asset sales and accrued severance.
(f)	After income taxes, the net gain was $421 million.
(g)	After income taxes, the net charge was $416 million.

See accompanying notes to consolidated financial statements, including Note 2 on Acquisition of Triton Energy Limited in August of 2001.

52 Amerada Hess Corporation 2001 Annual Report

1998			1997		1996			1995			1994		1993			1992
$	894		$	1,436	$	1,528		$	1,565		$	1,228	$	1,220		$	1,362
	1,711			1,414		1,365			1,120			1,063		1,021			788
	3,464			4,961		5,081			4,311			3,981		3,349			3,429
	511			413		296			303			328		290			279
	6,580			8,224		8,270			7,299			6,600		5,880			5,858
	(26	)		16		529	(f)		96			42		—			—
	(16	)		—		—			—			—		—			—
	83			120		125			125			49		17			100
	6,621			8,360		8,924			7,520			6,691		5,897			5,958
	4,373			5,578		5,386			4,501			3,795		3,509			3,214
	518			557		621			611			601		626			684
	379			329		264			259			261		247			229
	349			422		384			382			331		351			324
	224			232		129			186			124		242			234
	271			236		238			263			230		229			238
	153			136		166			247			245		157			147
	662			663		722			840			868		759			765
	206			80		—			584	(g)		—		—			—
	7,135			8,233		7,910			7,873			6,455		6,120			5,835
	(514	)		127		1,014			(353	)		236		(223	)		123
	(55	)		119		354			41			162		45			115
$	(459	)(e)	$	8	$	660		$	(394	)	$	74	$	(268	)	$	8
$	(5.12	)	$	.08	$	7.13		$	(4.26	)	$	.80	$	(2.91	)	$	.09
	(5.12	)		.08		7.09			(4.26	)		.79		(2.91	)		.09
$	.60		$	.60	$	.60		$	.60		$	.60	$	.60		$	.60
	89,585			91,733		93,110			92,509			92,968		92,213			87,286

Amerada Hess Corporation 2001 Annual Report 53

Ten-Year Summary of Financial Data

Amerada Hess Corporation and Consolidated Subsidiaries

Millions of dollars, except per share data					2001			2000			1999
Selected Balance Sheet Data at Year-End
	Cash and cash equivalents				$	37		$	312		$	41
	Working capital					228			577			249
	Property, plant and equipment Exploration and production				$	15,194		$	10,499		$	9,974
	Refining, marketing and shipping					1,433			1,399			1,091
			Total — at cost			16,627			11,898			11,065
		Less reserves				8,462			7,575			7,013
			Property, plant and equipment — net		$	8,165		$	4,323		$	4,052
	Total assets				$	15,369		$	10,274		$	7,728
	Total debt					5,665			2,050			2,310
	Stockholders’ equity					4,907			3,883			3,038
	Stockholders’ equity per common share				$	55.11		$	43.58		$	33.51
Summarized Statement of Cash Flows
	Net cash provided by operating activities				$	1,960		$	1,795		$	746
	Cash flows from investing activities Capital expenditures
			Exploration and production			(5,061	)		(783	)		(727	)
			Refining, marketing and other			(160	)		(155	)		(70	)
				Total capital expenditures		(5,221	)		(938	)		(797	)
		Proceeds from sales of property, plant and equipment and other				16			36			397
			Net cash provided by (used in) investing activities			(5,205	)		(902	)		(400	)
	Cash flows from financing activities
		Issuance (repayment) of notes				99			(11	)		15
		Long-term borrowings				3,060			—			990
		Repayment of long-term debt				(54	)		(396	)		(1,348	)
		Issuance of common stock				—			—			—
		Cash dividends paid				(94	)		(54	)		(54	)
		Common stock acquired				(100	)		(220	)		—
		Stock options exercised				59			59			18
			Net cash provided by (used in) financing activities			2,970			(622	)		(379	)
	Net increase (decrease) in cash and cash equivalents				$	(275)		$	271		$	(33	)
Stockholder Data at Year-End
	Number of common shares outstanding (thousands)					88,757			88,744			90,676
	Number of stockholders (based on number of holders of record)					6,481			7,709			7,416
	Market price of common stock				$	62.50		$	73.06		$	56.75

54 Amerada Hess Corporation 2001 Annual Report

1998			1997			1996			1995			1994			1993			1992
$	74		$	91		$	113		$	56		$	53		$	80		$	141
	90			464			690			358			520			245			551
$	9,718		$	8,780		$	8,233		$	9,392		$	9,791		$	9,361		$	9,204
	1,309			3,842			3,669			3,672			4,514			4,426			3,887
	11,027			12,622			11,902			13,064			14,305			13,787			13,091
	6,835			7,431			6,995			7,694			7,939			7,052			6,647
$	4,192		$	5,191		$	4,907		$	5,370		$	6,366		$	6,735		$	6,444
$	7,883		$	7,935		$	7,784		$	7,756		$	8,338		$	8,642		$	8,722
	2,652			2,127			1,939			2,718			3,340			3,688			3,186
	2,643			3,216			3,384			2,660			3,100			3,029			3,388
$	29.26		$	35.16		$	36.35		$	28.60		$	33.33		$	32.71		$	36.59
$	519		$	1,250		$	808		$	1,241		$	957		$	819		$	1,138
	(1,307	)		(1,158	)		(788	)		(626	)		(532	)		(755	)		(917	)
	(132	)		(188	)		(73	)		(66	)		(64	)		(593	)		(641	)
	(1,439	)		(1,346	)		(861	)		(692	)		(596	)		(1,348	)		(1,558	)
	500			61			1,040			148			74			12			17
	(939	)		(1,285	)		179			(544	)		(522	)		(1,336	)		(1,541	)
	(14	)		2			(72	)		26			(54	)		118			(160	)
	848			398			—			25			290			548			675
	(317	)		(209	)		(795	)		(689	)		(642	)		(168	)		(524	)
	—			—			—			—			—			—			497
	(55	)		(55	)		(56	)		(56	)		(56	)		(42	)		(64	)
	(59	)		(122	)		(8	)		—			—			—			—
	—			—			—			—			—			—			—
	403			14			(931	)		(694	)		(462	)		456			424
$	(17	)	$	(21	)	$	56		$	3		$	(27	)	$	(61	)	$	21
	90,357			91,451			93,073			93,011			92,996			92,587			92,584
	8,959			9,591			10,153			11,294			11,506			12,000			13,088
$	49.75		$	54.88		$	57.88		$	53.00		$	45.63		$	45.13		$	46.00

Amerada Hess Corporation 2001 Annual Report 55

Ten-Year Summary of Operating Data

Amerada Hess Corporation and Consolidated Subsidiaries

				2001			2000		1999
Production Per Day (net)
	Crude oil (thousands of barrels)
		United States			63			55		55
		United Kingdom			119			119		112
		Norway			25			25		25
		Denmark			20			25		7
		Algeria			13			2		—
		Colombia			10			—		—
		Equatorial Guinea			6			—		—
		Gabon			9			7		10
		Indonesia			6			4		3
		Azerbaijan			4			3		2
		Canada and Abu Dhabi			—			—		—
			Total		275			240		214
	Natural gas liquids (thousands of barrels)
		United States			14			12		10
		United Kingdom			7			6		5
		Norway			1			2		2
		Thailand			1			1		1
		Canada			—			—		—
			Total		23			21		18
	Natural gas (thousands of Mcf)
		United States			424			288		338
		United Kingdom			291			297		258
		Denmark			43			37		3
		Norway			25			24		31
		Thailand			20			23		8
		Colombia			1			—		—
		Indonesia			8			10		5
		Canada			—			—		—
			Total		812			679		643
Well Completions (net)
		Oil wells			50			29		28
		Gas wells			31			11		11
		Dry holes			15			18		9
Productive Wells at Year-End (net)
		Oil wells			858			774		735
		Gas wells			257			188		161
			Total		1,115			962		896
Undeveloped Net Acreage at Year-End (thousands)
		United States			625			616		678
		Foreign(a)			15,999			14,419		15,858
			Total		16,624			15,035		16,536
Shipping
		Vessels owned or under charter at year-end			8			8		8
		Total deadweight tons (thousands)			890			884		884
Refining (thousands of barrels per day)
		Amerada Hess Corporation			—			—		—
		HOVENSA L.L.C.(c)			202			211		209
Petroleum Products Sold (thousands of barrels per day)
		Gasoline, distillates and other light products			322			304		284
		Residual fuel oils			65			62		60
			Total		387			366		344
Storage Capacity at Year-End (thousands of barrels)					36,298			37,487		38,343
Number of Employees (average)					10,838	(d)		9,891		8,485

(a)	Includes acreage held under production sharing contracts.
(b)	Through ten months of 1998.
(c)	Reflects 50% of HOVENSA refinery crude runs from November 1, 1998.
(d)	Includes approximately 6,200 employees of retail operations.

56 Amerada Hess Corporation 2001 Annual Report

1998			1997		1996		1995		1994		1993		1992
	37			35		41		52		56		60		62
	109			126		135		135		122		80		86
	27			30		28		26		24		26		30
	—			—		—		—		—		—		—
	—			—		—		—		—		—		—
	—			—		—		—		—		—		—
	—			—		—		—		—		—		—
	14			10		9		10		9		8		7
	3			1		—		—		—		—		—
	—			—		—		—		—		—		—
	—			—		6		17		18		22		23
	190			202		219		240		229		196		208
	8			8		9		11		12		12		11
	6			6		7		7		7		4		1
	2			2		2		1		1		1		2
	—			—		—		—		—		—		—
	—			—		—		2		2		2		2
	16			16		18		21		22		19		16
	294			312		338		402		427		502		602
	251			226		254		239		209		188		153
	—			—		—		—		—		—		—
	28			30		30		28		24		29		32
	—			—		—		—		—		—		—
	—			—		—		—		—		—		—
	3			1		—		—		—		—		—
	—			—		63		215		186		168		138
	576			569		685		884		846		887		925
	28			42		39		33		28		48		33
	20			11		25		41		44		49		20
	25			24		40		50		24		37		22
	721			860		854		2,154		2,160		2,189		2,082
	252			447		455		1,160		1,146		1,115		966
	973			1,307		1,309		3,314		3,306		3,304		3,048
	748			915		891		1,440		1,685		1,854		1,819
	16,927			10,180		7,455		5,871		4,570		4,310		3,168
	17,675			11,095		8,346		7,311		6,255		6,164		4,987
	9			14		13		16		17		15		21
	952			1,602		1,236		2,010		2,265		2,398		3,223
	419	(b)		411		396		377		388		351		335
	217			—		—		—		—		—		—
	411			436		412		401		375		291		275
	71			73		83		86		93		95		102
	482			509		495		487		468		386		377
	56,070			87,000		86,986		89,165		94,597		94,380		95,199
	9,777			9,216		9,085		9,574		9,858		10,173		10,263

Amerada Hess Corporation 2001 Annual Report 57