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USX Corporation Reports Record Marathon Group Second Quarter 2001 ResultsPRNewswire USX-Marathon Group (NYSE: MRO) today issued the following: Earnings Highlights
(Dollars in millions except per diluted share data)
2Q 2001 2Q 2000
Net income $582 $367
Net income per diluted share $1.88 $1.18
Revenues $9,176 $8,710
USX-Marathon Group (NYSE: MRO) reported net income of $582 million, or $1.88 per diluted share, in the second quarter of 2001, compared with net income of $367 million, or $1.18 per diluted share, in the second quarter of 2000. USX Corporation Board Chairman Thomas J. Usher said, "This record second quarter was primarily led by strong downstream margins coupled with higher upstream earnings in comparison to second quarter 2000 results. However, upstream results declined from first quarter 2001 due primarily to lower natural gas prices and lower volumes related to lower crude oil liftings and reduced natural gas demand due to seasonal factors. Downstream refining margins also ended the quarter sharply lower due to increasing refined product inventories." Marathon Group revenues were $9.2 billion in second quarter 2001 compared to $8.7 billion in second quarter 2000. Income for Marathon's reportable segments was $1,311 million in second quarter 2001 versus $885 million in second quarter 2000. Worldwide exploration and production (upstream) segment income totaled $459 million in second quarter 2001 compared to $356 million in second quarter 2000. Domestic upstream income was $374 million in second quarter 2001 compared to $277 million in second quarter 2000. The increase was primarily due to higher natural gas prices compared to second quarter 2000, along with additional natural gas production resulting from the Pennaco acquisition, partially offset by increased depreciation and decreased liquid hydrocarbon volumes and prices. Additionally, second quarter 2001 results included a $78 million net gain from derivative activities primarily related to Pennaco production. International upstream income was $85 million in second quarter 2001 compared to $79 million in second quarter 2000. USX Corporation Board Chairman Thomas J. Usher commented, "Marathon continues to enhance the value of its existing assets and to pursue new core areas and expansion of its global portfolio. Most recently, the company was selected to participate in Saudi Arabia's natural gas initiative, qualifying for a 20 percent interest in the Core Venture 2 integrated natural gas project in the Red Sea area. This project includes development of natural gas resources in northwest Saudi Arabia, power and desalination facilities in that region and exploration in the northern Red Sea." The next phase is project definition in which the companies involved and the Saudi government will define the technical scope of the venture as well as the commercial, legal, financial and regulatory regimes that will govern them. Marathon's third quarter and full year 2001 production is expected to be approximately 392 and 420 thousand barrels of oil equivalent per day, respectively. The full year estimate reflects reduced heavy oil investment in Canada, a higher than expected level of asset sales and delays in new project start-ups. Refining, marketing and transportation (downstream) segment income was $842 million in second quarter 2001 compared to $529 million in second quarter 2000 reflecting a higher refining and wholesale marketing margin, partially offset by a lower Speedway SuperAmerica LLC (SSA) gasoline and distillate gross margin. The downstream income equates to earning approximately 10.9 cents per gallon of sales after income taxes on all refining, marketing, merchandise and transportation activities. In June 2001, Marathon Ashland Petroleum LLC (MAP) acquired an interest in approximately 50 convenience stores located in Indiana and Michigan from Welsh, Inc. The acquisition of these retail outlets increases MAP's presence in these markets and should provide more than 80 million gallons of new annual gasoline sales. MAP is targeting a third quarter closing on a combination to create the largest nationwide travel center network, which includes the travel center operations of SSA, MAP's wholly owned subsidiary, and those of Pilot Corporation. MAP will have a 50 percent interest in the new company, Pilot Travel Centers LLC. MAP is also working to improve its logistics network and has been designated operator of the Centennial Pipeline, owned jointly by CMS Energy Corporation, MAP, and TEPPCO Partners, L.P. All of the permits and rights-of- way have been obtained for the new pipeline, which will connect Gulf Coast refiners with the Midwest market. The Centennial Pipeline system is expected to be operational in first quarter 2002. This release contains forward-looking statements with respect to the timing and levels of Marathon's worldwide liquid hydrocarbon and natural gas production, the expected successful completion and timing of the retail marketing transaction, and the expected completion of the Centennial Pipeline system. Some factors that could potentially affect worldwide liquid hydrocarbon and natural gas production include pricing, supply and demand for petroleum products, amount of capital available for exploration and development, regulatory constraints, timing of commencing production from new wells, drilling rig availability and other geological, operating and economic considerations. Some factors which affect the successful completion of the retail marketing transaction are the closing of definitive agreements, obtaining the necessary financing and the receipt of government and other third party approvals. Some factors which could impact the Centennial Pipeline system include delivery of equipment and materials, contractor performance and unforeseen hazards such as weather conditions. In accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, USX has included in Form 10-K for the year ended December 31, 2000, in Form 10-Q for the quarter ended March 31, 2001, and in subsequent Form 8-K's, cautionary statements identifying important factors, but not necessarily all factors, that could cause actual results to differ materially from those set forth in the forward-looking statements. A Statement of Operations and Preliminary Supplemental Statistics for the Marathon Group and a Consolidated Statement of Operations for USX Corporation are attached. The company will conduct a conference call on second quarter earnings on Monday, July 23 at 1 p.m. EDST. To listen to the webcast of the conference call, visit the USX website, http://www.usx.com/ and click on the "Marathon Group" button, then the "Investor Services" button. Replays of the webcast will be available through July 30. For more information on USX Corporation and Marathon Group, visit their websites at http://www.usx.com/ or http://www.marathon.com/. USX Corporation press releases are available through Company News On-Call at http://www.prnewswire.com/gh/cnoc/comp/929150.html; or at http://www.prnewswire.com/gh/cnoc/comp/133204.html. MARATHON GROUP OF USX CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
-----------------------------------
Second Quarter Six Months
Ended Ended
(Dollars in millions, except June 30 June 30
per share amounts) 2001 2000 2001 2000
REVENUES AND OTHER INCOME:
Revenues $9,121 $8,680 $17,741 $16,419
Dividend and investee income 39 17 72 28
Net gains on disposal of assets 7 2 22 94
Other income 9 11 76 24
------ ------ ------ ------
Total revenues and
other income 9,176 8,710 17,911 16,565
------ ------ ------ ------
COSTS AND EXPENSES:
Cost of revenues (excludes
items shown below) 6,202 6,264 12,436 12,063
Selling, general and
administrative expenses 170 124 310 258
Depreciation, depletion and
amortization 306 240 609 486
Taxes other than income taxes 1,202 1,176 2,324 2,282
Exploration expenses 26 46 49 91
Costs related to Proposed
Separation 15 - 16 -
------ ------ ------ ------
Total costs and expenses 7,921 7,850 15,744 15,180
------ ------ ------ ------
INCOME FROM OPERATIONS 1,255 860 2,167 1,385
Net interest and other
financial costs 38 68 73 139
Minority interest in income
of Marathon Ashland
Petroleum LLC 320 203 427 258
------ ------ ------ ------
INCOME BEFORE INCOME TAXES
AND CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 897 589 1,667 988
Provision for income taxes 315 222 577 367
------ ------ ------ ------
INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 582 367 1,090 621
Cumulative effect of change
in accounting principle - - (8) -
------ ------ ------ ------
NET INCOME $582 $367 $1,082 $621
====== ====== ====== ======
MARATHON STOCK DATA:
Income before cumulative
effect of change in
accounting principle $582 $367 $1,090 $621
- Per share - basic 1.88 1.18 3.53 1.99
- diluted 1.88 1.18 3.52 1.99
Cumulative effect of change
in accounting principle - - (8) -
- Per share - basic - - (.03) -
- diluted - - (.02) -
Net income $582 $367 $1,082 $621
- Per share - basic and
diluted 1.88 1.18 3.50 1.99
Dividends paid per share .23 .21 .46 .42
Weighted average shares,
in thousands
- Basic 309,101 312,233 308,928 312,180
- Diluted 309,627 312,431 309,338 312,359
The following notes are an integral part of this financial statement.
MARATHON GROUP OF USX CORPORATION
SELECTED NOTES TO FINANCIAL STATEMENT
-------------------------------------
1. The statement of operations of the Marathon Group includes the
results of operations for the businesses of Marathon Oil Company
(Marathon) and certain other subsidiaries of USX and a portion of
USX's net financial costs, general and administrative costs and
income taxes attributed to the groups in accordance with USX's
accounting and tax allocation policies. This statement should be
read in connection with the consolidated statement of operations of
USX.
2. Effective January 1, 2001, USX adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133), as amended by SFAS Nos. 137
and 138. This Standard requires recognition of all derivatives as
either assets or liabilities at fair value.
The transition adjustment related to adopting SFAS No. 133 on
January 1, 2001, was recognized as a cumulative effect of change in
accounting principle. The unfavorable cumulative effect on net
income, net of a tax benefit of $5 million, was $8 million. The
unfavorable cumulative effect on other comprehensive income (OCI),
net of a tax benefit of $4 million, was $8 million. The amounts
reported as OCI will be reflected in net income when the anticipated
physical transactions are consummated.
3. In the first quarter 2001, Marathon acquired Pennaco Energy, Inc.
(Pennaco), a natural gas producer. Marathon acquired 87% of the
outstanding stock of Pennaco through a tender offer completed on
February 7, 2001 at $19 a share. On March 26, 2001, Pennaco was
merged with a wholly owned subsidiary of Marathon. Under the terms
of the merger, each share not held by Marathon was converted into
the right to receive $19 in cash. The total purchase price of
Pennaco was $506 million. The acquisition was accounted for under
the purchase method of accounting. Results of operations for the
six months of 2001 include the results of Pennaco from February 7,
2001.
4. On April 24, 2001, USX announced that its board of directors
authorized management to proceed with the necessary steps to
implement a plan of reorganization to separate the energy and steel
businesses of USX (Proposed Separation). The Proposed Separation
envisions a tax-free spin-off of the steel and steel-related
businesses of USX into a freestanding, publicly traded company to be
known as United States Steel Corporation. Holders of current
USX-U. S. Steel Group Common Stock will become holders of United
States Steel Corporation Common Stock. Holders of current
USX-Marathon Group Common Stock will become holders of Marathon Oil
Corporation Common Stock. Costs related to the Proposed Separation
include professional fees and certain other expenses.
5. On July 2, 2001, a corporate reorganization was implemented to
create a new holding company structure. USX became a holding
company that owns all of the outstanding equity of Marathon Oil
Company, an Ohio Corporation which, directly and indirectly, owns
and operates the businesses of the USX-Marathon Group, and United
States Steel LLC, a Delaware limited liability company which owns
and operates the businesses of the USX-U. S. Steel Group. The
reorganization will not have any impact on the results of operations
or financial position of USX Corporation, the Marathon Group or the
U. S. Steel Group.
This reorganization in corporate form is independent of the Proposed
Separation of the energy and steel businesses of USX Corporation
that was announced on April 24, 2001.
MARATHON GROUP OF USX CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
------------------------------------------------
Second Quarter Six Months
Ended June 30 Ended June 30
(Dollars in millions) 2001 2000 2001 2000
INCOME (LOSS) FROM OPERATIONS
Exploration & Production ("E&P")
Domestic $374 $277 $816 $478
International 85 79 243 187
----- ----- ----- -----
Income For E&P Reportable
Segment 459 356 1,059 665
Refining, Marketing &
Transportation(a) 842 529 1,118 669
Other Energy Related
Businesses(b) 10 - 18 13
----- ----- ----- -----
Income For Reportable
Segments $1,311 $885 $2,195 $1,347
Items Not Allocated To Segments:
Administrative Expenses $(34) $(29) $(65) $(57)
Gain on disposition of
Angus/Stellaria - - - 87
Gain on lease resolution with
U.S. Government - - 59 -
Gain/(loss) on ownership
change - MAP (7) 4 (6) 8
Costs related to proposed
separation(c) (15) - (16) -
------ ------ ------ ------
Marathon Group Income
From Operations $1,255 $860 $2,167 $1,385
CAPITAL EXPENDITURES
Exploration &
Production $217 $129 $374 $400
Refining, Marketing &
Transportation 107 106 204 166
Other(d) 21 4 43 10
----- ----- ----- -----
Total $345 $239 $621 $576
EXPLORATION EXPENSE
Domestic $12 $20 $25 $51
International 14 26 24 40
----- ----- ----- -----
Total $26 $46 $49 $91
OPERATING STATISTICS
Net Liquid Hydrocarbon
Production(e):
United States 126.3 137.1 125.4 132.9
Europe 34.7 28.9 44.2 29.1
Other International 32.2 32.8 33.2 34.6
------ ------ ------ ------
Total Consolidated 193.2 198.8 202.8 196.6
Domestic Equity Investee
(MKM Partners L.P.) 9.4 - 9.8 -
International Equity
Investees (CLAM &
Sakhalin Energy)(f) 0.1 2.6 0.1 1.3
------ ------ ------ ------
Worldwide 202.7 201.4 212.7 197.9
Net Natural Gas Production(g):
United States 773.7 711.6 781.3 731.5
Europe(h) 319.6 331.8 332.5 346.6
Other International 127.2 154.6 128.6 144.8
------ ------ ------- -------
Total Consolidated 1,220.5 1,198.0 1,242.4 1,222.9
International Equity
Investee (CLAM) 33.8 25.9 34.3 31.4
------- ------- ------- -------
Worldwide 1,254.3 1,223.9 1,276.7 1,254.3
Average Equity Sales Prices(i)(j):
Liquid Hydrocarbons (per Bbl)
Domestic $21.11 $23.88 $22.23 $24.00
International 26.12 25.74 25.33 25.80
Natural Gas (per Mcf)
Domestic $3.90 $2.95 $4.71 $2.55
International 3.00 2.41 3.43 2.41
MARATHON GROUP OF USX CORPORATION
PRELIMINARY SUPPLEMENTAL STATISTICS (Unaudited)
------------------------------------------------
Second Quarter Six Months
Ended June 30 Ended June 30
2001 2000 2001 2000
OPERATING STATISTICS (continued)
MAP:
Crude Oil Refined(e) 958.2 965.0 914.3 908.2
Consolidated Refined Products
Sold(e)(n) 1,303.1 1,344.7 1,278.2 1,281.7
Matching buy/sell volumes
included in refined products
sold(e) 35.3 73.5 44.3 61.3
Refining and Wholesale
Marketing
Margin(k)(l) $0.1839 $0.1122 $0.1364 $0.0797
Number of SSA retail
outlets 2,272 2,416 - -
SSA Gasoline and Distillate
Sales(m) 1,102 1,145 2,156 2,258
SSA Gasoline and Distillate
Gross Margin(k) $0.1168 $0.1239 $0.1066 $0.1160
SSA Merchandise Sales $620 $600 $1,149 $1,133
SSA Merchandise Gross Margin $154 $152 $283 $281
(a) Includes MAP at 100%. RM&T income for reportable segments includes
Ashland's 38% interest in MAP of $320 million, $202 million, $428
million and $258 million in the second quarter and six month year-
to-date 2001 and 2000, respectively.
(b) Includes domestic natural gas and crude oil marketing and
transportation, and power generation.
(c) Includes professional fees and expenses, and certain other costs
related to the proposed separation.
(d) Includes other energy related businesses and corporate capital
expenditures.
(e) Thousands of barrels per day
(f) In 2001, equity investee is CLAM and in 2000, equity investees are
CLAM and Sakhalin Energy.
(g) Millions of cubic feet per day
(h) Includes gas acquired for injection and subsequent resale of 9.0,
11.9, 9.1 and 12.9 mmcfd in the second quarter and six month year-
to-date 2001 and 2000, respectively.
(i) Prices exclude gains and losses from hedging activities.
(j) Prices exclude equity affiliates and purchase/resale gas.
(k) Per gallon
(l) Sales revenue less cost of refinery inputs, purchased products and
manufacturing expenses, including depreciation.
(m) Millions of gallons
(n) Total average daily volume of all refined product sales to MAP's
wholesale, branded and retail (SSA) customers.
USX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
------------------------------------------------
Second Quarter Six Months
Ended Ended
June 30 June 30
(Dollars in millions) 2001 2000 2001 2000
REVENUES AND OTHER INCOME:
Revenues $10,844 $10,293 $20,960 $19,600
Dividend and
investee income 32 31 112 35
Net gains on
disposal of assets 17 15 38 122
Other income 10 11 78 22
------ ------ ------ ------
Total revenues
and other income 10,903 10,350 21,188 19,779
------ ------ ------ ------
COSTS AND EXPENSES:
Cost of revenues
(excludes items
shown below) 7,791 7,710 15,560 14,923
Selling, general and
administrative expenses 181 67 304 138
Depreciation, depletion
and amortization 385 318 761 639
Taxes other than
income taxes 1,269 1,237 2,450 2,400
Exploration expenses 26 46 49 91
Costs related to
Proposed Separation 23 - 25 -
------ ------ ------ ------
Total costs
and expenses 9,675 9,378 19,149 18,191
------ ------ ------ ------
INCOME FROM OPERATIONS 1,228 972 2,039 1,588
Net interest and
other financial costs 86 92 109 187
Minority interest in
income of Marathon Ashland
Petroleum LLC 320 203 427 258
------ ------ ------ ------
INCOME BEFORE INCOME
TAXES AND CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 822 677 1,503 1,143
Provision for
income taxes 270 254 434 423
------ ------ ------ ------
INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 552 423 1,069 720
Cumulative effect of
change in accounting
principle - - (8) -
------ ------ ------ ------
NET INCOME 552 423 1,061 720
Dividends on
preferred stock 2 2 4 4
------ ------ ------ ------
NET INCOME APPLICABLE
TO COMMON STOCKS $550 $421 $1,057 $716
====== ====== ====== ======
USX CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF OPERATIONS (Continued) (Unaudited)
INCOME PER COMMON SHARE
------------------------------------------------------------
Second Quarter Six Months
Ended Ended
(Dollars in millions, June 30 June 30
except per share amounts) 2001 2000 2001 2000
APPLICABLE TO
MARATHON STOCK:
Income before
cumulative effect
of change in
accounting principle $582 $367 $1,090 $621
- Per share - basic 1.88 1.18 3.53 1.99
- diluted 1.88 1.18 3.52 1.99
Cumulative effect of
change in accounting
principle - - (8) -
- Per share - basic - - (.03) -
- diluted - - (.02) -
Net income $582 $367 $1,082 $621
- Per share - basic
and diluted 1.88 1.18 3.50 1.99
Dividends paid per share .23 .21 .46 .42
Weighted average
shares, in thousands
- Basic 309,101 312,233 308,928 312,180
- Diluted 309,627 312,431 309,338 312,359
APPLICABLE TO STEEL STOCK:
Net income (loss) $(32) $54 $(25) $95
- Per share - basic (.36) .62 (.28) 1.08
- diluted (.36) .62 (.28) 1.07
Dividends paid
per share .10 .25 .35 .50
Weighted average
shares, in thousands
- Basic 89,005 88,499 88,906 88,461
- Diluted 89,005 92,755 88,906 92,721
The following notes are an integral part of this financial statement.
USX CORPORATION AND SUBSIDIARY COMPANIES
SELECTED NOTES TO FINANCIAL STATEMENT
----------------------------------------
1. Effective January 1, 2001, USX adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133), which was amended by SFAS
Nos. 137 and 138. This Standard requires recognition of all
derivatives as either assets or liabilities at fair value.
The transition adjustment related to adopting SFAS No. 133 on
January 1, 2001, was recognized as a cumulative effect of change in
accounting principle. The unfavorable cumulative effect on net
income, net of a tax benefit of $5 million, was $8 million. The
unfavorable cumulative effect on other comprehensive income (OCI),
net of a tax benefit of $4 million, was $8 million. The amounts
reported as OCI will be reflected in net income when the anticipated
physical transactions are consummated.
2. In the first quarter 2001, Marathon Oil Company (Marathon) acquired
Pennaco Energy, Inc. (Pennaco), a natural gas producer. Marathon
acquired 87% of the outstanding stock of Pennaco through a tender
offer completed on February 7, 2001 at $19 a share. On March 26,
2001, Pennaco was merged with a wholly owned subsidiary of Marathon.
Under the terms of the merger, each share not held by Marathon was
converted into the right to receive $19 in cash. The total purchase
price of Pennaco was $506 million. The acquisition was accounted
for under the purchase method of accounting. Results of operations
for the six months of 2001 include the results of Pennaco from
February 7, 2001.
On March 1, 2001, USX completed the purchase of East Chicago Tin,
the tin mill products business of LTV Corporation. In this noncash
transaction, USX assumed certain employee related obligations of
East Chicago Tin. The acquisition was accounted for using the
purchase method of accounting. Results of operations for the six
months of 2001 include the operations of East Chicago Tin from the
date of acquisition.
On March 23, 2001, Transtar, Inc. (Transtar) completed its
previously announced reorganization with its two voting
shareholders, USX and Transtar Holdings, L.P. (Holdings), an
affiliate of Blackstone Capital Partners L.P. As a result of this
transaction, USX became sole owner of Transtar and certain of its
subsidiaries. Holdings became owner of the other subsidiaries of
Transtar. USX accounted for the change in its ownership interest in
Transtar using the purchase method of accounting. USX recognized in
the six months of 2001, a pretax gain of $68 million (included in
dividend and investee income) and a favorable deferred tax
adjustment of $33 million related to this transaction. USX
previously accounted for its investment in Transtar under the equity
method of accounting.
3. USX has a 16% investment in Republic Technologies International LLC
(Republic) which was accounted for under the equity method of
accounting. During the first quarter of 2001, USX discontinued
applying the equity method since investments in and advances to
Republic had been reduced to zero. Also, USX has recognized certain
debt obligations of $14 million previously assumed by Republic. On
April 2, 2001, Republic filed a voluntary petition with the U.S.
Bankruptcy Court to reorganize its operations under Chapter 11 of
the U.S. Bankruptcy Code. In the first quarter of 2001, as a result
of Republic's action, USX recorded a pretax provision of $74 million
for potentially uncollectible receivables from Republic.
4. On April 24, 2001, USX announced that its board of directors
authorized management to proceed with the necessary steps to
implement a plan of reorganization to separate the energy and steel
businesses of USX (Proposed Separation). The Proposed Separation
envisions a tax-free spin-off of the steel and steel-related
businesses of USX into a freestanding, publicly traded company to be
known as United States Steel Corporation. Holders of current
USX-U. S. Steel Group Common Stock will become holders of United
States Steel Corporation Common Stock. Holders of current
USX-Marathon Group Common Stock will become holders of Marathon Oil
Corporation Common Stock. Costs related to the Proposed Separation
include professional fees and certain other expenses.
5. On July 2, 2001, a corporate reorganization was implemented to
create a new holding company structure. USX became a holding
company that owns all of the outstanding equity of Marathon Oil
Company, an Ohio Corporation which, directly and indirectly, owns
and operates the businesses of the USX-Marathon Group, and United
States Steel LLC, a Delaware limited liability company which owns
and operates the businesses of the USX-U. S. Steel Group. The
reorganization will not have any impact on the results of operations
or financial position of USX Corporation, the Marathon Group or the
U. S. Steel Group.
This reorganization in corporate form is independent of the Proposed
Separation of the energy and steel businesses of USX Corporation
that was announced on April 24, 2001.
SOURCE: USX-Marathon Group Contact: William E. Keslar or Don H. Herring, +1-412-433-6870, both of Website: http://www.usx.com/ Website: http://www.marathon.com/ Company News On-Call: http://www.prnewswire.com/gh/cnoc/comp/929150.html |
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