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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  ü  No    

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AMERADA HESS CORPORATION

Form 10-K

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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, Equatorial Guinea, Algeria, Gabon, Indonesia, Thailand, Azerbaijan, Malaysia and other countries. The Corporation also manufactures, purchases, 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, 2003, the Corporation had 646 million barrels of proved crude oil and natural gas liquids reserves compared with 782 million barrels at the end of 2002. Proved natural gas reserves were 2,332 million Mcf at December 31, 2003 compared with 2,477 million Mcf at December 31, 2002. These crude oil and natural gas reserves included the Corporation’s proportionate share of the reserves of equity investees in prior years. The decrease in proved reserves resulted from asset sales and production. Proved reserves at December 31, 2003 include 32% and 43%, respectively, of crude oil and natural gas held under production sharing contracts. Of the total proved reserves (on a barrel of oil equivalent basis), 18% are located in the United States, 42% are located in the United Kingdom, Norwegian and Danish sectors of the North Sea and the remainder are located in Algeria, Azerbaijan, Equatorial Guinea, Gabon, Indonesia, Thailand and Malaysia. On a barrel of oil equivalent basis, 32% of the Corporation’s December 31, 2003 worldwide proved reserves are undeveloped (33% in 2002).

      Worldwide crude oil and natural gas liquids production amounted to 259,000 barrels per day in 2003 compared with 325,000 barrels per day in 2002. Worldwide natural gas production was 683,000 Mcf per day in 2003 compared with 754,000 Mcf per day in 2002. The Corporation presently estimates that its 2004 barrel of oil equivalent production will be approximately 13% less than 2003. The Corporation is developing a number of oil and gas fields and also has an inventory of domestic and foreign drillable prospects.

      United States.  Amerada Hess Corporation operates mainly offshore in the Gulf of Mexico and onshore in Texas, Louisiana and North Dakota. During 2003, 21% of the Corporation’s crude oil and natural gas liquids production and 37% 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:

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*	Reflects natural gas production converted on the basis of relative energy content (six Mcf equals one barrel).

      The Llano Field (AHC 50%) on Garden Banks Blocks 385 and 386 in the Gulf of Mexico is currently being developed with initial net production expected in mid-2004 at an average rate of 12,000 barrels of oil equivalent per day. Additional appraisal drilling is planned for the Shenzi prospect (AHC 28%) on Green Canyon Block 654 in the deepwater Gulf of Mexico. Further appraisal drilling is also planned for the Tubular Bells discovery (AHC 20%) on Mississippi Canyon Block 725, also in the deepwater Gulf of Mexico.

      At December 31, 2003, the Corporation has interests in approximately 290 exploration blocks in the Gulf of Mexico of which it operates 202. The Corporation has 910,000 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 2003, 37% of the Corporation’s crude oil and natural gas liquids production and 46% of its natural gas production were from United Kingdom operations.

      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, 2003:

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      Development of the Clair Field (AHC 9.29%) is proceeding and it is expected to begin production in 2005. The Atlantic (AHC 25%) and Cromarty (AHC 90%) natural gas fields are also being developed. These fields are expected to have combined net production of approximately 25,000 barrels of oil equivalent per day in 2006.

      During 2003, Amerada Hess Limited exchanged its 25% shareholding interest in Premier Oil plc, for a 23% interest in Natuna Sea Block A in Indonesia.

      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 25,000 barrels per day in both 2003 and 2002. Natural gas production averaged 26,000 Mcf per day in 2003 and 25,000 Mcf per day in 2002. 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 commenced with water injection starting in the first quarter of 2004.

      Denmark.  Amerada Hess ApS, the Corporation’s wholly-owned Danish subsidiary, operates the South Arne Field. Net crude oil production from the Corporation’s 57.48% interest in the South Arne Field was 24,000 barrels of crude oil per day in 2003 compared to 23,000 barrels of oil per day in 2002. Natural gas production was 29,000 Mcf and 37,000 Mcf of natural gas per day in 2003 and 2002, respectively.

      Equatorial Guinea. The Corporation has interests in production sharing contracts covering three offshore blocks, acquired in August 2001. Net crude oil production from the Corporation’s 85% interest in the Ceiba Field averaged 22,000 barrels of crude oil per day in 2003 and 37,000 barrels per day in 2002. The results of an appraisal drilling program are being incorporated into the development plan for Northern Block G discoveries (AHC 85%). It is anticipated that the development plan will be submitted for government approval in the second quarter of 2004.

      Malaysia — Thailand. In 2003, the Corporation exchanged its oil and gas assets in Colombia for an additional 25% interest in long-lived natural gas reserves in the joint development area of Malaysia and Thailand, bringing the Corporation’s interest to 50%. This production sharing contract has a gas sales agreement for the sale of the first phase of gas production. Construction of the buyer’s pipeline commenced in the second half of 2003. First production from the field is expected in mid-2005.

      Algeria. The Corporation has a 49% interest in a venture with the Algerian national oil company that is redeveloping three oil fields. The Corporation’s share of production averaged 19,000 and 15,000 barrels of crude oil per day in 2003 and 2002, respectively. A seismic program is underway and appraisal drilling is planned on a 2003 discovery on an exploration block in Algeria.

      Gabon. Amerada Hess Production Gabon, the Corporation’s 77.5% owned Gabonese subsidiary, has a 10% interest in the Rabi Kounga Field and interests in two other Gabonese fields. The Corporation’s share of production averaged 11,000 net barrels of crude oil per day in 2003 and 9,000 barrels per day in 2002.

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      Indonesia. Reflecting the sale of the Jabung production sharing contract, net production in Indonesia amounted to 1,000 barrels of crude oil per day in 2003 compared with 4,000 barrels per day in 2002. During 2003, the Corporation acquired a 23% interest in the Natuna Sea Block A production sharing contract in exchange for its shares of Premier Oil plc. Consequently, natural gas production in Indonesia increased to 11,000 Mcf per day in 2003 from 6,000 Mcf per day in 2002. A natural gas discovery in the Pangkah production sharing contract area is being developed.

      Thailand. The Corporation has a 15% interest in the Pailin gas field offshore Thailand. Net production from the Corporation’s interest averaged 52,000 Mcf and 35,000 Mcf of natural gas per day in 2003 and 2002, respectively. Additional appraisal drilling is planned in 2004 on an onshore discovery on Phu Horm Block E5N (AHC 35%).

      Azerbaijan. The Corporation has a 2.72% interest in the AIOC Consortium in the Caspian Sea. Net production from its interest averaged 2,000 barrels of crude oil per day in 2003 and 4,000 barrels per day in 2002. Development of the Azeri, Chirag and Guneshli fields is continuing.

Refining and Marketing

      Refining.  The Corporation owns a 50% interest in the HOVENSA refining joint venture in the United States Virgin Islands with a subsidiary of Petroleos de Venezuela S.A. (PDVSA). In addition, it owns and operates a refining facility in Port Reading, New Jersey.

      HOVENSA. HOVENSA’s total crude runs amounted to 440,000 barrels per day in 2003 and 361,000 barrels per day in 2002. The fluid catalytic cracking unit at HOVENSA operated at the rates of 142,000 and 116,000 barrels per day in 2003 and 2002, respectively. The coking unit at HOVENSA commenced production in August 2002. The unit operated at the rate of 53,000 barrels per day in 2003. The coker permits HOVENSA to run lower-cost heavy crude oil. HOVENSA has a long-term supply contract with PDVSA to purchase 115,000 barrels per day of Venezuelan Merey heavy crude oil. PDVSA also 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 requirements are 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.

      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. During 2003, the facility operated at a rate of approximately 54,000 barrels per day and substantially all of its production was 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 1,195 HESS® gasoline stations at December 31, 2003, of which approximately 68% are company operated. In early 2004, a 50% owned joint venture acquired a chain of gasoline stations, adding approximately 50 HESS® retail outlets. Most of the Corporation’s gasoline stations are concentrated in densely populated areas, principally in New York, New Jersey, Pennsylvania, Florida, Massachusetts and North and South Carolina, and 856 gasoline stations have convenience stores. The Corporation owns approximately 50% of the properties on which the stations are located.

      The Corporation has 22 terminals with an aggregate storage capacity of 21 million barrels in its East Coast marketing areas.

      Refined product sales averaged 419,000 barrels per day in 2003 and 383,000 barrels per day in 2002. Of total refined products sold in 2003, approximately 50% was obtained from HOVENSA and Port Reading. The

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      The Corporation has a wholly-owned subsidiary that provides distributed electricity generating equipment to industrial and commercial customers as an alternative to purchasing electricity 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.

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 existing environmental and pollution control regulations imposed by federal, state and local governments is not expected to have a material adverse effect on the Corporation’s earnings and competitive position within the industry. The Corporation spent $12 million in 2003 for environmental remediation, with a comparable amount anticipated for 2004. Capital expenditures for facilities, primarily to comply with federal, state and local environmental standards, were $7 million in 2003 and the Corporation anticipates approximately $10 million in 2004. 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 will 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 estimated to be approximately $70 million over the next several years. Capital expenditures to comply with low-sulfur gasoline and diesel fuel requirements at HOVENSA are currently expected to be approximately $450 million over the next three years. HOVENSA expects to finance these capital expenditures through cash flow and, if necessary, future borrowings.

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      The number of persons employed by the Corporation averaged 11,481 in 2003 and 11,662 in 2002.

      Additional operating and financial information relating to the business and properties of the Corporation appears in the text on pages 10 and 11 under the heading “Exploration & Production,” on pages 12 and 13 under the heading “Refining & Marketing,” on pages 15 through 33 under the heading “Financial Review” and on pages 34 through 69 of the accompanying 2003 Annual Report to Stockholders, which information is incorporated herein by reference.*

      The Corporation’s Internet address is www.hess.com. On its website, the Corporation makes available free of charge its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after the Corporation electronically files with or furnishes such material to the Securities and Exchange Commission. Copies of the Corporation’s Code of Business Conduct and Ethics, its Corporate Governance Guidelines and the charters of the Audit Committee, the Compensation and Management Development Committee and the Corporate Governance and Nominating Committee of the Board of Directors are available on the Corporation’s website and are also available free of charge upon request to the Secretary of the Corporation at its principal executive offices.

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 2003, 2002 and 2001 are presented under Supplementary Oil and Gas Data in the accompanying 2003 Annual Report to Stockholders, which has been incorporated herein by reference.

      During 2003, the Corporation provided oil and gas reserve estimates for 2002 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 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 45% of its 2004 sales commitments under long-term contracts which total approximately 355,000 Mcf per day. Natural gas sales commitments for 2005 are expected to be 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.

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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 of oil equivalent 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 held 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, 2003

      Note A: Includes acreage held under production sharing contracts.

      Note B: Approximately one-half of net undeveloped acreage held at December 31, 2003 will expire during the next three years.

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4. Gross and net developed acreage and productive wells at December 31, 2003

      Note A: Includes multiple completion wells (wells producing from different formations in the same bore hole) totaling 99 gross wells and 30 net wells.

5. Number of net exploratory and development wells drilled