Back to GetFilings.com

Table of Contents

UNITED STATES

Form 10-K

	x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

	OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-1204

Amerada Hess Corporation

(Exact name of Registrant as specified in its charter)

DELAWARE

(Registrant’s telephone number, including area code, is (212) 997-8500)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:  None

      Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  X  No    

Table of Contents

AMERADA HESS CORPORATION

Form 10-K

1

Table of Contents

PART I

      Amerada Hess Corporation (the “Registrant”) is a Delaware corporation, incorporated in 1920. The Registrant and its subsidiaries (collectively referred to as the “Corporation”) explore for, produce, purchase, transport and sell crude oil and natural gas. These exploration and production activities take place in the United States, United Kingdom, Norway, Denmark, Gabon, Indonesia, Thailand, Azerbaijan, Algeria, Colombia, Equatorial Guinea, Malaysia and other countries. The Corporation also manufactures, purchases, transports, trades and markets refined petroleum and other energy products. The Corporation owns 50% of a refinery joint venture in the United States Virgin Islands, and another refining facility, terminals and retail gasoline stations located on the East Coast of the United States.

Exploration and Production

      At December 31, 2001, the Corporation had 955 million barrels of proved crude oil and natural gas liquids reserves compared with 766 million barrels at the end of 2000. Proved natural gas reserves were 2,881 million Mcf at December 31, 2001 compared with 2,127 million Mcf at December 31, 2000. The crude oil and natural gas reserves include the Corporation’s proportionate share of the reserves of equity investees. Of the total proved reserves (on a barrel of oil equivalent basis), 20% are located in the United States, 40% are located in the United Kingdom, Norwegian and Danish sectors of the North Sea and the remainder are located in Algeria, Azerbaijan, Colombia, Equatorial Guinea, Gabon, Indonesia, Thailand and Malaysia.

      Worldwide crude oil and natural gas liquids production amounted to 298,000 barrels per day in 2001 compared with 261,000 barrels per day in 2000. Worldwide natural gas production was 812,000 Mcf per day in 2001 compared with 679,000 Mcf per day in 2000. The Corporation has a number of oil and gas developments in progress and it also has an inventory of domestic and foreign drillable prospects.

      Acquisition of Triton Energy Limited. On August 14, 2001, the Corporation acquired Triton Energy Limited (Triton), an international oil and gas exploration and production company. Its principal properties, operations and oil and gas reserves are in Equatorial Guinea, Colombia and the Joint Development Area of Malaysia-Thailand.

      Equatorial Guinea. Triton has interests in production sharing contracts covering three offshore blocks. Net crude oil production from Triton’s 85% interest in the Ceiba Field averaged 14,500 barrels per day since acquisition in August 2001. The Corporation expects net crude oil production in 2002 to average over 45,000 barrels per day. The Corporation is considering development alternatives for other oil discoveries in Equatorial Guinea and plans additional exploration wells.

      Colombia. Triton participates in three contract areas with a 12% interest (9.6% after royalties) and another contract area with a 10% interest (8% after royalties). These contract areas include the Cusiana and Cupiagua Fields. The Corporation’s share of crude oil production from these fields averaged 26,400 barrels per day since acquisition in August 2001.

      Malaysia-Thailand. Triton owns one-half of a corporate joint venture that holds a 50% interest in a production sharing contract in the Joint Development Area of the Gulf of Thailand. In 1999, the parties to the production sharing contract entered into a gas sales agreement for the sale of the first phase of gas production. Commencement of production is subject to completion of pipeline facilities to be constructed by the gas purchaser.

2

Table of Contents

      United States.  Amerada Hess Corporation operates mainly offshore in the Gulf of Mexico and onshore in Texas, Louisiana and North Dakota. During 2001, 26% of the Corporation’s crude oil and natural gas liquids production and 52% of its natural gas production were from United States operations.

      The table below sets forth the Corporation’s average daily net production by area in the United States:

      At December 31, 2001, the Corporation has an interest in 177 exploration blocks in the Gulf of Mexico of which it operates 123. The Corporation has 535,000 net undeveloped acres in the Gulf of Mexico.

      United Kingdom.  The Corporation’s activities in the United Kingdom are conducted by its wholly-owned subsidiary, Amerada Hess Limited. During 2001, 42% of the Corporation’s crude oil and natural gas liquids production and 36% of its natural gas production were from United Kingdom operations.

3

Table of Contents

      The table below sets forth the Corporation’s average daily net production in the United Kingdom by field and the Corporation’s interest in each at December 31, 2001:

      The Corporation is developing several oil and gas fields in the United Kingdom North Sea and is evaluating other discoveries. Amerada Hess Limited owns 25% of the shares of Premier Oil plc, a United Kingdom company with international exploration and production interests.

      Norway.  The Corporation’s activities in Norway are conducted through its wholly-owned Norwegian subsidiary, Amerada Hess Norge A/S. Norwegian operations accounted for crude oil and natural gas liquids production of 26,000 and 27,000 barrels per day in 2001 and 2000, respectively. Natural gas production averaged 25,000 Mcf and 24,000 Mcf per day in 2001 and 2000, respectively. Substantially all of the Norwegian production is from the Corporation’s 28.09% interest in the Valhall Field. An enhanced-recovery waterflood project for the Valhall Field has been approved and initial water injection is scheduled for 2003.

      Denmark.  Amerada Hess ApS, the Corporation’s Danish subsidiary, operates the South Arne Field, which completed its first full year of production in 2000. Net crude oil production from the Corporation’s 57.48% interest in the South Arne Field was 20,000 barrels of oil per day in 2001 compared to 25,000 barrels of oil per day in 2000. Natural gas production was 43,000 Mcf and 37,000 Mcf of natural gas per day in 2001 and 2000, respectively.

      Gabon.  Amerada Hess Production Gabon (AHPG), the Corporation’s 77.5% Gabonese subsidiary, has a 10% interest in the Rabi Kounga Field and a 40% interest in the Atora Field, which began producing in 2001. The Corporation’s share of production averaged 9,000 net barrels of crude oil per day in 2001 and 7,000 net barrels per day in 2000.

      Indonesia.  The Corporation has a 30% interest in the Jabung Production Sharing Contract, which contains the North Geragai and Makmur fields. Net production from these fields averaged 6,000 barrels of oil per day in 2001 and 4,000 barrels of oil per day in 2000. The Jabung production sharing contract area contains

4

Table of Contents

      Thailand.  The Corporation has a 15% interest in the Pailin gas field offshore Thailand. Net production from the Corporation’s interest averaged 20,000 Mcf and 23,000 Mcf of natural gas per day in 2001 and 2000, respectively.

      Algeria.  The Corporation has a 49% interest in a joint venture with the Algerian national oil company, which is redeveloping three Algerian oil fields. The Corporation’s share of production averaged 13,000 barrels of crude oil per day in 2001.

      Azerbaijan.  The Corporation has a 2.72% equity interest in the AIOC Consortium in the Caspian Sea. Net production from its interest averaged 4,000 barrels and 3,000 barrels of oil per day in 2001 and 2000, respectively.

Refining and Marketing

      Refining.  The Corporation owns a 50% interest in the HOVENSA refining joint venture in the United States Virgin Islands. In addition, it owns and operates a refining facility in Port Reading, New Jersey.

      HOVENSA.  In 2001, the Corporation’s share of refinery crude runs averaged 202,000 barrels per day compared with 211,000 barrels per day in 2000. The refinery is a joint venture with a subsidiary of Petroleos de Venezuela S.A. Petroleos de Venezuela supplies 155,000 barrels per day of Venezuelan Mesa crude oil to HOVENSA under a long-term crude oil supply contract. The remaining crude oil is purchased mainly under contracts of one year or less from third parties and through spot purchases on the open market. After sales of refined products by HOVENSA to third parties, the Corporation purchases 50% of HOVENSA’s remaining production at market prices. Construction is in process on a 58,000 barrel per day delayed coking unit and related facilities, which are anticipated to be completed in the second quarter of 2002. HOVENSA has a long-term supply contract with Petroleos de Venezuela to purchase 115,000 barrels per day of heavy Venezuelan Merey crude oil commencing on completion of the coker.

      Port Reading Facility.  The Corporation owns and operates a fluid catalytic cracking facility in Port Reading, New Jersey. This facility processes vacuum gas oil and residual fuel oil. It currently operates at a rate of approximately 55,000 barrels per day and produces substantially all gasoline and heating oil.

      Marketing.  The Corporation markets refined petroleum products on the East Coast of the United States to the motoring public, wholesale distributors, industrial and commercial users, other petroleum companies, governmental agencies and public utilities. It also markets natural gas to utilities and other industrial and commercial customers. The Corporation’s energy marketing activities include the sale of electricity. The Corporation has a 50% voting interest in a consolidated partnership that trades energy commodities and derivatives. The Corporation also takes trading positions for its own account.

      The Corporation has 1,158 HESS® gasoline stations at December 31, 2001, of which approximately 65% are company operated. Most of the gasoline stations are concentrated in densely populated areas, principally in New York, New Jersey, Pennsylvania, Florida, Massachusetts and North and South Carolina, and 787 have convenience stores. The Corporation owns approximately 55% of the properties on which the stations are located.

      In 2001, the Corporation invested $86 million in a 50% joint venture which owns and operates 120 gasoline stations and 21 travel centers, located primarily in North Carolina, South Carolina and Virginia. Gasoline and diesel fuel are sold under the Hess brand. The Corporation added 53 retail outlets located in the Boston metropolitan area and southern New Hampshire. These sites, most of which include convenience stores, were rebranded HESS.

      The Corporation’s energy marketing activities include the sale and distribution of distillate and fuel oil to customers in its East Coast market area and natural gas to industrial, commercial and retail customers. In addition, the Corporation has a wholly-owned subsidiary which provides distributed electric generation to industrial and commercial customers as an alternative to purchasing electric from local utilities. The Corporation also has invested in long-term technology to develop fuel cells for electricity generation through a venture with other parties.

5

Table of Contents

      The Corporation has 23 terminals with an aggregate storage capacity of 22 million barrels in its East Coast marketing areas. Refined product sales averaged 387,000 barrels per day in 2001 and 366,000 barrels per day in 2000. Of total refined products sold in 2001, approximately 50% was obtained from HOVENSA and Port Reading. The Corporation purchased the balance from others under short-term supply contracts and by spot purchases from various sources.

Competition and Market Conditions

      The petroleum industry is highly competitive. The Corporation encounters competition from numerous companies in each of its activities, particularly in acquiring rights to explore for crude oil and natural gas and in the purchasing and marketing of refined products and natural gas. Many competitors are larger and have substantially greater resources than the Corporation. The Corporation is also in competition with producers and marketers of other forms of energy.

      The petroleum business involves large-scale capital expenditures and risk-taking. In the search for new oil and gas reserves, long lead times are often required from successful exploration to subsequent production. Operations in the petroleum industry depend on a depleting natural resource. The number of areas where it can be expected that hydrocarbons will be discovered in commercial quantities is constantly diminishing and exploration risks are high. Areas where hydrocarbons may be found are often in remote locations or offshore where exploration and development activities are capital intensive and operating costs are high.

      The major foreign oil producing countries, including members of the Organization of Petroleum Exporting Countries (“OPEC”), exert considerable influence over the supply and price of crude oil and refined petroleum products. Their ability or inability to agree on a common policy on rates of production and other matters has a significant impact on oil markets and the Corporation. The derivatives markets are also important in influencing the selling prices of crude oil, natural gas and refined products. The Corporation cannot predict the extent to which future market conditions may be affected by foreign oil producing countries, the derivatives markets or other external influences.

Other Items

      The Corporation’s operations may be affected by federal, state, local, territorial and foreign laws and regulations relating to tax increases and retroactive tax claims, expropriation of property, cancellation of contract rights, and changes in import regulations, as well as other political developments. The Corporation has been affected by certain of these events in various countries in which it operates. The Corporation markets motor fuels through lessee-dealers and wholesalers in certain states where legislation prohibits producers or refiners of crude oil from directly engaging in retail marketing of motor fuels. Similar legislation has been periodically proposed in the U.S. Congress and in various other states. The Corporation, at this time, cannot predict the effect of any of the foregoing on its future operations.

      Compliance with various environmental and pollution control regulations imposed by federal, state and local governments is not expected to have a materially adverse effect on the Corporation’s earnings and competitive position within the industry. The Corporation spent $8 million in 2001 for environmental remediation, with a comparable amount anticipated for 2002. Capital expenditures for facilities, primarily to comply with federal, state and local environmental standards, were $6 million in 2001 and the Corporation anticipates $12 million in 2002. Regulatory changes already made or anticipated in the United States will alter the composition and emissions characteristics of motor fuels. Future capital expenditures necessary to comply with these regulations may be substantial. The Environmental Protection Agency has adopted rules that limit the amount of sulfur in gasoline and diesel fuel. These rules phase in beginning in 2004. Capital expenditures necessary to comply with the low-sulfur gasoline requirements at Port Reading are expected to be approximately $70 million over the next three years. Capital expenditures to comply with low-sulfur gasoline and diesel fuel requirements at HOVENSA are currently expected to be $460 million over the next four years. HOVENSA expects to finance these capital expenditures through cash flow and, if necessary, future borrowings.

      The number of persons employed by the Corporation averaged 10,838 in 2001 and 9,891 in 2000.

      Additional operating and financial information relating to the business and properties of the Corporation appears in the text on pages 4 through 9 under the heading “Exploration & Production,” on page 10 under the

6

Table of Contents

Item 2. Properties

      Reference is made to Item 1 and the operating and financial information relating to the business and properties of the Corporation which is incorporated in Item 1 by reference.

      Additional information relating to the Corporation’s oil and gas operations follows:

1. Oil and gas reserves

      The Corporation’s net proved oil and gas reserves at the end of 2001, 2000 and 1999 are presented under Supplementary Oil and Gas Data in the accompanying 2001 Annual Report to Stockholders, which has been incorporated herein by reference.

      During 2001, the Corporation provided oil and gas reserve estimates for 2000 to the Department of Energy. Such estimates are compatible with the information furnished to the SEC on Form 10-K, although not necessarily directly comparable due to the requirements of the individual requests. There were no differences in excess of 5%.

      The Corporation has no contracts or agreements to sell fixed quantities of its crude oil production, although derivative instruments are used to reduce the effects of changes in selling prices. In the United States, natural gas is sold through the Company’s marketing division to local distribution companies, and commercial, industrial, and other purchasers, on a spot basis and under contracts for varying periods. The Corporation’s United States production is expected to approximate 55% of its 2002 commitments under these contracts which total approximately 700,000 Mcf per day. Natural gas sales commitments for 2003 are comparable. The Corporation attempts to minimize price and supply risks associated with its United States natural gas supply commitments by entering into purchase contracts with third parties having adequate sources of supply, on terms substantially similar to those under its commitments.

7

Table of Contents

2. Average selling prices and average production costs

      Note A: Includes inter-company transfers valued at approximate market prices and the effect of the Corporation’s hedging activities.

      Note B: Production (lifting) costs consist of amounts incurred to operate and maintain the Corporation’s producing oil and gas wells, related equipment and facilities (including lease costs of floating production and storage facilities) and production and severance taxes. The average production costs per barrel reflect the crude oil equivalent of natural gas production converted on the basis of relative energy content (six Mcf equals one barrel).

      Note C: Variations in production costs reflect changes in the mix of the Corporation’s producing fields in Africa and Asia, including fields under production sharing contracts.

      The foregoing tabulation does not include substantial costs and charges applicable to finding and developing proved oil and gas reserves, nor does it reflect significant outlays for related general and administrative expenses, interest expense and income taxes.

3. Gross and net undeveloped acreage at December 31, 2001

8

Table of Contents

4. Gross and net developed acreage and productive wells at December 31, 2001

      Note A: Includes multiple completion wells (wells producing from different formations in the same bore hole) totaling 137 gross wells and 42 net wells.

5. Number of net exploratory and development wells drilled