Texaco Press Release - Texaco Chief Says Company is Weathering Current Low-Price Environment
Recent Actions Reduce Costs, Create Earnings Growth
FOR RELEASE: WEDNESDAY, DECEMBER 2, 1998.
WHITE PLAINS, N.Y., Dec. 2 - Texaco Chairman and Chief Executive Officer Peter I. Bijur today outlined Texaco's plan to weather the current low-price environment by driving costs lower while investing in strategic opportunities designed to grow shareholder value. In a presentation to approximately 150 security analysts at the company's worldwide headquarters in White Plains, N.Y., Bijur and members of Texaco's senior management team reported that Texaco continues to achieve solid performance despite the low prices. Bijur pointed to the following key indicators:
- Oil and gas production is up 12 percent through the first nine months of the year and total 1998 production is estimated to be up nearly nine percent over last year;
- Refined product sales are up 12 percent;
- For the first nine months of the year, per barrel expenses are down six percent; and
- A strong balance sheet with a debt to total capital ratio in the mid-30's, which is well within the company's target range.
Bijur said that although the industry has been hard hit by the worst economic crisis in a half-century, he remains optimistic that the world economy will rebound and that oil prices have not permanently shifted to a new lower trading range.
Bijur went on to say that Texaco has targeted $400 million in pre-tax cost savings for 1999, which will grow to over $600 million in the year 2000. These savings will be achieved through a variety of activities including the reduction of approximately 2000 positions worldwide, a restructuring program at Caltex, the fuel and marine marketing joint venture with Chevron announced earlier this year, and a reduction in lifting costs worldwide.
"Texaco took action early in 1998 by making changes in both the organization and operations, and I am satisfied that we know how to operate in a low-price environment," Bijur stated.
"I am confident that when we emerge from this period, Texaco will be stronger, more competitive and more successful than ever," Bijur added. He noted that the company is well positioned to take advantage of any bargains that may appear as a result of the changing competitive landscape.
In looking toward the future, Bijur stated that Texaco's production will continue to grow over the next two years. Production at the Midway-Sunset field will increase by some 25,000 barrels per day and the company's key Gulf of Mexico projects, Petronius and Gemini, and the Anyala/Madu field in Nigeria will come on-stream. He also stated that Texaco's exploration program is expected to be more successful than in recent years. Texaco and BG plc announced today a significant natural gas discovery in the East Coast Marine Area, offshore Trinidad. The Starfish-1X discovery well tested at an intentionally constrained rate of 16.2 million cubic feet of gas per day.
Bijur noted that, in the U.S. downstream, 1998 brought the completion of the Motiva alliance with Shell and Saudi Aramco, and that Equilon and Motiva are well on their way to capturing the $800 million in synergies that were identified. Internationally, Texaco's downstream business remains strong. The company is growing in Latin America and looking for opportunities to strengthen its market position in Europe, despite the fact that a joint venture agreement was not reached with Shell.
Power generation is another area of growth Texaco is aggressively pursuing, Bijur said. The power business is not dependent on the price of oil and it generates solid returns above the cost of capital. Texaco and its affiliates own, operate, have under development, or license over 8000 megawatts of electrical generating capacity.
Note: This press release contains forward-looking statements about Texaco's capital expenditures, future earnings, production, and other operating results. Actual results may differ materially, and plans may change based on changing business conditions. Among the factors which could cause such differences are the following: crude oil and natural gas prices; refining margins and marketing margins; potential failure to achieve expected production from existing and future oil and gas developments; and potential disruption or interruption of the company's production or manufacturing facilities due to accidents or political events.
For a further discussion of additional factors that could cause actual results to materially differ from those in the forward-looking statements, please refer to the section entitled "Forward-Looking Statements" in Texaco's 1997 Annual Report on Form 10-K.
Updated: December 1998