Item 3. Legal Proceedings
Eight proceedings instituted by governmental authorities are pending or known to be contemplated against Amoco and certain of its subsidiaries under federal, state and local environmental laws, each of which could result in monetary sanctions in excess of $100,000. No individual proceeding is, nor are the proceedings as a group, expected to have a material adverse effect on Amoco's consolidated cash flows, financial position or results of operations. Amoco estimates that in the aggregate the monetary sanctions reasonably likely to be imposed from these proceedings amount to approximately $4 million.
The Internal Revenue Service ("IRS") has challenged the application of certain foreign income taxes as credits against the Corporation's U.S. taxes that otherwise would have been payable for the years 1980 through 1982. On June 18, 1992, the IRS issued a statutory Notice of Deficiency for additional taxes in the amount of $466 million, plus interest, relating to those years. The Corporation has filed a petition in the U.S. Tax Court contesting the IRS statutory Notice of Deficiency. A similar amount of additional taxes is expected to be claimed for years 1983 through 1985 based upon a subsequent IRS audit. Any claims for years subsequent to 1985 would not be as significant as those for prior years. The Corporation believes that the foreign income taxes have been reflected properly in its U.S. federal tax returns, and intends to contest the IRS claims. The Corporation is confident that it will prevail in the litigation. Consequently, this dispute is not expected to have a material adverse effect on the consolidated financial position of the Corporation.
On January 21, 1994, a judgment was entered by the Superior Court of the State of California, County of Los Angeles, in favor of Amoco Chemical Company and Amoco Reinforced Plastics Company, subsidiaries of Amoco Corporation, against certain underwriters at Lloyd's of London and various other British and European insurance carriers, in AMOCO CHEMICAL COMPANY, et al, vs. CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, et al. In that case Amoco alleged that the defendant insurers wrongfully refused to pay for the defense and settlement of product liability lawsuits arising from Amoco Reinforced Plastics Company's manufacture of irrigation and sewer pipe in the 1970's. Judgment was entered for $36 million in compensatory damages and $377 million in punitive damages. The judgment is slightly lower than the jury verdicts that were previously reported by Amoco.
The defendants have filed motions for a new trial and a judgment notwithstanding the verdict with respect to the actual and punitive damages, respectively. Amoco is making filings in opposition to those motions. In addition, the judgment is subject to appeal by the
defendants. Accordingly, it is impossible at this time to predict the ultimate outcome of this case or its impact, if any, on the financial position, results of operations and cash flows of the Corporation.
Reference is made to the first paragraph of Item 14(b). Rubicon and Amoco Production and the Corporation have agreed to settle the case. Final settlement papers are expected to be signed in the near future, after which the case will be dismissed. The terms of the settlement are confidential, but the settlement is not expected to have a material adverse effect on the financial position, results of operations or cash flows of the Corporation.
Amoco has various other suits and claims pending against it among which are several class actions for substantial monetary damages which in Amoco's opinion are not meritorious. While it is impossible to estimate with certainty the ultimate legal and financial liability in respect to these other suits and claims, Amoco believes that the aggregate amount will not be material in relation to its consolidated financial position.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the quarter ended December 31, 1993. __________________________ PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
The principal public trading market for Amoco common stock is the New York Stock Exchange. Amoco common stock is also traded on the Chicago, Pacific, Toronto, and four Swiss stock exchanges. The following table sets forth the high and low share sales prices of Amoco common stock as reported on the New York Stock Exchange and cash dividends paid for the periods presented.
On January 25, 1994, the board of directors declared a quarterly cash dividend rate of 55 cents per share.
Amoco had 141,039 shareholders of record at December 31, 1993.
Item 6.
Item 6. Selected Financial Data
The following selected financial data, as it relates to the years 1989 through 1993, have been derived from the consolidated financial statements of Amoco, including the consolidated statement of financial position at December 31, 1993 and 1992 and the related consolidated statement of income and consolidated statement of cash flows for the three years ended December 31, 1993, and the notes thereto, appearing elsewhere herein.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This discussion should be read in conjunction with the consolidated financial statements and accompanying notes and supplemental information.
1993 vs. 1992
Consolidated net income for 1993 amounted to $1,820 million, compared with a loss of $74 million incurred in 1992. Excluding the cumulative effects of adoption in 1992 of Statement of Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and SFAS No. 109, "Accounting for Income Taxes," 1992 earnings were $850 million. Net income in 1991 was $1,484 million, which included the cumulative benefit of $311 million associated with the adoption in 1991 of SFAS No. 96, "Accounting for Income Taxes."
Year-to-year comparisons in net income were affected by various items, summarized in the table below:
Favorably affecting 1993 net income were gains of $190 million associated with the disposition of certain Canadian properties and investments, and tax benefits of $113 million. Adversely affecting 1993 results were charges of $170 million associated with the writedown of Congo exploration and production operations to current recoverable value and additional deferred taxes of $53 million due to the effect of a tax
rate change resulting from enactment of the Omnibus Budget Reconciliation Act of 1993. Included in 1992 results were charges of $805 million associated with a strategic reassessment of business operations. Partially offsetting were benefits of $90 million related to natural gas contract settlements and $90 million associated with revised estimates of tax obligations and retirement of debt.
Excluding these items, 1993 earnings were 18 percent or $265 million above 1992 as a result of higher refined product margins in refining, marketing and transportation operations and improved chemical results. Also contributing to the improvement were higher U.S. natural gas prices and volumes and lower worldwide exploration and operating expenses.
1992 vs. 1991
Adjusting for special items, 1992 earnings were 10 percent or $137 million above the 1991 level. U.S. exploration and production operating results improved resulting from higher natural gas prices and volumes and lower expenses. Exploration and production earnings outside the United States were up slightly, mainly resulting from favorable currency effects. Chemical earnings were higher reflecting lower operating costs. Refining, marketing and transportation net income was lower, primarily attributable to lower refined product margins.
Results on a segment basis, for the five years ended December 31, 1993, are presented below:
1993 vs. 1992
United States Exploration and Production
U.S. exploration and production operations earned $811 million in 1993 compared with $778 million in 1992 and $595 million in 1991. Year- to-year comparisons of U.S. results were affected by various items, summarized in the table below.
Adjusting the respective periods for the items shown, 1993 results were $27 million above the comparable 1992 period mainly as a result of higher prices and volumes for natural gas and lower exploration expenses. Offsetting were lower crude oil prices and production volumes.
U.S. natural gas prices averaged $1.88 per thousand cubic feet ("mcf") for 1993, an increase of about $.23 per mcf over 1992, reflecting increased demand and a more favorable supply and demand balance.
Amoco's crude oil prices averaged about $16 per barrel in 1993, down 10 percent or about $2 per barrel compared with 1992. Prices remained relatively constant through the first six months of 1993, but declined over the latter half of 1993 reflecting increased worldwide supply. As a result, the average price in December 1993 was about $5 per barrel below the corresponding December 1992 average.
U.S. natural gas production averaged 2.4 billion cubic feet per day in 1993, 2 percent above 1992, reflecting increased deliverability, higher demand and increased marketing efforts. Crude oil and natural gas liquids ("NGL") production averaged 305,000 barrels per day in 1993, 5 percent below 1992, mainly due to normal field declines.
Non-U.S. Exploration and Production
Operations outside the U.S. were affected by various items, as shown below:
Canadian exploration and production operations earned $338 million in 1993 compared with a loss of $81 million in 1992. In 1993, Amoco disposed of 65 percent of its equity investment in Crestar Energy Inc., resulting in a $120 million gain. Amoco also sold a significant portion of non-core properties, which resulted in a $70 million benefit and lowered production volumes by approximately 8 percent. Results in 1992 were affected by charges of $236 million related to restructuring, property dispositions and work force reductions. Excluding these items, 1993 earnings were $7 million below 1992's level as higher natural gas prices and volumes and a significant reduction in expenses were more than offset by declining crude oil prices and lower currency gains. Natural gas production averaged 916 million cubic feet per day in 1993, an increase of 13 percent over 1992, reflecting increased demand. Crude oil and NGL production averaged 84,000 barrels per day in 1993 and 89,000 barrels per day in 1992.
Exploration and production activities in Europe incurred losses of $100 million in 1993 and $103 million in 1992. Excluding one-time Norwegian tax charges in 1992, losses increased by $36 million due to lower crude oil prices and higher expenses associated with increased activity in Eurasia. Natural gas production of 259 million cubic feet per day was 3 percent below 1992. Crude and NGL production averaged 51,000 barrels per day in 1993, compared with 55,000 barrels per day in 1992.
Exploration and production operations in other areas incurred a loss of $54 million in 1993, compared with earnings of $277 million in 1992. Included in 1993 results were charges of $170 million related to the writedown of Congo operations to current recoverable value. Included in 1992 earnings were benefits of $90 million related to natural gas contract settlements. Exclusive of these items, results for 1993 of $116 million were $71 million below 1992 due to lower crude oil volumes and prices and lower currency gains. Partly offsetting was reduced exploration expense. Natural gas production averaged 530 million cubic feet per day in 1993, 6 percent higher than 1992, reflecting new production in Sharjah and Trinidad. Crude oil and NGL production averaged 238,000 barrels per day in 1993, 3 percent below the 1992 level.
1992 vs. 1991
U.S. exploration and production operations earned $778 million in 1992 compared with $595 million in 1991. The increase over 1991 earnings primarily resulted from higher natural gas prices and volumes and lower operating costs and exploration expenses. Partly offsetting were lower crude oil production and prices and charges related to restructuring of $94 million.
In 1992, earnings outside the U.S. for exploration and production operations totaled $93 million, compared with $214 million in 1991. The decrease mainly resulted from restructuring charges of $258 million, charges of $39 million relating to the effects of Norwegian tax legislation, lower crude oil and NGL volumes and higher depreciation, depletion and amortization. Offsetting were favorable currency effects, lower operating expenses and the Sharjah natural gas settlement.
Outlook
Amoco and the oil industry will continue to be affected by the price volatility of crude oil and natural gas. Amoco's future performance is expected to be affected by ongoing efforts to reduce costs, the divestment of marginal operations and concentration of new investments in areas of competitive advantage. The Corporation will continue to focus on growth internationally and to pursue attractive new business opportunities worldwide.
Refining, Marketing and Transportation
1993 vs. 1992
Worldwide refining, marketing and transportation operations earned $826 million for 1993, compared with earnings of $462 million for 1992 and $644 million for 1991. Results for 1993 included benefits of $59 million due to a reduction in previous estimates of future costs for environmental remediation. Operations also benefited $50 million from the drawdown of inventories valued under the last-in, first-out ("LIFO") method. Earnings for 1992 included charges of $51 million for anticipated losses on asset dispositions and work force reductions. Excluding these items, the earnings improvement of $204 million in 1993 reflected higher refined product margins. Operating costs also declined in 1993, resulting from continuing efforts to reduce expenses.
Amoco's 1993 operating results outside the United States, consisting primarily of NGL supply and marketing activities in Canada and marine transportation, increased over 1992, partly reflecting restructuring efforts.
U.S. refined product margins increased from 1992 levels as crude oil prices declined more than product prices. Refined product prices averaged
58 cents per gallon compared with 61 cents per gallon for 1992. U.S. refined product selling prices, excluding consumer excise taxes, and refinery utilization data for the past five years are shown below.
Refined product sales volumes in the United States averaged 1,131,000 barrels per day in 1993 compared with 1,088,000 barrels per day in 1992. Gasoline sales volumes were up 3 percent in 1993 while distillate sales increased 5 percent. Canadian NGL sales volumes of 172,000 barrels per day in 1993 increased slightly over 1992 levels.
Refining capacity utilization of 97 percent was up from 1992's utilization rate of 95 percent, reflecting continued operating efficiencies.
1992 vs. 1991
In 1992, earnings of $462 million compared with 1991 earnings of $644 million. Excluding special items, the decrease in earnings between the two years primarily resulted from lower refined product margins reflecting strong price competition, particularly for gasoline.
Outlook
Amoco's refining, marketing and transportation operations will continue to be affected by volatility in crude oil prices and the overall industry supply-demand balance for refined products. Environmental initiatives, including a commitment to provide a product slate that is responsive to environmental concerns and regulations, could require significant additional investments in refining and marketing facilities. Amoco continues its strong focus on controlling costs and implementing new technologies to further upgrade facilities and improve operating efficiencies.
Chemicals
1993 vs. 1992
Chemical operations earned $240 million for 1993, compared with a loss of $94 million in 1992 and earnings of $68 million in 1991. Included
in 1992 results were charges of $265 million primarily associated with restructuring. Adjusting for those charges, 1993 earnings improved $69 million over 1992 as benefits of cost-containment, restructuring and a strong purified terephthalic acid ("PTA") market favorably affected earnings. Weak margins for olefins and polypropylene partly offset these favorable effects.
In 1993 overall chemical sales volumes improved slightly over 1992. Sales volumes for PTA were up 11 percent, as worldwide demand for PTA continued to grow. Polypropylene volumes also increased 11 percent, reflecting the full-year effect of operating the new unit added at the Chocolate Bayou plant, near Alvin, Texas, in mid-1992. Weak demand in the olefins industry caused olefins volumes to decline in 1993. The overall capacity utilization rates were 88 percent in both 1993 and 1992.
Chemical margins for most product lines were down in 1993. Margins were lower for olefins and polypropylene due to overcapacity in their respective markets. However, PTA margins were higher resulting from the strong market demand mentioned above.
1992 vs. 1991
In 1992 chemical activities incurred a loss of $94 million compared with earnings of $68 million in 1991. Adjusting for $265 million in restructuring charges, 1992 earnings were up $103 million over 1991 resulting from expense reduction measures and the restructuring of selected plastics and specialty businesses.
Outlook
Chemical operations continue to be influenced by the worldwide economic environment and the chemical industry supply and demand balance. In anticipation of growth in worldwide demand for chemicals, Amoco will increase the emphasis placed on its attractive core commodity petrochemical strengths, while continuing to implement successful process- improvement and cost-control strategies. Amoco also will focus on broadening the current commodity chemical portfolio and diversifying into specialty chemical and polymer conversion businesses.
Other Operations
Other operations include investments in laser manufacturing, photovoltaics and biotechnology; investments in hazardous-waste incineration facilities; offshore contract drilling; interests in real estate development; and other corporate diversification activities.
Other operations incurred a loss of $45 million in 1993, compared with losses of $179 million and $69 million, respectively, for 1992 and 1991. The higher losses for 1992 reflected charges of $99 million for
anticipated losses on the disposition of non-strategic investments. Excluding these items, losses in other operations were mainly associated with technology activities. In 1993, the Corporation sold its 49 percent interest in a fertilizer manufacturing venture in Trinidad, and its interest in Ok Tedi Mining Ltd. in Papua, New Guinea. The Corporation is no longer involved in the mining business.
Corporate Activities
Corporate activities, including net interest and other corporate expenses, were net expenses of $196 million for 1993, compared with net expenses of $210 million for 1992 and $279 million in 1991. Included in the 1993 results were prior-year tax benefits of $101 million and losses associated with early retirement of higher interest-rate debt. Included in 1992 results were favorable effects of $70 million primarily related to revised estimates of tax obligations and early retirement of debt, and charges of $38 million for work force reductions. Net expenses in 1991 included charges of $47 million related to the AMOCO CADIZ judgment. Adjusting for these items over the years shown, net expense increased $11 million between 1992 and 1993 and $10 million between 1991 and 1992.
Liquidity and Capital Resources
In 1993, cash flow from operating activities amounted to $3.5 billion, compared with $3 billion in 1992 and $3.3 billion in 1991.
Total debt was $5.1 billion at year-end 1993. Debt as a percent of debt-plus-equity was 27.1 percent at December 31, 1993, compared with 28.8 percent at year-end 1992. During 1993, Amoco retired approximately $1 billion of higher interest-rate debt and replaced it largely with the issuance of short-term commercial paper. Also, in 1992 and 1993, Amoco Canada Petroleum Company Ltd. ("Amoco Canada") debt was substantially refinanced. As part of the refinancing, Amoco and Amoco Company have guaranteed certain debt issues of Amoco Canada. See Notes 7 and 9 to the Consolidated Financial Statements.
Working capital was $751 million at year-end 1993, compared with $810 million at year-end 1992. At year-end 1993, the Corporation's current ratio was 1.14 to 1 compared with the current ratio at December 31, 1992 of 1.16 to 1. As a matter of policy, Amoco practices asset and liability management techniques that are designed to minimize its investment in non- cash working capital. This does not impair operational capability or flexibility since the Corporation has ready access to both short-term and long-term debt markets.
Amoco's short-term liquidity position is better than the reported figures indicate since the inventory component of working capital is valued in part under the LIFO method whereas other elements of working capital are reported at amounts more indicative of their current values. If inventories were valued at current replacement costs, it is estimated
that inventories would have been $900 million higher at December 31, 1993. As a result, the level of working capital would rise and an increase in the current ratio would result.
The Corporation believes its strong financial position will permit the financing of its business needs and opportunities in an orderly manner. It is anticipated that ongoing operations will be financed primarily by internally generated funds. Short-term obligations, such as commercial paper borrowings, give the Corporation the flexibility to meet short-term working capital and other temporary requirements. At December 31, 1993, bank lines of credit available to support commercial paper borrowings were $490 million, all of which were supported by commitment fees. To maintain flexibility, a $500 million shelf registration statement for debt securities remains on file with the Securities and Exchange Commission to permit ready access to capital markets.
The Corporation has provided in its accounts for the reasonably estimable future costs of probable environmental remediation obligations. These amounts relate to various refining and marketing sites, chemical locations, and oil and gas operations, including multiparty sites at which Amoco has been identified as a potentially responsible party by the U.S. Environmental Protection Agency. Such estimated costs will be refined over time as remedial requirements and regulations become better defined. However, any additional costs cannot be reasonably estimated at this time due to uncertainty of timing, the magnitude of contamination, future technology, regulatory changes and other factors. Although future costs could be significant, they are not expected to be material in relation to Amoco's liquidity or consolidated financial position. In total, the accrued liability represents a reasonable best estimate of Amoco's remediation liability. See Notes 1 and 21 to the Consolidated Financial Statements.
The Corporation and its subsidiaries maintain insurance coverage for environmental pollution resulting from the sudden or accidental release of pollutants. Amoco is self-insured for up to $35 million from the sudden or accidental release of pollutants per occurrence. Amoco currently does not carry insurance coverage with respect to other types of environmental obligations, except when required by regulation or contract. The financial statements do not reflect any significant recovery from claims under prior or current insurance coverage.
At December 31, 1993, the Corporation's reserves for future environmental remediation costs totaled $683 million, of which $401 million related to refining and marketing sites. The Corporation also maintains reserves associated with dismantlement, restoration and abandonment of oil and gas properties, which totaled $590 million at December 31, 1993.
Capital expenditures resulting from existing environmental regulations, primarily related to refining and marketing sites, totaled $360 million in 1993. Excluded from that total was $419 million for operating costs and amounts spent on research and development, and $104
million of mandated and voluntary spending charged against the remediation liability. Amoco's 1994 estimated capital spending for environmental cleanup and protection projects is expected to be approximately $250 million.
Capital and exploration expenditures in 1993 totaled $3.3 billion, an increase of 12 percent from the $3 billion spent in 1992.
A capital and exploration expenditure budget of $3 billion has been approved for 1994. Exploration and production spending for 1994 is forecast at $1.9 billion, the largest portion of which will be spent outside the United States. Capital outlays of approximately $1 billion are anticipated to be split equally between chemical operations and refining, marketing and transportation activities. It is anticipated that the 1994 capital and exploration expenditures budget will be financed primarily by funds generated internally. The planned expenditure level is subject to adjustment as changing economic conditions may indicate.
In March 1994, management of the Corporation announced to its employees that the organizational structure of the Corporation will be changed in an effort to reduce costs and increase effectiveness. Management currently anticipates that the new structure will be finalized in the last half of 1994.
Separate financial statements of subsidiary companies not consolidated, and of 50 percent or less owned companies accounted for by the equity method, have been omitted since, if considered in the aggregate, they would not constitute a significant subsidiary.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Amoco Corporation
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Amoco Corporation and its subsidiaries at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. These financial statements are the responsibility of Amoco Corporation's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 15 to the consolidated financial statements, Amoco Corporation changed its method of accounting for income taxes by adopting Statements of Financial Accounting Standards Nos. 109 and 96 in 1992 and 1991, respectively. Also in 1992, Amoco Corporation adopted Statement of Financial Accounting Standards No. 106, discussed in Note 19, and accordingly changed its method of accounting for postretirement benefits other than pensions.
PRICE WATERHOUSE
Chicago, Illinois February 22, 1994
AMOCO CORPORATION AND SUBSIDIARIES
_________________________
CONSOLIDATED STATEMENT OF INCOME
AMOCO CORPORATION AND SUBSIDIARIES _____________________
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AMOCO CORPORATION AND SUBSIDIARIES ___________________________
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
AMOCO CORPORATION AND SUBSIDIARIES _______________________
CONSOLIDATED STATEMENT OF CASH FLOWS
AMOCO CORPORATION AND SUBSIDIARIES __________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Accounting Policies
Principles of Consolidation
The operations of all significant subsidiaries in which the Corporation directly or indirectly owns more than 50 percent of the voting stock are included in the consolidated financial statements. The Corporation also consolidates its proportionate share of assets, liabilities and results of operations of oil and gas joint ventures and undivided interest in pipeline companies. Investments in other companies in which less than a majority interest is held are generally accounted for by the equity method.
Inventories
Inventories are carried at the lower of current market value or cost. Cost is determined under the last-in, first-out ("LIFO") method for the majority of inventories of crude oil, petroleum products and chemical products. The costs of remaining inventories are determined on the first-in, first-out ("FIFO") or average cost methods.
Costs Incurred in Oil and Gas Producing Activities
The Corporation follows the successful efforts method of accounting. Costs of property acquisitions, successful exploratory wells, all development costs (including CO2 and certain other injected materials in enhanced recovery projects) and support equipment and facilities are capitalized. Unsuccessful exploratory wells are expensed when determined to be non-productive. Production costs, overhead and all exploration costs other than exploratory drilling are charged against income as incurred.
Depreciation, Depletion and Amortization
Generally, depreciation of plant and equipment, other than oil and gas facilities, is computed on a straight-line basis over the estimated economic lives of the facilities. Assets held under capital leases are generally amortized over the terms of the leases. Depletion of the cost of producing oil and gas properties, amortization of related intangible drilling and development costs and depreciation of tangible lease and well equipment are computed on the unit-of-production method.
The portion of costs of unproved oil and gas properties estimated to be non-productive is amortized over projected holding periods.
AMOCO CORPORATION AND SUBSIDIARIES __________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The estimated costs to dismantle, restore and abandon oil and gas properties are accrued over the properties' remaining productive lives on the unit-of-production method.
Retirements
Upon normal retirement or replacement of facilities, the gross book value less salvage is charged to accumulated depreciation. Gains or losses from abnormal retirements or sales are credited or charged to income.
Maintenance and Repairs
All maintenance and repair costs are charged against income, while significant improvements are capitalized.
Income Taxes
Provision is made in the Corporation's accounts to reflect the current and deferred tax consequences of transactions that have been recognized in the financial statements.
Futures Contracts
The Corporation periodically enters into futures and options contracts generally to hedge its exposure to price fluctuations on hydrocarbon transactions, and to hedge its exposure to fluctuations in currency exchange rates on borrowings in foreign currencies. Recognized gains and losses on hedge contracts are reported as a component of the related transaction.
Translation of Foreign Currencies
The U.S. dollar has been determined to be the appropriate functional currency for essentially all operations except foreign chemical operations.
Environmental Liabilities
The Corporation has provided in its accounts for the reasonably estimable future costs of probable environmental remediation obligations relating to current and past activities, including obligations for previously disposed assets or businesses. In the case of long-lived cleanup projects, the effects of inflation and other factors, such as improved application of known technologies and methodologies, are considered in determining the amount of estimated liabilities. The undiscounted accrued amount primarily consists of costs such as site assessment, monitoring, equipment, utilities and soil and ground water treatment and disposal. The estimated environmental remediation obligation has not been reduced for probable recoveries from third parties.
AMOCO CORPORATION AND SUBSIDIARIES ___________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Net Income Per Share
Net income per share of common stock is based on the monthly weighted average number of shares outstanding during the year.
Note 2. Acquisitions, Dispositions and Special Items
In 1993, new investments, advances and business acquisitions totaled $200 million, including the purchase of Phillips Fibers Corporation. Proceeds from dispositions of property and other assets and from sales of investments totaled $850 million, including certain non-strategic properties and investments in Canada for approximately $471 million.
Earnings in 1993 included gains of $120 million relating to the Corporation's disposition of 65 percent of the equity investment in a Canadian company, Crestar Energy Inc., in connection with its initial public offering. Also included were gains of $70 million associated with the disposition of certain Canadian properties. Earnings in 1993 included after-tax charges of $170 million associated with the writedown of Congo exploration and production operations to current recoverable value.
Earnings in 1992 were reduced by after-tax charges of $805 million, as part of a strategic reassessment of business operations. These charges included $473 million for costs of restructuring business units and related charges, including anticipated losses on the disposition of oil and gas properties and other non-strategic assets and investments; $181 million for charges related to work force reductions; and $151 million for other reserves and adjustments. Earnings were favorably affected by $90 million related to the settlement of natural gas contracts in Sharjah. Also favorably affecting earnings were benefits of $90 million associated with revised estimates of tax obligations and retirement of debt.
In 1991, proceeds from dispositions of property and other assets totaled $747 million, including the sale of oil and gas properties in several states to Apache Corporation for approximately $500 million. Also, charges of $75 million were associated with the closing of the Casper, Wyo., refinery.
Note 3. Cash Flow Information
The Consolidated Statement of Cash Flows provides information about changes in cash and cash equivalents, including cash in excess of daily requirements that is invested in marketable securities, substantially all of which have a maturity of three months or less when acquired. The effect of foreign currency exchange rate fluctuations on total cash and marketable securities balances was not significant.
AMOCO CORPORATION AND SUBSIDIARIES _________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Net cash provided by operating activities reflects cash payments for interest and income taxes as follows:
Note 4. Inventories
Inventories at December 31, 1993 and 1992, are shown in the following table:
During the year ended December 31, 1993, the Corporation reduced certain inventory quantities which were valued at lower LIFO costs prevailing in prior years. The effect of this reduction was to increase net income by approximately $50 million. A smaller LIFO gain was included in 1992.
Inventories carried under the LIFO method represented approximately 47 percent of total year-end inventory carrying values in 1993 and 48 percent in 1992. It is estimated that inventories would have been approximately $900 million higher than reported on December 31, 1993, and approximately $1.3 billion higher on December 31, 1992, if the quantities valued on the LIFO basis were instead valued on the FIFO basis.
Note 5. Amoco Credit Corporation
Amoco Credit Corporation ("Credit") is a wholly owned finance subsidiary of the Corporation. Credit is primarily engaged in the business of financing certain accounts and notes receivable of the Corporation through the issuance of commercial paper and other short-term borrowings. The financial information of Credit included in the consolidated financial statements is provided in the following table:
AMOCO CORPORATION AND SUBSIDIARIES _________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 6. Property, Plant and Equipment
Investment in properties at December 31, 1993 and 1992, detailed by industry segment, was as follows:
Note 7. Short-Term Obligations
Amoco's short-term obligations consist of notes payable and commercial paper. Notes payable as of December 31, 1993, totaled $71 million at an average annual interest rate of 3.2 percent, compared with $75 million at an average annual interest rate of 3.6 percent at year-end 1992. Commercial paper borrowings at December 31, 1993, were $936 million at an average annual interest rate of 3.4 percent compared with $143 million at an average annual interest rate of 3.5 percent as of December 31, 1992. The carrying value of short-term obligations as of December 31, 1993 and December 31, 1992, approximated estimated fair value.
AMOCO CORPORATION AND SUBSIDIARIES _________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Bank lines of credit available to support commercial paper borrowings of the Corporation amounted to $490 million and $500 million at December 31, 1993 and 1992, respectively. All of these were supported by commitment fees.
The Corporation also maintains compensating balances with a number of banks for various purposes. Such arrangements do not legally restrict withdrawal or usage of available cash funds. In the aggregate, they are not material in relation to total liquid assets.
Note 8. Accounts Payable
Accounts payable at December 31, 1993 and 1992, included liabilities in the amount of $304 million and $342 million, respectively, for checks issued in excess of related bank balances but not yet presented for collection.
Note 9. Long-Term Debt
Amoco's long-term debt resides principally with two Amoco subsidiaries--Amoco Company and Amoco Canada. Amoco Company functions as the principal holding company for all of Amoco's petroleum and chemical operations, except Canadian petroleum operations and selected other activities.
AMOCO CORPORATION AND SUBSIDIARIES ________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The components of long-term debt and year-end rates are summarized as follows:
During 1993, Amoco retired $305 million of debt through a tender offer program that was initiated in October. In addition, Amoco called for redemption a total of $646 million in other securities. The majority of these obligations were replaced with commercial paper. Early
AMOCO CORPORATION AND SUBSIDIARIES _________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
retirement of these issues resulted in a loss of $44 million. Amoco Canada substantially completed refinancing its long-term debt with the issuance of $600 million in debentures. Proceeds from these issues were used to repay the bank loans and the commercial paper. Amoco Corporation guarantees the outstanding public debt obligations of Amoco Company. Amoco Corporation and Amoco Company guarantee the Notes and Debentures of Amoco Canada, except for the SEDs.
AmProp Inc., a real estate subsidiary, had long-term debt secured by real estate assets, totaling $88 million at year-end 1993, and $104 million at year-end 1992, which is not guaranteed by Amoco Corporation or Amoco Company.
Of Amoco's total debt outstanding at December 31, 1993, approximately $600 million was denominated in foreign currencies. The Corporation has entered into foreign currency forward and option contracts that have been designated as hedges of the currency exposure on substantially all of that debt. Unrealized losses on these hedge contracts totaled $14 million and $115 million for 1993 and 1992, respectively, and were offset by currency gains on long-term debt. The estimated fair values of long-term debt outstanding as of December 31, 1993 and 1992 were $4,264 million and $5,120 million, respectively, based on quoted market prices for the same or similar issues, or the current rates offered to the Corporation for debt of the same remaining maturities.
Annual maturities of total long-term debt during the next five years, including the portion classified as current, are $44 million in 1994, $200 million in 1995, $249 million in 1996, $205 million in 1997 and $266 million in 1998.
AMOCO CORPORATION AND SUBSIDIARIES _________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 10. Leases
The Corporation leases various types of properties, including service stations, tankers, buildings, railcars and other facilities, some of which are subleased to others, through operating leases. Some of the leases and subleases provide for contingent rentals based on refined product throughput.
Summarized below as of December 31, 1993, are future minimum rentals payable and related sublease rental income for non-cancelable capital and operating leases. Also shown is a reconciliation of minimum rentals payable with the amount of capitalized lease obligations included in the Consolidated Statement of Financial Position as of December 31, 1993.
Rental expense and related rental income applicable to operating leases for the three years ended December 31, 1993, are summarized below:
AMOCO CORPORATION AND SUBSIDIARIES _________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 11. Capital Stock
There were 800,000,000 shares of common stock without par value authorized at December 31, 1993. Details concerning share transactions are shown below:
In addition, there are 50 million shares of voting preferred stock and 50 million shares of non-voting preferred stock authorized. As of December 31, 1993, none of the preferred stock had been issued.
Note 12. Foreign Currency
A foreign currency gain of $47 million was reflected in income in 1993, compared with a gain of $129 million and a loss of $20 million for 1992 and 1991, respectively. In addition, net translation losses of $18 million and $27 million for 1993 and 1992, respectively, and a net translation gain of $1 million for 1991, were reflected in the foreign currency translation adjustment account in shareholders' equity.
AMOCO CORPORATION AND SUBSIDIARIES ________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 13. Interest Expense
The Corporation capitalizes interest cost related to the financing of major projects under development. All other interest is expensed as incurred. The components of interest expense are summarized in the following table:
Note 14. Research and Development Expenses
Research and development costs are expensed as incurred and amounted to $292 million in 1993, $300 million in 1992 and $330 million in 1991.
Note 15. Taxes
Effective January 1, 1992, the Corporation adopted Statement of Financial Accounting Standards ("SFAS") No. 109. The cumulative effect of the accounting change, relating to years prior to 1992, was to increase deferred income tax liabilities as of January 1, 1992, and reduce net income by $68 million ($.14 per share). In addition, 1992 net income before the cumulative effect was $215 million ($.43 per share) greater than it would have been under SFAS No. 96, the previous method. The Corporation had adopted SFAS No. 96, effective January 1, 1991. The cumulative effect of that accounting change was to decrease deferred income tax liabilities and increase 1991 net income by $311 million, or $.62 per share.
AMOCO CORPORATION AND SUBSIDIARIES _________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The aggregate federal and foreign deferred income tax liability represents the tax effect of the following items at December 31:
The decrease in the deferred tax asset valuation allowance primarily reflects recognition of tax benefits related to foreign operations and asset sales.
The provision for income taxes is composed of:
AMOCO CORPORATION AND SUBSIDIARIES _________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following is a reconciliation between the provision for income taxes and income taxes determined by applying the federal statutory rate to income before income taxes:
Taxes other than income taxes include:
Undistributed earnings of certain foreign subsidiaries and joint-venture companies aggregated $341 million on December 31, 1993, which, under existing law, will not be subject to U.S. tax until
AMOCO CORPORATION AND SUBSIDIARIES ________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
distributed as dividends. Since the earnings have been or are intended to be indefinitely reinvested in foreign operations, no provision has been made for any U.S. taxes that may be applicable thereto. Furthermore, any taxes paid to foreign governments on those earnings may be used in whole or in part, as credits against the U.S. tax on any dividends distributed from such earnings. It is not practicable to estimate the amount of unrecognized deferred U.S. taxes on these undistributed earnings.
Note 16. Stock Option Plans
The Corporation's stock option plans approved by shareholders provide for the granting of options with or without stock appreciation rights ("SARs") to key, managerial and other eligible employees to buy Corporation common stock at not less than 100 percent of the fair market value at the date of grant. Such options may be incentive stock options to the extent provided in the Internal Revenue Code. Options granted under the plans normally extend for 10 years and generally become exercisable two years after the date of the grant. Options with SARs permit holders to surrender exercisable options in exchange for payment determined by the amount by which the market value of the shares on the dates the rights are exercised exceeds the grant price. No options were granted with SARs in 1993. Such payments can be made in shares, cash or a combination at the discretion of the administering committee.
Option plan transactions in 1993 are summarized in the following table:
Of the total options outstanding on December 31, 1993, 692,492 were with SARs. Stock options for 6,396,005 shares were exercisable at year-end 1993. No options may be granted under the current plan after December 31, 2001.
The Corporation's restricted stock grant plans provide for the awarding of shares of Corporation common stock to selected employees of Amoco and its participating subsidiaries, including officers and directors. Shares issued under the plans may not be sold or otherwise
AMOCO CORPORATION AND SUBSIDIARIES ________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
transferred for a minimum period as established at the time of the grant. The shares generally are subject to forfeiture if the recipient's employment terminates during the specified period unless such termination is due to death, total disability or involuntary retirement. Shares issued have dividend and voting rights identical to other outstanding shares of the Corporation's common stock. During 1993, 58,535 shares were issued under the current plans. No restricted shares may be issued under the current plan after December 31, 2001.
Note 17. Employee Compensation Programs
Management incentive compensation plans approved by shareholders provide for the granting of awards to key, managerial and other eligible executives of the Corporation and certain subsidiaries. Amounts charged against earnings in anticipation of awards to be made later were $10 million in 1993, $8 million in 1992 and $6 million in 1991. Awards made in 1993, 1992 and 1991 amounted to $13 million, $16 million and $19 million, respectively.
The Amoco Performance Share Plan, which became effective in 1992, allocates Amoco stock to employees when the Corporation's total return to shareholders meets or exceeds the average return achieved by a select group of competitors. No contributions were made on behalf of employees in 1993 as the return on Amoco common stock was below the competitor average. The return on Amoco stock was above the competitor average in 1992. As a result, employees earned stock equal to 4.4 percent of base compensation, and the amount charged to expense in 1992 was $77 million.
Note 18. Retirement Plans
The Corporation and its subsidiaries have a number of defined benefit pension plans covering most employees. Plan benefits are generally based on employees' years of service and average final compensation. Essentially all of the cost of these plans is borne by the Corporation. The Corporation makes contributions to the plans in amounts that are intended to provide for the cost of pension benefits over the service lives of employees.
AMOCO CORPORATION AND SUBSIDIARIES _______________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The funded status of the plans as of December 31 for 1993 and 1992 was as follows:
AMOCO CORPORATION AND SUBSIDIARIES _________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The actuarial assumptions used for the Corporation's principal pension plans for 1993 and 1992 were as follows:
The components of net pension cost for the past three years were as follows:
Most employees are also eligible to participate in defined contribution plans by contributing a portion of their compensation. The Corporation matches contributions up to specified percentages of each employee's compensation. Matching contributions charged to income were $96 million in 1993, $100 million in 1992 and $87 million in 1991.
Note 19. Other Postretirement Benefits
The Corporation and its subsidiaries provide certain health care and life insurance benefits for retired employees. Substantially all of the Corporation's domestic employees and employees in certain foreign countries are provided these benefits through insurance companies whose premiums are based on benefits paid during the year. Effective January 1, 1992, the Corporation adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," which requires that the cost of such benefits be recognized during employees' years of active service. Prior to 1992, the cost of providing benefits to retirees was expensed as paid, and amounted to $47 million in 1991.
AMOCO CORPORATION AND SUBSIDIARIES ________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The cumulative effect of the accounting change, relating to benefits attributable to years of service prior to 1992, was to reduce 1992 net income by $856 million ($1.72 per share). In addition, the effect of adopting SFAS No. 106 in 1992 was to reduce net income by $64 million ($.13 per share). During 1992, the Corporation approved plan amendments which reduced the accumulated obligation by $270 million. The reduced costs associated with these amendments will be amortized prospectively over the average remaining years of service to full retirement eligibility of active employees.
The status of the Corporation's unfunded plans as of December 31 for 1993 and 1992 was as follows:
The actuarial assumptions used for the Corporation's principal postretirement benefit plans for 1993 and 1992 were as follows:
AMOCO CORPORATION AND SUBSIDIARIES ________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The components of net postretirement benefit costs for 1993 and 1992 were as follows:
Note 20. Litigation
The Internal Revenue Service ("IRS") has challenged the application of certain foreign income taxes as credits against the Corporation's U.S. taxes that otherwise would have been payable for the years 1980 through 1982. On June 18, 1992, the IRS issued a statutory Notice of Deficiency for additional taxes in the amount of $466 million, plus interest, relating to those years. The Corporation has filed a petition in the U.S. Tax Court contesting the IRS statutory Notice of Deficiency. A similar amount of additional taxes is expected to be claimed for years 1983 through 1985 based upon a subsequent IRS audit. Any claims for years subsequent to 1985 would not be as significant as those for prior years. The Corporation believes that the foreign income taxes have been reflected properly in its U.S. federal tax returns, and intends to contest the IRS claims. The Corporation is confident that it will prevail in the litigation. Consequently, this dispute is not expected to have a material adverse effect on the consolidated financial position of the Corporation.
Note 21. Other Contingencies and Commitments
At December 31, 1993, contingent liabilities of the Corporation included guarantees of $51 million on outstanding loans of others. The Corporation also has entered into various working capital maintenance agreements and pipeline throughput and deficiency contracts with affiliated companies. These agreements supported an estimated $15 million of affiliated company borrowings at December 31, 1993. The fair value of these guarantees and agreements is considered to be substantially less than the nominal amounts of the outstanding borrowings.
In the normal course of business, the Corporation has entered into contracts for the purchase of transportation capacity, materials and services over terms of up to 16 years. The remaining minimum payments required under these contracts at December 31, 1993, totaled $487 million.
AMOCO CORPORATION AND SUBSIDIARIES ________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
A significant portion of Amoco's receivables are from other oil and gas and chemical companies. Although collection of these receivables could be influenced by economic factors affecting these industries, the risk of significant loss is considered remote.
Amoco is subject to federal, state and local environmental laws and regulations. Amoco is currently participating in the cleanup of numerous sites pursuant to such laws and regulations. The reasonably estimable future costs of probable environmental obligations, including Amoco's probable costs for obligations for which Amoco is jointly and severally liable, and for assets or businesses that were previously disposed, have been provided for in the Corporation's results of operations. These estimated costs represent the amount of expenditures expected to be incurred in the future to remediate sites with known environmental obligations. The accrued liability represents a reasonable best estimate of Amoco's remediation liability. As the scope of the obligations becomes better defined, there may be changes in the estimated future costs, which could result in charges against the company's future results of operations. The ultimate amount of any such future costs, and the range within which such costs can be expected to fall, cannot be determined. Although the costs could be significant, they are not expected to have a material effect on Amoco's liquidity or consolidated financial position.
AMOCO CORPORATION AND SUBSIDIARIES ________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 22. Summarized Financial Data--Amoco Company
The Corporation's principal subsidiary, Amoco Company, is the holding company for all petroleum and chemical operating subsidiaries except Amoco Canada. Amoco guarantees the outstanding public debt obligations of Amoco Company.
Summarized financial data for Amoco Company are presented as follows:
Annual maturities of long-term debt during the next five years, including the portion classified as current, are $43 million in 1994, $135 million in 1995, $246 million in 1996, $202 million in 1997 and $263 million in 1998.
Note 23. Segment and Geographic Data
The Corporation operates in several industry segments. Petroleum operations include exploration and production ("E&P") and refining, marketing and transportation ("RM&T") segments. The E&P segment is engaged in exploring for, developing and producing crude oil and natural gas and extraction of natural gas liquids ("NGL"). The RM&T segment is responsible for petroleum refining operations, the marketing of all refined petroleum products and the transportation and wholesale marketing of NGL. This segment also encompasses transportation of crude oil to the refineries via marine vessels and pipelines and associated supply and trading activities. The chemical segment manufactures and sells various petroleum-based chemical products. Other operations include investments in technology companies, offshore contract drilling, real estate
AMOCO CORPORATION AND SUBSIDIARIES _______________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
interests, hazardous-waste incineration facilities and other diversification activities.
Intersegment and intergeographic sales are accounted for at prices that approximate arm's-length market prices. Operating profits include all revenues and expenses of the reportable segment, except for income taxes and equity in earnings of unconsolidated companies. Income taxes are generally assigned to the operations that give rise to the tax effects.
Identifiable assets are those used in the operations of each segment or area, including intersegment or intergeographic receivables. Corporate assets consist primarily of cash, marketable securities and the unamortized cost of purchased tax benefits. Intersegment and intergeographic sales and receivables are eliminated in determining consolidated revenue and identifiable asset totals. Information by Industry Segment and Geographic Area is summarized in the tables on pages 60 to 63.
AMOCO CORPORATION AND SUBSIDIARIES ________________________
SUPPLEMENTAL INFORMATION
1. Quarterly Results and Stock Market Data
2. Oil and Gas Exploration and Production Activities
Supplemental information about oil and gas exploration and production activities is reported in compliance with SFAS No. 69, "Disclosures about Oil and Gas Producing Activities."
Results of Operations for Oil and Gas Producing Activities
Oil and gas production revenues reflect the market prices of net production sold or transferred, with appropriate adjustments for royalties, net profits interest and other contractual provisions. Other revenues in 1993 include Canadian gains on dispositions of properties and investments. Taxes other than income include production and severance taxes and property taxes. Other production costs are lifting costs incurred to operate and maintain productive wells and related equipment, including such costs as operating labor, repairs and maintenance, materials, supplies and fuel consumed. Also included are operating costs of field natural gas liquids plants, because the Corporation includes the operations of these plants in the exploration and production segment. Production costs include related administrative expenses and depreciation applicable to support equipment associated with production activities.
Exploration expenses include the costs of geological and geophysical activity, carrying and retaining undeveloped properties and drilling exploratory wells determined to be non-productive. Depreciation, depletion and amortization expense relates to capitalized costs incurred in acquisition, exploration and development activities and does not include depreciation applicable to support equipment. Included in other related costs for 1993 are significant, non-recurring items and purchases of natural gas for field natural gas liquids plants. These items were classified as production costs in prior years; data for 1992 and 1991 were reclassified in the table above. Significant, non-recurring items include
$210 million for the writedown of Congo operations to current recoverable value and U.S. environmental charges of $96 million in 1993, and restructuring charges of $566 million and $38 million in 1992 and 1991, respectively.
Income taxes are generally assigned to the operations that give rise to the tax effects. Results of operations do not include interest expense and general corporate amounts nor their associated tax effects.
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
The standardized measure of discounted future net cash flows relating to proved oil and gas reserves is prescribed by SFAS No. 69. The statement requires measurement of future net cash flows through assignment of a monetary value to proved reserve quantities and changes therein using a standardized formula. The amounts shown are based on prices and costs at the end of each period, legislated tax rates and a 10 percent annual discount factor. Because the calculation assumes static economic and political conditions and requires extensive judgment in estimating the timing of production, the resultant future net cash flows are not necessarily indicative of the fair market value of estimated proved reserves, but provide a reference point that may assist the user in projecting future cash flows.
Summarized below is the standardized measure of discounted future net cash flows relating to proved oil and gas reserves at December 31, 1993, 1992 and 1991.
Future cash inflows are computed by applying the year-end prices of oil and gas to proved reserve quantities as reported in the tables under the heading "Estimated Proved Reserves." Future price changes are considered only to the extent provided by contractual arrangements. Future development and production costs are estimated expenditures to develop and produce the proved reserves based on year-end costs and assuming continuation of existing economic conditions. Future income taxes are calculated by applying appropriate statutory tax rates to future pre-tax net cash flows from proved oil and gas reserves less recovery of the tax basis of proved properties, and adjustments for permanent differences.
Statement of Changes in Standardized Measure of Discounted Future Net Cash Flows
The following table details the changes in the standardized measure of discounted future net cash flows for the three years ended December 31, 1993:
The price of crude oil has fluctuated over the past several years, and price changes have had significant effects on the computed future cash flows over the period shown. Because the price of crude oil is likely to remain volatile in the future, price changes can be expected to continue to significantly affect the standardized measure of future net cash flows.
Estimated Proved Reserves
Net proved reserves of crude oil (including condensate), natural gas liquids ("NGL") and natural gas at the beginning and end of 1993, 1992 and 1991, with the detail of changes during those years, are presented below. Reported quantities include reserves in which the Corporation holds an economic interest under production-sharing and other types of operating agreements with foreign governments. The estimates were prepared by Corporation engineers and are based on current technology and economic conditions. The Corporation considers such estimates to be reasonable and consistent with current knowledge of the characteristics and extent of proved production. These estimates include only those amounts considered to be proved reserves and do not include additional amounts that may result from extensions of currently proved areas, or amounts that may result from new discoveries in the future, or from application of secondary or tertiary recovery processes not yet determined to be commercial. Proved developed reserves are those reserves that are expected to be recovered through existing wells with existing equipment and operating methods.
Capitalized Costs
The following table summarizes capitalized costs for oil and gas exploration and production activities, and the related accumulated depreciation, depletion and amortization.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Part III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The information required by this item with respect to directors is incorporated by reference to pages 3-10 of Amoco's Proxy Statement dated March 14, 1994. Also, see heading "Executive Officers of the Registrant" on page 17 of this Form 10-K.
Item 11.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to pages 11-17 of Amoco's Proxy Statement dated March 14, 1994. Information related to the Board Compensation and Organization Committee Report on Executive Compensation and the Cumulative Total Shareholder Return Five- Year Comparison graph are identified separately therein and are not incorporated herein.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated by reference to pages 3, 10 and 12 of Amoco's Proxy Statement dated March 14, 1994.
Item 13.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated by reference to page 10 of Amoco's Proxy Statement dated March 14, 1994.
Part IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. and 2. Financial Statements and Schedules
See Index to Financial Statements and Supplemental Information on page 32.
Schedules not included in this Form 10-K have been omitted because they are either not applicable or the required information is shown in the financial statements or notes thereto.
3. Exhibits
See Index to Exhibits on page 83.
(b) Reports on Form 8-K.
A current report on Form 8-K dated December 1, 1993, was filed related to a jury verdict against Amoco Production Company, a subsidiary of Amoco Corporation, in RUBICON PETROLEUM INC. VS. AMOCO PRODUCTION COMPANY & AMOCO CORPORATION. In that case Rubicon alleged that in 1990 it entered into an oral contract with Amoco Production to purchase two Wyoming oil properties for $18 million. Rubicon sued for breach of contract, violation of the Texas Consumer Protection Statute and various other torts. The Matagorda County jury entered two alternative actual damage awards of $125 million and $45 million, respectively, a punitive damage award of $250 million, and attorneys' fees of one-third of Plaintiff's recovery. No judgment has yet been entered. See Item 3. Legal Proceedings.
A current report on Form 8-K dated December 10, 1993, was filed related to jury verdicts in favor of Amoco Chemical Company, a subsidiary of Amoco Corporation, against certain underwriters at Lloyd's of London and various other British and European insurance carriers, in AMOCO CHEMICAL COMPANY et al, vs. CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, et al. A current report on Form 8-K dated February 8, 1994, was filed related to a judgment entered by the Superior Court of the State of California, County of Los Angeles, in favor of Amoco Chemical Company and Amoco Reinforced Plastics Company, subsidiaries of Amoco. See Item 3. Legal Proceedings.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, and State of Illinois, on the 22nd day of March, 1994.
AMOCO CORPORATION (Registrant)
H. L. FULLER H. L. Fuller Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 22, 1994.
SCHEDULE V
AMOCO CORPORATION
PROPERTY, PLANT AND EQUIPMENT(1)
For the Year Ended December 31, (millions of dollars)
SCHEDULE VI
AMOCO CORPORATION
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
SCHEDULE VIII
AMOCO CORPORATION
VALUATION AND QUALIFYING ACCOUNTS(1)
SCHEDULE IX
AMOCO CORPORATION
SHORT-TERM OBLIGATIONS(1)
For the Year Ended December 31, (millions of dollars, except interest rates)
SCHEDULE X
AMOCO CORPORATION
SUPPLEMENTARY INCOME STATEMENT INFORMATION
AMOCO CORPORATION _________________
INDEX TO EXHIBITS