press release

Texaco Press Release - Texaco Reports Significant Increase In Net Income;

TEXACO REPORTS SIGNIFICANT INCREASE IN NET INCOME;
FIRST QUARTER 1997 EARNINGS REACH $980 MILLION

FOR IMMEDIATE RELEASE: TUESDAY, APRIL 22, 1997.

WHITE PLAINS, N.Y., April 22 - Texaco achieved a significant increase in net income for the first quarter of 1997, Chairman and Chief Executive Officer Peter I. Bijur reported today. "We are off to a good start this year as we continue to align our operations for growth. We are also gratified that our long-standing dispute with the Internal Revenue Service in the 'Aramco Advantage' case has ended," Bijur said.

Total net income for the first quarter of 1997 was $980 million, or $3.72 per share, including the benefit associated with the resolution of the "Aramco Advantage" case. Net income before this benefit was $492 million, or $1.84 per share, up significantly from first quarter 1996 net income of $386 million, or $1.42 per share. In the first quarter of 1997:

  • Net income from operations increased 27 percent -- representing the 11th consecutive quarter that earnings from operations exceeded previous years' levels.
  • Worldwide daily production rose 4 percent.
  • Capital and exploratory expenditures grew 25 percent to $799 million.
  • Total debt to total borrowed and invested capital was 32 percent, at the low end of our target range.
  • Expenses continue to be managed at levels less than inflation.

Commenting on first quarter 1997 results, Bijur said, "Our upstream business had another strong quarter, as higher commodity prices were enhanced by increased daily crude oil and natural gas production. In the downstream business, earnings continued to grow in our expanding Latin American marketing operations and margins in Europe improved over last year's depressed levels. However, earnings in the Caltex operating areas were lower, and U.S. downstream results were level with last year.

"During the first quarter, we increased capital and exploratory spending, focusing on upstream growth opportunities in the U.S., as appraisal and development work continued in the Gulf of Mexico. After some unexpected operating delays, first oil flowed from the U.K. North Sea Captain field in March and production is increasing rapidly. Also, government approval was secured for developing the U.K. Galley field, and we announced natural gas discoveries in Australia and Thailand.

"In the downstream, we moved forward in March with the signing of a memorandum of understanding with Shell to combine major elements of our U.S. operations, and we completed the sale of our remaining chemical business," Bijur said.

On April 21, 1997, Texaco was notified that the United States Supreme Court decided not to review the favorable decisions of the United States Court of Appeals for the Fifth Circuit and the United States Tax Court in the "Aramco Advantage" case. This decision by the Supreme Court, affirming Texaco's position, resulted in an earnings benefit of $488 million, or $1.88 per share. This benefit represents the after-tax effect of the expected refund of payments, with associated interest, made to the Internal Revenue Service in previous years for potential tax claims. The total refund from the IRS, including interest, will exceed $700 million. A significant portion of this amount is expected to be received in 1997.

ANALYSIS OF OPERATING EARNINGS

EXPLORATION AND PRODUCTION

UNITED STATES

First quarter 1997 earnings were $311 million, compared with $267 million for the first quarter of 1996. The 16-percent earnings improvement was due to higher prices and continuing success in enhancing production from existing fields, particularly in the Gulf of Mexico and Louisiana.

Texaco's average realized crude oil price for the first quarter 1997 was $19.62, an increase of $3.11 per barrel over 1996. Average realized natural gas price was $2.66 per thousand cubic feet (MCF), an increase of $.51 per MCF over 1996. A price spike late in 1996, attributed to lean stock levels at a time of seasonally strong demand, extended into January 1997. Prices retreated in February and March, due to abnormally mild weather and increasing worldwide supplies.

Partially offsetting the favorable factors were lower gas trading results and higher exploratory expenses. Exploratory expenses in the first quarter of 1997 were $42 million before tax versus $23 million in the first quarter of 1996. This sharp increase is attributed to higher seismic and exploratory drilling activity of promising prospects, mostly in the Gulf of Mexico.

INTERNATIONAL

First quarter 1997 earnings were $156 million, as compared with $130 million for the first quarter of 1996. The 20-percent improvement in earnings included the effects of higher crude oil prices, up 8 percent, and increased liquids and natural gas production.

Total daily production increased 9 percent as a result of new production in the Wafra field in the Partitioned Neutral Zone between Saudi Arabia and Kuwait, the Bagre field offshore Angola, and in the Danish North Sea coming onstream late in 1996. Additionally, natural gas production benefited from a full quarter's operations at the Dolphin field in Trinidad. These production increases, as well as continued field development programs, more than offset the impact of maturing fields. Higher exploratory expenses associated with Texaco's aggressive exploration program, as well as lower gas trading results in the U.K., partially offset these favorable results.

Operating results for the first quarter 1997 included a non-cash currency benefit of $19 million due to the weakening of the Pound Sterling versus the U.S. dollar relating to deferred income taxes, compared with a benefit of $4 million for the first quarter 1996.

MANUFACTURING, MARKETING AND DISTRIBUTION

United States

First quarter 1997 earnings were $6 million, compared with $4 million for the first quarter of 1996. Earnings in 1997 reflected improved refining results due to increased throughput and higher wholesale product prices. This improvement was somewhat reduced by the impact of refinery fires late in 1996 and early 1997 that resulted in property damage and adversely affected product yields in the first quarter. The refining system returned to normal operations by the middle of March.

Improved refining earnings were largely offset by lower West Coast marketing margins due to intense competition in the marketplace. Results in the distribution and transportation business and chemicals were also lower than the first quarter of 1996.

INTERNATIONAL

First quarter 1997 earnings were $104 million, compared to $92 million for the first quarter of 1996. The earnings were driven by improved results in Europe and Latin America. Caltex' results were below the first quarter of last year, but reflect a significant improvement over the latter half of 1996.

Higher refining earnings in Europe and Latin America in the first quarter of 1997 were primarily due to the improved recovery of crude costs in the U.K. and Panama. Marketing margins in Latin America also improved in the first quarter 1997 versus the same quarter in 1996 due to higher prices.

Caltex' improved operating margins in Korea were more than offset by unfavorable refining margins in Thailand, and higher currency losses of $26 million, mostly from the significant weakening of the Korean Won.

Refined product sales decreased due to Caltex' April 1, 1996, sale of its interest in refining operations in Japan and reduced purchase/sale activity to balance the system.

Operating results for the first quarter 1997 included a non-cash currency benefit of $5 million due to the weakening of the Pound Sterling versus the U.S. dollar relating to deferred income taxes, compared with a benefit of $4 million for the first quarter 1996.

CORPORATE/NONOPERATING RESULTS

Corporate and nonoperating results for the first quarter of 1997 included a $488 million benefit associated with the resolution of the "Aramco Advantage" case. Excluding this benefit, corporate and nonoperating charges were $97 million as compared with $109 million for the first quarter of 1996. The comparative improvement of $12 million was primarily attributable to reduced interest expense due to lower debt levels and slightly lower interest rates.

CAPITAL AND EXPLORATORY EXPENDITURES

Capital and exploratory expenditures, including equity in such expenditures of affiliates, were $799 million for the first quarter of 1997 as compared with $641 million for the same period of 1996.

In the U.S., Texaco's aggressive 1997 exploration and development drilling program is focused on strategic opportunities onshore and offshore. Offshore development continued in the deepwater Gulf of Mexico where Texaco holds a strong lease-acreage position. Platform construction and development drilling is underway in the Petronius and Arnold fields while delineation drilling continues in the Fuji and Gemini prospects. Texaco also continues an aggressive drilling and development program in traditional offshore shelf areas and onshore. Expenditures in 1997 reflect enhanced oil recovery projects using advanced thermal and CO2 techniques to increase production and lower per-barrel operating expenses. Thermal steam-flooding has been particularly successful at Kern River in Bakersfield, California.

Internationally, higher expenditures reflect development work in the U.K. North Sea, including the Erskine and Galley fields and drilling and development expenditures for the Mariner project. Development work was completed in the Captain field which came onstream late in the first quarter of 1997. Additionally, exploration and development work continued in Nigeria, China, Indonesia, and the Partitioned Neutral Zone.

Downstream expenditures in the U.S. declined somewhat, reflecting the completion of refinery upgrades. Internationally, expenditures increased due to marketing expenditures in the Pacific Rim by Texaco's affiliate, Caltex Petroleum Corporation.



                                                          First Quarter
                                                          --------------------------------
                                                           1997                        1996
                                                       --------                    --------
    FUNCTIONAL NET INCOME ($000,000)
    Operating Earnings
        Petroleum and natural gas
            Exploration and production
                United States                            $  311                      $  267
                International                               156                         130
                                                           ----                        ----
                    Total                                   467                         397
                                                           ----                        ----


    Manufacturing, marketing and distribution
        United States                                         6                           4
        International                                       104                          92
                                                           ----                        ----
                  Total                                     110                          96
                                                           ----                        ----
                  Total petroleum and natural gas           577                         493

    Nonpetroleum                                             12                           2
                                                           ----                        ----
                  Total operating earnings                  589                         495
        Corporate/Nonoperating (a)                          391                        (109)
                                                           ----                        ----
                   Total net income (b)                  $  980                      $  386
        ====                        ====

    Net income per common share (dollars)                $ 3.72                      $ 1.42

    Average number of common shares
        outstanding for computation
        of earnings per share (000,000)                   260.1                       260.7

      (a) Includes "Aramco Advantage" benefit as
        detailed in news release text
      (b) Includes (benefit) provision
        for income taxes ($000,000)                      $ (194)                     $  278



    ------------------------------------------------------------------------------------------------


                                                                    First Quarter
                                                         --------------------------------
    OTHER FINANCIAL DATA ($000,000)                        1997                        1996
                                                        --------                    --------
    Revenues                                             $12,029                     $10,271

    Total assets as of March 31                          $27,008                     $24,639

    Stockholders' equity as of March 31                  $11,062                     $ 9,653

    Total debt as of March 31                            $ 5,495                     $ 5,633
 
    Capital and exploratory expenditures
      (includes equity in affiliates)
        Exploration and production
          United States                                  $   352                     $   266
          International                                      282                         207
                                                            ----                        ----
                  Total                                      634                         473
                                                            ----                        ----

    Manufacturing, marketing and distribution
              United States                                   60                          77
              International                                  101                          87
                                                            ----                        ----
                  Total                                      161                         164
            Other                                              4                           4
                                                            ----                        ----
                  Total                                   $  799                      $  641
                                                            ====                        ====

    Texaco Inc. and subsidiary companies
       Exploratory expenses included above:
              United States                               $   42                      $   23
              International                                   57                          46
                                                            ----                        ----
                  Total                                   $   99                      $   69
                                                            ====                        ====

    Dividends paid to common stockholders                 $  221                      $  208

    Dividends per common share (dollars)                  $  .85                      $  .80

    Dividend requirements for preferred stockholders      $   14                      $   15


    ------------------------------------------------------------------------------------------------



    
      CONDENSED CONSOLIDATED
      BALANCE SHEET ($000,000)
    
                                                          As Of
                                                          ------------------------------------
                                                          March 31,             December 31,
                                                          1997                    1996
                                                          -----------            -------------
                                                          (Unaudited)

    ASSETS
    Current Assets
       Cash and cash equivalents                            $   619                  $   511
       Other current assets                                   6,742                    7,154
                                                            -------                  -------
           Total current assets                               7,361                    7,665

    Investments and Advances                                  5,301                    4,996

    Net Properties, Plant and Equipment                      13,402                   13,411

    Deferred Charges                                            944                      891
                                                            -------                  -------
              Total                                         $27,008                  $26,963
                                                            =======                  =======

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities
       Short-term debt                                      $   466                   $  465
       Other current liabilities                              5,276                    5,719
                                                             ------                  -------
            Total current liabilities                         5,742                    6,184

    Long-Term Debt and Capital Lease Obligations              5,029                    5,125

    Deferred Income Taxes                                       769                      795
 
    Other Noncurrent Liabilities                              3,737                    3,829

    Minority Interest in Subsidiary Companies                   669                      658

    Stockholders' Equity                                     11,062                   10,372
                                                            -------                  -------
              Total                                         $27,008                  $26,963
                                                            =======                  =======

    ------------------------------------------------------------------------------------------------


                                                                        First Quarter
                                                            --------------------------------
    OPERATING DATA- INCLUDING INTERESTS                      1997                      1996
       IN AFFILIATES                                      --------                  --------

    Exploration and ProductionUnited States
           Net production of crude oil and
            natural gas liquids (000 BPD)                      384                       382
           Net production of natural gas -
            available for sale (000 MCFPD)                   1,656                     1,648
           Total net production (000 BOEPD)                    660                       657

            Natural gas sales (000 MCFPD)                    3,841                     3,235

                Natural gas liquids sales
                  (including purchased LPGs) (000 BPD)         203                       245

    Average U.S. crude (per bbl.)                           $19.62                    $16.51

    Average U.S. natural gas (per mcf)                      $ 2.66                    $ 2.15

    Average WTI (Spot) (per bbl.)                           $22.76                    $19.75

    Average Kern (Spot) (per bbl.)                          $15.98                    $14.90



    International
          Net production of crude oil and
            natural gas liquids (000 BPD)
              Europe                                           114                       119
              Indonesia                                        140                       137
              Partitioned Neutral Zone                          90                        72
              Other                                             69                        62
                                                           -------                   ------- 
                  Total                                        413                       390

          Net production of natural gas -
            available for sale (000 MCFPD)
              Europe                                           241                       205
              Colombia                                         132                       115
              Other                                            102                        53
                                                           -------                   -------
                    Total                                      475                       373

          Total net production (000 BOEPD)                     492                       452

          Natural gas sales (000 MCFPD)                        620                       475

          Natural gas liquids sales
            (including purchased LPGs) (000 BPD)                83                       116

          Average International crude (per bbl.)            $19.48                    $18.02

          Average U.K. natural gas (per mcf)                $ 2.85                    $ 2.63

          Average Colombia natural gas (per mcf)            $ 1.05                    $  .94

    Manufacturing, Marketing and DistributionUnited States
        Refinery input (000 BPD)
            Subsidiary                                         409                       395
            Affiliate - Star Enterprise                        336                       316
                                                           -------                   -------
               Total                                           745                       711

        Refined product sales (000 BPD)
            Gasolines                                          497                       476
            Avjets                                              89                       131
            Middle Distillates                                 214                       219
            Residuals                                           85                        61
            Other                                              120                       134
                                                           -------                   -------
               Total                                         1,005                     1,021

        International

        Refinery input (000 BPD)
            Europe                                             348                       334
            Affiliate - Caltex                                 407                       499
            Latin America/West Africa                           62                        59
                                                            -------                   -------
                  Total                                        817                       892

        Refined product sales (000 BPD)
            Europe	                                           467                       475
            Affiliate - Caltex                                 586                       712
            Latin America/West Africa                          366                       389
            Other                                               44                        71
                                                           -------                   -------
                  Total                                      1,463                     1,647

  

Updated: April 1997