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Home My WebLink About880789.tiffFINDINGS AND RESOLUTION RE: FINDINGS AND RESOLUTION CONCERNING APPLICATION OF TEXACO OF COLORADO, INC. (STORE #104) FOR A 3.2% BEER LICENSE The application of Texaco of Colorado, Inc. (Store #104) came on for hearing on the 3rd day of August, 1988, at 2:00 p.m. and the Board of County Commissioners of Weld County, Colorado, having heard the testimony and evidence adduced upon said hearing, and having considered the testimony, evidence and remonstrances filed with said Board, and having carefully weighed the same, now makes the following Findings: 1. The evidence discloses that the applicant has sustained the burden of proof as to the desires of the inhabitants of the neighborhood. 2. That the applicant is of 3. The applicant has proven the neighborhood. good character and reputation. the reasonable requirements of RESOLUTION WHEREAS, the Board of County Commissioners of Weld County, Colorado, pursuant to Colorado statute and the Weld County Home Rule Charter, is vested with the authority of administering the affairs of Weld County, Colorado, and WHEREAS, the Board of County Commissioners has considered the application of Texaco of Colorado, Inc. (Store #104), 10963 I-25 Access Road, Longmont, Colorado 80501, for a 3.2% Beer License for the sale of fermented malt beverages containing not more than 3.2% of alcohol by weight, for consumption off the premises only, and WHEREAS, said applicant has paid to the County of Weld, the sum of $450.00 for the hearing fee, in addition to the other required fees, and due to the Findings of the Board of County in this matter, as stated herein, the Board deems it grant 3.2% Beer License No. 88-18 to Texaco of (Store #104). WHEREAS, Commissioners advisable to Colorado, Inc. 880789 Page 2 RE: BEER LICENSE - TEXACO OF COLORADO, INC. (STORE #104) NOW, THEREFORE, BE IT RESOLVED that the Board of County Commissioners of Weld County, Colorado, having examined said application, the qualifications of the applicant, and the testimony of those present at the hearing, does hereby approve the application of Texaco of Colorado, Inc. (Store #104) for a 3.2% Beer License for the sale of fermented malt beverages, containing not more than 3.2% of alcohol by weight, for consumption off the premises only, for the reasons stated herein. The above and foregoing Resolution was, on motion duly made and seconded, adopted by the following vote on the 3rd day of August, A.D., 1988. ATTEST: Weld County Clerk and Recorder and Clerk to the Board Deputy Co,y Clerk APPROVED AS TO FORM: County Attorney BOARD OF COUNTY COMMISSIONERS WEOUNTY , COLORADO Ad ene R. BrantNer, Chairman It Frank Yam.%uch EXCUSED DATE OF SIGNING - AYE Jacquel'n nson 880789 HEARING CERTIFICATION DOCKET NO. 88-40L RE: APPLICATION FOR 3.2% BEER LICENSE - TEXACO OF COLORADO, A DELAWARE CORPORATION, D/B/A TEXACO OF COLORADO, INC. (STORE NO. 104) A public hearing was conducted on August 3, 1988, at 2:00 P.M., with the following present: Commissioner Commissioner Commissioner Commissioner Commissioner Also present: Gene Brantner, Chairman C.W. Kirby, Pro-Tem Jacqueline Johnson Gordon E. Lacy Frank Yamaguchi Acting Clerk to the Board, Mary Reiff Assistant County Attorney, Lee D. Morrison Certified court reporter, Jacque Wilson The following business was transacted: I hereby certify that pursuant to a notice dated June 29, 1988, and duly published July 6, 1988, in the Platteville Herald, a public hearing was conducted to consider the application of Texaco of Colorado, Inc., a Delaware corporation, d/b/a Texaco of Colorado, Inc. (Store No. 104), for a 3.2% Beer License. Lee Morrison, Assistant County Attorney, made this matter of record. Alan Dill, Attorney, represented the applicant. He presented testimony from the following: Brenda Rowe, office manager for Oedipus, Inc., which circulated a petition concerning this request; Kathryn Ward, Glenda Cole, Donna Gruntmeir, and Cherie L. DeMartine, neighbors who favored granting the license; Robert Walden, marketing representative for Texaco; and Jeffrey Dillavou, manager of this store. Mr. Walden and Mr. Dillavou explained the procedure which will be used to train store personnel concerning the laws for the sale of beer. (Tape Change 1188-36) No other public testimony was offered. Commissioner Johnson moved to make the necessary findings and approve a Retail 3.2% Beer License, off premises only, for Texaco of Colorado, Inc. Seconded by Commissioner Lacy, the motion carried unanimously. This Certification was approved on the 8th day of August, 1988. ATTEST: Weld County Clerk and Recorder and Clerk to the Boa eputy County 1, k TAPE #88-35 & #88-36 DOCKET 1188-40L LC0013 APPROVED: BOARD OF COUNTY COMMISSIONERS WELD C TY, COLORADO Gene R. Brantner,,Chairman �6llf�Jl�/t/ itC EXCUSED DATE OF APPROVAL Jacquel EXCUSED DATE OP APPROVAL Frank Yamaguchi 880789 ATTENDANCE RECORD PLEASE write or print legibly your name, address and the name of the applicant or Docket # for the hearing you are attending. TODAY'S HEARINGS ARE AS FOLLOWS: AUGUST 3, 1988 DOCKET #88-40L 3.2% BEER LICENSE APPLICATION - TEXACO OF COLORADO, INC. DOCKET #88-41 AMEND SERVICE PLAN - ST. VRAIN SANITATION DISTRICT DOCKET # NAME ADDRESS HEARING ATTENDING '-:'(ti,lle hre-- 1:7)cNAI_p F. SILATL 79 CO S.GzAu_ee,cAvE. boa ra ..,•us eotQ5 # p- 41 G?4-ndR Afr 'ago //9't 32 L yno„ - MOAi& CiUATf Me.(,l./ /O7(pS T(A wee Rau LoAxr-tou7 l 5 VOS-0/ ‘kTHQynl %). Lo to -4i H..),{ H9 44/ , Lo,J(.n,•onif ea, 80Soi 38"IC) ??Z y . N 36 Lem, Cmtt Cr, _ -Po rry 7)79.( L� r i, ^ /(d5 S' J;_ilA s c, -) JA/l�.,)O,„ (, i (Z. ATOS 13041) J�fs�EY A.1i) kvov1/4_. '/ay/? )reS-/ .1r 7 orn fon CO 80,7e / Y\ia\kActs Gz,yr.* L#21 Sow Sr, Lesacr�.orck- CO Q-ocb\ g-Vo/ S'k.yOL Fe VOL 880789 NOTICE DOCKET NO. 88-40L PURSUANT TO THE LIQUOR LAWS OF THE STATE OF COLORADO, TEXACO OF COLORADO, INC., A DELAWARE CORPORATION, D/B/A TEXACO OF COLORADO, INC. (STORE NO. 104), 4601 DTC BLVD., DENVER, COLORADO 80237, HAS REQUESTED THE LICENSING OFFICIALS OF WELD COUNTY, COLORADO, TO GRANT A RETAIL 3.2% BEER LICENSE FOR CONSUMPTION OFF THE PREMISES ONLY, WITH A LOCATION MORE PARTICULARLY DESCRIBED AS FOLLOWS: 10963 1-25 Access Road West and Highway 119, Longmont, Colorado, Weld County, Colorado. DATE OF APPLICATION: June 27, 1988 THE BOARD OF COUNTY COMMISSIONERS OF WELD COUNTY, COLORADO, HAS DECLARED THAT THE NEIGHBORHOOD TO BE SERVED WILL BE AS FOLLOWS: All of Sections 2, 3, 10 and 11, Township 2 North, Range 68 West of the 6th P.M., Weld County, Colorado THE HEARING ON SAID LICENSE WILL BE HELD IN THE FIRST FLOOR ASSEMBLY ROOM, WELD COUNTY CENTENNIAL CENTER, 915 10TH STREET, GREELEY, COLORADO, ON WEDNESDAY, AUGUST 3, 1988, AT 2:00 P.M. PETITIONS AND REMONSTRANCES MAY BE FILED AT THE CLERK TO THE BOARD OF COUNTY COMMISSIONERS OFFICE, WELD COUNTY CENTENNIAL CENTER, 915 10TH STREET, GREELEY, COLORADO. DATED AT GREELEY, COLORADO, THIS 29TH DAY OF JUNE, 1988. THE BOARD OF COUNTY COMMISSIONERS WELD COUNTY, COLORADO BY: MARY ANN FEUERSTEIN WELD COUNTY CLERK AND RECORDER AND CLERK TO THE BOARD BY: Mary Reiff, Deputy PUBLISHED: July 6, 1988, in the Platteville Herald 880783 P AJidauit of Publication DOCKET #88-40L WELD COUNTY, COLORADO tt: nmc o: ea:,, oftt c:' • 1' STATE OF C.OI.ORADOI County of W Idi A. Winkler Riesel , ,,rn t: "n' pnhlt.heI Platteville Hex t..nt ;•,a w.,..lr r-, •.:spa,.rutg ry e; u:a:,cr: wn: _nC published to ` of Platteville t:Y.n,e . t,� n._: Ih'•a .•� r:.rcnft One o. -rte. that the nofht was p'.: bl.sr:rd in regular and enurt tssut o: even numhcr o` nru.sparv.. dur:nc :he ptrct and tin -is oh pur- 15,0 of sr.d nnutc u.,s ... •.hr newspeptr prt and not in a su;. pitmen; thereof. that th,i p_b'icaccn of sid noarc 'AES rontmned in Issue of s:d neast-uper bcanmg the daft. _ 6 date of July A. L I` 88 and ;ho last pub'.:cauon !hut -of. in yhe tssur Sar. ❑ea'spaper, br -a :no LH: e. the O ❑:. PURSUANT TO THE LIQUOR LAWS OF THE STATE OF COL- ORADO, TEXACO OF COLORADO, INC., A DELAWARE CORPO- RATION, D/B/A TEXACO OF COLORADO, INC., "STORE #104," 4601 DTC BLVD., DENVER, COLORA- DO, 80237, HAS RE- QUESTED THE LI- CENSING OFFICIALS OF WELD COUNTY, COLORADO, TO GRANT A RETAIL 3.2% BEER LI- CENSE FOR CON- SUMPTION OFF THE PREMISES ONLY, WITH A LOCATION MORE PARTICULAR- LY DESCRIBED AS FOLLOWS: July 88 a: 10963 I-25 Access Road West & High - Platteville Hen way 119, Longmont, a'td t" Colorado, Weld 1 County, Colorado. DATE OF APPLICA- • TION, JUNE 27, 1988. THE BOARD OF COUNTY COMMIS- SIONERS OF WELD COUNTY, COLORA- DO, HAS DECLARED THAT THE NEIGH- BORHOOD TO BE .SERVED WILL BE AS FOLLOWS: All of Sections 2, 3, 10 & 11, Township 2 North, Range 68 West of the 6th PM, Weld County, Colora- do. THE HEARING ON SAID LICENSING WILL BE HELD IN THE 1ST FLOOR AS- SEMBLY ROOM, WELD COUNTY CEN- TENNIAL CENTER, 915 10TH ST., GREELEY, COLORA- DO, ON WEDNES- DAY, AUGUST 3, 1988, AT 2:00 P.M. PETITIONS AND REMONSTRANCES MAY BE FILED AT THE CLERK TO THE BOARD OF COUNTY COMMISSIONERS OFFICE, WELD COUNTY CENTENNI- AL CENTER, 915 10TH ST., GREELEY, COLORADO. DATED AT GREE- LEY, COLORADO, THIS 29TH DAY OF JUNE, 1988. THE BOARD OF COUNTY COMMISSIONERS cc FORT LUPTON PRESS _ Fort Lupton, CO 80621 yz- BY: MARY ANN FEUERSTEIN COUNTY CLERK AND RECORDER AND CLERK TO THE BOARD BY: Mary Reiff, Deputy Published in the Platteville Herald on July 6, 1988. 880789 AFFIDAVIT OF PUBLICATION State of Colorado County of Boulder 1, J. R. Hofmann ,do solemnly swear that the LONGMONT DAILY TIMES CALL is a daily newspaper printed, in whole or in part, and published in the City of Longmont, County of Boulder, State of Colorado, and which has general circulation therein and in parts of Boulder and Weld Counties; that said newspaper has been continuously and uninterruptedly published for a period of more than six months next prior to the first publication of the annexed legal notice of advertisement, that said newspaper has been admitted to the United States mails as second-class matter under the provisions of the Act of March 3, 1879, or any amendments thereof, and that said newspaper is a daily newspaper duly qualified for publishing legal notices and advertisements within the meaning of the laws of the State of Colorado; that a copy of each number of said newspaper, in which said notice of advertisement was published, was transmitted by mail or carrier to each of the subscribers of said newspaper, according to the accustomed mode of business in this office. That the annexed legal notice or advertisement was published in the regular and entire edition of said daily newspaper once; and that one publication of said notice was in the issue of said newspaper dated July 19 , 1988 72rto General Manager Subscribed and sworn to before me this 19th day of July ,1988 M_S,c1f\1.5- Notary Public FEE$ 19.50 w L 15, 11192 50 TERRY 8T. COLORADO W801 NOTICE DOCKET Pursuant to the Liquor Laws of the E State ofBColo- rado, Texaco of Colorado, Inc., a Delaware Cor- poration, D/B/A Texaco of Colorado, Inc. (Store No. 104), 4601 OTC Blvd., Denver, Colorado 80237, has requested the licensing officials of Weld County, Colorado, to grant a retail 3.2% beer li- cense for consumption off the premises only, With a location more particularly describedas fol- lows: 10963 1.25 Access Road West and Highway 119, Longmont, Colorado, Weld County, Col- orado. Date of Application: June 27, 1988 The Board of County Commissioners of Weld County, Colorado, has declared that the neighbor- hood to be served will be as follows: All of Sections 2, 3, 10 and 11, Township 2 North, Range 68 West of the 6th P.M., Weld County, Colorado The Hearing on said License will be held in the First Floor Assembly Room, Weld County Cen- tennial Center 915 10th Street, Greeley, Colorado, on Wednesday, August 3, 1988, at 2:00 P,M. Petitions and Remonstrances may be filed at the Clerk to the Board of County Commissioners Of- fice, Weld County Centennial Center, 915 10th 'Street, Greeley, Colorado. Dated at Greeley, Colorado, this 29th day of June, 1988. THE BOARD OF COUNTY COMMISSIONERS WELD COUNTY, COLORADO BY: MARY ANN FEUERSTEIN WELD COUNTY CLERK AND RECORDER AND CLERK TO THE BOARD BY: Reiff, Published in the Daily Times-Call,Lon��t, Coto., July 19, 1980. 880 789 ,,. Riet 1 4 CilltOffII w ® Liquor Enforcement Division 1375 Sherman Street Denver,Colorado 80261 TEXACO OF COLORADO INC 10963 I 25 ACCESS RD LONGMONT CO 80501 Alcoholic Beverage License Account Number Warr women COUMV CM Indust. Woe IRWIN Date L)GENSE EXPIRES AT YDNIGHT 21-84862-001 03 206 5411 3 082988 AUG 28. 1_989 Type Name and Daaaiptiun d Lbn. Fee J 3.2 PERCENT BEER RETAIL LICENSE S 25.00 rtillNTv 85 PFRCFNT OAP FFF S 42.50 TOTALFEE(S) $ 67.50 This license is issued subject to the laws of the State of Colorado and especially under the provisions of Tide 12, Articles 46 or 47, CRS 1973, as amended. This license is non- transferable and shall be conspicuously posted in the place above described. This license is only valid through the expiration date shown above. Questions concerning this license should be addressed to the Department of Revenue, Liquor Enforcement Divison, 1375 Sherman Street, Denver, CO 80261. In testimony whereof, I have hereunto set my hand. Division Director . AUG 3 0 1988 OR 8402 (3-88) mar Executive Director witp 880789 or, Wl a�' 684®88 i0;" i�,a9 n NSPTCUOUS 68L088 aSENDER: Complete items 1 and ? •l✓f fa - services are desired, and complete Items 3 end 4. Put your address in the "RETURN TO" Space on the reverse side. Failure to do this will prevent this card from being returned to you. The Mum receipt fee will provide you the name of the oesort geliggredtq sag the detg of delivery For additions fees the following services ere available. Consult postmaster fr fees and cheek bOide) for additional scribe(s) requested. I. 0 Show to whom deflated, date, and oddness?* address. 3. 0 Restricted Delivery 1(Sxfre charge t (Sxfrg oheyent o r y 0 18 o❑ S814 a w z i a. t v9 S 3. Ankle Addressed to:. TEXACO OF COLORADO, INC. 4601 BTC BOULEVARD DENVER, CO 80237 ATTN: DICK IRVINE 6. Signature — Address X t\ a • J Q A io A 0 o la 81 LLd F <o Q wwmg., USw Q pal i z O<0 • LL 40 ao a wiz U w 6 U z H o p� z 0c4 01 I-4 w0 a CO H 0 0 >e fA 0 0 U 0 0 q C) P• 4 U z 0 z H Fes(] 6 t 9861 aunr `008E w1°J Sd T 'ASURER'S OFFICE, WELD COUNTY RECEIVED OF. •.. ON2 2349 Greeley, Colorado ...., • . . • • • , 19.'Q . . QP V71 $ .15-7 . 72 FOR 7-' Cubunty General Fund 101 0000 A // /¢-( `t4t.' Health Department 119 0000 Human Resources 121 0000 Social Services 112 0000 Housing Authority Road & Bridge Fund 111 0000 Airport 177 0000 County Clerk Cash Escrow 810 0803 Fee Fund 900 0912 District Gen Fund School District C R F School School District Bond Fun pp(y,ryp 880 /09 FRANCIS M. LOUSTALET I Y TOTAL AMOUNT �U County Treasurer 700 East Speer Boulevard Denver, Colorado 80203 303/777-3737 Telecopier 303/777-3823 H. Alan Dill Robert A. Dill Jon Stonbraker Daniel W. Carr John A. Hutchings Arthur Keith Whitelaw Ill Lucien J. Dhooge Charles J. Carroll Joseph M. Elio DILL and DILL A Partnership of Attorneys September 27, 1988 Tommie Antuna, Clerk to the Board Weld County Commissioners' Office P.O. Box 758 Greeley, CO 80632 RE: Texaco of Colorado, Inc. Dear Tommie, I believe that we discussed the need back and I told you that Herb Porter stated that the manager did not have Anyway, we had sent these forms out just received them back. I decided keep them in your files if you wish. take care of them as you wish. Thanks for all your help. Sincerely, Lois Rentz Paralegal lr enclosures for manager's registration a while at the Department of Revenue to be registered, just reported. the manager in the interim and to send them to you and you can If you don't want them, just DR 8401-I(1/88) COLORADO DEPARTMENT OF REVENUE LIQUOR ENFORCEMENT DIVISION INDIVIDUAL HISTORY RECORD 1375 Sherman Street Denver, Colorado 80261 To be completed by each individual applicant, each general and over 5% limited partner of a partnership, each officer, director, and over 5% stockholder of a public corporation, and the manager of the applicant. NOTICE: This individual History Record provides basic information which is necessary for the licensing authorities' investigation. ALL questions must be answered in their entirety. EVERY answer you give will be checked for its truthfulness. A deliberate falsehood will jeopardize the application as such falsehood within itself constitutes evidence regarding the character and reputation of the applicant. 1. Name of Business: Texaco Date: 9-1-88 Social Security Number. 2. Your Full Name: (last/first/middle) Dillavou, Jeffrey Alan 3. Also Known As: (maiden name/nickname, etc.) Jeff 4. )Mailing Address: (if different from residence) same Home Telephone: 5. Residence Address: (street and number, city, stare, zip 12518 Forrest Dr., Thornton, CO 80241 6. Is your residence: OWNED If rented, from whom? n/a • RENTED 7. Date of Birth: Place of Birth: Des Moines, IA 8. U.S. Citizen? ® YES Ifi♦ NO If naturalized, state where: n/a When: Name of U.S. District Court Naturalization Certificate No.: n/a Date of Certificate: If an alien, give Alien's Registration Card No.: Permanent Residence Card No. 9. Height: 6' Weight: 155 Hair Color: Brn Eye Color: Blue Sex: M Race: C 10. Do you have a Colorado Driver's License? If *yes, give number: G! YES • NO 11. What is your relationship to the applicant? (sole owner, partner, corporate officer, director, stockholder or manager): Manager 12. If Stockholder, Number of Shares Owned Beneficially or of Record: n/a Percent of Outstanding Stock Owned: n/a 13. If Partner, state whether: n/a ❑ GENERAL ❑ LIMITED Percent of Partnership Beneficially Owned: n/a 14. Name of Present Employer: Texaco 15. Type of Business of Employment: Truckstop, Gas station, Convenience stor 16. Address of Business Where Employed: (street end number, city, state, zip) 10963 1-25 Access Rd. West, Longmont, CO Business Telephone: 678-0204 17. Present Position: manager 18. Marital Status: married 19. Name of Spouse: (include maiden name if applicable) Sandra Maldonado 20. Spouse's Date of Birth: Spouse's Place of Birth: Bronx, NY 21. Spouse's residence address, If different than yours: (give street and number, sty, state, zip) same 22. Spouse's Present Employer: n/a Occupation: n/a 23, Address of Spouse's Present Employer: n/a 24. List the name(s) of all relatives working in the liquor industry, give their: Name of Relative: Relationship to You: Position held: Name of Employer: Location of Employer: none s. CONTINUED ON REVERSE SIDE 25. Do • you now, YES or © have you ever held a director indirect interest in ■ State of Colorado Liquor or Beer License? It year maw in awe. NO 26. Do you now, or have you ever had a direct or Indirect Interest in a liquor or beer license, or been employed in a liquor'or beer related business outside of the State of Colorado? If 'yes; describe in detail. ❑ YES [x] NO 27. Have you ever been convicted of a crime, tined, Imprisoned, placed on probation, received a suspended sentence or forfeited bail for arty offense In criminal or military court? (Do not include traffic violations, unless they resulted In suspension or revocation of your driver's license, or you were convicted of driving under the influence of alcoholic beverages.) If yes; explain In detail. ❑ YES [x] NO 28. Have you ever received a violation notice, suspenalon or revocation for a liquor l w violation, or been denied a liquor or beer license anywhere In the U.S.? If yes,- explain In detail. ❑ YES ®NO 29. Have • you ever held a gambling or gaming license or owned a Federal Gambling Stamp? If yes; explain in detail below. YES © NO State/Federal: Year: City: State: State/Federal: Year: City: State: 30. Military Service: (branch) none From: To: Serial No.: Type of Discharge: 31. List all addressee where you have lived for the last five years. (Attach separate sheet if necessary) Street and Number City, State, Zip From: To: Same as #5 32. List all former employers or businesses engaged in within the last live years. (Attach separate sheets if necessary.) Name of employer: Address: (street, number, dry, state, zip) Position Held: From: To: JC Penney Co Englewood, CO security 1978 1981 JC Penney Co Northglenn security mgr 1981 1985 Franco Fashions, Inc. New York, NY Dir of Oper 1985 1986 33. List the names and attach letters of recommendation from three persons who can vouch for your good character and fitness in connection with this application. Name of reference: Address: (street, number, city, state, zip) No. of Years Known: Margaret LaRocca 2201 14th Ave, #1-101, Longmont, CO 80501 2 years Louie S. Sabarini 12531 Forrest Dr., Thornton, CO 80241 4 years Frank Lubo 7340 N Otis Ct., Westminster, CO 10 years OATH OF APPLICANT I declare under penalty of perju in the second degree that I have read the foregoing application and all attachments thereto, and that all infor • true, correct, and complete to the best of my knowledge. Sirgature: Title: manager Date: 9-1-88 n8367 (11/86) Colorado Department of Revenue Liquor Enforcement ONIsbn 1375 Sherman St. Denver, CO 80261 303-866-3741 Answer all questions. Press firmly or type. MANAGER'S REGISTRATION FORM • Form must be completed by all Hotel and Restaurant licensees employing a separate and distinct manager. • Form must be submitted to and approved by Local Licensing Authority. • A state and Ideal fee of $75 is required for Hotel and Restaurant applicants. • Managers must complete and submit form DRL 404-I (Individual History Record.) Attach a copy of any written management contracts or agreements 1. NAME OF CURRENT LICENSEE: Texarn of nnlnrarin_ Tnr 4. TRADE NAME OF ESTABLISHMENT (DBA): Texaco of Colorado, Inc. 6. ADDRESS OF LICENSED ESTABLISHMENT: 10963 I-25 Access Rd. W. & Hwy. 119 7. NAME OF MANAGER: Jeffrey Dillavou 10. COMPENSATION OF MANAGER: • 2. CLASS OF LICENSE: 1 2% FMR CITY/TOWN Longmont 8. DATE EMPLOYMENT BEGAN: FEE: $75 3. ACCOUNT NO. OF LICENSEE: 5. BUSINESS TELEPHONE: 678-0204 STATE ZIP en sni501 9. EXPIRATION DATE: 11. DID MANAGER EVER MANAGE LIQUOR ESTABLISHMENT IN ANY OTHER STATE? ❑ NO ❑ YES IF YES, GIVE DETAILS 12. DOES MANAGER HAVE A FINANCIAL INTEREST IN ANY OTHER LIQUOR ESTABLISHMENT? ❑ NO ❑ YES IF YES, GIVE NAME AND LOCATION OF ESTABLISHMENT: 13. DOES MANAGER MANAGE ANOTHER "HOTEL AND RESTAURANT" LICENSED LIQUOR ESTABLISHMENT IN COLORADO? IF YES, GIVE NAME AND LOCATION OF ESTABLISHMENT: ❑ NO ❑ YES OATH OF APPLICANT I declare under penalty of perjury in the second degree that I have read the foregoing registration and all attachments thereto, and that all information therein is true, correct, and complete to the best of my knowledge. SIGNATURE cPORT ANLS APP TITLE: DATE: DATE: ROVAL OF LOCAL LICE NSING AUTHORITY The foregg has been examined and the character of the registrant is satisfactory and complies with the provision of Title 12, Article 47, CRS, as amen• THEREFORE THIS REGISTRATION IS HEREBY APPROVED. LOCAL LICENSING AUTHORITY I.D. NUMBER: LOCAL LICENSING AUTHORITY (City or County): SIGNATURE: TITLE: DATE: REPORT OF STATE LICENSING AUTHORITY The foregoing has been examined and complies with the filing requirements of Title 12, Article 47, CRS, as amended. SIGNATURE: TITLE: DATE: DR 8367 (11/86) MANAGER'S REGISTRATION FORM NAME OF CURRENT LICENSEE: DO NOT WRITE BELOW THIS LINE ACCOUNT NO. OF LICENSEE: PERIOD: 41 - 24 FEE: (09) $75.00 TO WHOM IT MAY CONCERN: I have known -.(-: c/ /// 1/24142(4-- for years and find him/her to be a person of honest and sound character and has the background to maintain a professional approach to the liquor business. It is my opinion that he is the type of person who has the maturity and judgment to responsibly handle a liquor license. Signed, 1 n/7( Sign'ture Print Name: Address: 734d /L/, 07-1,5 C7 41O6 c r71,w c/�K2( Phone Number: �2 2 -- S: 7 V7 Date://y/ () TO WHOM IT MAY CONCERN: I have known JeEv 'Nam for nC years and find him/her to be a person of honest and sound character and has the background to maintain a professional approach to the liquor business. It is my opinion that he is the type of person who has the maturity and judgment to responsibly handle a liquor license. Signed, Signa j�'' Lire Yl i �1 Print Name: /�er �I' I (elrCCa Address: 0)61 /lT' ' I Sid( ( [TO/ COO gWV Phone Number. Date: TO WHOM IT MAY CONCERN: I, have known 4 for years and find him/her to be a person of honest and sound character and has the background to maintain a professional approach to the liquor business. It is my opinion that he is the type of person who has the maturity and judgment to responsibly handle a liquor license. Signed, Print Name: ZcXaE , S. Sitiae- q// Address : AM/ „icieeSr .PR TXClehlrOVAi do i gngj// Phone Number: r —033 Date: kuen,.1"k Kr Oedipus; Inc. The Empirical Data Company 880789 Oedipus: Inc. The Empirical Data Company LOCAL LICENSING AUTHORITY RE: SURVEY TO DETERMINE NEEDS AND DESIRES OF THE DEFINED NEIGHBORHOOD IN THE APPLICATION OF: TEXACO OF COLORADO, INC., a Delaware Corporation, d/b/a, TEXACO OF COLORADO, INC. (STORE #104) 10963 1-25 ACCESS ROAD WEST AND HIGHWAY 119; WELD COUNTY, COLO RETAIL 3.2% FMB LICENSE, OFF PREMISE CONSUMPTION 03 August 1988 P.O. 2302, (303) 449-7300 BOULDER, COLORADO 80306 PETITION & TELEPHONE SURVEYS Liquor Licensing Rezonings Opinion Poll Venue Special Tax Districts SURVEY PROCEDURE 1. Under the direction and control of Oedipus, Inc. management, surveyors were briefed on the application. 2. Each surveyor carried a clipboard with the following: A. A map of the area denoting the proposed Location of the License and the boundaries of the defined neighborhood; B. Petitions allowing individuals contacted to indicate their needs and desires with instruc- tions and qualifications for signing; and, C. A stet sheet to record the opinion of those not signing and not -at -homes. 3. Surveying took place on Saturday, 09 July 1988, within the neighborhood defined as follows: Township 2 North, Range 68 West, Sections 2, 3, 10 and 11. 4. Individuals were surveyed on a random sampling basis, were screened to identify them as parties in interest, and were asked whether they consumed alcoholic beverages. 5. Individuals surveyed were asked their opinion after they had been informed of the applicant, site location and type of License being applied for. This opinion was either recorded on the petition format or on the stat sheet. "Don't Worry about a Thing"' 880789 Local Licensing Authority Weld County, Colorado 03 August 1988 Page Two OPINION POLL SURVEY RESULTS 1. Total Doorknocks: Not -At -Homes and/or Business Owners/Managers Not Available Not Qualified To Sign Preferred Not To Participate Signatures and Those Not Signing DeLeted Signatures Total Base Figure 2. Qualified Contacts: A. Needs and Desires Contacts: Signatures Favoring Issuance Not Signing/Favoring Issuance Signatures Opposing Issuance Not Signing/Opposing Issuance B. Desires Only Contacts: Abhorrence of Alcohol Religious Objections Usage Objections (Commercial, Traffic, Parking, Crime) Other Miscellaneous Reasons Total Base Figure RE: TEXACO #104 21 = 47.73% 0 0 23 = 52.27% 0 = --- 44 = 100.00% 19 = 82.61% 0 = 1 = 0 = 0 0 = 13,04% 4,35% 23 = 100.00% 3. Needs and Desires Opinion of the Neighborhood Signatures Favoring Issuance (Based on Needs/Desires) Not Signing/Favoring Issuance (Based on Needs/Desires) Signatures Opposing Issuance (Based on Needs/Desires) Not Signing/Opposing Issuance (Based on Needs/Desires) 197 0 3 0 19 = 86.36% 13,64% Total Base Figure 22 = 100.00% Oedibus. Inc. 1988 880759 (303) 449-7300 • P.O. BOX 2302 • BOULDER, CO 80306 Local Licensing Authority Weld County, CoLorado 03 August 1988 Page Three TEXACO #104 RespectfuLL M J. o dent Oedipus, Inc. MJS/bjr Enclosures: One Petition Packet AFFIDAVIT MAX J. SCOTT, the affiant, being duly sworn, deposes and states the attached information is true anj3 correct to the best of his knowledge. AW J. SCOTT STATE OF COLORADO) ss. COUNTY OF BOULDER) Subscribed and sworn to before me this 3rd day of August 1988, by Max J. Scott. Witness my hand and official seal. My Commission Expires: 30 Januar 1992. 497( (SEAL) Notary Public 2902 5th Street; Boulder, CO 80302 880789 foc/i-hi[c Tnr 1988 13031 449-7300 • P.O. BOX 2302 • BOULDER, CO 80306 Oedipus;" Inc. The Empirical Data Company 19 JuLy 1988 Ms. Tommie Antuna Secretary/Board of Commissioners County Office Building 915 10th Street Greeley, CO 80631 V4"f f= T C�,i1,.. JUL 2 01988 g.�3oq P.O. 2302, (303) 449-7300 BOULDER, COLORADO 80306 PETITION & TELEPHONE SURVEYS Liquor Licensing Rezonings Opinion Poll Venue Special Tax Districts RE: TEXACO OF COLORADO, INC., a Delaware Corporation, d/b/a, TEXACO OF COLORADO, INC. (STORE #104) 10963 1-25 Access Road West and Highway 119; Weld County Retail 3.2% FMB License, Off Premise Consumption Dear Ms. Antuna: Please find enclosed petitions circulated by Oedipus, Inc. in the above -referenced matter. Petition circulation was conducted on Saturday, 09 July 1988. One petition packet is enclosed representing one petition circulator. The signatures were edited by this office. If a signature was deleted, it was marked with an asterisk by the signature number. Our results are as follows: FAVORING: TOTAL SIGNATURES VALID SIGS DELETIONS 19 19 0 OPPOSING: TOTAL SIGNATURES VALID SIGS DELETIONS 3 3 0 "Don't Worry about a Thing" TM 880789 © Oedipus; Inc. Ms. Tommie Antuna 19 JuLy 1988 Page Two ShouLd you have any questions, pLease advise. A representative of Oedipus, Inc. wiLL be present at the public hearing to provide testimony concerning the survey and answer questions. RespefctffiuuLL Ly, Brenda J. Rowe Office Manager /bjr Enclosure: One Petition Packet cc: Richard R. Irvine H. Alan DILL FEDERAL EXPRESS AirbiLL Number 6471247123 © Oedipus Inc. 880759 (303) 449-7300 • P.O. BOX 2302 • BOULDER, CO 80306 T3N TO JCT. 30.4"— _ 28... 26... TO Z Lq;NONT 1/43 24 JET U3 M.: 22.. U 20... 12N:: 18... 16... TO .ICT. 14. : s 2.7. 12... 10... 6 J T I N r o• • PLO $ A%( VITEW o1u0 EE :TV TEXACO To UnYEm 2 'FT us to RIFLE R NOE POND RE • , a 6- 4. . Z •°or cw. 1 3 S 4• T 941 MCON ST s A A situr 41.1 2URR E OIL FIELD LINE I. A •0 A; M: s R'ar 11 13 IS IT 19 21 0I V H R 880789 PETITIONER 1`J RE: TEXACO OF COLORADO, INC., a Delaware Corp., dba, TEXACO OF COL0i, INC. 10963 I-25 ACCESS ROAD WEST & HWY 119; WELD COUNTY CO (STORE #104) RETAIL 3.2% FERMENIED MALT BEVERAGE (3.2% BEER) LICENSE, OFF PREMISE CONSUMPTION PUBLIC HEARING: WEDNESDAY -- 03 AUGUST 1988 -- 2:00 P.M. COUNTY OFFICE BUILDING / 915 10TH STREET GREELEY, COLORADO INSTRUCTIONS AND QUALIFICATIONS FOR SIGNING PFTITION 1. To sign this petition, you must be a qualified elector twenty-one (21) years of age or older and a resident of the defined neighborhood as follows: Township 2 North, Range 68 West. Sections 2, 3, 10 and 11 --approximately one mile in each direction from the proposed license location. A qualified elector is: (a) A person eighteen (18) years of age or older; (b) A United States citizen; and, (c) A person who has resided within the defined neighbor- hood for thirty-two (32) days. 2. Or, if you do not reside within the defined neighborhood, you may sign this peti- tion if you are the owner or manager of a business with said business located within the defined neighborhood, and you are twenty-one (21) years of age or older. 3. You must execute your signature in the presence of the petition circulator. 4. You shall have the opportunity to read, or have read to you, the petition in its entirety and understand its meaning. 5. You cannot have signed another petition concerning this license application. 6. You must sign your own given name, i.e., first name or first initial, middle name or middle initial (if applicable), and last name. Noindividual may sign for another individual. PETITION TO THE LOCAL LICENSING AUTHORITY OF WELD COUNTY, COLORADO IF YOU FAVOR THIS APPLICATION FOR A RETAIL 3.2% FERMENTED MALT BEVER- p AGE (3.2% BEER) LICENSE (OFF PREMISE CONSUMPTION), BECAUSE YOU FEEL 0 THE REASONABLE REQUIREMENTS OF THE DEFINED NEIGHBORHOOD ARE NOT NOW ��_ BEING ADEQUATELY SERVED BY EXISTING 3.2% BEER OFF PREMISE OUTLETS, AND IT IS YOUR DESIRE THAT THIS LICENSE BE ISSUED, CHECK THE "YES" COLUMN. ("YES" COLUMN INDICATED BY ONE ASTERISK.) ^iidiEii6'iie7AX,tiGl@UYtAKt'ip i33i4UWWPii0Air`tMIi"A33i+LONMXA+Lf' X4AMW0VO tiiEilLriiMiC1'XY.tYli Ei2f NINi". IAMAXAKtiAtali ap'£iiCiY;t ".iu JCViidl@ilCiA,riJNilpK4ldMMXIKlkAMlPa1iNN°A, MXIMk`tAiBiWK6kt7d1 P~XOiAAMiiqAMKai WWWi ^iANNAic1T`iAANGitiri6^Ai`irr IF YOU OPPOSE THIS APPLICATION FOR A RETAIL 3.2% FERMENTED MALT BEVERAGE (3.2% BEER) LICENSE (OFF PREMISE CONSUMPTION), BECAUSE YOU r� -;t FEEL THE REASONABLE REQUIREMENTS OF THE DEFINED NEIGHBORHOOD ARE NOW 7��` • BEING ADEQUATELY SERVED BY EXISTING 3.2% BEER OFF PREMISE OUTLETS, Y' AND, IT IS YOUR DESIRE THIS LICENSE NOT BE ISSUED, CHECK THE "NO" 2 COLUMN. ("NO" COLUMN INDICATED BY TWO ASTERISKS.) P 1GK7WNXIWAAAAXONA ii Kilt'iiGldY.iK7kiR'iK'ituA^iP.li AAktAAAKAK!iK4AiGiGKiidiK;i¢iiNkiAtAXIMM "KS NAtiit~Ar~iitiK tikilYitiA NO. SIGNATURE ADDRESS YES NO AGE DATE 1 � �� .��:. 3O 5 c � . 1 i P' , . ad 5.e 108/`1 c - 7/ is 6 a � ':R , 3. ] / a -7/ .I_ ��.� /B/. ae,,// 8. ! v 0-R_ 29 ? ;g 10 .5 / / 6 Gltr' A 2 ,t i 1 edapus, Inc. PAGE ONE OF TWO PAGES 880789 RE: TEXACO OF COLO., INC., A DELAWARE CORP., DBA, TEXACO OF COLO., INC. 10963 I-25 ACCESS RD WEST & HWY 119; WELD CO, COLO (STORE #104) RETAIL 3.2% FERMENTED MALT BEVERAGE (3.2% BEER) LICENSE, OFF PREMISE CONSUMPTION THE UNDERSIGNED HAVE HAD THE OPPORTUNITY TO READ THE INSTRUCTIONS, QUALIFICATIONS AND PETITION ON PAGE ONE OF THIS TWO PAGE PETITION. NO. SIGNATURE ADDRESS * YES ** NO AGE DATE 11 _�% .4- .t % / rl�/oe,, ee '/2;G g�. 71 12 . ,11 -at tOd( CZ, i 4-- 9g.V / AYR // / a5 � 13. Fad 1-A flY &Fi/ )( 53 1,C iL ketno, IL go g/u'GOER 77 X4 3 8r 15. 1 rdsc q c/'c1/4 /Dvloc w e gl X O.2, `1- 9-8k 16. i _ r'.�r_-, fDHbc LA) (�c&v ---)----)-)( W ?.-9"��/��', c`d 17. MC C VJe Q.1 V / a 7- 7 - s-€ 20, 34--i$ t; ((f k 39 2-9-$ g' 21, 3598 / j/9 y ZI 7-9-58 22, � eAttAck 35-91 /19 X e 7 -7 "er 23. 01, 24. 25. 26. 27. 28. 29. 30. 31. 32, 33, 34. 35, 36. 37. 38. 39. 40, 41. 42, PAGE TWO OF TWO PAGES © Oedipus, Inc. 1981 880789 AFFIDAVIT JIM NEWMAN , DO HEREBY STATE THAT I WAS THE CIRCULATOR OF THE ATTACHED PETITIONS AND FURTHER, THAT I PERSONALLY WITNESSED EACH SIGNATURE APPEARING ON THESE PETITIONS. TO THE BEST OF MY KNOWLEDGE, EACH SIGNATURE THEREON IS THE SIGNATURE OF THE PERSON WHOSE NAME IT PURPORTS TO BE, EACH ADDRESS GIVEN OPPOSITE EACH NAME IS THE TRUE ADDRESS OF THE PERSON THAT SIGNED, THAT EACH PERSON WHO SIGNED THE PETITION REPRESENTED THEIRSELF TO BE TWENTY-ONE YEARS OF AGE OR OLDER, AND THAT EACH PERSON WHO SIGNED THE PETITION HAD THE OPPORTUNITY TO READ, OR HAVE READ TO THEM, THE PETITION IN ITS ENTIRETY AND UNDERSTAND ITS MEANING. I ALSO HEREBY AFFIRM THAT NO PROMISES, THREATS OR INDUCEMENTS WERE EMPLOYED WHATSOEVER IN CONNECTION WITH THE PRESENTATION OF THIS PETITION AND THAT EVERY SIGNATURE APPEARING HEREON WAS COMPLETELY FREE AND VOLUNTARILY GIVEN. FURTHER AFFIANT SAYETH NOT. 9TH DAY OF CIRCULATOR STATE OF COLORADO) ) SS. COUNTY OF BOULDER) SUBSCRIBED AND SWORN TO BEFORE ME THIS JUI Y , 1988 . WITNESS MY HAND AND OFFICIAL SEAL. MY COMMISSION EXPIRES: 30 JANUARY 1992. (SEAL) zsiGGu.. _ace -- NOTARY PUBLIC Brenda J. Rowe 2902 5th Street Boulder, CO 80302 Oedipus, Inc. / P.O. BOX 2302 / BOULDER, CO 80306 / (303) 449-7300 (24 HouRs) 880789 DC NOT WRITE iN THIS BLOCK aRL 403 (Rev. 9/83) STATE OF COLORADO DEPARTMENT OF REVENUE DIVISION OF LIQUOR ENFORCEMENT 1375 SHERMAN STREET DENVER, COLORADO 80261 COLORADO FERMENTED MALT BEVERAGE (3.2% BEER) LICENSE APPLICATION MASTER FILE Instructions on Page 3 of Application. USE LICENSE ACCOUNT NO. FOR ALL REFERENCE NSE ISSUED THHOUGH (EXPIRATION DATE) LIABILITY INFORMATION COUNTY CITY INDUSTRY TYPE LIABILITY DATE KEY CODE STATE FEE PAID CITY TOTAL FEE COUNTY 49-1 ALL ANSWERS MUST BE PRINTED IN BLACK INK OR TYPEWRITTEN 1. Name of Applicant(s): I1 partnership, list partners names (at least two); if corporation, rwma of corporation: Texaco of Colorado, Inc., a Delaware corporation Date tiled with Loci Authority' State Sales Tax No.: 80-05540 2. Trade Name of Establishment. (OBA) Texaco of Colorado, Inc. (Store No. 104) 3. Address of Premises: (Exact location of premises must be given. Girt street and number. when possible. If place to be licensed is located in a town or rural —district where it it impossible to give street and number, the lot and Nock number or part of section where located roust be given.) 10963 1-25 Access Rd. West & Highway 119 Business Telephone: 678-0204 City: Longmont County: Weld State: Colorado Zip Cude: 80501 4. Meiling Address: (Number and Street) 4601 DTC Blvd. 5. If these premises are now licensed, answer the following: Trade Name of Establishment (O8A). n/a City or Town: Denver State: CO Zip Code: 80237 State License No.: Type 01 License: Expiration Date: KEY CODE COLUMN A STATE FEES LOCAL FEES 11 ❑ Retail 3.2% Beer: Fermented Malt Beverage License • City 11 © Retail 3.2% Beer: Fermented Malt Beverage License • County $ 46.25 $ 3.75 $ 67.50 7.50 ❑ Other (Specify) (Change of Corporate structure, location, trade name, renewal, etc.) KEY COLUMN 8 CODE • 12 O Wholesale 3.2% Beer License 13 Li Manufacturer's 3.2% Beer Llcnese 16 Cl Nonresident Manufacturer or Importer License (Fermented Malt Beverage) STATE; FEES $100.00 100.00 100.00 1 :,f 4 880789 ICLIMMuetfl r..; nu 6. Is the applicant; or any of the partners; or officers, stockholders or directors of said applicant (if a corporation); Or manager; under the aye of eighteen years? El a 7. (a) Has the applicant; or any of the partners; or officers, stockholders or drreCtun of said applicant (if a corporation) ever been convicted of a crime? If answer it "yes," explain in detail. (b) Has persons lending assistance or financial support to the applicant; or the menayer; or employees; ever been convicted of a came? If answer is "yes," explain in detail. 8. Has the applicant; or any of the partners; or officers, directors or stockholders of said applicant (if a corporation); or manager; ever: Ill been denied an alcoholic beverage license? (b) had an alcoholic beverage license suspended or revoked? (C) had interest In an entity that moo an elconollc beverage license suspended or revoked? It answer Is "yes." explain in (retell (Attach separate sheet II necessary.) E L1 9. Has a fermented malt beverage license for the premises to be licensed been refused within tee preceding one year? -x so. Does or did the applicant; or any of the partners; or officers, directors or stockholders of said applicant (if a corporation), have a direct Or indirect interest in any other Colorado Liquor or Fermented Malt beverage license (include loans to or froiit any liLerisee, or interest in a loan to any licensee)? If answer is "yes," explain in detail. Texaco of Colorado, Inc. is in the process of making application for 3.2% FMB licenses throughout the State of Colorado '-x 11. State whether the applicant has legal possession of the premises by virtue of ownership or under a lease. If leased, list name end address of landlord ano term of lease: Leased from Texaco Refining and Marketing, Inc. (see lease) 12 Identify the persons, firms or corporations who now or will have, a financial interest, evidenced either by loans or equity ownership in the business for — which this license is requested. State the nines and addresses, and the amount and source of such financial interest expressed in doiiars or other items of value, such as inventory, furniture or equipment; (i.e., bank, relatives, friends, previous owners, etc.). Use separate sheet if necessary. rvArvlc Petroman, Inc. ADDRESS 4601 DTC Blvd. Denver CO $0237 INTEREST 100% Stockholder List the names and aOdre►sas Of all liquor ouslnesses In which any of ins persons in the previous question are materially Interesteo. (Use separate sheet if necessary.) NAME n/a BUSINESS ADDRESS Aft.:h copies of off hetes end security inatruments, and any worsen agreement of details u} any oral agreement, by which any persun Ui,c.uding a corporation} will abere in the profit or gross proceeds of the esseuhsliment, and rosy',veement relating to the business which is contingent or con- ditional in any way by volume, profit, sales, giving of advice or consultation. 14. Coloreds Manufacturer or Wholesaler app:icants, answer the forlowrng: n/a (a) Does the applicant own, lease or operate any Colorado warehouse or storage plant in connection with this business? If answer is "yes," give full address; if "no," explain in detail. YLS fvu (b) Does the applicant have an active surety bond for the payment of liquor excise taxes? If answer is "yes," give amount and name and address of insuror; if "no," explain in detail. lc) If the applicant is a wholesaler, does or did any owner, part Owner, shareholder, director or officer have any direct or indirect financial interest in a wholesaler, retailer, manufacturer or importer already licensed by the Stale of Colorado to sell fermented malt beverages, or malt, vinous or splrll u.i„, luruor? If answer is "yes," attach ex?lan„tiOn in detail, 880789 (di Does the applicant have a valid Federal Basic Permit? If "yes," attach a copy of the permit. if "no," explain in det.,,l. Pave 2r.l4 f; lb. Nonresident Manufacturer (fermented melt _.) or importer (fermented malt beverages) aPPllcants, answer the following: n/a (al To what Colorado licensed wholesaler do you intend to ship your merchandise? d any owner, part owner, er, rector Ibl any applicant is an indirect 1 financial al rter interest ir n an importer, turer, s manufacturer, r 1 wholesaler or retailer already' licensed rbyfther have State of Colorado to sell fermented malt beverages or malt, vinous or spirituous liquor? It answer is "yes." attach explanation in detail. to) Does the applicant have a valid Federal Basic Permit? If "yes," attach a copy of the permit: if "no." explain in detail. (d) If the applicant is an importer or manufacturer, are you the primary source of supply in the US.? If "no," explain in detail. 16. If the applicant is an individual or partnership, answer the rfollowing: ( and Attach separate sheet if necessary.) n a — (al Name of individual or name and class of each partner: YES NO I_ ❑ ❑ Date of Birth: Date of Birth. lb) Name of Operating Manager: - (4 When did said partnership commence doing business? (Attach a copy of the partnership agreement, except as between husband and wile, Date'. and trade name affidavit.) 17, I I the applicant is a corporation, answer the following: " la) Corporation is organized under the laws of the State of: Delaware State of County of: I Colorado lb) is eontluctetl at: t Arapahoe 4601 DTC Blvd. Id Date of fnnglas[ annual corpra[e report to the secretary of state: Home Address, City and State: Name of each officer listed below. President: Richard R. Irvine Vice -President: James R. Schaaf Treasurer: Varaney Secretary: Ierome L. Francfq Operating Manager: Jeff pillavnu (el List all stockholders; include actual owner or Home ddrse geAeparele sheet City and Setlif necessary) — Name of stockholder: er,.' rr Iittleton CO 80122 Petroman. Tnr, 4601 DTC Blyd, Denver, CO 80737 3/22/88 Date of a utn Home Address, City and State 7343 S. Ivy Way, Englewood, CO 80112 7952 S d . s Way littleto. CO 80122 919 F 125 18 Forest Dr., Thornton, CO 80241 5/ nods: Date of firth: 100% n/a ($J Name of all Director' or Trustees of Corporation: Richard R. Irvine Tamar R Schaaf Jerome L. Francis INSTRUCTIONS ' ^lied for on page 1. If you are applying for a retail license described in Check the appropriate box for the type of of license(s) being app Column A, contact the Local Licensing Authority to obtain all local procedures and requirement. You may attach separate sheets or additional documents if necessary to fully complete this application. Copies may be accepted (other than application) if signatures are evident. All documents must be typewritten or legibly printed in BLACK ink. Date of Birth: Home Address, City and State: 7343 S. Ivy Way, Englewood, CO 80112 10/ IMPORTANT: For those retail licenses described in Column A on page 1, this application and all supporting documents must FIRST BE FILED IN DUPLICATE WITH AND APPROVED BY THE LOCAL AUTHORITY. Application will not be accepted unless alappli- cable questions arefully answered, all supporting documents correspond exactly with the name of the applicant(s) and proper fees are attached. __. _ • 4) Form DRL 404-I, " Individual History Record" must be completed and filed in duplicate by the following: a. Each applicant b. All general partners - c. Over 5% limited partners d. All officers and directors of a corporation - e. All stockholders of a corporation not subject to the Securities and Exchange Act of 1934. _ f. Over 5% stockholders of a corporation subject to the Securities and Exchange Act of 1934. g. Operating managers h. Each person required to file form DRL 404-I must submit fingerprints to Local Licensing Authority. 5) NOTE: License status will not be given over the telephone. License will be mailed to the Local Licensing Authority ��lu suance. 880 a3of4 OATH OF APPLICANT 'his application is to be signed by individual, each general partner of partnership and by corporate applicants. declare under penalty of perjury in the second degree that I have read the foregoing application and all attachments thereto, Ind that I know the contents thereof, and that all matters and information set forth therein are true, correct and complete to he best of my knowledge and information; and I agree to conform to all applicablestatutesand all rules and regulations ,romulgated by the Colorado Department of Revenue in connection therewith. - - INDIVIDUALS AND ALL GENERAL PARTNERS OF CORPORATIONS SIGN HERE: PARTNERSHIPS MUST SIGN HERE: DATE: TEXAC, OF COLORADO, INC. • By i'A'.n. .1/ a (Preside t, Vice President, or Secretary) DATE: y— iy-8g REPORT AND APPROVAL OF LOCAL LICENSING AUTHORITY --•--• (MANUFACTURERS, IMPORTERS, WHOLESALERS DISREGARD THIS SECTIONI he foregoing application has been examined and the premises, business conducted and character of the applicant is itisfactory. We do report that such license, if granted, will meet the reasonable requirements of the neighborhood td the desires of the inhabitants, and complies with the provisions of Title 12, Article 46, CRS 1973 as amended. ...._...Check One: CRS 1973,as amended, 12-46-117 (1) (a) The local licensing authority shall restrict the use of said license to: (I) Sales for consumption "off" the premises of the licensee; or . . car (I I) Sales for consumption "on" the premises of the licensee; or „_ ❑ (III) Sales for consumption "both on and off" the premises ,. s❑ - of the licensee. (b) The provisions of paragraph (1) (a) shall not apply to any license issued or applied for under this article prior to July 1, 1967, nor to any renewal or reissuance thereof. THEREFORE THIS APPLICATION IS HEREBY APPROVED. DATED AT Greeley AT BY: X ATTEST: (May this 3rd day of Weld County t Town; City and • unry) August , A.D. 19 misaioners or other title of the licensing autnoriry) (Clerk, sec j ary seer off iceyha79the official of the licensing authority( (If the premises are located within a town or city, the above approval should be signed by the mayor and clerk, if in a county, then by the chairman of the board of county commissioners and the clerk to the board. If, by ordinance or otherwise, the local licensing authority is some other official, then such approval should be given by such official.) Local Licensing Authority report the following pertaining to each person required to file form DRL 404-I: FINGERPRINTED & SUBMITTED BACKGROUND N.C.I.C. & C.C.I.C. CHECKS Yes ❑ No ❑ Yes ❑ No ❑ 880789 PA- ♦ of 4 PETROMAN, INC. OFFICERS: President V. Pres. C. F. Tilton 2107 Sunshine Pt. Kingwood, TX 77345 (D.O.B. 4/7/48) - J. Conard 1566 Boyce Springs Dr. Houston, TX 77066 (D.O.B. 8/29/39) Secretary - C. B. Davidson 28 Fox Den Rd. Mt. Kisco, NY 10549 (D.O.B. 4/17/33) DIRECTORS: G. F. Tilton 2107 Sunshine Pt. Kingwood, TX 77345 (D.O.B. 4/7/48) J. Conard 1566 Boyce Springs Dr. Houston, TX 77066 (D.O.B. 8/29/39) J.. D. Cox 15303 Walters Rd. Houston, TX 77068 (D.O.B. 1/14/31) STOCKHOLDER: J. W. Nay 2506 "A" Potomac Dr. Houston, TX 77057 (D.O.B. 1/27/30) W. M. Villars 13938 Jaycreek Ct. Houston, TX 77070 (D.O.B. 8/14/28) C. B. Davidson 28 Fox Den Rd. Mt. Kisco, NY 10549 (D.O.B. 4/17/33) Texaco Refining and Marketing, Inc., 4601 DTC Blvd., Denver, CO 80237 100% 880789 APPLICATION FOR 3.2% FERMENTED MALT BEVERAGE LICENSES April Date I` ) 1988 TO THE BOARD OF COUNTY COMMISSIONERS OF WELD COUNTY, COLORADO: The undersigned hereby makes application for a County Retail 3.2% Beverage License. 1. Name of Applicant (s) Texaco of Colorado, Inc., a Delaware corporation 2. Home Address of Applicant (s) 4601 DTC Blvd., Denver, CO 80237 3. Trade Name Texaco of Colorado, Inc. 4. Business Telephone 793-4181 5. Home Telephone Number (s) Store - 678-0204 6. Business Address 10963 I-25 Access Rd. West & Highway 119 7. If Partnership, give names of partners; if a Corporation or Club give names of principal officers President -Richard R. Irvine, Vice President -James R. Schaaf and (Attach list if necessary) Secretary -Jerome L. 1-rancis 8. Check the appropriate line for the type of retail license being applied for: x For Sales for consumption OFF the premises of license only. For Sales for consumption ON the premises of licensee only. _ For Sales for consumption ON and OFF the premises of licensee. 9. EXACT LOCATION OF PREMISES. Give street and number, lot and block number or range, township and section (identify quarter section). 10963 I-25 Access Rd. West & Highway 119 10. Do you have legal possession of the premises for which this application for license is made? Yes 11. Are the premises owned or rented? leased If rented or leased, from whom? Texaco Refining and Marketing, Inc. 12. State nature of business conducted: Convenience store 13. If restaurant, state whether other business is conducted except sale of food, meals, drinks and tobaccos: n/a 14. If club, state whether operating for a national, social, fraternal, patriotic, political or athletic nature: n/a 15. If club, state whether it is for pecuniary gain: n/a io. If club, state whether the property and advantages of club belong to members: n/a 17. Is applicant(s) or all officers of the corporation a citizen(s) of the United States? YPS 18: If applicant is not a citizen of the United States, specify which country: n/a 19. Has applicant(s) a state license for the sale of 3.2% fermented malt beverage? No 20. Has applicant(s) ever been convicted of a felony? 880789. Page 2 Application for 3.2% 21. If answer to question 20 is "yes", give full details: n/a 22. Has applicant been adjudged guilty by a court of record of violating the laws covering the prevention of gambling under the laws of the State of Colorado, or under the laws of the United States? No 23. If answer to question 22 is "yes", give full details: n/a 24. Will applicant(s) permit any wholesaler or manufacturer to be interested financially, by loan or otherwise, in applicant's business? No 25. If answer to question 24 is "yes", give full details: n/a 26. Will applicant(s) use any equipment, fixtures, chattles, decorations or furnishings supplied or loaned by any manufacturer or wholesaler? No 27. Is answer to question 26 is "yes", explain: n/a The applicant hereby agrees, if license is -used for sale of 3.22 Fermented Malt Beverage only, as herein requested, the place of business used therefor will be conducted in strict conformity with all laws of the State of Colorado, and the rules and regulations of the Board of County Commissoners of Weld County, Colorado, relating thereto, and any conviction of violations of said laws, rules and/or regulations shall be cause for revocation of such license, without further hearing thereon. The applicant(s) further agrees that he, she (they) has/have full knowledge of the aforesaid state laws and Board rules and regulations existing at the date of this application and agrees he, she (they) will keep advised as to all subsequent state law, Board rules and regulations, that may be hereafter passed relating thereto during the term of said license. TEXACO OF COLORADO, INC. STATE OF COLORADO ) COUNTY OF WELD ) ss. Richard R. Irvine, Applicant(s) President Richard R. Irvine being first duly sworn on oath, deposes and says: That he, she (they) is/are the applicant(s) above named: That he, she (they) has/have read the above and foregoing application and the answers made thereto, and well knows the contents hereof, and that the answers made to the interragatories therein set forth are true to his, her (their) own knowledge. Subscribed and sworn to before me this day of April 14th , A.D. 19 Ea_ O.. , Depu, County Clerk Commission Expires: January 22, 1992 Notary Public TEXACO OF COLORADO, INC. r,.wa_ /N IA Richard R rvine, Applicant(s) President 880789 13 880789 :13789 STATE OF COLORADO DEEAR MENT OF REVENUE Stilt Capitol Annex 1375 Shermen Street Urneer,CUforado 80261 June 8, 1988 Texaco of Colorado, Inc. 4601 DTC Blvd. Denver, CO 80237 JUN 1 U 7988 Room 600 Liquor Enforcement Division Phone: (303) 856-3741 Re: Chain Store Application for Texaco of Colorado, Inc. Dear Sir or Madam: This is to advise you that the State Liquor Enforcement Division has, at your request, created a "master file" for the above -listed applicant. As of the date of this letter our master file includes the following items which you have submitted: 1. Individual History Records (Form 404I) for the following persons: Richard R. Irvine James R. Schaaf Jerome L. Francis 2. Fingerprint cards bearing the names and birthdates of the persons listed in paragraph 1, above. All the fingerprint cards have been submitted by us to the Colorado Bureau of Investigation. The CBI and FBI have checked the prints and reportedly found no record of any criminal history. 3. Certificate of Authority or a Certificate of Good Corporate Standing from the Colorado Secretary of State which indicates that Texaco of Colorado, Inc. is a corporation authorized to do busi,iess in Colorado. 880789 41, Texaco of Coloruo, Inc. June 8, 1988 Page 2 You must check with the local licensing authority to determine what documents they may require to process your application. Please feel free to provide them with this letter --- as many local authorities will not require you again to submit certain documents to them if you have already submitted such documents to the State Liquor Enforcement Division. This letter will serve to inform the local authorities exactly which documents you have already submitted to the State Liquor Enforcement Division. Finally, once the local authority has approved your application, it must be sent to the Liquor Enforcement Division. The only documents which are needed by the Division are: 1. The approved application signed by the local authority; 2. The appropriate fees; 3. A copy of this letter; 4. Proof of possession of the premises; 5. A diagram of the licensed premises; 6. Completed form DRL-367, if manager's registration is required. i c• rely, -;?L Herbert . Porter Licensing Supervisor gtb AL120S/1777S&4653c 880789 700 East Speer boulevard Denver. Colorado 80203 303/777-3737 Telecopier 303/777-3823 H. Alan Dill Robert A. Dill Jon Stonbraker Daniel W. Carr John A. Hutchings Arthur Keith Whitelaw III Lucien J. Dhooge Charles J. Carroll Joseph M. Elio DILL and DILL A Partnership of Attorneys August 26, 1988 Herb Luoma Colorado Department of Revenue Liquor Enforcement Division 1375 Sherman, Room 600 Denver, CO 80261 RE: Texaco of Colorado, Inc. in Weld County Dear Mr. Luoma, Enclosed is a copy of the lease for the 3.2'%, FMB application for Texaco of Colorado, Inc. d/b/a/ Texaco at 10963 I-25 Access Rd. West and Highway 119, Longmont, in Weld County. You may come across some other Texaco applications with leases not completed, just give me a call and we will send you the necessary completed copy. I apologize for the extra work that this may cause. Feel free to call if you have any questions. Sincerely, Lois Rentz Paralegal lr enclosure cc: Tommie Antuna, Clerk to the Board, Weld County with enclosure 880789 LEASE This Lease is made this (pia day of A r( /( , 1988, between TEXACO REFINING AND MARKETING INC. (the "Lessor') and TEXACO OF COLORADO INC. (the "Lessee"). In consideration of the payment of the rent and the performance of the covenants and agreements by the Lessee set forth below, the Lessor does hereby lease to the Lessee the following -described premises situated at: 10963 I-25 Access Road West and Highway 119 "See attached Schedule A" TO HAVE AND TO HOLD the same with all the appurtenance unto the said Lease from twelve o'clock (12:00) noon on the aa" day of and until twelve o'clock (12:00) noon on the :2/"day of ti c 1990 , at and for a rental for the full term and any subsequent terms of One Hundred Dollars ($100.00) payable in one (1) installment. Said Lease shall continue from year to year thereafter unless terminated by either party giving the other party thirty (30) days advance written notice in writing. The Lessee, in consideration of the leasing of the premises agrees as follows: 1. To pay the rent for the premises above -described. 2. To sublet no part of the premises, and not to assign the Lease or any interest therein without the written consent of the Lessor. 3. To use the premises only as provided in paragraph eleven below and to use the premises for no purposes prohibited by the laws of the United States or the State of Colorado, or of the ordinances of the city or town in which said premises are located, and for no improper or questionable purposes whatsoever, and to neither permit nor suffer any disorderly conduct, noise or nuisance having a tendency to annoy or disturb any persons occupying adjacent premises. 4. To allow the Lessor to enter upon the premises at any reasonable hour. 5. No assent, express or implied, to any breach of any one or more of the agreements hereof shall be deemed or taken to be a waiver of any succeeding or other breach. 6. If, after the expiration of this Lease, the Lessee shall remain in possession of the premises and continue to pay rent without a written agreement as to such possession, then such tenancy shall be regarded as a month -to -month tenancy, subject to all the terms and conditions of this Lease. 7. The Lessee agrees to peacefully surrender the premises to the Lessor immediately upon termination, and if the Lessee remains in possession of the premises, the Lessee shall be deemed guilty of forcible entry and detainer of the premises, and waiving notice, shall be subject to forcible eviction with or without process of law. 8. This Lease shall be binding on the parties, their personal represen- tatives, successors and assigns. 9. This Lease shall be effective when approved by the local and state licensing authorities as indicated by the issuance of a new 3.2% fermented malt beverage license in the name of TEXACO OF COLORADO INC. 10. Lessee agrees during the term of this Lease to indemnify and hold Lessor harmless from and against any and all loss and liability including the cost of defending any claims or threatened claims arising from Lessee's use or operation of the unit on the premises except to the extent that such liability 886789 is attributable to the negligent act or inaction of Lessor, its agents or employees. 11. Lessor is leasing the premises to Lessee for the sole purpose of selling alcoholic beverages. Lessee shall use the leased premises as a tenant - in -common with Lessor and shall not use said premises in any manner which is inconsistent with Lessor's normal business thereon. LESSOR: TEXACO REFINING AND MARKETING INC. By: Title: LESSEE: TEXACO OF COLORADO INC. By: x9I.c&L„ Title: %`ZES/C p 2FOR APPROV-p �. L.wFRANCIS FORE APPROVED L FRANCISV 880789 \real\1egp218 SCHEDULE 'A" Lots 1 and 3 in Star Center Minor Subdivision, Weld County, Colorado, together with a sign easement over the Easterly 25 feet of the Northerly 25 feet of the Southerly 60 feet of Lot 2 in Star Center Minor Subdivision, Weld County, Colorado, and together with and subject to utility, ingress and egress sewer treatment, sewer lines and snow dumping purposes as contained in Texaco-McDonald's Fuel Stop Complex Easement Grant recorded in Book 1075 at Reception No. 2.015796. also known and numbered as: I-25 and State Hwy. 119, Longmont, Colorado. 880789 700 East Speer Boulevard Denver, Colorado 80203 303/777-3737 Telecopier 303/777-3823 H. Alan Dill Robert A. Dill Jon Stonbraker Daniel W. Carr John A. Hutchings Arthur Keith Whitelaw Ill Lucien J. Dhooge Charles J. Carroll Joseph M. Elio DILL and DILL A Partnership of Attorneys June 29, 1988 Tommie Antuna Weld County Commissioner's Office 915 10th Street Greeley, CO 80631 RE: 3.2% Beer Application - Texaco of Colorado, Inc. Dear Tommie: Enclosed please find a copy of the Deed with regard to the above application. I believe this completes our application, but if anything further is needed, please give me a call. Very truly yours, i7 JL le Culver Paralegal BC/ Encls. 880789 AR2013654 B 1073 REC C J13654 06/17/85 15:34 $39.00 1/013 F 0717 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO SPECIAL WARRANTY DEED THIS DEED, effective as of the 31st day of December, 1984. Reference is hereby made to that certain instrument of conveyance styled "General Assignment, Conveyance, Bill of Sale and Transfer", a copy of which is incorporated by reference herein as Exhibit " A " and made a part hereof, dated, executed and delivered on December 31, 1984 whereby TEXACO INC. as Grantor, conveyed unto TEXACO REFINING AND MARKETING INC. as Grantee, with offices at 4601 DTC Blvd., P.O. Box 2100, Denver, CO 80201, among other properties, the real property hereinafter specifically described. Grantor, in furtherance of its express covenant in said instrument of conveyance "to execute and deliver to Grantee all such further instruments of conveyance, assignment, and transfer and all such notices, releases, aquittances, and other documents, and to do all such other acts and things, as may be necessary more fully or specifically to convey and assign to and vest in Grantee, its successors or assigns, title to all and singular the properties, assets and rights hereby conveyed, assigned, or transferred", does by these presents ratify, confirm and adopt all of the terms and provisions of said instrument of conveyance and for and in consideration of the sum of Ten and No/100 ($10.00) Dollars, to the said grantor in hand paid by the said grantee, the receipt whereof is hereby confessed and acknowledged, hath granted, bargained, sold and conveyed, and by these presents doth grant, bargain, sell, convey and confirm unto the said grantee, its successors and assigns forever, all of the following described parts of land, situate, lying and being in the NE* of Section 10, Township 2 North, Range 68 West of the 6th P.M., County of Weld and State of Colorado, described in Exhibit "B". M AT THE RETICORDER'S MEMORANDUM A , OF RECORDATION THIS IN- STRUMENT AS FOUND TO BE INADEQUATE FOR THE GEST PHOTOORAPIi IC REPRODUCTION BECAUSE OF ILLEGIBILITY, CARBON OR PHOTO COPY, DISCOLORED PAPER, EEC. 880789 B 1073 REC 654 85 4 $39.00 2/013 F 0718 MARY OANN 3FEUERSTEIN/CLERK S & 3 RECORDER WELD CO, CO Subject to the following: 1. Taxes for the year 1985 and subsequent years. 2. Any and all easements, reservations and restrictions of record. 3. Any state of facts an accurate survey may disclose. TOGETHER with all and singular the hereditaments and thereunto belonging, or in anywise appertaining, reversions, remainders, rents, issues and profits estate, right, title, interest, claim and demand whatsoever and the appurtenances reversion or thereof; and all the of the said grantor, either in law or equity, of, in and to the above bargained premises with the hereditaments and appurtenances. TO HAVE AND TO HOLD the said premises above bargained and described, with the appurtenances unto the said grantee, its successors and assigns forever. And the said grantor, for itself, and its successors, covenants and agrees to and with the said grantee, its successors and assigns, the above bargained premises in the quiet and peaceable possession of the said grantee, its successors and assigns, against all and every person or persons lawfully claiming the whole or any part thereof, by, through or under the said grantor and none other, to forever WARRANT AND DEFEND. IN WITNESS WHEREOF, The said grantor hath caused its corporate name to be hereunto subscribed by its Vice President, and its corporate seal to be hereunto affixed, attested by its Assistant Secretary, this C day of rCO ssjtant:S�ecretary PAULINE S. COWART 1985. By TEXACO INC. • dent fl.&DIDKINSON 880789 B 1073 REC 0 13654 06/17/85 15:34 $39.00 3/013 F 0719 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO STATE OF 4e.F COUNTY OF a/ ) ss. The foregoing instrument was acknowledged before me this L d day of 1985, by "it ,d the Vice President INC., a Delaware corporation, on •e alf of said corporation. WITNESS my hand and official seal. of T My commission expires: I reside at: /3727 /?4,,,s44- W,»+11-) scic44...) 77oG� Notary Public MELBA ADAMS Notary Public, State of Texas My Commission Expires January 28. 19 . -Fl 880789 B 1073 REC 02013b34 06/17/85 15:34 $39.,J0 4/013 F 0720 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO EXHIBIT B Beginning at the East # corner of said Section 10; thence North 89°49' West 451.4 feet; thence North 00°24' East 1323.4 feet; thence South 89°15' East 40 feet to the Southeast corner of that certain tract dedicated for street easement (known as Burger Street) described in Book 653 as Reception No. 1575358, Weld County Records and the TRUE POINT OF BEGINNING; thence North 00°24' East along the East right of way line of Burger Street, 1255.52 feet, more or less, to a point on the South right of way boundary of Highway No. 119, from which point the Northeast corner of said Section 10 bears North 00°24' East 49.2 feet, South 89°55' East 410.46 feet; thence South 89°49' East along said South right of way boundary of Highway 119, 328.4 feet to the Westerly right of way boundary of Highway 87; thence along said Westerly right of way boundary of Highway 87, the following courses and distances: South 49°47.'30" East 10.1 feet; South 10°00' East 132.16 feet; South 0°28' West 896.38 feet to the North line of a parcel of land described in Book 1504 at Page 608, Weld County Records; thence North 89°32' West 90 feet along the North line of said parcel of land; thence South 0°28' West 224.9 feet along the West line of said parcel of land; thence North 89°15' West 270 feet, more or less, to the TRUE POINT OF BEGINNING. NOW KNOWN AS: Lots 1, 2 and 3 in Star Center Minor Subdivision, Weld -County, Colorado. also known as: 1-25 and Colorado Highway 119 being the same property conveyed to Texaco Inc. from Del Camino by deed dated September 7, 1973 and recorded November 23, 1973 in Book 703, in Book of Deeds of said County. 880789 B 1073 REC 020136.. 06/17/85 15:34 $39... 5/013 F 0721 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO EXHIBIT "A" GENERAL ASSIGNMENT CONVEYANCE, BILL OF SALE AND TRANSFER FROM TEXACO INC. TO TEXACO REFINING AND MARKETING INC. Dated December 31, 1984 4(1) 880789 B 1073 REC 02013654 06/17/85 15:34 S39.00 6/013 F 0722 MARY AN FEUERSTEIN CLERK & RECORD?" WELD CO, CO THIS GENERAL ASSIGNMENT, CONVEYANCE, BILL OF SALE AND TF__LSFER (hereinafter called "Assignment"), effective as of Eecember 31, 1984, from Texaco Inc., a Delaware corporation, hereinafter called "Grantor," to Texaco Refining and Marketing Ir.c., a Delaware corporation, hereinafter called "Grantee." W I T N E S S E T H: That Grantor by these presents and in exchange for the issuance to the Grantor by the Grantee of that number of shares of Grantee's common stock having an aggregate fair market value equal to the fair market value of the net assets transferred to Grantee hereunder, does hereby sell, convey, assign, transfer, set over, and deliver unto Grantee, and unto its successors and assigns, all and singular, the properties, assets, rights, liabilities and obligations of whatsoever kind or nature of Grantor pertaining to (1) Grantor's refining, marketing and transportation of petroleum products within the United States, all as currently operated by the Texaco USA Division of Grantor, incLuding the stock of the subsidiaries and affiliates of Grantor related to such operations as set forth in Exhibit 4A attached hereto and including any property designated as "surplus" by Texaco USA, (2) Grantor's domestic marine fleet, (3) Grantor's domestic marine sales and aviation sales operations as currently operated by the marine sales and aviation sales divisions of Grantor, and (4) Grantor's crude oil and petroleum product purchase, sale and exchange agreements, including, without limitation oil division and transfer orders and inventories. INCLUDING, BUT NOT LIMITED TO: A. Grantor's refineries and including with such refineries, but not limited to, processing units, research fa^"4"es, office buildings, fee properties, leaseholds, inven- tories, automotive equipment, storage tanks, tank farms, tank cars and all equipment, facilities, materials, supplies, licenses, permits and contracts, used in connection therewith or related thereto, but excluding from the foregoing and (B) through (F) be:cw any patents of Grantor or licenses to Grantor for use of proprietary technology which shall be licensed or extended to Grantee. B. Grantor's petroleum marketing bulk plants, terminals, service stations, and truck stops (whether owned in fee or leased by Grantor), automotive equipment, warehouses, marketing offices, signs, inventories (refined petroleum products and TEA), equipment, facilities, materials and supplies, Licenses, permits, and contracts used in connection therewith or related thereto. C. Grantor's interests in pipelines and rights therein cr thereto related to its aforesaid petroleum r.arcet_ng, -rare-""`a"-m. and refining operations. Grantor's product terminals (wheth.er owned in fee cr _eased), railroad tank car leases, transport trucks, warehouses, 880789 B 1073 REC•02011654 06/17/85 15:34 $39' 00 ' 7/013 F 0723 MARY ANA EUERSTEIN CLERK & RECORDE. 'JELD CO, CO ec::ipment, facilities, materials and supplies used in connection with or related to petroleum marketing, transportation and refinery operations. E. Grantor's net working capital and other assets and n'''ties related to its aforesaid petroleum marketing, transportation and refining operations, and domestic marine and aviation sales operations. F. Rights of way, easements, servitudes, franchises, permits, interests and licenses (except process and technology licenses); and all dispensing, display, repair, maintenance and other equipment; all piping, fittings, connections and other facilities for or related to the refining, transportation and marketing of petroleum products and other products; all office furniture, fixtures, supplies and inventories; all contracts, agreements and leases of every kind and character, and Grantor's interests in or under all contracts, agreements and leases; and all bank accounts, deposits, books and records relating to the assets, properties, facilities and accounts transferred to Grantee hereby. G. - Shares of stock in Grantor's subsidiaries and affiliates which subsidiaries and affiliates are primarily engaged in Grantor's aforesaid petroleum marketing, transporta- tion 'and refining operations, as set forth in Exhibit 4A attached hereto and incorporated herein by this reference. EXPRESSLY RESERVING, EXCEPTING AND EXCLUDING, HOWEVER, from this Assignment that property owned by Grantor on the effective date hereof as generally described in Exhibit "43" attached hereto and incorporated herein by this reference. TO HAVE AND TO HOLD unto said Grantee, its successors and assigns forever, together with all and singular the prcper- ties, assets, rights and appurtenances, thereto belonging or in anywise incident or appertaining thereto; and Grantor hereby binds itself, its successors and assigns to specially warrant title to the said properties, assets and rights unto Grantee, its successors and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof occurring or arising out of occurrences or omissions by, through or under Grantor, but not otherwise: This Assignment is made with full substitution and subrogation of Grantee in and to all covenants and warranties by others heretofore given or made in respect to said properties, assets, and rights or any part thereof. Grantor covenants to her=_=_f_,,r ".::ucuto and deliver to Grantee, ee, from time to time, other genera'_ and specific CCnve'!- =.. assignments, and other instruments relating to certain cf its properties, assets, and rights, and Grantor hereby covenants to and with Grantee, its successors and assigns, so long as to is authorized by applicable law so to do, at Grantor's e:-ense, tC execute and deliver to Grantee all such other further renter cf conveyance, assignment, and transfer ant r._1 such nslices, releases, eccuittances, and other documents, and to CC 880789 B 1073 REC 020]"'54 06/17/85 15:34 $3 00 8/013 F 0724 MARY. ANN /EUERSTEIN CLERK & RECORDER WELD CO, CO all such other acts and things, as may be necessary more fully or specifically to convey and assign to and vest in Grantee, its successors or assigns, title to all and singular the properties, assets and rights hereby conveyed, assigned, or transferred. Nothing contained in such other general and specific instruments of conveyance, assignment, and transfer (except to such extent as may be therein specifically stated with reference to specific properties) shall be deemed to limit or restrict the properties, assets, and rights, herein conveyed, assigned, or transferred to Grantee. Notwithstanding any other date shown therein, any grant, deed, assignment, agreement, or other instrument sub- sequently executed is to be effective as of December 31, 1984. If for any reason any of said property is not transfer- able at the date of this Assignment without the consent of a third party or parties, or cannot be made transferable by sub- sequent consent of third party or parties, or if any such assign- ment without such consent would constitute a breach of any lease, contract or agreement or in any way affect Grantor's or Grantee's rights, or if the transfer of said property would violate any applicable law, rule or regulation, then legal title to such property or rights shall be EXCEPTED AND EXCLUDED from this Assignment and shall not be deemed transferred hereby, but such property and rights shall be held in trust by Grantor for Grantee, its successors and assigns forever, and all the rents, issues, profits, and income therefrom over and above necessary expenses, and the net proceeds upon any sale of such property or richts, shall be turned over to Grantee or its successors cr assigns, and any such property or rights so held in trust by Grantor for Grantee shall, if it shall become transferable, be assigned, transferred, conveyed, and delivered over to Grantee by deed, assicm:;ent, bill.of sale, or such other form of instrument as Grantee shall reasonably request. This Assignment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original. All such counterparts shall together constitute but one and the same Assignment. IN WITNESS WHEREOF, Grantor has caused this Assignment to be duly executed on this 31c} day of December, 1984 by its Vice President, duly authorized. GRANTOR: [SEAL) TEXACO INC. Bv r .., *'V no= Prts4dent 880789 B 1073 REC 0201 54 06/17/85 15:34 $3 O0 9/013 F 0725 MARY ANN FEUERSTEIN CLERK & RECORDEn WELD CO, CO EXHIBIT 4A TEXACO INC. SUBSIDIARIES TO BE TRANSFERRED TO TEXACO REFINING AND MARKETING INC. Name of Company Certified Terminals Corp. Charles Oil Co., Inc. .Claflin-Dcnohue Company, Inc. Curran & Burton, Incorporated General Automatic Oil Heat, Inc. Genera_ Industrial Services, Inc. Indian Refining Company JEF Realty, Inc. Kelleher Oil Company, Inc. New Castle Oil Company, Inc. Paragon Oil Burner Corporation Paragon Oil Company, Inc. Paragon Oil Company, Inc. Regent Oil Corp. Rhode Island Refining Corp. Seaboard Fite Line Company Seattle Fuel Company Sterling Cil Terminal Corp. Texaco Convent Refining Inc. Texaco Oil -fort Holdings, (I) Inc. Texaco O''lpert Holdings, (II) Inc. Texaco Stations Inc. Texaco Tankers Texas Company, Texas Company, Texas Company, Texas Company, Texas Company, Texas Company, Texas Company, Texas Company, Texas Pipe Line Company, White Fuel Corporation Badger Pipe Line Company Colonial Pipeline Company ixie Pipeline Company Explorer . -cl;ne Company Ka-. Pipe Line Company Laurel Pipe Line Company Inc. The The The The The The The Inc.,The The State of Incorporation Delaware Maryland Massachusetts Connecticut Massachusetts New York Delaware New Jersey Rhode Island Delaware New York Maine New Jersey Delaware Delaware Delaware Washington New York Delaware Delaware Delaware Delaware Delaware Alabama Connecticut Maine Maryland Nebraska New Jersey New Mexico New York Texas Connecticut Delaware Delaware Delaware Delaware Delaware Ohio 880789 B 1073 REC 0201"c54 06/17/85 15:34 $39 00 10/013 F 0726 MARY ANN .EUERSTEIN CLERK & RECORDE. HELD CO, CO Exhibit 4A Page 2 Name of Company State of Incorporation LOCAP INC. LOOP INC. Olympic Pipe Line Company Texaco -Cities Service Pipe Line Company Texas -New Mexico Pipe Line Company (lest Shore Pipe Line Company Wolverine Pipe Line Company Wycc Pipe Line Company Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware -5- 880789 B 1073 REC 02013 4 06/17/65 15:34 $39. ) 11/013 F 0727 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO EXHIBIT 4B The property, plant and equipment at Grantor's Eagle Point Refinery and Westville Sales Terminal in Westville, New Jersey, including assets related to Grantor's petrochemical operations, but excluding inventories. 2. Grantor's inventories of natural gas liquids. 880789 B 1073 REC 0201365/ 06/17/85 .15:34 $39.00 12/013 F 0726 MARY ANN FEU..aSTEIN CLERK & RECORDER WE___, CO, CO CP_..NTEE'S ACCEPTANCE Grantee agrees to undertake, pay, satisfy and discharge all the lawful debts and liabilities of the Grantor incurred by Grantor in connection with its ownership and operation of the property, assets and rights assigned by Grantor to Grantee herein. Grantee further hereby accepts this Assignment expressly subject to all covenants, conditions, and obligations of Assignor under or relating to the property, assets, and rights assigned herein and expressly assumes and agrees to be responsible for and discharge said covenants, conditions, and obligations. IN WITNESS WHEREOF, Grantee has caused this Acceptance tc be duly executed on this 31st day of December, 1984 by its Vice President, duly authorized. GRANTEE: • (SEAL] Attest: TEXACO REFINING AND MARKETING INC. • Vice President Vi 880789 B 1073 REC 020136 06/17/85 15:34 $39. 13/013 F 0729 MARY ANN FEUERSTEIN CLERK & RECORDER WELD CO, CO RESOLUTION ADOPTED BY THE BOARD OF DIRECTORS OF TEXACO INC. SEPTEMBER 23, 1983 RESOLVED, subject to the approval of the Chairman of the Board, that the Vice Chairman of the Board, the President, all of the Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Division Presidents and Department Heads of the Company, and the General Manager, Corporate Real Estate Department are hereby severally authorized from time to time to approve the terms and con- ditions of the sale, exchange, donation, or other transfer of any real property or other fixed (capital) assets of the Company having a sale value not in excess of $5,000,000.00, and the Vice Chairman of the Board, the President, all of the Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Division Presidents and Department Heads of the Company, and the General Manager, Corporate Real Estate Department are hereby severally authorized to sign, and the Secretary and the Assistant Secretaries are hereby severally authorized to attest and affix the Company's seal to, such deeds, bills of sale, and other instruments, and to do such other acts, as may be necessary or proper to carry out the purpose of this resolu- tion; and the delivery of any such deed, bill of sale, or other instrument so signed,attested and sealed shall be conclusive evidence that the transaction has the approval of the Chairman of the Board of the Company and has been executed within the authority of this reso- lution. A true copy, I certify. PAULINE S. COWART Assistant Secretary I, LEGALI/s 880789 W(lr,1U erP*703 ._ _ .. N0V 2 3 1973 locueded a P / o'oiock nn..._......_ AaC.110 1EGa5 .9 ,._... Ann Spomer, Recorder WARRANTY DEED T—, This Deed, made this 7th day of September , 1973 between DEL CAMINO CORPORATION, a corporation duly organized and existing under and by virtue of the laws of the State of Colorado of the first part, and TEXACO INC., a corporation duly organized and existing under and by virtue of the laws of the State of Delaware of the second part; WITNESSETH, That the said party of the first part, for and in consideration of the sum of One Million Two Hundred Fifty Thousand and no/100 Dollars ($1,250,000.00) to the said party of the first part in hand paid by the said party of the second part, the receipt whereof is hereby confessed and acknowledged, hath granted, bargained, sold and conveyed, and by these presents does grant, bargain, sell, convey and confirm, unto the said party of the second part, its successors and assigns forever, all of the following described lots or parcels of. land, situate lying and being in the NEB of Section 10, Township 2 North, Range 68 West of the 6th P.M., County of Weld and State of Colorado, to -wit: Beginning at the East corner of said Section 10; thence North 89°49' West 451.4 feet; thence North 00°24' East 1323.4 feet; thence South 89°15' East 40 feet to the Southeast corner of that certain tract dedicated for street easement (known as Burger Street) described in Book 653 as Reception No. 1575358, Weld County Records and the TRUE POINT OF BEGINNING; thence North 00°24' East along the East right of way line of Burger Street •, 1255.52 feet, more or less, to a point on the South right of way boundary of Highway No. 119, from which point the Northeast corner of said Section 10 bears North 00°24' East 49.2 feet, South 89°55' East 410.46 feet; thence South 89°49' East along said South right of way boundary of Highway 119, 328.4 feet to the Westerly right of way boundary of Highway 87; thence along said Westerly right of way boundary of Highway 87, the following courses and distances: South 49°47'30" East 10.1 feet; South 10°00' East 132.16 feet; South 0°28' West 896.38 feet to the North line of a parcel of land described in Book 1504 at Page 608, Weld County Records; 880789 CORRECTION DEED -NO DOCUMENTARY PEE I3unv II)') 1625239 thence North 89°32' West 90 feet along the North line of said parcel of land; thence South 0°28' West 224.9 feet along the West line of said parcel of land; thence North 89°15' West 270 feet, more or less, to the TRUE POINT OF BEGINNING. TOGETHER, with all and singular the hereditaments and appurtenances thereunto belonging, or in anywise appertaining, and the reversion and reversions, remainder and remainders, rents, issues and profits thereof; and all the estate, right, title, interest, claim and demand whatsoever of the said party of the first part, either in law or equity, of, in and to the above bargained premises, with the hereditaments and appurtenances. TO HAVE AND TO HOLD the said premises above bargained and described, with the appurtenances unto the said party of the second part, its successors and assigns forever. And the said DEL CAMINO CORPORATION, party of the first part, for itself, its successors and assigns, doth covenant, grant, bargain and agree to and with the said party of the second part, its successors and assigns, that at the time of the ensealing and delivery of these presents it is well seized of the premises above conveyed, as of good, sure, perfect, absolute and indefeasible estate of inheritance, in law, in fee simple, and hath good right, full power and lawful authority to grant, bargain, sell and convey the same in manner and form aforesaid, and that the same are free and clear from all former and other grants, bargains, sales, liens, taxes, assessments and incumbrances of whatever kind or nature soever; EXCEPT general taxes for 1973, payable in 1974; EXCEPT Moffat Tunnel Improvement District assessments payable in 1974 and thereafter; EXCEPT reservations, restrictions, protective covenants and rights -of -way of record; EXCEPT that certain Deed of Trust to the use of North Denver Bank to secure $350,000, dated February 5, 1968, recorded February 7, 1968, in Book 591 -2- 880789 eaoK 703 1625293 5f- 3 as Reception No. 1512834 (thereafter assigned by North Denver Bank to Continental Assurance Company, Chicago, Illinois, by instrument recorded November 6, 1968, in Book 602 as Reception No. 1523555), which the said party of the second part hereby expressly agrees to assume; EXCEPT that certain Deed of Trust to the use of North Denver Bank to secure $520,000, dated February 5, 1968, recorded February 7, 1968, in Book 591 as Reception No. 1512835 (thereafter assigned by North Denver Bank to Continental Assurance Company, Chicago, Illinois, by instrument recorded November 6, 1968, in Book 602 as Reception No. 1523556), which the said party of the second part hereby expressly agrees to assume; and EXCEPT any tax or other charges by reason of inclusion of property in the Northern Colorado Water Conservancy District; and the above bargained premises in the quiet and peaceable posses- sion of the said party of the second part, its successors and assigns against all and every person or persons lawfully claiming or to claim the whole or any part thereof, the said party of the first part shall and will WARRANT AND FOREVER DEFEND. This is a correction deed amplifying the legal descri- ption contained in that certain deed from DEL CAMINO CORPORATION to TEXACO INC. recorded September 10, 1973, in Book 699, as Reception No. 1620909, Weld County Records. IN WITNESS WHEREOF, The said party of the first part bath caused its corporate name to be hereunto subscribed by its Pve ideht•h:and its corporate seal to be hereunto affixed, attested was ,secretary, this .2"/ `day of October, 1973. wJ'r c .r1. AA• : .r� AT4T.EST: 0tcItk° Shirley J. 9:larider, Secretary ,i ✓ -3- DEL CAMINO CORPORATION By Q)�Ct�CW IAJ ? Yl1 two ✓ T omas W. Inman, President 880789 1625299 ¢--`f STATE OF COLORADO ) ) ss. COUNTY OF 7G_:(1e-6 The foregoing instrument was acknowledged before me this / day of (�� , 1973, by Thomas W. Inman, as President, ,,of.Del Camino Corporation, a corporation Witness my hand and official seal. p010-,tO STATE OF COLORADO N/ COUNTY OF lac 2a ‘L- SS. Notary Public My Commission expires March 31, 1975 ,,�� The foregoing instrument was ;'• ,s -0 day of (-/knr��c.�% 1973, by Shirley J. Seer tary • ovUl-fig j- , L" '1i,, ..,..,..,. , of Del Camino acknowledged before me this Olander, as Corporation, a corporation. Witness my hand and official seal. Notary Public 1:1y Commission es; ;res March 31, 1975 -4- 880789 State of Colorado )AFFIDAVIT County of Denver Affidavit with respect to Source of Funds to be invested with the following applicant: TEXACO OF COLORADO, INC., a Delaware corporation 1) The amount to be invested in this enterprise is: $2,000.00 (approx.) 2) The source of said funds is: General Corporate Funds TFXA.0 OF GUI DRAM, INC By: 7 G Richard R. Irvine, President Subscribed and sworn to me this 14th day of April , 198 8 My commission expires: January 22, 1992 d- Notary pLblic 880789 MINUTES OF AN ORGANIZATIONAL MEETING OF THE BOARD OF DIRECTORS OF TEXACO OF COLORADO INC. MARCH 22, 1988 The undersigned, being all of the Directors of the above - captioned corporation, a Delaware corporation, do hereby unani- mously consent to the adoption of the following resolution,:: as to the action of the Board of Directors without formal meeting of such Board, pursuant to the provisions of the General Corporation Law of the State of Delaware, and the Secretary is hereby di- rected to file this unanimous consent in the Minute nook of said corporation. RESOLVED, that the following persons be and they hereby are elected to the positions shown opposite their names until their respective successors shall be duly appointed and qualified: Richard R. Irvine - President James Schaaf - Vice President Jerome L. Francis - Secretary RESOLVED, that R. C. Gross and H. C. Warnke be and they hereby are appointed separately, singly and individually Transfer. Agents for the transfer of shares of the capital stock of this corporation with a transfer office at 2000 West Chester Avenue, White Plains, New York. RESOLVED, that the seal, an impression of which appears in 880789 the margin hereof, be adopted as a corporate seal of the corpora- tion. The President stated that subscription had been received for Stock of this corporation at $100.00 par value per share as follows: Petroman - 10 shares RESOLVED, that the President or Vice President and Secre- tary are authorized to issue to Petroman or as directed by it, fully paid and nonassessable stock of this corporation to the amount of its subscription. RESOLVED, that bank accounts may be opened and conducted under such names and in such banks as may from time to time be designated or approved, either by resolution of the Board of Directors or by the President or Vice President or Secretary of the company. Checks upon such bank accounts respectively shall be honored when signed by the persons designated from time to time in writing by a company officer whose signatures have been furnished to the bank in question. RESOLVED, that o'clock a.m. on the commencing in the year 1988, be and is hereby designated as the time and date for the Annual. Meeting of the - 2 - 880789 Shareholders, such meeting to he held at -iOl DTC Boulevard, Denver, Colorado. RESOLVED, that the Board shall be composed of three Di- rectors. RESOLVED, that Mr. John A. Ramsey, Division Attorney be appointed the Registered Agent of the corporation in charge or the principal office in Delaware and of the books required by law to be kept in that office, and the agent upon whom process against the corporation may be served in accordance with the 1,ws of Delaware. RESOLVED, that the President is authorized to take all steps necessary to secure a liquor license on the premises at all Colorado Texaco of Incorporated locations throughout Colorado. IN WITNESS WHEREOF, this Consent is executed as of the chite set forth above. R. R. Irvine 6th James Scl Jerome L. Francis 3 880789 CORPORATE RECORDS * * * * * * * * * * * Texaco of Colorado Inc. Organized under the laws of the State of Delaware March 22, 1988 Registered with The Prentice -Hall Corporation System, Inc. 229 South State Street Dover, Kent County, Delaware 880789 CERTIFICATE OF INCORPORATION OF Texaco of Colorado Inc. ARTICLE I The name of the Corporation is Texaco of Colorado Inc. ARTICLE II The address of the ,registered office of the Corporation in the State of Delaware is No. 229 South State Street in the City of Dover, County of Kent. The name of its registered agent at that address is The Prentice -Hall Corporation System, Inc. ARTICLE III The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. ARTICLE IV The total number of shares of stock which the Corporation has authority to issue is 10 shares of Common Stock, with a par value of One Hundred Dollars ($100) per share. Each share of Common Stock shall be equal to every other share of Common Stock in every respect. Each share of the Common Stock shall entitle the holder thereof to one vote upon all matters upon which stockholders have the right to vote. ARTICLE V All powers of the Corporation shall be exercised by or under the direction of the Board of Directors except as otherwise provided herein or required by law. For the management of the business and for the conduct of the affairs of the Corporation, and in further.: creation, definition, limitation and regulation of the powers of the Corporation and of its directors and of its stockholders and not in limitation of the powers conferred by the laws of the State of Delaware, it is further provided: (1) Elections of directors need not be by written ballot unless the ByLaws of the Corporation shall so provide; and (2) The Board of Directors is expressly authorized and empowered to adopt, amend, or repeal all or any of the ByLaws of the Corporation. (3) The personal liability of the directors of the Corporation is hereby eliminated to the fullest -2- 880789 extent permitted by paragraph (7) of subsection (b) of Section 102 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented. ARTICLE VI The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. ARTICLE VII The name and mailing address of the sole incorporator is as follows: Name T. M. Bonovich Mailing Address 229 South State Street Dover, Delaware IN WITNESS WHEREOF, the undersigned, being the sole incorporator named above, has hereunto set her hand and seal this twenty-second day of March, 1988. . 9/J7T3P-u-ov-rsi T. M. Bonovich, Incorporator -3- 880789 STATE OF DELAWARE OFFICE OF SECRETARY,OF STATE I, Michael Harkins, Secretary of State of the State of Delaware, do hereby certify that the above and foregoing is a true and correct copy of Certificate of Incorporation of the "Texaco of Colorado Inc.", as received and filed in this office the twenty-second day of March, A.D., 1988, at 9 o'clock A.M. IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at Dover this twenty-second day of March in the year of our Lord one thousand, nine hundred and eighty-eight. MICHAEL HARKINS Secretary of State RICHARD L. TEMPLETON Assistant Secretary of State 880789 BY-LAWS OF Texaco of Colorado Inc. ARTICLE I Stockholders Section 1. Annual Meetings. The regular annual meeting of the Stockholders of the corporation shall be held at its office in the City of Dover, Delaware or at such other place, within or outside the United Stated of America, as may be determined by the Board of Directors, on the in each year (if not a legal holiday, and if a legal holiday, then:on the.next.. succeeding business day) at o'clock A. M.', for.the purpose of electing Directors and for the transaction-of� such other business as may be properly brought before the meeting. Section 2. Special Meetings. Special meetings of the Stockholuers for any purpose or purposes may be called at any time by the Chairman of the Board, the President or the Secretary, or by the Board of Directors, to be held at the office of the corporation in Dover, Delaware, or at such other place, within or outside the United States of America, as may be designated in the notice of meeting. 880789 Section 3. Notice of Meetings. Except as hereinafter in this Section provided, written or printed notice, stating the place, day and hour of holding every regular annual and every special meeting of the Stockholders shall be mailed by the Secretary or an Assistant Secretary of the corporation in a postage prepaid envelope, not less than ten diys before such meeting, to each person who then appears on thc books of the corporation as a Stockholder, addressed to his last known post office address as it appears on such books. The notice of every special meeting, besides stating the time and place of such meeting, shall state briefly the objects thereof, and no business other than that specified in such notice or germane thereto -shall he transacted at the meeting, except with the written' consent of all the Stockholders of the corporation'eatiticd to vote thereat, which consent may be given either before or aftcr such meeting. Notice of any meeting of Stockholders shall not be required to be given to any Stockholder who sh 11 attend such meeting in person or by proxy, or who shall waive notice thereof in writing, or by telegraph or cable, in person or by attorney thereunto duly authorized, either before or after the time of holding such meeting. Notice of any adjourned meeting need not be given. Section 4. Quorum. At all meetings of the Stockholders of the corporation, the holders of a majority -2- 880789 in amount of the outstanding stock of the corporation, present in person or by proxy and entitled to vote thereat, shall constitute a quorum for the transaction of business. In the absence of a quorum, a majority in interest of the Stockholders so present or represented and entitled to vote may adjourn the meeting from time to time and from place to place, without further notice, other than by oral announcement at the meeting, until a quorum is obtained. At any such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. Section `_i. Voting. At all meetings of .the Stockholders, ellery owner of record of shares entitled to vote thereat may vote in person or by proxy, provided his. name appeared ,.s such owner of record on the books of the .. corporation at least ten (10) days prior to the date of: such meeting; each such Stockholder shall have one vote for every share then standing in his name on said books. All elections of Directors shall be by ballot. ARTICLE II Board of Directors Section 1. Number, Qualifications, Election and Term of Office. The business of the corporation shall be managed by a Board of Directors. The number of the directors of the Company shall be fixed from time to time by -.- 880789 meet, without the necessity of notice, for the election of officers and the transaction of other business. Regular meeting: of the Board of Directors shall be held on such day and hour and at such place as the Board of Directors shall from time to time determine; once the Board shall, by resolution, have fixed the time and place at which its regular meetings shall be held and shall have so advised its members, no further notice need be given of any subsequent regular meetings unless and until the Board shall, by resolution, change either the time or place. Special meetings of the Board may be held at any time upon call by the Chairman of the Board, the President, or by the Secretary, or by any two Directors. Notice of..any such special meeting shall be duly delivered to each Director not less than one day before such meeting; or, in tlae case of each Director nut residing at the place where the meeting is to be held, such notice shall be sent by telegraph or cable not less than three (3) days before such meeting. Any meeting of the Board at which all the members shall be present, or of which notice shall be waived, either before or after such meeting, in writing or by telegraph or cable by all absentees, shall be valid for all purposes, provided a quorum is present thereat. Notice of any adjourned meeting need not be given. -5- 880789 meet, without the necessity of notice, for the election of officers and the transaction of other business. Regular meetings of the Board of Directors shall be held on such day and hour and at such place as the Board of Directors shall from time to time determine; once the Board shall, by resolution, have fixed the time and place at which its regular meetings shall be held and shall have so advised its members, no further notice need be given of any subsequent regular meetings unless and until the Board shall, by resolution, change either the time or place. Special meetings of the Board may be held at any time upon call by the Chairman of the Board, the President, or by the Secretary, or by any two Directors. Notice of any such special meeting shall be duly delivered to each Directo=.not less than one day before such meeting; or, in the case of each Director not residing at the place where the meeting is to be held, such notice shall be sent by telegraph or cable not less than three (3) days before such meeting. Any meeting of the Board at which all the members shall be present, or of which notice shall be waived, either before or after such meeting, in writing or by telegraph or cable by all absentees, shall be valid for all purposes, provided a quorum is present: thereat. Notice of any adjourned meeting need not be given. _5_ 880 789 Section 4. Quorum. One-third of the total number of Directors, but not less than two (2), in office at the time of any meeting of the Board shall be present in person at such meeting in order to constitute a quorum for the transaction of business at such meeting. In the absence of a quorum the Directors present may adjourn the meeting from time to time and from place to place until a quorum is obtained. The act of a majority of the Directors present at a meeting at which a quorum is present shall constitute the act of the Board. Section 5. Vacancies. In case of any vacancy in the Board of Directors from any cause, the Board shall.. elect a successor to hold office for the unexpired portion of -the term of the Director whose place shall be vacant and until the election and qualification of a successor. Section 6. Committees. The Board of Directors may appoint committees which shall have and may exercise such powers as shall be conferred or authorized by the reqolutions appointing them; provided, however, that if any such committee is to have and exercise any of the authority or powers of the Board, it shall be composed of not less than two (2) members of the Board. Subject to such regulations as may be made by resolution of the Board of Directors, a majority of any such committee may determine its action and fix the time and place of its meetings. -6- 880789 Section 7. Action Without Meeting. The Board may act without meeting by resolution signed by all of the Directors at the time in office. ARTICLE III Officers Section 1. Number. The executive officers of the corporation shall be a Chairman of the Board, a President, one or more Vice -Presidents, a General Counsel, a Secretary, a Treasurer, a Comptroller and a General Tax Counsel. One person may hold more than one office, except that the same person shall not hold the three (3) offices of Vice -President, Secretary and Treasurer. Section 2. Election. The executive officers of the corporation shall be elected annually by the Board of Directors at the meeting of the Board to be held as soon as practicable after the regular annual meeting of the stockholders for the election of Directors. Every officer shall hold his office only during the pleasure of the Board. Section 3. Other Officers. The Board of Directors may appoint from time to time such other officers and agents as it shall deem necessary, each of whom shall hold of_ice during the pleasure of the Board and shall have such authority and perform such duties as the Board of Directors from time to time rt,/ determine. The Board of nirectrr.s may delegate to any committee or officer the power -7- 880789 to appoint and to remove any such subordinate officer or agent. Section 4. Powers and Duties of the Chairman of the Board. The Chairman of the Board shall be a member of the Board of Directors. He shall preside at meetings of the Stockholders and the Directcrs, and shall do and perform such other things as m'y from time to time be assigned to him by the Board Secretary or the corporation, and corporation deeds, mortgages, instruments authorized by the of Directors. He may sign, with the Treasurer certificates for the stock of the may sign and execute in the name of the bonds, contracts or other Board of Directors. Section 5. Powers and Duties of the President. The President shall be a member of the Board of Directors. He shall be the chief executive officer of the corporation and, subject to the direction of the Board, shall have and ex.er_cise general supervision over the business and affairs of the corporation. He may also sign, with the Secretary or the Treasurer, certificates for the stock of the corporation, and may also sign and execute in the name of the corporation deeds, mortgages, bonds, contracts or other instruments authorized by the Board of Directors. do and perform such other duties as may from time assigned to him by the Board of Directors. In the or in the event of the disability or death of the -8- He shall to time be absence, Chairman 880789 of the Board, he shall preside at the meetings of the Stockholders and the Directors. Section 6. Powers and Duties of Vice -President. In the absence, or in the event of the disability or death of the President, the Vice -President, or if there be more than one Vice -President, the Vice -Presidents in the order of their rank as fixed by the Board of Directors, shall have and possess all the powers and discharge all the duties of the President, subject to the control of the Board of Directors. Any Vice -President may also sign, with the Secretary or Treasurer, certificates for stock of the corporation, and, when so authorized by the Board, may also sign and execute in the name of the corporation deeds, mortgages, bonds, contracts or other instruments authorized by the Board of Directors, and shall perform such other duties as from time to time may be assigned to him by the Board of Directors. Section 7. Powers and Duties of the Secretary. It shall be the duty of the Secretary to act as Secretary of all meetings of the Board of Directors and of the Stockholders of the corporation and to keep the minutes thereof in a proper book or books to be provided for that purpose; he shall see that all notices required to be given by the corporation are duly given and served; he may sign, with the Chairman of the Board, the President or any -9- 880789 Vice -President, certificates for stock of the corporation; he shall be custodian of the seal of the corporation and shall affix the seal to all certificates for stock of the corporation and to all documents the execution of which on behalf of the corporation under its seal is duly authorized in accordance with the provisions of these By -Laws; he shall have charge of the stock books and also of the other books and papers of the corporation and shall see that the reports, statements and other documents required by law arc properly kept and filed; and L;Ball in general perform all the duties incident to the office of Secretary, subject to the control of the Board of Directors. Section 8. Assistant Secretaries. The Board of Directors may appoint one or more Assistant Secretaries. Each Assistant Secretary, in the absence of the• Secretary, may exercise all the powers and perform all the duties of the Secretary, and any such exercise of power or performance of duty by an Assistant Secretary shall be conclusive proof of the absence of the Secretary. Section 9. Powers and Duties of the Treasurer. The Treasurer .shall have the care and custody of all the funds and securities of the corporation which may come into his hands and shall deposit all such funds to the credit of the corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the -10- 880789 provisions of Article IV hereof; he shall enter regularly, in books to be kept by him for that purpose, full and adequate account of all moneys received and paid by him on account of the corporation; he shall exhibit his books of account and records to any of the Directors of the corporation at any time upon request at the office of the corporation where such books and records are kept and shall render a detailed statement of his accounts and records to the Board of Directors as often as they shall require the same; he may endorse all commercial documents requiring endorsement for or on behalf of the corporation; he may sign all receipts and vouchers for payments made to the corporation; he may sign, with the Chairman of the Board, the President or any Vice -President, certificates for stock of the corporation; and he shall perform all duties incident to the office of treasurer, subject to the control of the Board of Directors. The Treasurer may be required to give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors may require. Section 10. Assistant Treasurers. The Board of Directors may appoint one or more Assistant Treasurers. Each Assistant Treasurer, in the absence of the Treasurer, may exercise all the powers and perform all the duties of the Treasurer, and any such exercise of power or performance -11- 880789 of duty by an Assistant Treasurer shall be conclusive proof of the absence of the Treasurer. Section :11. Powers and Duties of The General Counsel. The General Counsel shall have charge of all the legal affairs of the company and shall exercise supervision over its contract relations. Section 12. Powers and Duties of The Comptroller. The Comptroller shall be the principal officer in charge of the accounts of the corporation and shall perform such duties as from time to time may be assigned to him by the Board of Directors. Section :L3. Powers and Duties of The General Tax Counsel. The General Tax Counsel shall have charge of --all the tax affairs of the company. Section 14. Salaries. The salaries of the officers shall be fixed from time to time by the Board of Directors, and no officer shall be prevented from receiving a salary by reason of the fact that he is also a Director of the corporation. ARTICLE IV Contracts, Loans and Bank Accounts Section 1. Execution of Contracts. The Board of Directors, except as in these By -Laws otherwise provided, may authorize any officer or officers, agent or agents, in the name of and on behalf of the corporation, to enter into 880789 any contract or execute and deliver any instrument, or to sign checks, drafts or other orders for the payment of money or notes or other evidences of indebtedness, and such authority may be general or confined to specific instances; and, unless so authorized by the Board of Directors, no officer or agent or employee shall have power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it pecuniarily liable for any purpose or to any amount. Section 2. Loans. No loan shall be contracted on behalf of the corporation and no negotiable paper shall be issued in its name unless authorized by the vote of the Board of Directors. When authorized by the. Board of Directors so to do, any officer or agent of the corporation may effect loans and advances at any time for the . corporation from any bank, trust company, or other institution, or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other certificates or evidences of indebtedness of the corporation. Such authority may be general or confined to specific instances. Section 3. Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositaries as the Board of -13- 880799 Directors may select, or as may be selected by any officer or officers, agent or agents of the corporation to whom such power from time to time may be delegated by the Board of Directors; and for the purpose of such deposit the Chairman of the Board, the President, any VicePresident, the Secretary, the Treasurer, or any other officer or agent to whom such power may be delegated by th' Board of Directors, may endorse, assign and deliver checks, drafts and other orders for the payment of money which are payable to the order of the corporation. ARTICLE V Shares and Dividends Section 1. Certificates of Stock. Certif-icates_ for shares of the stock of the corporation shall be in such form as shall be approved by the Board of Directors. The certificates shall be numbered in the order of their issue, and shall be signed by the Chairman of the Board, the President or any VicePresident and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and the seal of the corporation shall be affixed thereto. Section 2. Transfer of Stock. Transfers of shares of the stock of the corporation shall be made only on the transfer books of the corporation by the holder thereof, or by his attorney thereunto authorized by a power of -14- 880789 .attorney duly executed and filed with the Secretary of the corporation, and on surrender of the certificate or certificates for such shares. Every certificate surrendered to the corporation shall be marked "cancelled", and the date of canrrllation shall be noted thereon. Except as otherwise provided in Section 3 below, no new certificate shall be issued in respect of any share of stock until the old certificate has been surrendered and cancelled. The Board of Directors may make such additional rules and regulations, including, but not by way of limitation, the designation of one or more transfer agents and one or more registrars, as it may deem expedient concerning the issue and transfer of_ certificates for shares of the capital stock of the: corporation. Section 3. Lost Certificates. Any person claiming a certificate of stock to be lost, stolen or destroyed shall make an affidavit or affirmation of that fact, and, if requested to do so by the Board of Directors of the corporation, shall advertise the same in such manner as the Board of Directors may require, and shall give a bond of indemnity in such sum as the Board of Directors may direct, in form satisfactory to the Board of Directors and with or without sureties, as the Board of Directors may prescribe, whereupon the Chairman of the Board, the President or a Vice -President and the Treasurer or an -15- 880789 Assistant Treasurer or the Secretary or an Assistant Secretary may cause to be issued a new certificate for the same number of shares as the one alleged to have been lost, stolen or destroyed, but always subject to the approval of the Board. Section 4. Record of Stockholders. The officer or agent having charge of the transfer books shall make, at least ten days before each election, a complete alphabetical list of the Stockholders entitled to vote, together with the residence of each and the number of shares held by each, which list shall be on file at the registered office of the corporation. Such lists shall be open at the registered... office or place of election during the holding of such •. election and subject to the inspection of any Stockholder. Such lists or transfer book shall be the only evidence as to who are the Stockholders entitled to examine such lists or to vote at any meeting of the Stockholders. No stock shall be voted at any meeting which shall have been transferred on the books of the corporation within ten days next preceding the date of such meeting. The Board of Directors may fix a date in advance, not exceeding forty (40) days preceding the date for the payment of any dividend, as a record date for the determination of the Stockholders of record entitled to receive payment of such dividend, and only the Stockholders -16- 880789 of record on the date so fixed shall be entitled to receive payment of such dividend. ARTICLE VI Offices and Books Section 1. Offices. The registered office of the corporation in the State of Delaware shall be at No. 229 South State Street in the City of Dover, Delaware, or at such other place in Delaware as the Board of Directors may determine. The Board of Directors from time to time, and at any time, may establish other offices of the corporation or branches of its business at whatever place or places the Board may determine. Section 2. Books. There shall be kept at the, registered office of the corporation in the State of.., uelaware a correct and complete original or duplicate stock ledger or transfer book containing the names and addresses of the Stockholders and the number of shares held by them, which at all times during the usual hours for business shall be open to the examination of every Stockholder. Duplicate stock ledg.:rs or transfer books may, if so determined by the Board of Directors, be kept at any other office of the corporation, but in no event shall recording on such duplicate books be required or effective to transfer shares of stock of the corporation. -17- 880789 ARTICLE VII Miscellaneous Provisions Section 1. Fiscal Year. The fiscal year of the corporation shall be the calendar year. Section 2. Notice and Waiver of Notice. Whenever any notice whatever is required to be given under the provisions of these By -Laws, said notice shall be deemed to be sufficient if given by depositing the same in a post office box in a sealed, postpaid wrapper addressed to the person entitled thereto at his post office address, as it appears on the books of the corporation, and such notice shall be deemed to have been given on the day of such mailing. A waiver of notice signed by the,person or persons - entitled to said notice, whether given before or after:the time stated therein, shall be deemed equivalent to due•. notice. Section 3. Resignations. Any Director or officer may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or, if no time be specified, at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation. -18- 880789 ARTICLE VIII The seal o1 the corporation shall be circular in form and shall bear the name of the corporation and words showing that it was incorporated in the State of Delaware. ARTICLE IX Amendments The By -Laws of this corporation may be repealed, altered or amended by the Board of Directors, at any regular or special meeting.. ARTICLE X Indemnification of Directors and Officers No person shall be liable to the corporation for any loss or damage suffered by it on account of any action taken or omitted to be taken by him as a Director or officer of the corporation in good faith, if such person (a) exercised or used the same degree of care and skill as a prudent man would have exercised or used under the circumstances in the conduct of his own affairs, or (b) took or omitted to take such action in reliance upon advice of counsel for the corporation or upon statements made or information furnished by officers or employees of the corporation which he had reasonable grounds to believe. In case any action, suit or proceeding, to which any person may be made a party on account of action taken or omitted to be taken by him as a Director or officer of the -19- 880789 corporation or of any other company which he may serve at the request of the corporation, shall result in the entry of final judgment in his favor or be dismissed as to him, the corporation shall reimburse or indemnify him for or against all costs and expenses reasonably incurred by him in connection therewith. In case any such action, suit or proceeding shall result in a settlement and if in the judgment of a disinterested majority of the Board of Directors or of any disinterested committee or group of persons to whom the question may be referred by the Board Directors, any such person was not negligent or guilty of bad faith in relation to the matters complained of therein,. the corporation shall reimburse him for or:. ihdemnify him for., or against all costs and expenses reasonably incurred by him in connection therewith, other than for any sums paid to the corporation. The provisions of this Section shall be in addition to and not in limitation of any other rights, indemnities or limitations of liability. -20- of 880789 City of Dover County of Kent March 22, 1988 ORGANIZATION ACTION IN WRITING OF INCORPORATOR OF Texaco of Colorado Inc. (Organized March 22, 1988) The following action is taken this day through this instrument by the incorporator of the above corporation: 1. The adoption of the initial By -Laws of the corporation. 2. The election of the following persons to serve as the directors of the corporation until the first annual meeting of stockholders and until theii successors are elected and qualified' or. until their earlier resignation or. removal:_ Richard R. Irvine Edward L. Heil, Jr. Jerome L. Francis /13,107,J1.-- . M. Bonovich Incorporator 880789 J STAVE Of, COLORADO DEPARTMENT OF STATE CERTIFICATE I, NATALIE MEYER, Secretary of State of the State of Colorado hereby certify that the prerequisites for the issuance of this certificate have been fulfilled in compli- ance with law and are found to conform to law. Accordingly, the undersigned, by virtue of the authority vested in me by law, hereby issues A CERTIFICATE OF AUTHORITY TO TEXACO OF COLORADO INC., A DELAWARE CORPORATION. NAME USED IN COLORADO IS TEXACO O1' COLORADO, INC. Dated: MAY 9, 1988 SECRETARY OF ST/ r 880789 SS Form Fl flti' u , Y b•dupukate tag fee: $40.00 ntis document must be typewritten .J APPLICATION FOR CERTIFICATE OF AUTHORITY Pursuant to the provisions of the Colorado Corporation Code the undersigned corporation hereby applies fora Certificate of Authority to transact business in your slate, and for that p,:rpose submits the following statement FIRST: The name of the corporation is Texaco of Colorado Inc. SECOND: The name which it elects to use in Colorado is Texaco of Colorado, ipr_ (Note I) THIRD: It is incorporated under the laws of FOURTH: The date of its incorporation is Delaware "larch 22, 1988 FIFTH: The address of its principal office in the state or country under the laws of which it is incorporated is 229 South State Street, Dover, Delaware. 19901 4601 DTC Boulevard Principal place of business in Colorado is Denver CQlor.tdo 80237 tit Y/io LAO NAT MAINTAIN A PLACE fo ItUSINI SS IN CUWIAtw. STAILNOt,L SIXTH: The address of its proposed e o 'Texaco Inc . registered office in Colorado is 4601 OTC boulevard Denver, Colorado 80237 Colorado at that address is , and the name of its proposed registered agent in SEVENTH: The names and respective addresses of its directors and officers are: NAME Richard R. Irvine OFFICE ADDRESS President & 7343 S. Ivy_ Way, Englewood, CO Director 80112 James R. Schaaf V. Pres. & Director 7952 S. Adams Wy. Littleton, CO 80122 Jerome L. Francis Secretary & 491gZ. idineral Cr. Director Littleton, CO 80122 Notes: I. If the name of the corporation does not contain the word "corporation," "company," "incorporated," or "limited" or an Abbreviation <,fnne such words. insert the name of the corporation with the word or abbreviation with the word or abhlevia- t which it elects to add thereto for use in this State. tithe corporation "elects" to use a name other than the name used to the home state, the corporation must file a Certificate of Assumed or Trade Name. form and submit an additional filing fee of 510.00. of 1* isuU. it • 880 789 EIGHTH: This application MUST BE ACCO;v1PAN:CD BY A CERTIFICATE OF GOOD S -I ANDING ISSUED BY THE JURISDICTION OF ITS INCORPORATION AND DATED WITHIN NINETY (90) DAYS OF THE FILING OF THE APPLICATION. Dated April 14 i9 88 Texaco of Colorado Inc. By Its - - - Presidcnt and .44" Its Sect -rutty and Its f Authonaod Aacnt (Note 2) (Note 3) Notes 2. Exact corporation name of corporation making this application. 3. Signature and titles of officers signing for the corporation or fat a corporation without such oRccrs, the authorized agent. 880789 MINUTES OF AN ORGANIZATIONAL MEETING OF THE BOARD OF DIRECTORS OF TEXACO OF COLORADO INC. MARCH 22, 1988 The undersigned, being all of the Directors of the above - captioned corporation, a Delaware corporation, do hereby unani- mously consent to the adoption of the following resolutions as to the action of the Board of Directors without formal meeting of such Board, pursuant to the provisions of the General Corporation Law of the State of Delaware, and the Secretary is hereby di- rected to file this unanimous consent in the Minute hook of said corporation. RESOLVED, that the following persons be and they hereby are elected to the positions shown opposite their names until their respective successors shall be duly appointed and qualified: Richard R. Irvine - President James Schaaf - Vice President Jerome L. Francis - Secretary RESOLVED, that R. C. Gross and II. C. Warnke be and they hereby are appointed separately, singly and individually Transfer Agents for the transfer of shares of the capital stock of this corporation with a transfer office at 2000 West Chester Avenue, White Plains, New York. RESOLVED, that the seal, an impression of which appears in 880789 the margin hereof, be adopted as a corporate seal of the corpora- tion. The President stated that subscription had been received for Stock of this corporation follows: at $100.00 par value per share as Petroman - 10 shares RESOLVED, that the President or Vice President and Secre- tary are authorized to issue to Petroman or as directed by it, fully paid and nonassessable stock of this corporation to the amount of its subscription. RESOLVED, that bank accounts may be opened and conducted under such names and in such banks as may from time to time be designated or approved, either by resolution of the Board of Directors or by the President or Vice President or Secretary of the company. Checks upon such bank accounts respectively shall be honored when signed by the persons designated from time to time in writing by a company officer whose signatures have been furnished to the bank in question. RESOLVED, that o'clock a.m. on the commencing in the year 1988, be and is hereby designated as the time and date for the Annual Meeting of thD - 2 - 880789 Shareholders, such meeting to be held at 4601 DTC Boulevard, Denver, Colorado. RESOLVED, that the Board shall be composed of three Di- rectors. RESOLVED, that Mr. John A. Ramsey, Division Attorney be appointed the Registered Agent of the corporation in charge of the principal office in Delaware and of the books required by law to be kept in that office, and the agent upon whom process against the corporation may be served in accordance with the laws of Delaware. RESOLVED, that the President is authorized to take all steps necessary to secure a liquor license on the premises at all Colorado Texaco ofAIncorporated locations throughout Colorado. IN WITNESS WHEREOF, this Consent is executed as of the date set forth above. �M. Jerome L. Francis / - 3 - 880789 700 East Speer Boulevard Denver, Colorado 80203 303/777-3737 Telecopier 303/777-3823 H. Alan Dill Arthur Keith Whitelaw III Robert A. Dill Lucien J. Dhooge Jon Stonbraker Charles J. Carroll Daniel W. Carr Joseph M. Elio John A. Hutchings DILL and DILL A Partnership of Attorneys July 22, 1988 Tommie Antuna County Commissioner's Office P.O. Box 758 Greeley, CO 80632 Re: Addition to 3.2% FMB liquor license application/s Dear Tommie: Please include the following with the application/applications submitted for 3.2% FMB license/licenses for Texaco of Colorado, Inc. The Individual History Records of Messrs. Irvine, Schaaf, and Francis question #26 should be amended to reflect the following: "Yes, through Texaco, Inc. which has an interest in beer licenses in the State of Oklahoma." If you have any questions, please do not hesitate to contact me. Sincerely, Lois Rentz Paralegal 886'439 39 DR b401 - I (UM) COLORADO DEPARTMENT OF REVENUE LIQUOR ENFORCEMENT DIVISION INDIVIDUAL HISTORY RECORD 1375 Sherman Street Denver, Colorado B0261 To be completed by each individual applicant, each general and over 5% limited partner of a partnership, each officer, director, and over 5% stockholder of a public corporation, and the manager of the applicant. NOTICE: This individual History Record provides basic information which is necessary for the licensing authorities' investigation. ALL questions must be answered in their entirety. EVERY answer you give will be checked for its truthfulness. A deliberate falsehood will jeopardize the application as such falsehood within itself constitutes evidence regarding the character and reputation of the applicant. 1. Name of Business: Texaco of Colorado, Inc. Date: 4-8-88 Social Security Number: 2. Your Full Nome: (last4lisVmiddie) Francis, Jerome, L. 3. Also Known As: (maiden rwnelnickname, etc.) Jerry 4. )Mailing Address: (if different from residence) 4601 DTC Blvd., Denver, CO 80237 Home Telephone: 796-0665 5. Residence Address: (street and number, city, state, zip 4919 E. Mineral Cr., Littleton, CO 80122 6. Is your residence: E] OWNED ❑ RENTED II rented, from whom? N/A 7. Date of Birth: Place of Birth: Seattle, WA 8. U.S. Citizen? ] YES 0NO If naturalized, state where: N/A When: N/A Name of U.S. District Court: N/A Naturalization Certificate No.: N/A Date of Certificate: N/A If an alien, give Alien's Registration Card No.:'Permanant N/A Residence Card No.. N/A 9. Height: 11" Weight: 182 lbs Hair Color: Brown Eye Color: Sex: Brown j Male Race: Cauc. 10. Do you have a Colorado (river's License? If 'yes.* give number:5' DYES [No 11. What is your relationship to i ne applicant? Corporate Officer and (sole owner, partner, corporate ohwur, director, Director. stockholder or manager): 12. If Stockholder, Number at Shares Owned N/A Beneficially or of Record: Percent of Outstanding Stock Owned: N/A 13. If Partner, state whether: Ill GENERAL L] LIMITED Percent of Partnership Beneficially Owned; N/A 14. Name of Present Employer: Texaco, Inc. 15. Type of Business of Employment: Oil & Gas 16. Address of Business Where Employed: (street 4601 D'rC Blvd., Denver, end number, city, state, zip) CO 80237 I Business Telephone: 1 793-4314 17. Present Position: Attorney 18. Marital Status: Married 19. Name of Spouse: (include maiden name if applicable) Jen H. Francis (Hough) 20. Spouse's Date of Birth: Spouse's Place of Birtn: Providence, RI 21. Spouse's residence address, if different than Same yours: (give street and number, city, state, zip) 22. Spouse's Present Employer: Civil Service Eri,loyees Insurance Company Occupation: Production Assistant 23, Address of Spouse's Present Employer: 3035 S. Parker Rd., Aurora, CD 80014 24. List the names) of ail relatives working in the liquor Industry. give their: Name of Relative: Relationship to You: Position held: Name of Employer: Location of Employer: None CONTINUED ON REVERSE SIDE 8EC789 2s. Do to you now, YES or O have you ever Sid a direct or indirect Inmost Ina State of Colorado Liquor or ever License? M yore; answer In detail. NO 28. Do you now, Colorado? ❑ YEs or M & have you ever had a direct a Indirect Interest in a liquor or bear Moaner, or been employed in a liquor or beer related business outside of the State of yes,' describe in detail. NO 27. Have you ever coon? (Do not of alcoholic ❑ YES Include beverages.) g been convicted of a alms, fined, imprisoned, placed on probation, reached a suspended sentence or f rfeited bail tor any offense in criminal or military trallk violations, Sees they resulted in suspension or revocation of your drivers license, or you were convicted of driving under the influence if In; explain in detail,. NO 28. Have you ever received a violation rode, suspension or reaction for a liquor taw violation, or been denied a liquor or bear h ams& anywnere in the U.S.? II 'yes, explain in deal. ❑YES ®NO 29. Have you ever held a gambling or gaming license or owned a Federal Gambling Stamp? M yes,' explain in detail below. ❑ YES QNO StateeFederal: Year: City: State: State/Federal: Year: City: State: 30. Military Service: (branch) U.S. Coast Guard From: 5-63 To: 4-69 Serial No.: Type of Discharge: Honorable 31. List all addresses where you have lived for the last five years. (Attach separate sheet it necessary) Street and Number City, State, Zip From: To: 4919 E. Mineral Cr. Littleton, CO 80122 11-84 Present 528 Sentinel Rd. Moorestown, NJ 80057 1-76 11-84 32. List all former employers or businesses aged in within the last five years. (Attach separate sheets if necessary.) Name of employer:- Address.: (street, number, dry, state, zip) Position Held: From: To: Texaco, Inc. 1040 Kings Highway, Cherry Hill, NJ Attorney 1976 Present 33. List the names and attach letters of reaommsn dadon from three persons who an vouch for your good character and lianas in connection with this application. Name of reference: Address: (street, number, city, state, zip) No. of Years Known: John A. Ramsey 7069 S. Magnolia Cr., Englewood, CO 80112 3 Mark W. Reinhardt 1221. S. High St., Denver, CO 80210 3 Marvin G. Twenhafel 7684 E. Jefferson Dr., Denver, CO 80237 3 OATH OF APPLICANT I declare under penaltyof perjuryin the second degree that I have read the foregoing application and all attachments thereto, and that all inforrr :.,.;an therein is tnaa, correct, an, f . ,: nplete to the best of my knowledge. Simplon,:—�� L_ .6.44...6.44..-e_il�, c+ — Tide: Corp. Officer/Director Date: 4-8-88 8789 TO WHOM IT MAY CONCERN: I have known Jerome L. Francis for three (3) years and find him4box to be a person of honest and sound character and has the background to maintain a professional approach to the liquor business. It is my opinion that he is the type of person who has the maturity and judgment to responsibly handle a liquor license. Signed, Signature Print Name: Address: Phone Number: Marvin G. ltaenhafel 7684 E. Jefferson Drive Denver, Colorado 80237 (303) 771-9636 Date: April 7, 1988 880789 TO WHOM IT MAY CONCERN: I have known Jerome L. Francis for three (3) years and find hiMPWY to be a person of honest and sound character and has the background to maintain a professional approach to the liquor business. It is my opinion that he is the type of person who has the maturity and judgment to responsibly handle a liquor license. Signed, Signature Print Name: Mark W. Reinhardt Address: 1221 South High Street Denver, Colorado 80210 Phone Number: Date: (303) 733-8036 April 6, 1988 880789 TO WHOM IT MAY CONCERN: I have known Jerome L. Francis for three (3) years and find himM@ic to be a person of honest and sound character and has the background to maintain a professional approach to the liquor business. It is my opinion that he is the type of person who has the maturity and judgment to responsibly handle a liquor license. Signed, si.g ature n-nt Name: Jo A. ey Address: 7069 S. Magnolia Circle Englewood, Colorado 80112 Phone Number: (303) 793-0947 Daie: April 6, 1988 880789 Da e4o1 • I (1/68) COLORADO DEPARTMENT OF REVENUE LIQUOR ENFORCEMENT DIVISION 1375 Sherman Street Denver, Colorado 80261 INDIVIDUAL HISTORY RECORD To be completed by each individual applicant, each general and over 5% limited partner of a partnership, each olfivar, director, and over 5% stockholder of apublic corporation, and the manager of the applicant. NOTICE: This individual History Record provides basic information which is necessary for the licensing authorities' investigation. ALL questions must be answered in their entirety. EVERY answer you give will be checked for its truthfulness. A deliberate falsehood will Jeopardize the application as such falsehood within itself constitutes evidence regarding the character and reputation of the applicant. 1. Name of Business: Texaco of Colorado, Inc. Date:Social 4—8-88 Security Number: 2. Your full Name: (Iestlfirsumiddle) Schaaf, James, Roger 3. Also Known As: (maiden name/nickname, etc.) Jim 4. )Mailing Address: (if different from readence) 4601 irc Blvd., Denver, CO 80237 Norte Telephone: 771-6410 5. Residence Address: (street and number, city, slate, zip 7952 S. Adams Way( Littleton, CO 80122 6. Is your residence: El OWNED 0 RENTED N/A if rented, from whom? 7. Date of Birth: Place of Birth: Saint Paul, MN 5. U.S. Citizen? V] YES ❑ No If naturalized, state where: N/A When: N/A Name of U.S. ()Istria Court: N/A Naturalization Certificate No.: N/A Date of Certificate: N/A If an alien, give Alien's Registration N/A Card No.: Permanant Residence Card No N/A 9. Height: 6'1" Weight: 200 lbs Hair Color: Brown Eye Color: Blue Sex: Male Race: Cauc. 10. Do you have a Colorado ❑ YES p] No Dnver's License? If give number: 1. What is your relationship to the applicant? (sole owner, partner, corporate officer, director, Corporate Officer and Director stockholder or manager): 12. II Stockholder. Number of Shares Owned Beneficially or of Record: N/A Percent of Ouwanding Stock N/A Owned: 13. II Partner, state whether: ill GENERAL ❑ LIMREO Percent of Partnership Beneficially N/A Owned: 14. Name of Present Employer: TexaCOL Inc. 15. Type of Business of Employment: Oil & Gas 16. Address of Business Where Employed: (street and number, city, state, zip) 4601 dI'C Blvd. Denver, CO 80237 Business Telephone: 793-4173 17. Present Position: Area Manager, Marketing 18. Marital Status: Married 19. Name of Spouse: (indude maiden name if applicable) Irene F. Schaaf 20. Spouse's Date of Birth: Spouse's Place of Birth: Minnea li.s, MN 21. Spouse's residence address, it different than yours: (give street and number, aty, state, Same zip) 22. Spouse's Present Employer: J N/A Occupation: Homemaker 23, Address of Spouse's Present Employer N/A 24. List the name(,) of all relatives working In the liquor Industry, give their: Name of Relative: Relationship to You: Position held: Name of Employer: Location of Employer: None CONTINUED ON REVERSE 610E 880789 25. Do you now, or have you ever Feld a direct or hdirea lnlwset in a Stave of Colorado Liquor or Beer License? If yes; answer In detait. ❑ YES ® NO 26. Do you now, Colorado? ❑ YES or If 'yes; Q have Iwo ever had a direct or Indirect Interval In a liquor or bear license, or been employed in a liquor or beer related business outside of the Stew J orecribe in detail. NO 27. Have you ever court? (Do not of alcoholic beveregere.) ❑ YES X been convicted of a aim, fired, imprisoned, placed on probation, received a suspended sentence or forfeited bail to any offense in criminal or military Induce traffic violations, unless rosy resulted in suspension or revocation of your arms sere*, a you were convicted of driving CA ,er the inM.unce If yes; explain In detail. NO 28. If Have you ever received a violation notice, auspension or revocation Iona liquor law violation, or been denied a liquor or beer license anywhere in ace U.S.? 'yea," explain In detail. Ill YES ® NO 29. Have you ever held a gambling or gaming license or owned a Federal Gambling Stamp? If 'yes," explain in detail below. [] YES ®NO Steterfederel: Year: City: State: State/Federal: Year: City: State: 30. Military Service: (branch) None From: To: Serial No.: Type of Discharge: 3t. List all addresses where you have lived for the last five years. (Attach separate sheet if necessary) Street end Number City, State, Zip From: To: 7952 S. Adams Way Littleton, CO 80122 1.988 Present 441 Eli. Road Saint Paul, MN 55117 1974 1988 32. List all former employers or businesses In within the last five years. (Attach separate ehtults if neceasarl.) Name of employer:• Address: (street, number. city, stew. zip) Position Hold: From: To: Same for past five yea s 33. List the names end attach letters of naommendaton from three persons who ten vouch for your good character end fitness In connection with this appiicaoon. 1 Name of reference: Address: (sheet, number, city, state, zip) No. of Years Known: Edward L. Heil, Jr. 6276 S. Flower Way, Littleton, CO 80123 5 Mary K. Bakko 1577 S. Helena Circle, Aurora, CO 80017 7 Gorman H. Smith 6948 S. Valentine, Englewood, CO 80112 19 OATH OF APPLICANT I declare under penalty of perjury in the second degree that t have read the foregoing application and all attachments thereto, and that all informally' therein is true, correct, and complete to the best of my knowledge. Singature: --I � i/%- ic�� ,,-.:.g--0-7'6..'":."=-- � � TitN: Corp Officer/Director Data: 4-II-8II 8 TO WHOM IT MAY CONCERN: I have known �1 0. 61n C Q, s��Cko-c for years and find (im her to be a person of honest and sound character and has the background to maintain a professional approach to the liquor business. It is my opinion that he is the type of person who has he maturity and judgment to responsibly handle a liquor license. Signed, Signature Print Name: E CA)ard t, 7-4; / V %' Address: (n776 S. i`/oPoai en ZthLv 2:441e -ion ) &do , / z 3 Phone Number: _30:3 `773- J9/b s Dale: 880768 TO WHOM IT MAY CONCERN: I have known -- S, for years and find i her to be a person of honest and sound character and has the background to maintain a professional approach to the liquor business. It is my opinion that he is the type of person who has the maturity and judgment to responsibly handle a liquor license. Signed, Signature Print Name: C3-ior11/1 Chi/1/4 Address: 6 57-111 S, (/C/ /f',2/(�j I a E/7 4 (v(i UO4 r)(d) to//a. Phone Number: .363- 7`l (" 05,2 Dale: 21 ss 880789 TO WHOM IT MAY CONCERN: I have known ("An. 0/L Q for 7 years and find him/her to be a person of honest and sound character and has the background to maintain a professional approach to the liquor business. it is my opinion that he is the type of person who has the maturity and judgment to responsibly handle a liquor license. Si,ned, `12] rt. iVI Signal re Print Name: rtcr_ -2Ayr° Address: ('C7-7 S I•-\ctr 3A. C10Ct(.— Aupc.k?P Ce,_ COO i7 Phone Number: 3 u3 3(cf{ -7-�� Gale: 880799 • COLORADO DEPARTMENT OF REVENUE LIQUOR ENFORCEMENT DIVISION INDIVIDUAL HISTORY RECORD 1375 Sherman Steel Denver, Colorado 80261 To be completed by each individual applicant, each general and over 5% limited partner of a partnership, each officer, director, and over 5% stockholder of a public corporation, and the manager of the applicant. NOTICE: This individual History Record provides basic information which is necessary for the licensing authorities' investigation. ALL questions must be answered in their entirety. EVERY answer you give will be checked for its truthfulness. A deliberate falsehood will Jeopardize the application as such falsehood within itself constitutes evidence regarding the character and reputation of the applicant. 1. Name of Business: Texaco of Colorado, Inc. Data: 4-6-88 Social Securfly Number: 2. Your Full Name: (Iasifirsvmiddle) Irvine, Richard, Roland 3. Also Known As: (nwioen namelnickname, etc.) Dick 4. )Mailing Address: (if different from residence) 4601 DTC Blvd., Denver, CO 80237 Home Teisphone: 741-5308 _ 5. Residence Address: (street and number, dry, state, zip 7343 S. Ivy Way, Englewood, CO 80112 6. Is your residence: E OWNED ❑ RENTED If rented, from whom? N/A ,. Date of Birth: Place of Birth: Manhattan, KS 8. U.S. Citizen? kJ YES NO If naturalized, state where: N/A When: N/A Name of U.S. District Court: N/A - Naturalization Certificate No.: N/A Dale of Certrftcata: N/A If an alien, give Alien's Reg,stration N/A Card No.: Permanant Residence Card No. N/A 9. Height: 6'2" Weight: ( 220 lbs Hair Color: Brown Eye Color: Brown Sax: Male Race: Cauc. 10. Da you have a Colorado Drivers License? If *yes," give number: J] YES ❑ No 11. What is your relationship to the applicant? (sole owner, partner, corporate officer, director, stockholder or manager); Corporate Officer and Director 12. If Stockholder, Number of Shares Owned Beneficially or of Record: N/A Percent of Outstanding Stock Owned: N/A 13. If Partner, state whether: Li GENERAL +] LIMffED — — Percent of Partnership Beneficially Owned: N/A 14. Name of Present Employer: Texaco, Inc. 15. Type of Business of Employment: Oil & Gas 16. Address of Business Where Employed: (street and number, city, state, zip) !Business Telephone: 4601 DTC Blvd., Denver, CO 80237 f 793-4131 17. Present Position: Area Manager, Marketing 18. Marital Status: Married 19. Name of Spouse: (indude maiden name if appi.cable) Sandra Maier Irvine 20. Spouse's Date of Birth: Spouse's Place of Bah: Cedar City, UT 21. Spouse's residence address, if different than yours (give street and number, city, state, Saute zip) 22. Spouse's Present Employer: N/A Occupation: Homemaker 23, Address of Spouses Present Employer: N/A 24. List the name(s) of all relatives working in the liquor industry, give their: Name of Relative: Relationship to You: Position held: Name of Employer: I Location of Empsuyer: None CONTINUED ON REVERSE SIDE 8807R9 .. Do you now, or hive you ever heid a direct or indirect interest In a Stan of Colorado Liquor or Baer License? If yes; answer in detail. ill YES © NO zs. Do you now, Colorado? IN YES or If kb have you ever had a direct or indirect interest in a liquor or beer license, or been employed in a llyuor or beer related buslnwa outside of the State of yea,' describe In detail. NO 27. Have you ever been convicted of a crime, fined, imprisoned, placed on probation, received a suspended sentence or forested ball for any offense in criminal or mditwy court? (Do not Include traffic vioardons, unless Ng resulted In suspension or revocation of your driver's Ycense, or you were convicted of driving under the influence of alcoholic beveryw.) If yes; explain in detail. II YES ® NO 28. If Have you ever received a violation notice, suspension or revocation for a liquor law violation, or been denied a liquor or beer license anywMne In the U.S.? 'yes; explain In detail. A YES ]NO 29. Have you ever held a gambling or gaming license or owned a Federal Gambling Stamp? If yes, explain In detail below. [] YES ] NO Sate/Federal: a Year: City: Stale: State/Federal: Year: City: State: 30. Military Services: (branch) None From: To: Serial No.: Type of Discharge: 31. List all addresses where you have lived for the last Ave years. (Attach separate sneer if necessary) Street and Number City, State, Zip From: To: Same for past five years r- 32. List at former employees or businesses en aged In within .he last five years. (Attach separate sheets if necessary.) Name of employer: Address: (street, number, dry, state, zip) Position Held: From: To: Sarre for past five y rs 33 List the names and .rttach letters of recommendation from three persons who can vouch far your good character and fitness in connection with this application. Nutria of relerence: Address: (street, number, city, state, zip) No. of Years Known: R. M. Walden 1625 S. Jellison, Lakewood, CO 80226 6 1/2 Gorman H. Smith 6948 S. Valential Englewood, CO 80112 8 Beverly J. Young 2846 S. Joslin Ct., Denver, CO 80227 15 OATH OF APPLICANT I declare under penalty of perjury in the second degree that I have read the foregoing application and all attachments f • reto, and that all rrfformat,,,.' therein is to ie, correct, and complete to the best of my knowledge. aWyr1 , 4: Ile—, r _ _ Title: Corp. Officer/Director Date: `/-- G s 88(J7S9 TO WHOM IT MAY CONCERN: I have known RICHARD R. IRVINE for 15 years and find him/her to be a person of honest and sound character and has the background to maintain a professional approach to the liquor business. It is my opinion that he is the type of person who has the maturity and judgment to responsibly handle a liquor license. Signed, Si_gnatire Print Name: Address: BEVERLY J. YOUNG 2846 S. JOSLIN CT. DENVER, COLORADO 80227 Phone Number: (303)988-1082 OR (303) 793-4081 WORK Date: 04/04/88 880789 TO WHOM IT MAY CONCERN: I have known CA mr Pt Tr 1) ha years and find him/her to be a person of honest for and sound character and has the background to maintain a professional approach to the liquor business. It is my opinion that he is the type of person who has the maturity and judgment to responsibly handle a liquor license. Signed, Signature Pri.nL Name: (;ot man 1/, Sh„//A Address: g/71. §, Cl/Plg7li GI /= h, % wog/ 4/O,, z o // 2 Phone Number: 303- / 7 / - U sa2 Date: 880789 TO WHOM IT MAY CONCERN: I have known 1C�CAOra K 1Qvi4 for years and find him/her to be a parson of honest and sound character and has the background to maintain a professional approach to the liquor business. It is my opinion that he is the type of person who has the maturity and judgment to responsibly handle a liquor license. gM. 6)4c -c O.Es) Print Name: Address: /4as S' re//Son /A&3oo3 04 670024,110 Phone Number: 793 9 2? Date: 9 -6-&P 880789 l ON THE FRONTIER OF EXPLORATION l I, iN(..I (ii\it('(t uiRE( ;'(fgt5 Itahrri d. Rcck Chairman Enwrilus, 1'he I'rudenual hisutnnre Company of America. Nwsark, N.J. 1Cillard l'. ]deities Ch'ah'nian and Chid I:zerai ice Ullieer. The'haw AI:uiheti:ae Curpural ion. Nov, ark. N\.. Fronk'I. t'try I iirocisn-:nut 14n'uu•r Chuirinna of Ihr Beard, C,11 (Otitis ion. Purrhi,v'. A 1: Mlle,] C. I lethally .h. ( i li a mu n of the 'leAaru Inc A'hl¢• I'Iain,A1. The Raul of lirwm'd I nn •star. lU irge,,. tiss lr zo is a td June', VA, Kine:v President .end ('hest Fa'cui it's• Ollirre'. 'feA.u'u Ins_ VA idly Plain,, N1 i:kis L.,Ahtann Mull=rging I':u'(net,, Aloson liyA 1'umpaen. \Ice !Hui Iorakers. I kdlas.'fe,u, .helm R. 1IcKinl(c Rrl ired ('tniirarm of (lit' Rowel wed (Hier Lxerut der 1 )tlitxr, l'rxnot her.. \Chits Thomas S. t1nrpM Chuirnnn rind ('hief I?xtri➢its ((Ile et 1'upii:d i lies Gl lilt Inr.. Ness link Ni. trusts• I'arker..lr. lens's] ensue, tiara. Aietoliin.'reAO, Lorene I,I{ogee, I'rrsidriii (Itel iced), 'rho l uin,zia iii TexasAa,lin. Nast [II,''rsa, 1$x11(1'1 A. I{unsa net. ISrnss'ii Rrul hers ILu'rinvm k Ihis.nc hwikcrs. New 'rhnmas :1. Aandersli(1' rhuirm;m :end Chief I'.urulivr Illiimt. \potlu ellItIplitel Inc.. ('hrltusll ere 1. ,Hass. VA illirun \rrig6g I'resideai unit I'hirl' haremisr fliliar. \\m_ AVrig6g .Is'. (.+mgwgs. hic.o4o. IIL I( i11\N'I' t !!ES (li' IRE ROAR!) Executive Committee VJill'rl l'. I tn(rani .h', Chaff ruum Nlllard C_ Rul(her James Ak_ Kinnear John K. JleKink 'rhntnus F. bim'phy George 1':n'kor,.h. hither! A. I{nnsa Committee of Non -Management Directors Huber' V. Roos:.('/winnow All non -employee Directors Audit Conan it tee Thonia, A. Aanrlerslirr, ('lurinuan VA'ill:u'tl t'. Buirhw' George Parker,.h- I, 'elle 1.. Neger, Itoht'I'I V Nnnsu Nominating Committee 'rho Earl I of. Gran:uxl ('hairnuut ILeberl. A. Berk George P:u'ker,.lr. Robert A'. Ream 11'illiwn AArigky James W. Kinnear r;r y(Jicio Pension Committer Frank tasss, 1'hsLirntw, F.Ivis I.. Mason Thomas A. Vanderslice Compensation Committee hlvis h. Alrrwm. Chairrrnm Rubel A. Reek Frank'I. ('my Robert \'. Ruusa Finance Committer J:un 's W. Kinnear rimy/ \Villard ('- Belcher The F:a.rl of Gillian! John K. 11cKinlry l'houcts S. M19w phc lenene I. Rogcry \Vlllitui \Vrigh'y Ill(' u,1' 'm I his Itepoei of the n•rne Texa('i Irlt'. refers vult'Iv Iu Te.Aa(n Inc., n Pelawxrs uorpora.Inn.Th1' u,( of such Iernis ris "[exam, Cnmpanc, dlA'I,,Ioll, t i'gani%ation. Nm, u,,or and its, when referring niftier to Tex:tru Ina and il, roisolidaicd wbsidi tiles or to Nuh,sidi tries and uon,uhsidiari(s either milk iulna lle us' collect eveIs, is Ball\ Ihr comaeirnre uud Is not Intendal In rlescrihe legal relal dough dins. TexInc aignifiittnt subsidiaries ire IisleJ :r, due exhibit tt,Tt'xaru hir's Form III -K Report to I he Seeurii M's and ExcIi tn. r (;e emmiseiou. '1'111' disisiou, of Tt'xarn Inc. dewrtired in this Repoli are not corporate em it its.'I'he 'le Aare I'.S. A. disi,inn cnrompass(s lhr douse it assns al 'le vare Inc. untl certain of ii., domestic '1111'111kt! ,urh ns 'I'exaro Producing Inr.. Gel( Cumpimv, Tes;uv Relining and Marketing Inc., and 'frxaen'llMI] ng anti Transport It inn lnr. The'fevtru Rmp( II eft 'R•rua Latin ,Anu's'es V4i.,t Rill( a rllvHon, rnrumpus, Mr suhsidi:u'ie, ofit'.eaco (O1' ,ea, Holdings het . apes] tug Hi their Is' ,pertly aleaa.'I'lie 'rexacu Middle Fast i Far Bast division cnrangtusse, the subaidinri '5 of'll•salt (ltrrsr:u Milling', Inr. III Indonesia, Still! IArahi�i, taxi r:d iu, and the Ptopltis Itepuhlic of ('.hinaruin telly Oil Cnmpam nperiting in the 11u'I it ionctl SeWaI Zell('. ('ores: ('allege geology marl working Fir'Teearn nn it summer internship plants n'rording dry ices used daring siisniie Ies's In help estimate I he potential of pwsihlc drilling sitt's, I i its world),Nide esplorat inn prngranl, 'rrxaro is Iirllowing a atraiegc rah ennernUrti.lug on hid -potentiul prnspn9 s. l'EXAC11 INC. 1987 ANNUAL REPORT 1 t00 Westchester Avenue, White Plains, ) Y.10650 CONTENTS HIGHLIGHTS Highlights 1 Letter to Stockholders FINANCIAL Millions of dollars 2 Revenues Special Section: The Search for Solutions 4 Texaco H.S.A. 7 Texaco Europe 8 Texaco Latin America/ 10 West. Africa 'lex:rco Canada 11 Texaco Middle East/ 12 Fan East • Caltex Tex; cu Chemical 13 'I'echnology•Other 13 Operations Index 15 Financial Review of IIIS! 16 Five Year Financial 17 Nut mmary Financial Statements 22 Ilesrription of Significant. 25 Ace( outing Policies Not to Conmilidated 26 Financial Statements Auditors Report. 37 Audit Committee Duties 37 Supplemental Oil and 38 Gas Inhumation SUP isticalNummar) 44 Batted Quarterly Financial I Lrta 48 Investor Infornmtion 48 Inside h:u:k cover: Ilt5,it's of Texaco Net income (loss) Cash dividends paid to common stockholders 1987* 1986 535,315 $32,591 $ (4,407) $ 725 $ 181 $ 722 Common stockholders' equity (end of year) $ 9,171 $13,739 Total assets (end of yeas) $ 33,962 $34,940 Capit d and exploratory expenditures: Texaco Inc and subsidiary companies Equity in nonsubsidiary companies Total $ 2,234 $ 2.369 Per share of camrnon stock (dollars): Net income (loss) (primary) S (18.15) $ 3.01 Cash dividends paid S .75 $ 3.00 Stockholders' equity (end of year) S 37.76 $ 56.71 $ 1,990 $ 2.197 244 172 OPERATIONAL -including interests in nonsubsidiary companies Thousands of barrels a day 1987 1986 Gross production of crude oil and natural gas liquids: United States Other Western Hemisphere Eastern Hemisphere, including Europe Total worldwide 603 660 181 232 418 408 1,202 1.300 Refinery input: United States Other Western Hemisphere Eastern Hemisphere, including Europe lbtal worldwide 836 920 166 152 890 862 1,892 1 934 Petroleum product. sales: Tinged States Other Western Hemisphere Eastern Hemisphere, including Europe Total worldwide 1,159 1 227 406 395 1,169 1 118 2,734 2 740 Millions of cubic feet a day Natural gas sales: I nited States Outside United States Total wurldw ide 2,392 2,363 375 342 2,767 2,705 'Reference is made to Note 1, "Chapter 11 —Plan of Reorganization;' and Note 2, "Restructuring and Associated Charges?' 2 TO THE STOCKHOLDERS James W. Kinnear, President and Chief Executive Officsr,Texaco Inc. 1987 way a difficult ,year for Texaco. The decisions to lilt for Chapter II and ultimately to settle the Pennzoil lit ignitor' I'ur S3 billion though necessary to protect the assets of our share- holders were not easy tor any of us.hut 1987was also ayear in which the groundwork was laid for a st r(ffiger competiti \It future I'ur'I'e.xaco with resulting bcnolil s for its shareholders. As you receive this Annual Report weant concluding the shareholder vote on a reorgartiza lion phut I.hatwould put the Pennzoil litigation behind us and let us emerge from Chapter 11. Once that reorganization plan is approved, we 6tt end to move quickly to implement an aggres- sive restructuring the lirst steps ul' which have been announced - and to build on the substwn ial progress we have already achieved in making the Compam's opera- tions more efficient and productive. Texaco is now ready to Muni to its role as a. fully competitive challenger in this industry —arid to attain our goals of maximiz- ing value and rv,turns for all our shareholders. Putting Litigation Behind Us As you kit tw, in t ha closing days of 1987 we agreed to settle the. Pennzoil litigation for $3 billion. Resolving the casein this manner was indeed adifficult, decision It was part iurlany difficult given the I'arlthat tlorpdginent was the product. of numerous and seri- ous er'r'ors committed by the courts which remain uncorrected.l3ul under the circumstances, this settlement was fine most realisl,ic way to protect shareholders from I he considerable risks of continu- ing the rse. Furthermore, I.he settlement set the sta ge for us to lift. the rest rictinn,s of Chapter I I. All of you have tad an uppnrt un it y I u review the Disclosure Statement. furTexaco's Chapter II reorgani zal.ion plan- -a plan designed to provide 'Fevre() the upper( unit ,y In return to cnngte.til ivc leadership. We expect the plan to receive final approval in the next few weeks fleeing Texaco in carry out fully its restructuring plans. An Aggressive Program Significant act ivit.ies have already been undertaken to implement whal, will he a. far-reaching and aggressive restruet tiring. We have already harken steps to: Sell al Itvtst $3 billion in assets, especially underper traorig properties both upstream and dnwnslrcmt. Engage in relining ja i nl, ventures with oil -producing countries to generate cash and increase prolitabilit,y. Texaco is currently considering a wide range of options fur the next. round of restructuring steps, including financial resl.rued.uring. A major goal of our programs is to concenl.rate for'war'd invest ntant un uu r most promising ex plur anion and production opportuni lies, including reserve pur'chases, enhanced ail recovery, and related activities. As such, we will be rearranging and downsizing some marketing and relining activities and divesting prnptrt ies we feel can be more prod uct ively operat eel by other parties, but which till t l it t le prospect, of eonr.ri but i ng to Texaco's cumpet tt ivc renewal. Bn, of course, our most import tart goal is to maximize value and total ret'ur'n forall Texaco shareholders. Willi our restructur ng, we will fully exploit. opportu- nities to improve earnings and cash now reduce nperat ing costs. and redeploy assets to improve book and cash return - resulting in more competitive returns and payouts furtill 'I'exaco abase holder;. A Year of Progress Our for progress will hail:h o❑ the importtun advances alr'eatly achieved in our opera I ions and financial strut'.tlute progress masked by the Pennzoil settlement, and of fat special t hargcs: Texaco's operal,ing earnings, exclusive of special charges, improved steadily through 19S'7. Texaco recently announced Ihal it had replaced fully 71L„ ulits reserves in 1987, a 52A, improvement over 'lie preyisms year's efforts. (Mr replacentint cost's for oil and natural gas worldwide, excluding purchases and stales. at .5410 a barrel 8151 in he Minted Stales art fully compel itivrt. And last year'I'exar.uagair posted one nl' Lhe best, records of pr'oductivity of the rotor try, with some 570(1,000 in revenue ;ter employee. This progress roller l,s a deter mined effortby'I'exaco manage merit , to increase the efficiency and product ivily of exisl,ing a s_sel.s even in advance. of our rest ruel,tu'in};. The imp Hold in reserve atldil.ions a.t,d explorai.ion cost perfitrm; nce. indiea.tcs I,ha.l. the major ex ploration c'a'mpaign begun in IJu' early tight -its is beginning h t pay utl for inn (ruin pan.y..To improve per hl this area further, Texaco has Permed a Frontier Exploration Depart meet to focus nm' interne t iomtl search for major new oil and gas reserves. Its programs 3 are d Isrussrd bs t h is Rolcorl. Mcanwh ile, we am continuing nsu umgeLrd lensing std cxplo rat inn prngra.m ;rimed ;it develop 'rim', I Ile heat prospecls. espeniully hs rho (lull of Mcxiro in the I u i led ,`;I nLos and 111I' Knrt,I l Sea Ire es of I?wupr, whom me err extending, Lhr Minis of pravrn holds I h rou);h dovrdnpnu•nl. nrillinn new disecmvcit s -and Ile ucqulsil tun of promising nevv nrn•;11:c. D1111 II lPm.11l, W('. II;IVP. virtu ;slh rungdeted I.hc upl;r;rdin'of nllr nil' r Ing system, ext.rrrl ing 'nom valor from i'vor'y beard of oilwofoal nosnrrfuu;ries.And lvo runs' nue to bu l ld en thcm. surrrss mil our logic vnhune and plrelilnblo,VipeGn� °000 'otail g;ssnlino artwork hrl'e. in Ihr. I 'mLrd Statrx, in C;uuula, I?in'opr unrl Latu' Alnerlca,;unl through (nu 611 nwncrahip in C;dtrs Lhr m;tjor tllltrkr',ter in the 'lento li;lsiu- 1'luonghuul'hr. Cangoany, we are • rest r qei ng I he catty we. clo buss errs. I;rIII y 111111. is br]n)!;tested ass pudlt crntcrn.nd support {WI i 1d I(s;coo r1r, s. engrelIcc be snnsprliiivr wish rununrreial alernalives- We;uealso Inuking belles use ei eour INIR. IIII IuI't a.111. asst `I _ 'Fe ‘;Ile', pruplr.'loll to 1111110111 st altos nf'll'xarsis oprrnl.ing and stall units have olinunnled nr rnnsol idt died lulus tee increll se the r'thrioacy of all work of ccri. I.Inc, of .ad.horil y am bring sireann humid_;usrl drrisinn-makinp rospomibilil.y is being numr.d closer hs he level of ingclemenl.e t ion. Wr hovo also hu roasod our mliance use cungocrmsmil melsnds linking reward to I,rr far nruxr. 1987 Results 'I'exac eis consul idal.ed worldwide results for',he year ended I )eeem- her 31, 1987 reflected a net loss of 44,407 million, or .818.15 per com- mon share, compared with net. income of ¶725 million, or 83.01 per commit' shale, for the year 1986.ltervnnucs fur the year 1987 anotinlexl n435.3billion, corn pared with ,532.6 billion 1'0' 1986. These results collected the steps we are taking to clear away pastproblems and to position the Company to move forward. The 1987 results included a fourth quarter Ile'. charge of $2,796 nod lion, or $11.51 per common share, ti I rlbnl.ahle to the settlement that will put Pennzoil behind us. A'hurt Isquarter net charge of 42,125 million reflected a write. (lawn of ;1ssrLs lakcn in wd,ieipa- tion of our planned restructuring. This charge idso r'eflected increased linmu.ial reserves set aside for claims of the Deparl- mmd. n1' Energy, which "I'cxaco subsequently settled in early 1988. That D01'] sal t.lemcnt dis poses of major coot i ngc.nl. I iabi i- tics lunni icg back to 19713, and trees energies for our e11'orts to stxengt hen Texaco. A first gmu'Lor dividend of 75 con's per sloe was paid Iu stock- holders in 1987. I Icwcver, as a n sell ol'the Chapter 11 tiling on April 12, 1987, Texaco was barred by Federal law from paying divi fends during the bankruptcy proceedings. Completion of the reorgn.nizal ion pr'ocess and env'rgunce from Chapter I removes t limit restraint. Goals for 1988 OM WAS fee 1988, very simply, are Iu per form for our share Alfred C. DeCrane, Jr., Chairman of the Board, Texaco Inc. holders and I hereby unh;mee their shuns' values. With the approval of the reor- ganization plan, we will acceler- ate our restructuring activities and build on 'he operational successes already achieved to emerge as a stronger and more profitable company. Wr f i roily believe vc. that Texaco is poised to put the dull ult.ies of the last tom' years behind us and accomplish these, goals. We appreciate the continuing support Texaco shareholders have shown us troughout a difficult, period IN' the Company. In closing, we reaffirm our commit. - mama to realizing Texaco's full potential o❑ your hchall and to producing a stronger return on the investment of all of Texacds siuu'nholders in the months to 1 come. Former Senior Vice President. of Texaco Inc. Hebert H.. McCall, who was also Executive Vice. President/Exploration and Pro- ducing of the Texaco L.S.A. divi sion, elected narl,y retirement after 35 years o1' service. His long and loyal dedication to the Company is greatly appreciated. For the Board o1' Directors, James W. Kinnear Presubrrtl. a.od Citu/7s:aeaelicxr Ollther Alfred C. DeCrane, Jr. (hairrcw'rc of the Board March I I, 1988 4 THE SEARCH FOR SOLUTIONS llama' They're earl lrcasure maps, brut the currgr/Her j>rn- graut that mates (hem is son relJarag of a high -ball treasure ha fael. Ow ?Ciao) tease Mapping SY/.slr"nr tfs (hay. [',cabal' is Xu'h Ilauripiard, SUItrbr Projects Geophysx- eial provides n pin/ii able caw pet l- lier• r d(K' by quickly prudru'lug nuq,a as' 'of to ranluale Uur ihouanurrs of tracts (Piaui Ilea Wailer) leases jar eepl)rrdama and juvduulzrur. Puri A rlhur: A neir program called Muraa{ldclurirul fur Prod act lot g lard up lu ets rawer, say Larry Pia kabob, Opera, mos Superri- nvr, b'onaieut Gene Ilabey oral Arl Sac eons, and SSgaer;7 sal' nob /hum's, hfl to right. The ernrrr yips al hoc l) /'per ale maser rlJri'k rellrp lh+'y ,sus. °dried avow 800000 barrels to lolul lulu and base s'lot'h probe inn ul the Purl Albat 'dowry to !,087 7 ato,or(r Inginc /r Part/ Arlbunand flu hose ail nrdra'!lamp isrur ubbYrdrollar2ur iu rrllirpq the it, rrevv'd pnn!/u'liuu. Thr/ixrr:vnr'c s(pl (h al lhr' nu ow se sig sal s ''o I,rn' spirit of 4,08 (Molt ymunag PrJitwig ( pi ogees Austin: llr Georyr .Sjrr'rnreca, Rasa°trla billow al /bran Chem un/t llesearrh Laboratory IoLs mas- tered OW v{y5Yer(es' of pet iso /euaraaly for 37 Hears, and Lary&iu d (Err 80((8 Ixi)euls l/ai h' /'(ears the recoil .sale g17ri.s lwi+(ld(Pi Si nt pl illy (he rnnrrnfuelbre palyob usrdlbr /bait cos/lemma, as his aunt byport nrd rnrib'tbill iknr In pt. rg(ituba elu TIteI v rt u h for s1 u s butt'. iyr lonthebniloar iu'- 'I'hrsr puuple in m tin \va\ a ttoss-,u'tionnl'IIl mru.wd evunu'n(If Ihenose'lk"uOr bH•IIrvethatIlie Gmpturv's polrntisl furarhlovenuerd is IimiI Iess.'I'hey have both I hr ity;tot twice and experti,er. In pursue trout nppnrtunitIt'd hint. spring hunt fresh u//ISIS, anteans war met' t uvrr. ']'heir nittiluuls, of eourse, cars. A vetenm Irsearrhrr prides hunsrll on ]mining kcvs to SI Rill Illr secrets ].hat others iusisl can I. in. iulurkcd. I lis suareh produrrd duzcns of innuvptl,ivr anti ptcditahle patenls Iha1ha'm expuuded 1,hc cnnttneictal patroltal oh palroehom iea] s. lieliurrs ter lint(',tun al Pt'xaetis fort At reliaer€ in'fc'as take advanlagr of new irelutiques taught Ina Company sponsored produrt.ivity- progrant tttboost produettun of Iutal bast' stork Iuhrte.anls lat... attooyimale]y 800.000 barrel it gc,u In the Midslest.,a Innrkrtilig manager hirst identities and (Mt rllmivates problem arras what hrca.11s "tatAet, Of inlpntve Iaent'—it' were asprrl ul retail mullet op,•ra- tions.Tint rrsti]l.: sate; and 'quirtsinset' vet' s7,tl.inns I hrwtghmutfits lure tier, month tilt et' mall It. Ina Texas roaearr fi laboratory, a let lint cal support train examines etthaiced (Al rye() tt'rfiu iqurs 1 / / tap hu4r 11`S(`1vrs of Indrurorhnns in Sumatin.'flit, program developed by t.ltis tciuu unposed prolaabdilv and rih,mersl'I'esacok ii( ltnminglcrrl st,utdh tug with Indnnrstlr. 'I'hrsrsuerrsses,and ntauy others. under score a I hems 1.lrata horn trpeatrdly sounded ill 'I'exar'ismanugenr.'nt flit,Cnirpam's must important assetis its people. l4,(Hsorc Whit liney rived current i r¢lor- rrurlitm about Rrru'u—au:1uihrr it ill' abort the Can tparu/'S 'driulurin / pro acorn or MVP the sl atUUS of a remote 'radial HO'- Will Street: 4, curdy aryl - trysts any portfolio manage, s null Oil rurstor IG/Calurris Inrector F6.Caheih Smith. Inie.,tors rely of her fir leas(, detailed irl,rbrmalion in order lo etrapaate pl!r(uo (Ii an imust men! opportunity ihf ;a; The ?Ulsn regioa'S retail rud- ourk implied a dra- ranlrC Yocum.] increase last year, thanks largely to OP 2nfpenilNa.Y .surorry crgfted 6t/ Dennis Vil++ka, Coortlirr111ar uf 'forte? lug Ser rricus- It allows mar- krliny persaontet /o readily pinpoint "targets" in rturd of alladurn-fame prdce adjust meals. to extended hnnrs, fa thirst amine Midland/floraslurr..1 new Oil Production Auturn alioa System vuiGt. rnViacom pot- rms maraitorirty pro during mills wade an impressive debut in some [Nisi 'Prins fields in A987 increasing prodac- firm lry 4%; reducing pnnap ertergpp corn manikin?. by /V : WWI cuatliruJ pncutpr routfailures by 'The System is a joiii[ dorlopnuertl lathier/ the Midland Opera lions Un isirm5 nut field opmnliorr.s leant—aboir. left to ndlal: Charley Gildert ull, Mike Kelm, lubb Wruphl, 'Pion. Pickerel, and Scutt Sollars —and .fha.r merraher.s of the information 7141, nal- oily I reparl cord in llnslr, -l9/, bit to right: Joh r< Leonard Johan Macrgana6'i. Leland Chunal , and Paster 'lbluum. Bellaire: The task: coating even more 011 from author re.serzoirs in the jungles afParaalra by applying labora- tory evaluations and curraputer modeling Ilinuald Robinson. llesereoir Engineer in dm Exploration and Producing 71st- nnlog;g Dianisiura, teamed up until E/'77) colleagues Will Ledmcr and Marc Furduene, left la Tight, to dewlap an en heti ed oil revou+ry process to do just that fir Irulun,suac legendary Mires field. Braean: Onirsl(dri req ra maarafnctnrerup process in the far initiation of MOM - grade o mine oils alas the challenge10r Beacon & swarcll Coder -s Magda R(gruseue.sleh Jar right, and Lee .4urt Bragger (crtcl Ronald Jones The profitable resit t of the r e(f(rt.s reran flee derwloprunod o f a f cr able process- ing method fir use ira 7DrmoJima flus hrrrldwide. Brussels: Gurepeli- lion is strung throughout Europe ,for the profd(tble anlmrtotirr: and industrial lubricant bu si-uss. Byfocus- irup their e/flats on Puerto we With a 12% gain in sales, Eons forty/ikd its lop spot among gasoline retailers ira Puerto Pe 0, ?Is blimps! and most pro/globe neat✓d ira operang new aam� ket.s and tarpaulin?? (a[i.eling rats, 7laaco Europe's lubricant marketing team helped tree all- tirrae high nuarlu-tiug pron. tabled y fir the division in 19,47 Lell to right: Thane ti/ill- Illrs are Carole Bergin, T'hh'rry Michel, Allen Futures, 5lllnth ne lfariie l$th', Rudy Del ruol and Thomas Bien. Harrison: Itiler national hzalion Sales gained access to profitable last European 111(11 / lb rough the (earn efforts of right to (e_lll, Marmyers Dung Mclean, Mike_ liya✓i, laud led Campbell in rrago- tialivyg (hymnal i Or agreerrmrds with a key /bi:ropeun airii tie the Caribbean Tat - 4arnot aliar market( ry ?entrains a ins dekhrped by 14o. mutters Cur!a v 1,Wars LuisAro14o Quires, Jana Aram°r, rand Heurr Fovea le/l to right, nxwrr a maijarlietar. 7 TEXACO U.S.A. Higher crude oil prices strengthened the profitability of Texaco U.S.Ah exploration and producing operations during 1987. The improved upstream results more than offset weaker downstream margins brought on by lagging product prices, reflecting sluggish growth in demand. Texaco U.S.A's underlying 1987 strategy was to examine the perfor- mance of each asset in every phase of its activities. As a result, the division activated plans to increase the performance of specific assets where necessary, or to divest those having little potential for profitability as part of Texaco's system. The division directed its capital and explor- atory expenditures to those areas offering the highest profitability potential. Ongoing programs to improve customer relations and employee effectiveness and to carefully control expenses were also sharpened. Upstream, the aggressive exploration program on which Texaco embarked in the early 1980s is paying off. Texaco's oil and gas finding efficiency has steadily improved. The unit finding and development cost —an acceptable yardstick to measure exploration performance — showed a dramatic improvement from $9.70 per barrel of oil equivalent. in 1986 to $4.51 in 1987. The 1987 performance was better than the average for major competitors during the past few years. In the Gulf of Mexico and certain onshore areas holding the highest potential for oil and gas discoveries, Texaco's leasing and exploration program further solidified the Company's reputation as a major player. Pmduction strategies included focusing on the best development opportunities both onshore and offshore, improving productivity through the application of new technology and production techniques, and con- solidating operations. Texaco sold more than 400 selected producing properties that were of no long-range strategic value. Downstream, Texaco continued selective investments in its domestic refining system to cut manufacturing costs and to increase the yield of Joint Ventures Open Opportunities Joint -venture agreements with other companies continued to provide funding for additional U.S. exploration. Following a successful program in 1986, in which Texaco and Japan's Nippon Oil Company made a number of interesting onshore discoveries, the two companies have entered into a second venture covering selected acreage holdings in the Gulf of Mexico. Texaco has also signed an agreement with Petrobras America Inc. for a similar program in the Gulf. The new agreements specify that the joint -venture partners will provide most of the funds needed for the drilling and other costs associated with exploring and developing some 155,000 net acres in the Gulf of Mexico. By year-end, seven wells had been drilled, resulting in three discoveries. The Company also entered into a partnership agreement with PEKO Oil USA to drill mare than 65 wildcat wells in the prolific Arkoma Basin area of Arkansas and Oklahoma. Potential joint -venture partners recognize that Texaco is a company rich in promising acreage and in the people needed to direct exploration programs. higher valued products, such as gasoline and aviation and diesel fuels. In marketing, Texaco U.S.A. further expanded its highly successful and profitable System 2000 retail outlet network by reinvesting proceeds from the sale of underperforming assets. The division implemented new programs in the retail, wholesale, and lubricant lines of business —each intended to maximize revenue and profitability. Texaco also consolidated and restructured its marketing field operations to reduce expenses. In 1987, the profitable marketing operations were more than offset by losses in the manufacturing area due to increased crude costs. In the long-term, however, the strategies initiated by Texaco will enable its downstream operations to compete with better results under mom advantageous market conditions. EXPLORATION/PRODUCTION Deepwater tracts in Federal waters offshore Louisiana hold the greatest, potential for oil discoveries in the Gulf, where Texaco is continuing its aggressive exploration and development program, particularly in the Green Canyon area. In Green Canyon's Block 184 field, 100 miles off the coast of Louisiana, Texaco will participate in a technological milestone. Engineers arc preparing to install a first in the Gulf —a specially designed floating platform secured to the sea floor —to allow production in nearly 1,800 feet of water. Production from this field —discovered in 1981 —is expected to begin late in 1989, and to mach 33,000 barrels of oil and 50 million cubic feet of natural gas a day by 1990. Texaco has a one-third interest in this venture. New discoveries in this field are only now beginning to be added to the Company's reserves. Also in this area, Texaco awarded a contract late in 1987 to construct a 16 -well drilling and production platform in its 50% -owned Block 6. This platform is expected to produce 36 million cubic feet of natural gas and 1,400 barrels of condensate a day by 1990. Following these successes, a new deepwater discovery well on nearby Green Canyon Block 141, half -owned by Texaco, tested at daily rates of 1,152 barrels of oil and 342,000 cubic feet of natural gas. Other significant discoveries in the Gulf of Mexico included the Viosca Knoll Block 825, a joint venture with Nippon Central U.S. Oil Company Ltd., and the wholly owned Mississippi Canyon Block 285 (see photo, above). The Viosca Knoll well tested at a daily rate of 1,846 barrels of crude oil. The Mississippi Canyon well tested through two intervals at a combined flow rate of 1,156 barrels of crude oil and 751,000 cubic feet of natural gas a day. 8 During 1987, Texaco also improved its strong lease acreage position in the Gulf —where it is the leading leaseholder —with the acquisition of 72 new leases totalling about 385,000 net acres. At year-end, the com- pany held varying interests in 315 undeveloped offshore leases totalling well over one million net acres. Offshore California is another active and promising area for Texaco. Here, the first barrels of oil will begin flowing by mid -1988 through a 28 -mile pipe line from Texaco's 35% -owned Platform Harvest in the Point Arguello field. Drilling from the platform continued in 1987 and will be completed by early 1989. Peak production of at least 40,000 barrels a day is expected later that year. Elsewhere in California, a second 200 -megawatt, cogeneration plant in the Kern River field near Bakersfield began commercial operation early in 1988, almost three months ahead of schedule. This plant pro- vides lower cost steam to Texaco's Ken River steamflood producing operations, while also profitably generating electricity for sale. Texaco focused its onshore exploration activities in 1987 on selected areas of high discovery potential, mainly in Colorado and Wyoming. Because drilling is near existing production and pipeline facilities, discoveries can be brought ea production quickly and economically. This focus paid off when Texaco made a significant discovery late in the year in Uinta County, Wyoming. The No.1 Whiskey Spring Unit tested at a daily rate of 1,268 barrels of oil and 527,000 cubic feet of natural gas. Following that success, Texaco increased its acreage holdings by acquiring a number of new exploratory tracts near the discovery well. MANUFACTURING/ MARKETING Manufacturing As part of Texaco USA's strategy to examine every asset, and improve its performance, where possible, the division in mid -1987 acquired an exist- ing petroleum coking unit., located near its refinery in Bakersfield, California. Purchased at a fraction of the cost of a. new unit, the coker converts heavy residual fuel from the Bakersfield plant. into more valu- able lighter products and coke. The unit significantly enhances the refinery's ability to process heavy crude oil from Texaco's nearby Kern River field. New state-of-the-art electronic ins rumentation and computer -based control systems are cutting operating costs and improving efficiency at many plants. The Puget Sound refinery near Seattle, Washington, for example, is well equipped to process the readily available Alaskan crudes. New computer control systems enabled the plant to achieve a record operating level of 92,000 barrels of crude oil a day in 1987. This record throughput, in an area with strong refining margins, allowed Puget Sound to make a significant, contribution to earnings. At. Texaco's strategically located El Dorado refinery in Kansas, the addition of an isomerization unit substantially increased the plant's capability to produce higher margin, high-octane gasolines. Modernized fluid catalytic cracking units at Port Arthur, Texas, and Convent, Louisi- ana, also achieved solid gains in output of more, profitable products. To enhance continued competitiveness in this area, new alkylation facili- ties will be added at Port, Arthur, and additional gasoline -producing facilities are planned for Convent. Marketing The name of the gasoline retailing game is to bring customers into your station. Texaco's network of trend -setting and profitable System 2000 retail outlets is doing just that, attracting customers with quality prod- ucts and one -stop service, including the convenience of a food mart and ear wash. At year-end, there were some 1,200 of these outlets, about half of them developed by Texaco wholesalers, with gasoline sales averaging over 156,000 gallons a month —among the highest in the industry The System 2000 concept, with its built-in operational efficiencies and one of the best-known trade marks in the oil business —the Texaco Star -- has helped increase the Company's share in preferred markets —those with the greatest profit potential —to nearly 12%. Texaco's new advertising campaign, with its "Star of the American Road" theme, debuted in regional test markets in 1987 to promote the modern System 2000 retail outlets. After a nationwide introduction during the televised Winter Olympics in February, 1988, the commercials will continue to be aired in key markets throughout the country to enhance continued brand awareness and improve sales. Trading and Transportation By combining oil trading skills with an excellent transportation and storage system, Texaco Trading and Transportation Inc. (TTTI) responds quickly to market conditions in the purchase and sale of crude oil, as well as the transporting of crude oil and refined products. These combined operations make TTTI the second largest U.S. oil trading and transpor- tation company and an important source of profitability for Texaco. TTTI is responsible for most of the Company's purchases, trades, and resales of crude oil through individual leaseholders in the United States, as well as its extensive interstate network of crude oil and product pipe lines. TTTI had an excellent year in 1987, selling approximately 675,000 barrels and trading another 475,000 barrels of crude oil a day. During the same period, its pipeline network transported some two million barrels of oil and petroleum products a day. A $35 -million marine terminal near Santa Barbara, California, will begin operations by mid 1988 as a loading and storage facility for offshore California oil production, including crude from the Texaco -operated Plat Pm Harvest. TTTI will operate this 20%Texaco-owned terminal. TEXACO EUROPE In 1987, Texaco Europe achieved its goal of improved upstream opera- tions with an ongoing strategy based on drilling in high -potential areas and by utilizing sophisticated subsea technology to increase production. Record liquids production and increased natural gas sales significantly contributed to all-time high profitability in the upstream. Texaco Europe conducts exploration or production in 10 countries and has significant manufacturing or marketing operations in 11 coun- tries, plus specialized or limited marketing operations in seven others. Texaco Europe's downstream strategy for profit and sales improve- ment stressed the expansion of its modern, high -volume System 2000 network, and the development, of pan-European marketing programs within subsidiary companies. Joint transportation and term inalling projects, coupled with selected rationalization of low -volume outdated facilities, improved cost. efficiency. EXPLORATION/PRODUCTION Production of crude oil and natural gas liquids reached a record high level of 214,000 barrels a day in 198 i; up 13% over the 190,000 barrels a day average in 1986. Natural gas sales also increased, to an average of 132 million cubic feet a day, up 28% over 1986 levels. Proved reserve levels of both liquids and gas remained virtually unchanged, despite record -high production during the year. In United Kingdom waters of the North Sea, Texaco production through facilities on its wholly owned Tartan platform averaged a record high 73,000 barrels of oil a day during 1987, up 46% over the 1986 level of 50,000 barrels a day. About half of this production was from the Tartan field, located in Block 15/16. The remainder was produced from Highlander and Petronella, two wholly owned subsea satellite fields in Block 14/20 connected to the Tartan platform. These two fields utilize subsea technology, pioneered by Texaco, which enables the division to economically tie-in production from smaller fields with crude and gas treating facilities on the Tartan platform. The British semi -submersible drilling rig'Benvrakie" (see photo, aboze) was utilized in the drilling and testing operations on these two North Sea blocks. A significant oil discovery was made on Block 14/20 during the year, testing at a rate of 6,725 barrels a day. Appraisal drilling is planned to delin- eate this discovery, which could also be tied in with the Tartan platform. On Block 14/19, development continued during the year on Texaco's 23.5% -owned Scapa field, increasing Texaco's average production there to nearly 5,000 barrels of oil a day, substantially over 1986 levels. The Scapa field is being developed as a subsea satellite to the nearby Clay- more field, in which Texaco holds a 21.2% interest. Offshore West Germany, Deutsche Texaco A.G. (DTA), owned 99.13% by Texaco, initiated production late in 1987 from its artificial island at the Mittelplate field in shallow waters off the west coast. of Schleswig- Holstein. At year-end, production from four wells in this field, the first from the West German sector of tte North Sea, averaged 5,370 barrels of oil a day. DTA, as half owner and operator of this field, will continue development work in this heavy oil reservoir. Onshore West Germany, DTA participated in two important natural gas discoveries. Wardboehmen Z-1, half -owned by DTA and located south of Hamburg, tested at a rate of 13 million cubic feet of gas a day. Hoehnsmoor Z-1, owned 30% by DTA and located east of Bremen, tested at a rate of 24 million cubic feet of gas a day. These discoveries represent significant new sources of supply for the expanding West German natu- ral gas market. In the Danish sector of the North Sea, where Texaco holds a 15% inter est through the Danish Underground Consortium (DUE), a major expan sion of the Dan field facilities was completed in the spring of 1987, increas ing the field's oil production by some 21,000 barrels of oil a day. This expansion, plus the startup of new Tyra field facilities for additional condensate production, increased Texaco's share of Danish production t� a record high of 14,000 barrels of liquids a day, up 26% over 1986 levels. Also in the Danish North Sea area, Texaco --through DUC—partici- pated in the successful completion of the Gert-1 exploratory well, which tested at rates of 4,200 barrels of oil and 2.9 million cubic feet of natura gas a day. MANUFACTURING/MARKETING Reflecting its progressive and consistent strategy, Texaco's European market share of total product sales increased during 1987 to 9.2% of tilt market, compared with 8.5% in 1986, in the 11 countries in which the division has major operations. Its gasoline market share in these coun- tries remained strong at about 11% of the total market. The division's concentration on its prime and more profitable investment -type outlets increased average monthly throughput per outlet by 10.8% to 45,500 gallons, compared with 1986 levels of 41,000 gallons. During the year, Texaco Europe enhanced its position as an aggressive, competitive marketer by creating additional profit streams from convenience stores, tied in with System 2000 retail outlet cornier sions. The division plans to capitalize on the growing market for diesel fuel through the development of a truck stop chain on major European highways. The division's consistently profitable lubricant sales rose 4% during the year, bolstered by the introduction of a new XI Haooline IOW- 40 semi -synthetic motor oil. Modifications to improve product yields and upgrade heavy fuels to more profitable lighter products continued at the Pernis refinery in the Netherlands, the Heide refinery in West. Germany, and the Scanraff refinery in Sweden. The Grasbrook lube plant in West Germany is also being upgraded to increase production of lube base oils to meet the increasing demand for high -profit lubricants. Successful Strategy Texaco Europe achieved all -time -high production records in 1987 What's more, the division was able to maintain its proved reserve base in spite of high production through the division's strategic plan of development and delineation drilling, successful selective wildcatting, and the full utilization of sub -sea production technology pioneered by Texaco. Through this strategy, the United Kingdom waters of the North Sea have become a major production source for Texaco, yielding a high rate of return on the Company's investments in this area. 10 PEXACO LATIN AMERICA/WEST AFRICA Throughout Central and South America, the Caribbean, and West Africa, Texaco's Latin America/West, Africa division operates or has nterests in areas characterized by stable markets with attractive earn- ings opportunities. The division represents a steady source of revenue and earnings for Texaco. The division's operations, which cover about 50 countries, primarily support a three -pronged plan: • A selective acreage acquisition strasegy to provide a base for future upstream revenues. • The introduction of additional System 2000 retail outlets in high - volume marketing areas to increase downstream profitahility: • Ongoing investments in facilities Ic serve the growing and profitable market. for lubricants. EXPLORATION/ PRODUCTION Principally due to severe earthquake damage in Ecuador which disrupted production in that country during much of the year, Texaco's equity production in Latin America/West Africa averaged 99,000 barrels a day in 1987, compared with 143,000 barrels a day in 1986. By year-end, however, Texaco's share of production rose to an average of 139,000 barrels a day. In Colombia, acquisitions of new ex adoration acreage in the southern 'Janos and outer basins have doubled Texaco's gross holdings to more than 4 million acres. This is the largest acreage holding of any oil company in this high -potential producing area, and places Texaco in a strong position to carry out an expanded exploration program with future potential for enhanced profitability. Texaco's share of heavy oil production from concessions and associa, lion contracts with Ecopetrol, the Colombian national oil company, averaged 14,000 barrels a day during 1987. From its contract. area in the Ecuador's Day to Remember When the earthquake struck Ecuador's Oriente region on March 5, 198g the floods and landslides that followed totally destroyed 10 miles of the Trans -Ecuadorian Pipeline, the parallel Shushufindi-Quito liquid petroleum gas (LPG) lines, and the main access road and bridges into the Oriente basin. Crude oil production from the area was instantly sus- pended, eliminating 70% of Ecuador's foreign income. Texaco's reaction to the devastation: move quickly to reconstruct the destroyed facilities and to reestablish crude production as soon as possible. Working through the national oil company of Ecuador and with many specialized contractors, Texaco completed repairs to the crude oil pipe line in slightly over five months, ahead of all estimates. By November, production from the Oriente field operated by Texaco —some 240,000 barrels a day —was the highest since 1974 and the second highest in the area's history. A month later, the LPG line and access roads into the area were reopened. Ecuador's Oriente basin was back on -stream. Guajira region of northeastern Colombia, Texaco's share of natural gas sales rase to 95 million cubic feet a day, compared with 92 million cubic feet in 1986. Coastal manufacturing companies and electric utilities provide a ready market for much of this gas. In Ecuador's Oriente basin, where Texaco made the country's first major oil discoveries in the 1960s, the Company is operator and holds a 371/2% interest in a consortium which produced an average of 136,000 barrels of oil a day in 1987. Repairs to the heavily damaged Trans -Ecuadorian pipeline system, half -owned by Texaco, were rapidly completed and, by ,year-end, the consortium's production rose to 243,000 barrels a day. Texaco's year-end share was 91,000 barrels a day. In the Marajo basin of northern Brazil, exploratory drilling will begin early in 1988 on Texaco's wholly owned 21 -million -acre conces- sion area near the mouth of the Amazon River, a frontier area of special interest to explorationists (see photo, done). Additional drilling is scheduled into 1989 in this large high -potential area, jointly owned by the division and Texaco Canada.. In West Africa, Texaco now holds a 20% interest in a million- at:re-block offshore Angola. As the result of an attractive commercial business arrangement, the Company sold half of its initial 40% interest to two other partners in this block early in 1988. Texaco's share of production from the previously discovered Tubarao, Lombo East., and Sulele West, fields on this block averaged 4,200 barrels a day in 1987, augmenting production at the older Essungo and Cuntala fields nearby. Additional development, and appraisal drilling on this block is scheduled during 1988 to further increase production and develop new reserves. Offshore Mauritania, Texaco completed a comprehensive geologic and seismic analysis of its wholly owned 1.8 -million -acre concession area. An exploratory well is scheduled to begin drilling by mid -year on a large prospect. in this relatively unexplored region. In Nigeria, where Texaco holds a 20% interest in six offshore leases covering 606,000 acres, an oil discovery, Ekeh-I, tested at rates of nearly 2,200 barrels a day Additional exploratory drilling and seismic surveys are planned during 1988, including one exploratory well on the pnnnis- ing Outer Trend acreage. Texaco's share of production from five fields it operates on this block, including North Apoi and Fun iwa, averaged 12,000 barrels of oil a day during 1987. 11 MANUFACTURING/ MARKETING Texaco is bolstering its marketing position through investments in new System 2000 retail outlets in key marketing areas, and sophisticated lubricating oil blending plants to serve the profitable lubricants market. These investments include a portion of the proceeds from the sale of certain African assets that no longer fit the Company's strategy, and will add to the Company's profitability in these attractive areas. The expanded additive plant in Brazil will allow Texaco to enter Latin America's competitive multi -viscosity motor oil market with such products as Haoline High-Ferforn+ance Motor Oil. New plastic container plants, under construction in Brazil and Colombia, will provide state-of- the-art packaging facilities that will strengthen the Company's position in the fast-growing motor oil markets in these cuntries. During 1987, for products sold in countries where it operates, Texaco benefited from firm margins and supplied nearly 30% of the market in Central America; about 14% in the Caribbean; over 10% in West Africa; and 10% in South America. In spite of weakened overall demand, sales of lubricants and greases in 1987 increased nearly 5% over 1986 levels. Texaco's share of these reliable and profitable markets averaged 20% in Latin America and 18% in West Africa. Texaco continues to upgrade marketing facilities in economically stable areas with good returns on investments, particularly in the Caribbean where 33 System 2000 retail outlet rehabilitations were completed in Puerto Rico alone. TEXACO CANADA Texaco Canada Inc., a subsidiary 73% -owned by Texaco, is a major Canadian producer of conventional crude oil and natural gas liquids, and a marketer of substantial volumes of natural gas. It markets petroleum products throughout Canada, and has manufacturing facilities in Ontario and Nova Scotia. Texaco Canada has interests in exploration activities in Western Canada, the Beaufort Sea, off the Atlantic coast, and in three other countries. The Company's intensified exploration and development drilling pm - gram —integral to Texaco Canada's strategy to add to its reserves of liquids and natural gas —added 4 million barrels of gross proved liquids reserves and 31 billion cubic feet cf gross proved natural gas reserves during the year. An additional 16 million barrels of liquids added to gross proved reserves came from eight new enhanced oil recovery projects at established producing fields in Alberta. EXPLORATION/PRODUCTION In 1987, Texaco Canada carried out a successful exploration campaign, participating in drilling 109 exploratory wells, with 37 oil discoveries and 11 gas discoveries. The Company also participated in drilling 202 development wells, with 167 oil and 17 gas completions, to extend the perimeters of existing fields and add to reserves. The Company participated in exploratory drilling in Canada's fron- tier, where there is the potential for large reserves of hydrocarbons. Texaco Canada is involved in two exploratory wells at the Amauligak discovery site in the Beaufort Sea through its 25% interest in ATW,S Exploration Ltd. In late -1987, Texaco Canada made a commitment to Improved Business Environment The business environment in Canada is continuing to improve through the easing of certain restrictive Federal and Provin- cial Government regulations. In 198E the action of the Alberta Energy Resources Conser- vation Board to modify its prorationing system was important. This enabled Texaco Canada to increase its liquids production by as much as 21,000 barrels a day during the second half of the year, and allowed the Company to control more effectively its production for use in its own refining system. In September, 1987, the National Energy Board announced new procedures for determining exports of natural gas, which take into consideration Canadian marketing requirements and economic benefits. These new procedures provide favorable long-term marketing opportunities for the Company. purchase an interest, of 3% in the Amauligak field, adding to its previous indirect interest in this field, through AT&S, of 2.5%. This field is expected to be the area's first commercial oil production project. During the year, gross production of crude oil and natural gas liquids averaged 103,000 barrels a day, down 8% from 1986, due to pipeline limitations and prorationing in the first half of 1987, as well as a. decline in productivity from mature fields. Modifications to the market pro - rationing system in Alberta and reduced restrictions on pipeline capar ity enabled the Company to produce at or near capacity during the second half of the year, thus maintaining its position as one of Canada's leading conventional liquids producers. Sales of natural gas averaged 132 million cubic feel, a day in 1987, a 3% increase from 1986 levels. Changes in Government policies in 1987 also included provisions for the export of surplus natural gas production, which may provide additional profit opportunities for the Company. MANUFACTURING/ MARKETING Driven by the strong demands of Texaco Canada's markets, refinery input in 1987 averaged 116,000 barrels a day. This represented optimmn utilization of the Company's manufacturing facilities. 12 During the year, Texaco Canada's 95,000 -barrel -a -day Nanticoke refinery in Ontario completed major construction that will improve the valuable clean product yield volumes, including the plant's capability to produce lead-free gasoline. Texaco Canada continued to increase its share of the country's profitable retail gasoline market during the year as customers responded to an extensive advertising campaign and expansion of -the successful System 2000 retail network (see photo, page 11). Texaco Canada's sales volumes of petroleum products averaged 190,000 barrels a day in 1987, up slightly over the previous year. Sales of gasoline alone averaged 93,000 barrels a day, about the same as 1986. TEXACO MIDDLE EAST/FAR EAST Responsibility for Texaco's operating interests in Indonesia, Saudi Arabia, the Partitioned Neutral Zone between Saudi Arabia and Kuwait, Australia, and the People's Republic of China lies with the Texaco Middle East/Par East division. Texaco's exploration and producing interests in these areas support the Company's global strategy of providing a large pool of natural resources for its worldwide manufacturing, marketing, and oil trading operations. The mutually beneficial long-term relationships Texaco has estab- lished through affiliates —such as the Arabian American Oil Company (Armco) and P T. Caltex Pacific Indonesia (CPO -provide developing nations with capital, technical assistance, and employee training, while enhancing profitability and maintaining Texaco's access to significant volumes of crude oil. Through its subsidiaries and affiliates, Texaco holds interests in 11 contract areas in Indonesia, five of which are currently producing oil. Production restrictions, agreed to by OPEC, continued to limit oil pro- duction during 1987. Texaco's equity share of production in 1987 amounted to 11.3,000 barrels of oil a day in Indonesia, slightly below the 1986 level. CPI produces just under half of the nation's crude oil. In order to maintain its share of this production and provide for future increases, Texaco contin- ued its exploration and development program during the year. Texaco was also awarded a new exploration contract on the highly prospective east coast of Sulawesi late in the year. In Central Sumatra, the Company's commitment to getting maxi- mum value from its assets is illustrated by the massive Dud steamflood project, in which Texaco technology and engineers have played a key role. Steaming underground formations boosted total production from the Dud field in 1987 to a record high of 85,000 barrels of oil a day at year-end. Production from the Duri steamflood (see photo, above right) is expected to increase to more than 25C,000 barrels a day over the next decade as the project is expanded. In Saudi Arabia, Texaco provided manpower and technical assis- tance to Armco in its ongoing operation of assets on behalf of the Saudi Arab Government, and maintained access to this important source of crude oil. In the Partitioned Neutral Zone, whet Texaco holds a 50% interest in all onshore petroleum production operations under a concession agreement with Saudi Arabia, Texaco's share of production averaged over 65,000 barrels a day in 1987. Actions were taken to increase efficiency and profitability at the Mina Saud refinery, and negotiation with the Government as to the profitability of crude oil production and product manufacture continued. Development work that will triple Texaco's Australian oil production began at the Saladin discovery site near Barrow Island. Texaco holds a 25.7% interest in the project, scheduled to go on stream in 1989. The Company also has a 28.6% interest in existing production from the Barrow Island oil field and the Dongara gas field. Production from both fields remained close to 1986 levels of 19,000 barrels a day. In the People's Republic of China, a potentially important petroleum - producing province, a supplemental agreement to provide improved eco- nomic terms for the offshore Contract Area 16/08 was negotiated in 1987. The agreement covers the Huizhou-21 oil field, in which Texaco holds a 16.33% interest, where development operations have begun. Production is expected to begin in 1990. Exploratory drilling is sched- uled in 1988 on both of Texaco's one -third -owned Contract Areas in the vicinity of the Huizhou-21 discovery field. CALTEX Asia —a major portion of the Caltex marketing area --is forecast to see economic growth above world averages and enhanced regional pros- perity in coming years. This should be especially beneficial to the Caltex group of companies, which supplied about 18% of the petroleum products for its wide-ranging markets during 1987. Given the generally attractive margins, there is strong competition for market share. At a time when worldwide average demand growth was flat, Caltex market- ing areas saw a demand increase of 2.5%, the world's highest. To take full advantage of market opportunities, Caltex continued to upgrade both wholly owned and affiliate refineries during 1987 to provide greater flexibility in feedstock selection and to improve yields of lighter, more valuable products. In Japan, 50% Caltex-owned Nippon Petroleum Refining Company completed modifications on hydro-desulfurizing and catalytic cracking units at its Muroran refinery to increase production of more profitable grades of gasoline. In South Korea, the Honam Oil Refinery Company, also 50% Caltex- owned, completed construction of a major polypropylene manufacturing plant at its refinery on the country's south coast. The plant will be placed on stream early in 1988, primarily to supply the rapidly expand- ing Korean market for this widely used petrochemical product. Throughout 1987, Caltex continued to expand its network of retail outlets in the Shenzhen Special Economic Zone in the People's Republic Caltex: Symbol of Success In 1932, the discovery of oil in Bahrain, a small island in the Arabian Gulf, led to the formation —in 1936 —of Caltex, which has been called "the most successful joint venture in the his- tory of American business." This multinational oil company— owned on a 50-50 basis by its two shareholder companies —was established under an agreement that combined Chevron's producing interests in the Eastern Hemisphere with Texaco's marketing operations there. Today, the Caltex world stretches across three continents east of Suez, marketing and/or refining products in some 55 countries in South and East f Erica, Asia, and Australia. From the bustling streets of Hong Kong, Singapore, and Tokyo to the heart of Africa, Caltex is a symbol of quality and success. of China, just across the border from Hong Kong's New Territories. The Zone is considered a model for future trade areas, which could provide profitable business opportunities lbr Caltex. In Hong Kong, where an expanding population and limited space combine to produce some of the highest housing costs in the world, land is extremely valuable. Taking advantage of a unique market situation, a Caltex subsidiary has erected a multi -tower condominium project on the site of Caltex' former Tsuen Wan products terminal. The venture is a commercial success and is generating a very significant cash flow for Caltex. TEXACO CHEMICAL COMPANY Texaco Chemical Company produces chemicals in seven countries and markets them worldwide for use in thousands of industrial and con- sumer products. The company's drive to enhance profitability gained momentum in 1987 for both U.S. and foreign operations. It, supports this drive through a Quality hnprovement/Employee Involvement program aimed at building a team commitment to excellence. Record production rates, increased revenues, and increased quality control are among the results. UNITED STATES During 1987, net operating earnings in the United States rose 25% on the strength of increased operational efficiency and improved markets. U.S. operations produce both commodity chemicals and a limited range of high -potential specialties. Ethylene and ethylene derivatives are Texaco Chemical's largest com- modity products. Other major commodities include propylene, butadiene, cyclohexane, benzene, methyl tertiary butyl ether (NITRE), and a variety of solvents and chemical intermediates. Texaco Chemical's goal is to become the most, cost-efficient producer of each of its commodity products. In Texas, a $60 -million moderniza- tion project at the Port Arthur Chemical Plant increased production and reduced ethylene unit energy usage by more than 20% in 1987. At the nearby Neches Chemical Plant, engineering was completed on a project to fully integrate ethylene oxide and ethylene glycol units to reduce costs and increase output of the higher value products. In specialties, Texaco Chemical is focusing on strategic areas el strength. Amines, lube oil additives, carbonates, and urethane cab) i. are principal products. Strong demand and new uses for these perfor mance-related products resulted in rapid growth of specialty client ii a sales in 1987. OUTSIDE THE UNITED STATES Texaco has chemical plants in Great Britain, Belgium, and West Ge r many and smaller chemical facilities in Canada, Brazil, and Ecuad' it. Products are sold directly by Texaco, by a Japanese affiliate, and b� agents and distributors in many countries. Texaco Ltds chemical plant in Llanelli, Wales, was expanded to serve the growing market for Jeffamine brand specialty products. In Ghent, Belgium, Texaco Petroleum NV completed construct]) im d state-of-the-art facility for the storage and shipment of products. In West Germany, profitability was enhanced by a favorable market for aromatics and olefins, and by the continued strong performance d Deutsche Texaco A.Gs wholly owned subsidiary, Condea Chemic. Expanded research facilities, new distillation capacity, and cogeneoam ism equipment completed at Condea's Brunsbuettel Plant will further ('MitI dea's growth in specialty alcohols and high-performance aluminas TECHNOLOGY/OTHER OPERATIONS MARINE In 1987, Texaco's marine operation continued to realize cost eflicienr from its ongoing fleet rationalization and consolidation programs it h i partly offset lower charter revenues. Included were the sale of tire, ' Abry Large Crude Carriers (VLCCs) that were in lay-up and two smaller vessels, and the reactivation of the last of Texaco's VLCCs from htc service in support of Texaco's long -haul requirements. At year-end, Texaco's marine fleet consisted of 49 owned or term chartered oceangoing tankers (see photo, below), totalling nearly o million deadweight tons. The full -service ship management. subsic Texaco Marine Services Inc., manages Texaco's fleet as well as se t i third -party vessels on a contract basis. INTERNATIONAL AVIATION SALES In 1987, an all-out marketing effort, brought in a 25% increase in a ,iva ism fuel sales over 1986 levels. Texaco serves some 130 airlines and mil i I u r and general aviation customers, at nearly 500 airports worldwide. 14 INTERNATIONAL MARINE SALES With about 10% of the competitive and profitable world market, Texaco continues to be a leading supplier of bunker fuels, distillate fuels and lubricating oils to international marine fleets. Texaco can supply bunker fuels to more than 250 ports throughout the world and marine lubri- cants can be delivered at some 350 ports. TEXACO OIL TRADING AND SUPPLY COMPANY Texaco Oil Trading and Supply Company (TOTS) operates internation- ally to supply crude oil and feedstocks to Texaco's worldwide refining system, and finished products to its marketing operations. The division also serves as marketer for the international sale of crude oil. While 1987 was a year of continued volatility in world oil markets, TOTS traders increased Texaco's earnings by selling some crude produc- tion, and by purchasing replacement crudes with a higher yield to the Company's refining system. RESEARCH AND ENVIRONMENTAL AFFAIRS Texacos research activities are geared to a profit -center concept: developing new products responsive to the demands of the market- place; cost -reducing manufacturing process improvements; and tech- nology to operate oil fields more eficiendy. Product. and process development programs included: improvements in engine oil additives; conversion of residual fuels to more valuable lighter fuels; and the development of processing conditions for the manufacture of high - viscosity base oils. Exploration and production technology research programs included the development of new enhanced -oil -recovery chemicals from nonpetroleum sources and advancements in oilfield automation instrumentation. On the Frontier of Exploration An important part of Texaco's ongoing strategy involves selec- tive exploration in high -potential frontier areas. Frontier areas — which are geological basins not yet found to be productive — offer Texaco the greatest opportunity for major new additions of profitable oil and gas reserves. To enhance Texaco's competitive position in exploring these high -potential areas, the Frontier. Exploration Department was established in mid 1987 with responsibility for the identification and evaluation of frontier exploration oppor- tunities worldwide. The centralization of this effort under one department will provide both a consistent basis for evaluating and funding worldwide opportunities, as well as the most efficient use of the Company's exploration expertise and technology. In its first six months, the department acquired an explo- ration permit for 8 million acres in the Parana Basin of Paraguay, and half interests in exploration concessions cover- ing 6.6 million acres offshore eastern India, 2.9 million acres in eastern Indonesia, and 2.3 million acres in the Yemen Arab Republic. Exploratory drilling in these areas is expected to begin in 1989 and 1990. TEXACO DEVELOPMENT CORPORATION Texaco continued to expand its profitable licensing of commercial appli- cations of its proprietary technology in 1987. In addition to its successful Coal Gasification Process and its Synthesis Gas Generation Process, which are being used at plants around the world, the Company licensed process control software and an ultrasonic device to monitor the struc- tural condition of pipe lines. ALTERNATE ENERGY AND RESOURCES The Cool Water Coal Gasification plant in California, the first electric power application of Texaco's proprietary coal gasification technology, completed its third year of successful operation in 1987. Late in the year. Texaco and the U.S. Department of Energy signed a ,817 million, five-year cooperative agreement for advanced research and further development of the Texaco Coal Gasification Process. HUMAN RESOURCES During the year, some 2,800 Texaco employees at all levels took part in human resource development and training programs designed to assist employees in realizing their full potential (see photo, above). These programs included Executive Development. Seminars at various universi- ties, as well as numerous courses to enhance personal career develop- ment and advancement, skills. Major revisions were made to salary administration programs to recognize performance, and all salaried positions were re-evaluated and updated throughout. the domestic organization. Company contributions were increased to medical plans and six new investment options were added to the thrift plan. PUBLIC AFFAIRS During the year, Texaco's major public affairs ef1'orlcentered around communicating to stockholders, investors, the media, and the public on all aspects of the ongoing Pennzoil litigation. The Company continued to make its views known on other vital issues through speeches and interviews, position papers, brochures, and articles. The Company began its 48th consecutive season of sponsorship of the live Saturday matinee broadcasts of the Metropolitan Opera in 1987. Texaco also began its 12th season of "The Metropolitan Opera Presents" opera telecasts, with major funding provided through the Texaco Philanthropic Foundation Inc. FINANCIAL AND OPERATIONAL INFORMATION INDEX Financial Review of 1987 Five -Year Financial Summary Statements of Consolidated Income and Retained Earnings Consolidated Balance Sheet Statement of Changes in Consolidated Financial Position Description of Significant Accounting Policies Notes to Consolidated Financial Statements: Note I —Chapter 11 —Plan of Recrganization Note 2 —Restructuring and Associated Charges Note 3 —Sale of Receivables Note 4 —Inventories Note 5 —Investments and Advances Note 6 —Properties, Plant, and Equipment Note 7 —Notes Payable and Current Portion of Long -Term Debt Note 8 —Long -Term Debt Note 9 —Preferred Stock and Rights Note 10 —Changes in Outstanding Common Stock Note 11 —Paid -In Capital in Excess of Par Value Note 12 —Foreign Currency Translation Note 13 —Lease Commitments and Rental Expense Note 14 —Taxes Note 15 —Employee Benefit Plans Note 16 —Contingent Liabilities Note 17 —Segmented Financial Data Note 18—Caltex Group of Companies 16 Auditors' Report 17 Audit Committee Duties 22 Supplemental Oil and Gas Information: 23 Introduction Estimated Proved Reserves Capitalized Costs Costs Incurred Results of Operations Average Sales Prices and Production Costs —Per Unit Standardized Measure of Discounted Future Net Cash Flows 24 25 26 27 27 27 27 27 28 28 29 29 30 30 30 30 31 32 35 36 Statistical Summary: Production of Crude Oil and Natural Gas Liquids Net Production of Natural Gas Number of Wells Capable of Producing Oil, Gas, and Dry Wells Completed Additional Well Data Oil and Gas Acreage Refinery Input Refinery Crude Oil Capacity Petroleum Product Sales Natural Gas Sales Transportation Selected Quarterly Financial Data Investor Information FINANCIAL REVIEW OF 1987 16 lkxaeo Inc. and Subsidiary Companies Consolidated Highlights Consolidated worldwide results for the year ended December 31,1987, reflected a net loss of $4,407 million or $18.15 per common share.These results included fourth-quarter net charges of $2,796 million, or $11.51 per common share, applicable to the proposed settlement of the disputed Pennzoil judgment claim and $2,125 million, or $8.75 per common share, related to a write -down of selected assets and a provision of financial reserves in anticipation of the Company's planned restructuring. Refer- ence is made to Notes I and 2 to the Consolidated Financial Statements for additional information concerning these charges. Consolidated worldwide net income for 1986 was $725 million, or $3.01 per common share and $1,233 million, or $5.11 per common share, for the year 1985. Consolidated worldwide revenues from sales and services for the year 1987 were $34.4 billion, compared with $31.6 billion and $46.3 billion for 1986 and 1985, respectively. The Company's consolidated common stockholders' equity at December 31,1.987, was $9.2 billion, compared with $13.7 billion and $13.6 billion at year-end 1986 and 1985, respectively. Texaco Inc. and its consolidated subsidiary companies had total assets of $34.0 billion at December .31,1987, compared with $34.9 billion and $37.7 billion at December 31,1986 and 1985, respectively. On April 12,1987Texaco Inc. and two of its wholly -owned finance companies filed for protection under Chapter 11,Title 11 of the United States Code (Chapter 11). The decision by the Board of Directors of Texaco Inc. to authorize these filings was required to avoid premature enforcement of the Pennzoil judgment and to protect the value of Texaco and its subsidiaries and the interests of Texaco Inc. stockhold- ers. On December 19,1987, Texaco Inc. reached an agreement with Pennzoil with respect to the settlement of the judgment claim which resulted in the subsequent filing of a Plan of Reorganization (Plan) with the U.S. Bankruptcy Court (Court). If the Plan is confirmed by the Court at a hearing scheduled to commence on March 22,1938, and if the Plan is made effective on or before April 14,1988,Texaeo will emerge from Chapter Il as a viable business enterprise. Proposed Plan of Reorganization The Plan proposed by Texaco is described in a Disclosure Statement sent to Texaco stockholders and creditors. Confirmation procedures call for approval of the Plan by a two-thirds majority of the outstanding Texaco Inc. common shares voting on the Plan, although the Bankruptcy Court has the power to confirm or reject the Plan pursuant to the Bankruptcy Code, notwithstanding the vote of the stockholders. The basic terms of the proposed Plan are summarized as follows: • A payment of $3 billion in cash to Pennzoil on the effective date of the Plan. • Settlement of the litigation between Texaco Inc. and Pennzoil and the resolution of all shareholder derivative lawsuits arising out of the acquisition of Getty Oil Company and the Pennzoil judgment. • Reinstatement of debt obligations, by curing all monetary defaults and payment in full, plus interest, of all other undisputed claims. • Ilnliquidated, disputed claims of the Internal Revenue Service (IRS), the U.S. Department of Energy (DOE), and certain others will survive confirmation of the Plan and be resolved as if the Chapter Il cases had not commenced. Reference is made to Note 16 to the Consolidated Financial Statements for information on a tentative settlement of the IX)E dispute and further discussion concerning other disputed claims. • Retention of equity interests by Texaco Inc. stockholders. The required financing to implement the Plan, which would require cash payments of approximately $5.6 billion, is discussed in the Liquid- ity and Capital Resources section on page 20. Future Outlook The outlook for the petroleum industry in 1988 remains highly uncer- tain. An excess of crude oil supplies and a highly competitive market- place are expected to exert pressure on petroleum prices over the near term. In the years ahead, it is expected that demand for petroleum will rise modestly, non -OPEC supplies will remain Oat, and excess oil -produc- ing capacity will continue to depress the market. Beginning in 1989, crude oil prices are expected to move upward gradually over the next several years. During the pendency of the prolonged Pennzoil Iit.igat.ion,Texaco lost valuable time in making the necessary changes to its operations to keep pare with the rapidly changing oil and gas industry. The Company's operational and financial flexibility was hampered by the overhang from the enormous jury award to Pennzoil. The condition was further strained with the necessary filing of Chapter ll petitions. Anticipating the confirmation of the proposed Plan of Reorganization and taking into consideration the expected environment in the petroleum industry plans are in motion to revitalize Texaco into a more productive and competitive company. In early January, 1988, the Company announced that it will pursue major structural changes. The basic plan involves reshaping Texaco's worldwide refining and marketing activities to improve profitability, and disposing of underperforming oil and gas assets. The Company has a strong underground proved oil and gas reserve base which should provide the necessary foundation to meet its objective of enhancing stockholder value and restoring Texaco's financial strength and flexibility. Nevertheless, certain oil and gas properties that do not yield satisfactory returns will be sold, and the funds will be redeployed elsewhere in the Company's integrated worldwide operations. As part of its overall restructuring, Texaco intends to raise at least, $3 billion through the sale of assets and utilize the proceeds to reduce outstanding debt. Major asset sales are being considered, and prelimi- nary contacts have already been made with prospective purchasers.The initial step will involve the sale of partial interests in selected United States refineries and related assets to one or more joint ventures to be formed with outside parties. Under any joint venture arrangement, the future competitiveness of these refineries would be enhanced through access to resources of the other partner. Overview of Net Income Prior to Texaco's decision to file for Chapter 11 protection in connection with the Pennzoil litigation, it was becoming increasingly difficult to conduct business Restrictions and demands were being imposed by many of the Company's suppliers due to public uncertainty surrounding the Company's capacity to maintain its financial viability while pursu- ing its appeal of the Pennzoil judgment. Although the Chapter Il filing mitigated some of the more routine operational problems arising from the Pennzoil litigation,Texaco was further confronted with the burdens and constraints associated with the reorganization cass. The Company was also faced with the general industry problems coutliated on page 18 FIVEYEAR FINANCIAL SUMMARY 17 7kraeo Inc. and Subsidiary Companies Dollar amounts in millions, except where noted 1987' 1986 1985 1984" Working capital at year-end: Current assets: Cash, and cash investments and marketable securities Accounts and notes receivable Inventories Deferred income taxes and other current assets Total current assets Current liabilities: Notes payable and current portion of long-term debt Accounts payable and accrued liabilities Estimated income and other taxes Total current liabilities Working capital Current ratio Properties, plant, and equipment at year-end: At cost: Exploration and production Manufacturing, marketing, and transportation Petrochemical Other Total properties, plant, and equipment -at cost Net properties, plant, and equipment: Exploration and production Manufacturing, marketing, and transportation Petrochemical Other Total net properties, plant, and equipment Depreciation, depletion, and amortization charges Total assets at year-end: Petroleum, natural gas, and petrochemical: United States Outside United States Marine transportation Total petroleum, natural gas, and petrochemical Nonpetroleum Cash, cash investments, and other corporate assets Total assets Net income (loss) to total assets Debt obligations and redeemable preferred stock at year-end, excluding debt subject to Chapter 11 proceedings: Long-term debt Capital lease obligations Redeemable preferred stock Debt obligations and redeemable preferred stock to total borrowed and invested capital, including capital lease obligations Long-term obligations and redeemable preferred stock to long-term obligations and invested capital, including capital lease obligations Common stockholders' equity at year-end: Common stockholders' equity Common stockholders' equity per share (dollars) Common shares outstanding (thousands) Average number of common shares outstanding (thousands) Net income (loss) to common stockholders' equity Dividends paid on common stock: Total cash Cash dividends per share (dollars) Number of common stockholders at year-end $ 4,112 $ 3,000 $ 1777 $ 1,401 4,178 3,794 5,925 4,769 £: ^ II 2,887 2,826 2,792 2,495 1 209 189 440 881 $11,386 $ 9,809 $10,934 $ 9,546 $ 8 $ 1,118 $ 1,553 $ 2,693 $ 849 $ 3,309 4,255 5,865 5,039 1,690 1,933 2,233 2,186 1 $ 6,117 $ 7,741 $10,791 $ 8,074 $ $ 5,269- $ 2,068 $ 143 $ 1,472 $ 1.86` 1.27 1.01 1.18 $25,729 $25,410 $25,050 $24,572 $14 10,366 10,050 9,965 9,937 f 1,413 1,400 1,192 1,246 965 955 947 923 $38,473 $37,875 $37,154 $36,678 $2t $11,840 $13,422 $14,772 $16,180 $ 1 5,363 6,734 6,720 6,754 798 773 688 730 721 732 756 765 $18,722 $21,661 $22,936 $24,429 $1 $ 2,552 $ 2,732 $ 3,043 $ 2,823 $ $16,952 $19,177 $22,326 $21,891 10,233 9,932 10,737 10,936 317 347 405 436 27,502 29,456 33,468 33,263 2','' 789 757 836 794 5,671 4,727 3,399 3,687 $33,962 $34,940 $37,703 $37,744 $2 (13.0)% 2.1% 3.3% 0.8% $ 155t $ 6,857 $ 6,908 $10,489 $ 9r� $ 367 $ 703 $ 749 $ 726 $ $ - $ - $ -. $ 631 $ 14.5%t 39.1% 42.4% 48.80/0 5.1%t 347% 35.2% 47.1% $ 9,171 $13,739 $13,6211 $13,107 $1'1 $ 37.76 $56.71 $57.04 $55.15 $ 242,852 242,274 238,921 237,668 25 242,764 240,523 238,121 240,220 25' (48.0)% 5.3% 8.9% 1.9% $ 181 $ 722 $ 714 $ 725 $ $ .75 $ 3.00 $ 3.00 $ 3.00 $ 215,888 278,321 287,672 331,343 35 'Reference is made to Note I, "Chapter ll—Plan of Reorganization;' and Note 2, "Restructuring and Associated Charges" "Includes results of Getty Oil Company teginning March 1,1984 and the $765 million special charge, net of income taxes, to recognize permanent impairment in the value of certain assets and to establish certain reserves. tfased on Texau,k Plan of Reorganization, as discussed in Note 1, pro forma information at December 31,1987 would be as follows: working capital —$627 million; current ratio -1.07; longterm debtand capital lease obligations —$7,57 million; total debt to total borrowed and invested capital -51.8%; and long-term obligations to long-term obligations and invested capital -43.9%. ccr,di1 wd on pa; 1.'- FINANCIAL REVIEW OF 1987 (continued) 18 Thxaeo Ina and Subsidiary Companies associated with the uncertain and competitive energy environment of the 1980's. An unprecedented decline in crude oil prices had occurred early in 1986 and continued into the summer of 1980. A modest price improvement was experienced in the latter half of 1986 and extended throughout much of 1987, reflecting general compliance with crude oil production quotas among the members of the Organization of Petroleum Exporting Countries (OPEC). Although Texaco's worldwide upstream operations benefited from the improved crude oil prices during 1987, the resultant increased raw material costs adversely impacted the Company's refining margins. Despite all of these difficulties,Texaeo's 1987 operating profit, exclusive of the fourth-quarter restructuring and associated charges, improved steadily through the year. Functional Analysis— Worldwide net results for the years 1983 through 1987 are segregated in the FiveYear Financial Summary on page 19 between operating, and corporate and nonoperating. Operating results, after income taxes, are further segregated functionally and geographi- cally for the major segments. Opertti rg results for 1087 reflect the net charge of $2.1 billion relating to the Company's planned restructuring. Corporate and nonoperating results include the 1987 proposed Pennzoil settlement. of $2.8 billion, net of income taxes, as well as interest income and expense, dividends, other nonoperating income, minority interest and general corporate expenses. Texaco's net income for -1985 included a last -in, first -out (LIFO) inventory drawdown earnings benefit of $63 million. There was no comparable LIFO drawdown effect in _987 or 1986. Net results for the year 1987 included foreign currency translation gains, after applicable income taxes, of $46 million, compared with gains of $130 million and $28 million for 1986 and 1985, respectively. Year 1987 Versus 1986 Petroleum and Natural Gas: Exploration and Production —Operating earnings in the United States were $213 million in 1987compared with losses of $135 million in 1986. The improved results reflected reduced operating and exploratory expenses and higher crude oil prices, which were partially offset by lower crude oil production and decreased natural gas prices. Upstream operating income outside the United States was $627 million in 1987, compared with $441 million in 1986.This increase reflected higher crude oil prices, decreased operating and exploratory expenses and increased European production. Results for 1986 included a $57 million benefit from the recognition of a receivable from prior periods' gas production in the United Kingdom as well as from a gain arising from the clarification of arrangements with a foreign producing country. Manufacturing, Marketing, rind Supply —United States operations incurred a 868 million loss in 1987, compared with income of $128 million in 1986.This decline reflected lower operating margins as increases in petroleum product prices in 1987 did not keep pacewith the rise in crude oil and product acquisition costs. Manufacturing and marketing operating income abroad was $192 million for 1987, compared with ,$697 °Milian in 1986. This decline was the result of lower mar -gins before operating expenses, mainly in Europe, arising from higher crude oil and product acquisition costs which were only partially offset by increased product. prices. In addition, operating expenses in foreign countries adversely impacted 1987 results due to the deterioration in the value of the U.S. dollar. Marine Transportation —For the year 1987, worldwide marine opera- tions reported losses of $41 million compared with earnings of $15 million for 1986, This decline was attributable to increased fuel expenses and lower charter revenues. Petrochemical: Petrochemical earnings in the United States were $30 million in 1987, compared with $24 million in 1986. Earnings improved primarily as a result of higher sales prices, partially offset by increased feedstock costs. Early in the year; U.S. earnings were adversely impacted by the shut -down of the Company's light olefins unit. at Port Arthur,Texas, for completion of a modernization project. This project, which began in 1986, enabled the olefins unit to achieve lower manufacturing costs and higher production in the second half of the year. Outside the United States, petrochemical earnings were $44 million in 1987, compared with $32 million in 1986.This increase was mainly due to the acquisition of the remaining 50 percent share of Condea Chemie, a West German petrochemical company in December,1986. Year 1986 Versus 1985 Petroleum and Natural Gas: Exploration and Production —United States operations incurred a 8135 million loss in 1986, compared with a gain of $905 million for 1985. This substantial decline in exploration and producing earnings was princi- pally due to significantly lower prices for crude oil, natural gas liquids, and natural gas, as well as decreased natural gas sales volumes. A reduction in operating and exploratory expenses partially offset these factors. Outside the United States, upstream earnings were $441 million in 1986, compared with $681 million for 1985. This decline reflected the significant reduction in worldwide crude oil prices.The effect of lower prices was offset somewhat by decreased operating and exploratory expenses as well as reduced income taxes. In addition,1986 results benefited by $57 million from the recognition of a receivable for prior periods' gas production in the United Kingdom as well as from a gain arising from the clarification of the arrangements with a foreign pro- ducing country. Manufacturing, Marketing, and Supply —Net operating income was $128 million in the United States during 1986, compared with $35 million in 1985.This improvement reflected higher operating margins in 1986, particularly during the early part of the year when crude oil and product acquisition costs declined at faster rates than petroleum product prices. However, the benefits of lower acquisition costs, as well as reduced operating expenses, were largely offset by the dramatic decline in petroleum product revenues due to reduced prices throughout 1986. Manufacturing and marketing earnings abroad were $697 million for the year 1986, compared with $241 million for the 1985 period. Similar to United States downstream operations, the improved 1986 results reflected substantially reduced crude oil and product acquisition costs, largely offset by reduced petroleum product revenues due to the decline in prices. However, the price decline abroad was offset somewhat by the strengthening of major foreign currencies in relation to the ICS. dollar Marine 74•ansportatian—Fbr the year 1986, worldwide marine operat- ing earnings were $15 million, compared with a loss of $57 million in 1985.This comparative benefit was the result of increased charter revenues, as well as improved fleet utilization. cautioned an page 20 FIVEYEAR FINANCIAL SUMMARY (continued) 19 7kxaco Inc. and .9ubsidiery Companies Dollar amounts in millions, except where noted 1987' 1986 1985 1984'' Net income (loss): Net operating earnings (losses): Petroleum and natural gas Exploration and production Manufacturing, marketing, and supply Marine transportation Restructuring and associated charges Total petroleum and natural gas operatiunst Petrochemicalt Nonpetmleum Currency translation net gains Total net operating earnings (losses) Corporate and nonoperating: Pennzoil settlement Other corporate and nonoperating Net income (loss) Per share of common stock (dollars): Primary net income (loss) Fully diluted net income (loss) tGeographical segregation of net operating earnings (losses): Petroleum and natural gas: United States Outside United States Marine transportation Restructuring and associated charges Total petroleum and natural gas operations Petrochemical: I lnited States Outside United States Total petrochemical Revenues: Sales and services: Petroleum products, petrochemical, and crude oil sales Natural gas sales Other sales and services Total sales and services Equity in net income of nonsubsidiary companies, dividends., interest, and other income Total revenues Income and other taxes: Direct taxes: United States Outside United States Total direct taxes Taxes collected from consumers: United States Outside United States Total taxes collected from consumers Total income and other taxes $ 840 $ 306 $ 1,586 $ 1,757 $ 1,' 124 825 276 (352) (41) 15 (57) (119) (''. (2,125) - - (1,202) 1,146 1,805 1,286 74 56 5 25 17 36 26 28 46 130 28 89 (1,065) 1,368 1,864 1,428 (2,796) - - - (546) (643) (631) (1,122) ( S (4,407) $ 725 $ 1,233 $ 306 $ 1, $(18.15) $ 3.01 $ 5.11 $ 1.03 $ $ (18.15) $ 3.00 $ 4.84 $ 1.03 $ $ 145 $ (7) $ 940 $ 564 $ I 819 1,138 922 841 1, it (41) 15 (57) (119) (2,125) - - - $ (1,202) $ 1,146 $ 1,805 $ 1,286 $ 1, : $ 30 $ 24 $ (4) $ 19 $ 44 32 9 6 $ 74 $ 56 $ 5 $ 25 $ $31,674 $28,744 $42,672 $43,710 $ 37 ' 1,632 1,890 2,668 2,521 1. 1,066 979 957 1,103 34,372 31,613 46,297 47,334 40 ' 943 978 1,217 601 1 ,.. $35,315 $32,591 $47,514 $47,935 $ 41. S (406) $ 492 $ 1,579 $ 1,264 $ 1 4,194 3,716 4,509 4,477 3 3,788 4,208 6,088 5,741 4 958 876 876 954 4,184 3,390 3,053 3,045 2 5,142 4,266 3,929 3,999 3 $ 8,930 $ 8,474 $10,017 $ 9,740 $ 7 Employees: Number at year-end Payrolls and benefits Total assets per employee at year-end (thousands) Gross properties, plant, and equipment per employee at year-end (thousands) 50,164 51,978 54,481 68,088 54 S 2,242 $ 2,087 $ 2,226 $ 2,552 $ 2 $ 677 $ 672 $ 692 $ 554 $ S 767 $ 729 $ 682 $ 539 $ 'Reference is made to Note 1, "Chapter II —Plan of Reorganization?' and Note 2, "Restructuring and Associated Charges?' "Includes results of Getty Oil Company beginning March 1,1984 and the 6765 million special charge, net of income taxes, to recognize permanent impairment in the value of certain assets and to establish certain reserves. FINANCIAL REVIEW OF 1987 (continued) 20 ?exam) Inc. and Subsidiary Companies Petrochemical: Petrochemical earnings in the United States amounted to 824 million for the year 1986, as compared with a $4 million loss in 1985. This increase was primarily the result of lower feedstock costs and increased produc- tivity, partially offset by lower product prices. Outside the United States, petrochemical earnings were $32 million in 1986 compared with $9 mil- lion in 1985. This increase was mainly due to lower feedstock costs which more than offset the effect of lower product prices. Taxes Taxes paid or accrued by Texaco and :.ts subsidiary companies, both in the United States and abroad, including taxes collected from consumers for governmental agencies, aggregated $8.9 billion in 1987, $8.5 billion in 1986, and $10 billion in 1985. Total taxes include direct taxes and taxes collected from consumers. Direct taxes include current and deferred income taxes, windfall profit tax, oil and gas production taxes, sales and use taxes, property taxes, payroll taxes, import duties, and other governmental levies. Taxes collected from consumers consist principally of U.S. Federal and state excise taxes, as well as motor fuel and value added taxes abroad. The $456 million increase in total faxes from 1986 was due to increased taxes outside the United States of $1,272 million partially offset by decreased taxes in the United States of $816 million. The increase outside the United States was primarily due to increased taxes collected from consumers, $794 million, and greater taxes being paid as duties and for other governmental levies, $478 million. These increases were principally due to the deterioration in the U.S. dollar versus local currencies and increased sales and production volumes, The decrease of $816 million in the United States was due to lower U.S. Federal income taxes primarily as a result of tax benefits of $796 million applicable to the 1987 restructuring and associated charges and the Pennzoil settlement. The Financial Accounting Standards Board has issued a new pronouncement concerning the accounting for deferred income taxes. As mentioned in the Description of Significant Accounting Policies on page 25, Texaco has not yet adopted this accounting standard, which must be adopted no later than 1989. Liquidity and Capital Resources Funds provided by the Company's operations and other sources were $3.3 billion in 1987, compared with $5.0 billion in 1986.The funds in 1987 were used in part for $181 million in cash dividend payments in the first quarter and for $1.7 billion in capital expenditures. Since the Chapter 11 filing, Texaco Inc. and the two other filing companies have ceased to make principal and interest payments in respect of debt obligations in existence at the date of the filing. As a result, it is estimated that cash outflows in 1987 were reduced by approxi- mately $1.3 billion. In addition, Texaco Inc. ceased payment, of dividends on its common stock due to the legal restrictions of Chapter 11. On December 19,1987, Texaco Inc. entered into an agreement with Pennzoil Company to settle, for $3 bill on, the litigation relating to Texaco's acquisition of Getty Oil Company. This agreement became the cornerstone for the Plan of Reorganization which has been filed with the U.S. Bankruptcy Court and is discussed more completely elsewhere in this Financial Review, as well as in Note 1 to the Consolidated Financial Statements. The estimated $5.6 billion required to emerge front Chapter Il will be provided by approximately $2.4 billion of internally generated funds, and the utilization of $3.2 billion of financing arrange- ments. A $3.0 billion bridge facility is currently being negotiated. Texaco has announced that its corporate restructuring plans include the sale of operating assets and the formation of joint ventures. The Company expects to raise at least $3 billion from the sale of assets.The proceeds from these sales will be used to retire debt, It is the intention of Texaco to manage its business and financial affairs in a manner, and to take such actions, that will establish and maintain an investment grade rating on its outstanding debt securities.The Company does not currently intend to issue equity securities in connection with the retire- ment of such indebtedness. Additionally, in September,1987 Texaco Refining and Marketing Inc. (TRMI), a wholly -owned subsidiary of Texaco Inc., entered into an agree- ment with a syndicate of major banks under which TRMI has the right to sell on a continuing basis up to $700 million of accounts receivable. TRMI's ability to utilize the Facility as a source of liquidity is influenced by the general level of business, as well as the level of crude oil and petroleum product prices, and other factors. As of December 31,1987, there were no outstanding accounts receivable sales under the facility. See the Consolidated Financial Statements and the Notes thereto for further information on the Company's financial structure. 21 Capital and Exploratory Expenditures Worldwide capital and exploratory expenditures, including equity in such expenditures of nonsubsidiary companies, were $2,234 million for the year 1987 compared with $2,369 million in 1986 and $2,824 million in 1985. The decline in recent years as compared to the record high expen- diture levels from 1981 to 1984 was directly associated with the dramatic decrease in crude oil prices, as evidenced by the decline in West Texas Intermediate crude oil (an industrywide benchmark crude) from an average level exceeding $30 per barrel during the period 1981 through 1984 to a low of nearly $12 per barrel at mid-year,1986.Texaco's curtailed capital and exploratory activity reflected this price volatility which reduced the attractiveness of expensive drilling activities. During 1987,Texaco's upstream operations continued to concentrate expenditures in the most promising areas including the Gulf of Mexico, the United Kingdom and Danish sectors of the North Sea and the Alberta Province in Canada. Capital expenditures for manufacturing and marketing subsidiat operations have remained relatively steady, at approximately $500 rr lion per year during the last three years. In the petrochemical segment, expenditures declined in the Unit t States following the modernization of the light olefins unit at Port. Arthur which was completed early in 1987. In foreign areas, spendin: also declined from 1986 levels when Texaco's German subsidiary acquired the outside interest in a chemical manufacturer and marks previously 50% -owned. Pipeline expenditures were also down in 1987 following Texaco's 1986 acquisition of a pipeline operation which transports petrochen H products and feedstocks in the State of Texas. Millions of dollars 1987 1986 1985 1984 Properties, plant, and equipment expenditures: Exploration Production Manufacturing Marketing Marine Pipe lines Petrochemical Other Total Investments and advances Total capital expenditures Exploratory expenses Total Texaco Inc. and subsidiary companies Equity in nonsubsidiary companies Total $ 170 $ 104 797 923 267 237 270 290 1 2 15 85 89 121 31 18 1,640 1,780 73 56 1,713 1,836 277 361 1,990 2,197 244 172 $ 2,234 $ 2,369 $ 214 1,298 252 207 1 21 32 27 $ 699 $ 1,223 573 365 3 48 35 133 2,052 3,079 30 55 2,082 3,134 588 610 2,670 3,744 154 169 $ 2,824 $ 3,913 $ Texaco Inc. and subsidiary companies by area: United States: Exploration Production All other operations Total Other Western Hemisphere: Exploration Production All other operations Total $ 277 $ 284 555 579 416 483 $ 537 996 351 $ 1,040 779 910 1,248 1,346 1,884 2,729 82 77 130 289 295 302 335 73 117 105 109 109 84 96 146 93 Eastern Hemisphere, including Europe: Exploration Production All other operations Total Worldwide: Exploration Production All other operations Total $1,990 $ 2,197 $ 2,670 $ 3,744 $ 91 199 163 453 556 484 680 102 271 183 165 205 114 181 339 160 450 459 831 967 709 771 811 1,310 549 1,317 1,264 1,163 STATEMENTS OF CONSOLIDATED INCOME AND RETAINED EARNINGS 22 7kraco Inc and Subsidiary Companies For the years ended December 31, Millions of dollars 1981' 1986 1985 Revenues: Sales and services (includes sales to a significant nonsubsidiary company of $844 million in 1987, $656 million in 1986, and $1,326 million in 1985) Equity in net income of nonsubsidiary companies, dividends, interest, and other income Deductions: Costs and operating expenses (includes purchases from a significant nonsubsidiary company of $655 million in 1987, $566 million in 1986, and $963 million in 1985) Selling, general and administrative expenses Pennzoil settlement Restructuring and associated charges Maintenance and repairs Exploratory expenses Depreciation, depletion, and amortization Interest expense Taxes other than income taxes" Provision for income taxes Minority interest in net income $34,372 $31,613 $46,297 943 978 1,217 35,315 32,591 47,514 26,931 23,727 35,121 1,546 1,381 1,480 3,000 - 2,717 - 724 635 721 277 361 588 2,552 2,732 3,043 1,000 962 1,141 830 895 1,353 80 1,095 2,756 65 78 78 39,722 31,866 46,281 Net income (loss) $ (4,407) $ 725 $ 1,233 Per share of common stock (dollars): Primary net income (loss) Fully diluted net income (loss) Average number of common shares outstanding (thousands): Primary Fully diluted $ (18.15) $ 3.01 $ 511 $ (18.15) $ 3.00 $ 4.84 242,764 240,523 238,121 242,764 242,735 273,175 Retained Earnings: Balance at beginning of year Add: Net income (loss) for the year Deduct: Common stock -cash dividends ($75 per share in 1987, and $3.00 per share in 1986 and 1985) Preferred stock -cash dividends and redemption $12,882 $12,879 $12,401 (4,407) 725 1,233 181 722 714 41 Balance at end of year $ 8,294 $12,882 $12,879 'Reference is made to Note I, "Chapter 11 —Plan of Reorganization," and Note 2, "Restructuring and Associated Charges." "In addition, motor fuel, value added, and other taxes collected from consumers for governmental agencies in the United States and abroad amounted to $5,142 million during 1987, $4,2f6 million during 1986, and $3,929 million during 1985. See accompanying description of significant accounting policies and notes to consolidated financial statements. CONSOLIDATED BALANCE SHEET 23 7kraco Inc. and Subsidiary Companies Millions of dollar'. As of December 31, 1987* Assets Current Assets: Cash $ 377 $ Cash investments and marketable securities —at cost 3,735 Accounts and notes receivable (includes receivables from a significant nonsubsidiary company of $39 million in 1987 and $32 million in 1986), less allowance for doubtful accounts of $29 million in 1987 and $49 million in 1986 4,178 Inventories 2,887 2; Deferred income taxes and other current assets 209 Total current assets 11,386 Investments and Advances 3,226 Properties, Plant, and Equipment: At cost Less —Accumulated depreciation, depletion, and amortization Net properties, plant, and equipment Deferred Charges Total 38,473 37, 19,751 16, 18,722 21, 628 $33,962 $34, Liabilities and Common Stockholders' Equity Current Liabilities: Notes payable and current portion of long-term debt Accounts payable (includes parables to a significant nonsubsidiary company of $58 million in 1987 and $63 million in 1986) Accrued liabilities Estimated income and other taxes Total current liabilities Liabilities Subject to Chapter 1.1 Proceedings Long -Term Debt Capital Lease Obligations Deferred Credits —Income Taxes Other Deferred Credits and Noncurrent Liabilities Minority Interest in Subsidiary Companies Common Stockholders' Equity: Common stock —par value $6.25: Shares authorized -350,000,000 Shares issued -274,293,417 in 1987 and 1986, including treasury stock Paid -in capital in excess of par value Retained earnings Less —Common stock held in treasury -31,441,423 shares in 1987 and 32,018,991 shares in 1936, at cost Total common stockholders' equity Total $ 1,118 $ 1, 1,975 2, 1,334 2,' 1,690 1, 6,117 14,346 155 367 1,296 2,003 507 1,714 1 657 8,294 12 10,665 15 1,494 1 9,171 13 $33,962 $34 *Reference is made to Note 1, "Chapter 11 —Plan of Reorganization;' and Note 2, 'Restructuring and Associated Charges?' See accompanying description of significant accounting policies and notes to consolidated financial statements. STATEMENT OF CHANGES IN CONSOLIDATED FINANCIAL POSITION 24 lkraeo Inc. and Subsidiary Companies Millions of dollars I'br the years ended December 31, 1981" 1986 1985 Funds From Operations: Net income (loss) Pennzoil settlement charge, net of income taxes Restructuring and associated charges, net of income taxes Depreciation, depletion, and amortization Provision (benefit) for deferred income taxes —noncurrent portion Dividends from nonsubsidiary companies and unconsolidated finance subsidiaries less than equity in net income Other income account items not involving expenditure or receipt of funds Funds from operations Funds From (Used In) Other Sources: Properties, plant, and equipment retirements and sales Postpetition interest and other accruals subject to Chapter 11 proceedings Additional minority interest arising from sale of Texaco Canada Inc. shares All other decreases in noncurrent accounts Changes in working capital, excluding cash, cash investments and marketable securities, and debt: Reduction (increase) in current assets: Accounts and notes receivable Inventories Deferred income taxes and other current assets Increase (reduction) in current liabilities: Accounts payable Accrued liabilities Estimated income and other taxes Funds from other sources Funds from operations and other sources Account Reclassifications of Obligations Subject to Chapter 11 Proceedings: Long- and short-term debt Other current and noncurrent liabilities Long- and short-term obligations subject to Chapter 11 proceedings Account reclassifications of obligations subject to Chapter 11 proceedings Funds From (Used In) Financing Activities: Additions to long-term debt and capital lease obligations Reductions in long-term debt and capital lease obligations Net additions (reductions) in short-term debt Redemption of redeemable preferred stock Funds used in financing activities Funds available Funds Utilized: Cash dividends paid to: Preferred stockholders Common stockholders Capital expenditures Funds utilized Increase in cash, and cash investments and marketable securities S 1,112 $ 1,223 $ 376 $ (4,407) $ 725 $ 1,233 2,796 — 2,125 — — 2,552 2,732 3,043 (109) 91 276 (102) (19) (5 129 154 209 2,984 3,683 4,756 165 284 482 713 - - 191 42 623 289 (384) 2,131 (1,156 (61) (34) (297 30 251 441 (41) (1,316) 558 (260) (294) 268 155 (300) 47 359 1,345 823 3,343 5,028 5,579 (7,213) (2,349) 9,562 27 795 209 (250) (902) (3,788 (114) (1,140) 1,844 (656 (337) x,247) __(2,391 3,006 3,781 3,188 16 181 722 714 1,713 1,836 2,082 1,894 2,558 2,812 `Reference is made to Note 1, "Chapter 11 —Pan of Reorganization;' and Note 2, "Restructuring and Associated Charges:" See accompanying description of significaa, accounting policies and notes to consolidated financial statements. DESCRIPTION OF SIGNIFICANT ACCOUNTING POLICIES 27 lkxaaco Inc. and Subsidiary Companies Principles of Consolidation The consolidated financial statements are prepared on a going -concern basis and consist of the accounts of Texaco Inc. and subsidiary compa- nies, except for the accounts of unconsolidated finance subsidiaries. Intercompany accounts and transactions are eliminated. The U.S. dollar is the functional currency for all of the Company's operations and substantially all of the operations of its affiliates accounted for on the equity method. Inventories Virtually all inventories of crude oil, petroleum products, and petro- chemicals are stated at cost, determined on the last -in, first -out (LIFO) method. Other merchandise inventories are stated at cost, determined on the first -in, first -out (FIFO) method. Inventories are valued at the lower of cost or market. Materials and supplies are stated at average cost. Investments and Advances The equity method of accounting is used for investments in certain nonsubsidiary corporate joint -venture companies, partnerships, and unconsolidated finance subsidiaries. Under this method, equity in the net income or losses of these investees is reflected currently in Texaco's net income, rather than when realized through dividends or distribu- tions. Investments in the entities accounted for by this method reflect Texaco's equity in their underlying net assets. The Company's interest in the net income of nonsubsidiary compa- nies accounted for at cost is reflected in net income when realized as dividends. Properties, Plant, and Equipment and Depreciation, Depletion, and Amortization Texaco follows the "successful efforts" method of accounting for its oil and gas exploration and producing operations. Lease acquisition costs related to properties held for oil, gas, and mineral production are capitalized when incurred. Unproved properties, the acquisition costs of which are individually significant, are assessed on a property -by -property basis, and a loss is recognized by provision of a valuation allowance when the assessment, indicates an impairment in value. Unproved properties with acquisition costs which are not in- dividually significant are generally aggregated, and the portion of such costs estimated to be nonproductive, based on historical experience, is amortized on an average holding period basis. Exploratory costs, excluding t he cost of exploratory wells, are charged to expense as incurred. Costs of drilling exploratory wells, including stratigraphic test wells, are capitalized pending determination whether the wells have found proved reserves which justify commercial develop- ment. If such reserves are not found, the drilling costs are charged to exploratory expenses. Intangible drilling costs applicable to productive wells and to development dry holes, as well as tangible equipment costs related to the development of oil and gas reserves, are capitalized. The costs of productive leaseholds and other capitalized costs related to producing activities, including tangible and intangible costs, are amor- tized principally by field on the anit-of-production basis by applying the ratio of produced oil and gas to estimated recoverable proved oil and gas reserves. Estimated future restoration and abandonment costs are taken into account in determining amortization and depreciation rates. Depreciation of properties, plant, and equipment related to opera- tions other than producing is provided generally on the group plan, using the straight-line method, with depreciation rates based upon esti- mated useful life applied to the cost of each class of property. Marine vessels are depreciated based on estimated useful lives. Capitalized nonmineral leases are amortized over the estimated useful life of the asset or the lease term, as appropriate, using the straight-line method. Periodic maintenance and repairs applicable to marine vessels an manufacturing facilities are accounted for on the accrual basis. Norm maintenance and repairs of all other properties, plant, and equipmen. are charged to expense as incurred. Renewals, betterments, and maje' repairs that materially extend the life of properties are capitalized a the assets replaced, if any, are retired. When fixed capital assets representing complete units of property I! disposed of, any profit or loss after accumulated depreciation, depletit r or amortization is credited or charged to income. When miscellaneou business properties are disposed of, the difference between asset. cost and salvage value is charged or credited to accumulated depreciation Deferred Income Taxes Certain transactions are recorded in the financial statements in a period different from that in which these transactions are reported fi income tax purposes. The principal transactions are those related to depreciable properties, intangible drilling costs, nonproductive leases, and merchandise inventories. The income statement reflects provision for deferring the income It effects related to these transactions and matching such tax effects ws the periods in which the transactions are recorded for financial repo.. ing purposes. The deferred income taxes reported in the balance she. accounts represent the cumulative net effect of charges and credits made to earnings to defer the income tax effects of transactions to appropriate future periods. Provision is not made for possible income taxes payable upon dist; bution of accumulated earnings of subsidiary companies and nonsub sidiary corporate joint -venture companies when such earnings are pc manently reinvested. Net Income (Loss) Per Share Primary net income (loss) per common share is based on net income (loss) less preferred stock dividend requirements, if any, divided by the average number of common shares outstanding. Fully diluted net income per common share is computed similarly to primary net incou per common share except that it assumes full conversion of all con- vertible debentures into common stock at the beginning of the year (unless antidilutive) New Accounting Standards The Company has not yet adopted the following Financial Accountin Standards issued in 1987: Consoluiatirm of All Mc jority—awned Subsidiaries— This stand,, will require the Company to fully consolidate its finance subsidiaries n. the end of 1988.The adoption of the standard will not have a materia' effect on the financial statements for 1988. Accounting for Income 7tuns— This standard requires adoption the liability method for accounting for deferred income taxes no late than 1989 on either a prospective or retroactive basis. For companies which have had recent significant acquisitions for which the purcha: method of accounting was used, as was the case in the Getty acquisi tion, the effect of adoption will differ significantly depending on the method of adoption elected. While the effects on Texaco of adopting 1 standard have not been determined, the prospective method could K a substantial, adverse impact on retained earnings, while restatement could have a positive effect. No decisions have been made as to the d of adoption or the approach to application. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 26 Texaco Inc. and Subsidiary Companies Note 1. Chapter 11 —Plan of Reorganization On December 10,1985, the 151st District Court of Harris County, Texas entered judgment for Pennzoil Company (Pennzoil) against Texaco Inc. in the amount of $11.1 billion in Pennzoil Company vs. 7&aeo Inc., an action in which Pennzoil claimed that Texaco Inc. tortiousl;y interfered with Pennzoil's alleged contract to acquire a 3/7ths interest in Getty Oil Company. After efforts to reach a settlement with Pennzoil proved unsuccessful, and in order to protect and preserve Texaco's assets and properties from the attachment of liens by Pennzoil, on April 12,1987, Texaco Inc. and two of its wholly -owned finance subsidiaries, Texaco Capital Inc. and Texaco Capital N.V. (Debtor Companies), each filed a voluntary petition for relief under Chapter 11,Title 11 of the United States Code (Bankruptcy Code) with the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court). The Debtor Companies have operated their respective businesses and man- aged their respective properties as debtors -in -possession pursuant to the provisions of the Bankruptcy Code. For a summary of the events lead- ing up to the filing of the Chapter 11 cases, reference is made to Note 16. On December 19,1987, Texaco Inc. reached agreement with Pennzoil that, subject to certain conditions, would settle their litigation. The proposed settlement led to a Plan of Reorganization (Plan), which has been submitted to stockholders for their approval.The voting period will extend through March 21,1988. Major elements of the Plan are: • A payment of $3 billion in cash to Pennzoil on the effective date of the Plan. • The settlement of the litigation between Texaco Inc. and Pennzoil and the resolution of all shareholder derivative lawsuits arising out of the acquisition of Getty and the Pennzoil judgment. • Reinstatement of debt obligations of the Debtor Companies by curing all monetary defaults and payment in full, plus interest, of all other undisputed claims against the Debtor Companies. • Unliquidated, disputed claims of the Internal Revenue Service (IRS), 11.5. Department of Energy (DOE), and certain others will survive confirmation of the Plan and be resolved as if the Chapter 11 cases had not commenced. Reference is made to Note 16 for information on a tentative settlement of the DOE dispute and further discussion concerning other disputed claims. • Retention of equity interests by Texaco Inc. stockholders. Satisfaction of these elements would require cash payments approximat- ing $5.6 billion. Among other things, confirmation procedures call for approval of the Plan by a two-thirds majority of the outstanding Texaco Inc. common shares voting on the Plan (although the Bankruptcy Court has the power to confirm or reject confirmation of the Plan pursuant to the Bankruptcy Code, notwithstanding a negative or an affirmative vote by the stockholders) and a determination by the Bankruptcy Court that the Plan is feasible. The Bankruptcy Court has scheduled a hearing to consider confirmation of the Plan on March 22,1988. The Plan is subject to several significant conditions including that it must be confirmed by March 30,1988, that the effective date of the Plan must occur by April 14,1988, and that the order confirming the Plan is not stayed. If the conditions to confirmation or consummation are not met or waived to the satisfaction of the Debtor Companies and Pennzoil, the Plan would be of no effect. If the Plan is not confirmed or if it is confirmed but not consummated, the theoretical alternatives include continuation of the litigation, alternative plans of reorganization which could include the prospect of seeking further review by the Supreme Court of the United States, or an orderly liquidation of the Debtor Companies under the Bankruptcy Code. The following unaudited pro forma condensed consolidated balance sheet gives effect to the Plan as if the Plan had been confirmed without material modification, no stay was in effect, the time for an appeal from the confirmation order had expired, no material modification of the Plan resulted from any appeal of the confirmation order, and the effective date had occurred as of December 31,1987. The pro forma adjustments reflect the utilization of $3.2 billion of financing arrange- ments; payment to Pennzoil of $3 billion in cash; payment of $2.6 billion As of December 31,1987 Millions of dollars As reported on Consolidated Balance Sheet Reclassification of Accounts Subject to Chapter 11 Unaudited Financing and Implementation of the Plan Pro Forma Assets Cash and short-term investments Accounts and notes receivable Inventories Deferred income taxes and other currant assets Total current assets Investments and advances Net properties, plant, and equipment Deferred charges Total assets Liabilities and Common Stockholders' Equity Notes payable and current portion of long; term debt Accounts payable and accrued liabilities Estimated income and other taxes Total current liabilities liabilities subject to Chapter 11 proceedings Long-term debt and capital lease obligations Deferred credits —income taxes Other deferred credits and noncurrent liabilities Minority interest in subsidiary companies Common stockholders' equity $ 4,112 4,178 2,887 209 11,386 3,226 18.722 628 $33,962 $ 1,118 3,309 1,690 6,117 14,346 522 1,296 2,003 507 9,171 Total liabilities and common stockholders' equity $33,962 $ — $(2,349) 426 426 (2,349) $ 426 $(2,349) $ 1,656 4,460 452 6,568 (14,346) 5,557 426 2,221 $ 41 (3,890) (3,849) 1,500 $ 426 $(2,349) $ 1,763 4,178 2,887 635 9,463 3,226 18,722 628 $32,039 $ 2,815 3,879 2,142 8,836 7,579 1,722 4,224 507 9,171 $32,039 27 of matured debt, interest, and prepetition trade credit; and reclassi- fication of liabilities subject to Chapter 11 proceedings to their appropri- ate balance sheet accounts. These pro forma amounts exclude the projected sale of assets under Texaco's planned restructuring as described in Note 2. Iln addition, the pro forma results do not purport to reflect Texaco's actual financial position upon emergence from Chapter 11, since these amounts may be subject to future adjustments due to Bankruptcy Court actions, further developments with respect to disputed claims, the passage of time, or other events. Note 2. Restructuring and Associated Charges The consolidated financial statements for 1987 reflect a reduction in the valuation of selected assets and a provision of financial reserves totaling $2,125 million (net of income taxes of $592 million) in connec- tion with the initial phase of the Company's planned restructuring. The $2,125 million charge included $851 million to reduce the Com- pany's investments in certain U.S. refineries and other assets to their realizable values. The Company is seeking joint -venture partners for these refineries. Of the remainder, $381 million was attributable to the write -down of producing properties that will be sold (60 million equiva- lent barrels of crude reserves) antto recognize the diminished value of certain oil and gas assets in the United States; $57 million was applica- ble to an impairment in certain oil and gas exploration prospects outside the United States; and $836 million was for the establishment of additional financial reserves for claims of the U.S. Department of Energy, increases in prior years' estimated income taxes, and other items. Note 3. Sale of Receivables In September, 1987, Texaco Refining and Marketing Inc., a wholly -owned subsidiary of Texaco Inc., entered into an accounts receivable agree- ment with a syndicate of major domestic and international banks under which it has the right to sell up to $700 million of accounts receivable on a continuing basis. During 0ctober,1987, approximately $250 million of receivables were sold under this agreement. When uncollected receiv- ables are outstanding under this agreement, the Company includes a reserve for losses on such receivables expected to be uncollectible in the reserve for doubtful accounts. There were no receivables sold which remained uncollected at December 31,1987. In December, 1985,Texaco Inc. and certain subsidiaries entered into a similar agreement with a syndicate of major banks.The initial sale of receivables under this agreement occurred in early 1986. Thereafter and through April 12,1987, the date of Texaco int.'s Chapter 11 filing, the additional cash balances generated by this facility were maintained by additional sales of receivables averaging $650 million per month. Receivables sold which remained uncollected at December 31,1986 were approximately $700 million. The maximum amount of commitment available at December 31,1986 was $1 billion.This commitment termi- nated as a result of the Chapter 11 filing by Texaco Inc. Note 4. Inventories As of December 31, Millions of dollars 1987 1986 Crude oil Petroleum products, petrochemicals, and other merchandise Materials and supplies Total $ 919 $ 904 1,614 2,533 354 $2,867 1,559 2,463 363 $2,826 The excess of estimated current cost over the LIFO value of crude oil, petroleum products, and petrochemicals was approximately $725 mil- lion and $379 million at December 31,1987 and 1986, respectively. During 1985, worldwide inventories accounted for on the LIFO basi were partially liquidated. This resulted in inventory costs prevailing in prior years, which were lower than current year's costs, being charge I to 1985 costs of sales. These lower costs increased 1985 net income by approximately $63 million, after applicable income taxes. There was comparable LIFO drawdown effect in 1987 or 1986. Note 5. Investments and Advances As of December 31, Millions of dollars 1987 Nonsuhsidiary companies and unconsolidated finance subsidiaries accounted for on the equity method: Caltex group of companies Other companies $1,270 $1 813 2,083 Nonsuhsidiary companies -at cost 72 2,155 Miscellaneous investments (at cost), lung -term receivables, etc., less reserve 1,071 Total $3,226 $2 For additional information regarding the Caltex group of companies, reference is made to Note 18. Texaco's equity in the net income of nonsubsidiary companies ani +I unconsolidated finance subsidiaries accounted for on the equity metad aggregated $441 million in 1987, $470 million in 1986, and $485 milliot 1985. Dividends received from all companies accounted for by this method amounted to $339 million in 1987, $451 million in 1986, and $1 million in 1985, Undistributed earnings of these companies included i Texaco's retained earnings amounted to $1,527 million in 1987, and $1,374 million at December 31,1986. Note 6. Properties, Plant, and Equipment As of December 31, Millions of dollars 1987 Net Gross Gross Exploration and production $25,729 $11,840 $25,470 $1; Manufacturing 5,618 2,407 5,388 Marketing 3,342 2,238 3,264 Marine 523 234 559 Pipe lines 883 484 839 Petrochemical 1,413 798 1,400 Other 965 721 955 Total $38,473 $18,722 $37,875 $2 Capital lease amounts included above $ 783 $ 418 $ 779 $ Interest capitalized as part of properties, plant, and equipment was ' million in 1987, $41 million in 1986, and $57 million in 1985. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 28 'ikraco Inc. and Subsidiary Companies Note 7. Notes Payable and Current Portion of Long -Term Debt As of December 31, 1987 1986 1985 Millions of dollars Commercial paper Notes payable to banks and other with originating terms of one year or less 195 378 Current portion of long-term debt: Indebtedness Capital lease obligations Long-term debt guaranteed by Texaco Inc. which is in technical default due to the Chapter Il filing: Indebtedness Capital lease obligations Less current. portion of long-term debt reclassified to liabilities subject to Chapter 11 proceedings Total $ -- $ 50 $1,718 550 2,004 1,067 369 60 58 56 2,267 1,553 2,693 205 302 507 1,656 $1,110 $1,553 $2,693 The information presented reflects nor mal debt terms which would be reinstated under the provisions of the Reorganization Plan, as discussed in Note 1. The weighted average interest rates on commercial paper and notes payable to banks at December 31,1987,1986, and 1985 were 9.5%, 7.7%, and 8.1%, respectively. The maximum amounts of commercial paper and notes payable to banks outstanding at any month -end during 1987,1986, and 1985 aggre- gated $1,395 million, $1,705 million, and $3,028 million, respectivelyTlle average amounts outstanding during the years 1987,1986, and 1985 amounted to $366 million, $967 million, and $535 million, at weighted average interest rates of 7.9%, 7.8%, and 8,1%, respectively The averages were determined by using the average of the amounts outstanding as of each month -end. Immediately prior to the date of the Chapter Il filing, certain non - filing subsidiaries had outstanding approximately $1 billion of loans under three-year revolving credit facilities with various banks.These facilities were guaranteed by Texaco Inc. and secured by the pledge of stock interests in certain foreign subsidiaries and an affiliate. As a result of the Chapter 11 filing by the guarantor,Texaco Inc., the facilities were terminated and the loans repaid pursuant to their terms. Included in the current portion of long-term debt, prior to the reclass fication of liabilities subject to Chapter 11, are extendible note obligations aggregating $1 billion which become redeemable at certain times at the option of noteholders. Of this amount, approximately $740 million has been tendered, but not paid due to Chapter 11 restrictions. Note 8. Long -Term Debt As of December 31, Millions of dollars 1987 1986 Liabilities subject to Chapter II proceedings: Texaco Inc.: P/% Note, due in installments 1989 through 1998 8'/% Debentures, due 2006 with sinking fund payments through 2005, less unamortized discount 8%x% Debentures, due 2005 with sinking fund payments through 2004, less unamortized discount Other long; term debt (7.0%) Texaco Capital Inc:: 9% Guaranteed notes, due 1988, less unamortized discount 10% Guaranteed notes, due 1990, plus unamortized premium 10% Guaranteed notes, due 1995, less enamortized discount 11% Guaranteed notes, due 1989, less unamortized discount 11'/s% Guaranteed notes, due 1995 12r%% Guaranteed notes, due 1992 13% Guaranteed notes, due 1991, less unamortized discount 13Ys% Guaranteed notes, due 1994, plus unamortized net premium Extendible guaranteed notes, due 2000 (10'34% to January 15,1988) Extendible guaranteed notes, due 21100 (1114% to March 1,1989), less unamortized discount Texaco Capital N. V: 93/4% Guaranteed notes, due 1990 10'h'a Guaranteed notes, due 1990 and 1993, less unamortized discount I1%% Convertible guaranteed subordinated debentures, due 1994 1 Vq% Convertible guaranteed subord xated debentures, due 1994 13�/N, Guaranteed notes, due 1989 Consolidated subsidiaries' G.S. dollar debt (11.2%) in technical default in 1987 guaranteed by Texaco Inc. Other consolidated subsidiaries' debt: C.S. dollars (8.4%) Other currencies (8.5%) Less: Long-term debt of Debtor Companies reclassified to liabilities subject to Chapter 11 proceedings Long-term debt of other consolidated subsidiaries in technical default reclassified to current portion of long-term debt $ 250 $ 250 160 160 223 223 369 364 299 255 258 297 297 299 299 250 250 110 108 499 499 488 488 500 300 299 150 150 207 205 500 500 1,000 1,000 200 200 5,557 6.349 205 277 74 123 81 108 155 231 5,917 6,857 5,557 205 Total $ 155 $ 6.857 29 The information presented in this note assumes the reinstatement of original terms for debt subject to Chapter 11 proceedings. The percentages reflected for combined categories of long-term debt represent the weighted average interest rates as of the latest year-end. Long-term debt in 1987 included extendible note obligations aggregat- ing $800 million which call for periodic interest rate adjustments. The convertible debentures issued by subsidiaries are guaranteed by Texaco Inc.The 11%% and 11'/s% debentures of Texaco Capital N.V. are convertible into Texaco Inc. common stock at $50 per share.Texaco Inc. has reserved and has available sufficient common stock to cover the conversion requirements of all co avertible debentures. Annual maturities of long-term debt, including sinking fund pay- ments and other redemption requirements, for the five years subsequent to December 31,1987 are as follows (in millions): 1988—$2,209; 1989-$941; 1990-$663; 1991-$560; and 1992--$173. Note 9. Preferred Stock and Rights Preferred Stock— As of December 31,1987 and 1986, there were author- ized and unissued 30,000,000 shares of Texaco Inc. Preferred Stock —par value $1. Of this amount, 8,000,000 shares were designated as "Series A Preferred Stock" at a stated value of $8,000 per share. Series A Preferred Stock and .Rights —On December It),1985, Texaco Inc. effected a dividend distribution of one Right for each outstanding share of Texaco Inc. common stock. Under certain circumstances, each Right may be exercised to purchase V/,00th of a share of Series A Preferred Stock, at an exercise price of $80, subject to adjustment. The Rights may only be exercised after a person acquires, or has the right to acquire, 20% or more of the common stock or makes an offer for 30% or more of the common stock. The Rights, which do not have voting rights, expire on December 10,1995 and may be redeemed by Texaco Inc. at a price of $.10 per Right (or for securities of an equivalent value) at any time prior to ten days after public announcement of the acquisition by a person of 20% or more of the outstanding common stock. In the event that Texaco Inc. is involved in a merger or similar extraordinary transaction in which Texaco Inc. does not survive or in which its capital stock is exchanged, each holder of a Right will be entitled to purchase at the exercise price a number of shares of the common stock of the acquiring company having a market value equ: I twice the exercise price of such Right. In addition, if a 20% or greats stockholder acquires Texaco Inc. through a transaction in which Te8 t Inc. and its common stock survive, or engages in self -dealing transm tions with Texaco Inc. which have not been approved by a majority t the disinterested directors or two-thirds of the disinterested stock- holders, each Right (other than Rights owned by the 20% stockholdet' will become exercisable at an exercise price equal to one-third of tt then current market price of the common stock of Texaco Inc. The Series A Preferred Stock will have a liquidation preference $40 per /tooth of a share. Dividends on the Series A Preferred Stock I be payable quarterly at the annual rate of 13% of the liquidation preference. Unpaid dividends will cumulate and he compounded gut terly. The shares of Series A Preferred Stock are redeemable comme ing in the fourth year at declining premiums, ranging from $41.20 pt /iuoth of a share in the fourth year to $40.00 per '/tooth of a share i. the seventh year and thereafter, and must be redeemed after 11) yea. Prior to the effective date of the Plan, as discussed in Note 1, the sIx• of Series A Preferred Stock will not have any voting rights except at required by law or in the event dividends are not paid. Assuming th Plan is implemented, the Series A Preferred Stock shall have one ve. per /tooth of a share and shall vote as one class with the holders of Texaco Inc. common stock. In January 1988,Texaco Inc.'s Board of Directors adopted a resol r to irrevocably redeem the Rights no later than the first anniversary the effective date of the Plan by paying to stockholders the redempt price in cash, unless such Rights are no longer redeemable on such anniversary date, and without prejudice to Texaco Inc.'s ability to et cise its option to redeem at any time prior to such anniversary date Redeemable Series A Preferred Stock —In 1985, Texaco Inc. acquire 12.6 million shares of Redeemable Series A Preferred Stock for .$651 million, and these shares were subsequently retired. Note 10. Changes in Outstanding Common Stock Number of shares of common stock, par value 86.25 1987 1986 outstanding at beginning of year Add: Distribution of treasury stock to participants of incentive compensation plans Distribution (return) of treasury shares incident to deferred directors' fees (Return) of excess stock escrowed 8or the purchase of assets Issuance of treasury stock to fund employee plans Issuance of treasury stock to participants in the dividend reinvestment plan Conversion of subsidiary companies' convertible debentures into Texaco Inc. common stock Deduct purchases of common stock for treasury: Incentive compensation plan participants Outstanding at end of year 242,274,426 238,920,838 237,61 93,899 93,485 568 (21,694) 355,736 165,704 4,112 2,630.373 8' 675,347 3 42,451 23,923 242,851,994 242,274,426 238,9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 30 7hxaca Inc. and Subsidiary Companies Note 11. Paid -In Capital in Excess of Par Value Thousands of dollars 1987 1986 1985 Balance at beginning of year Distribution of treasury stock to participants of incentive wmpensation plans Distribution of treasury stock to participants in the dividend reinvestment plan Distribution of treasury stock to director; for deferred fees Conversion of subsidiary companies' convertible debentures into Texaco Inc. common stock Issuance of treasury stock to fund employee plans Balance at end of year $657,614 (232) (36) 55 26 $657,427 $657,614 $660,206 $660,206 (412) (529) (13) $660,449 111 (445'. (1,638) 91 Note 12. Foreign Currency Translation Currency translations resulted in ga..ns of $144 million in 1987, $1:37 million in 1986, and $40 million in 1985, before applicable income taxes. The effect after applicable income taxes was a gain of $4fi million in 1987, $130 million in 1986, and $28 million in 1985. These amounts include Texaco's equity in such gains and losses of nonsubsidiary companies accounted for on the equity method. Note 13. Lease Commitments and Rental Expense The Company has leasing arrangements involving service stations, tanker charters, and other facilities. Capital leases are recorded in the Company's balance sheet as debt obligations and the related assets are recorded in properties, plant, and equipment. The remaining lease obligations are operating leases which are recorded in the Company's income statement as rental expense. As of December 31,1987, Texaco Inc. and its subsidiary companies had estimated minimum commitments for payment of rentals (net of noncancelable sublease rentals) under leases which, at inception, had a noncancelable term of more than one year, as follows: Millions of dollars Operating Capital leases leases 1981 1989 1990 1991 1992 Alter 19112 Total lease commitments Less amounts representing: Executory casts Interest Add noncancelable sublease rentals netted in capital cemnmitments above Present value of total capital lease obligatkns Less: Current portion of capital lease obligatnns Long-term capital lease obligations guaranteed by Texaco Inc. which are in technical default due to the Chapter 11 filing Present value of long-term portion of capital lease obligations $144 124 102 68 54 273 $765 $147 149 128 126 125 722 $1,397 159 550 49 737 68 Rental expense relative to operating leases, including contingent rentals based on factors such as gallons sold, is provided below. Such payments do not include rentals on leases covering oil and gas mineral rights. Years ended December 31, Millions of dollars 1987 1986 1985 Rental expense: Minimum lease rentals Contingent rentals Total Less rental income on properties subleased to others Net rental expense $322 33 355 $316 32 $296 29 348 325 62 58 50 $293 $290 $275 Note 14. Taxes Years ended December 31, Millions of dollars 1987 1986 1985 Direct taxes: Provision for income taxes Taxes other than income taxes: Windfall profit Oil and gas production Sales and use Property Payroll Other Total taxes other than income taxes Import duties and other governmental levies Total direct taxes Taxes collected from consumers for governmental agencies Total $ 80 $1,095 $ 2,756 (24) 14 296 153 207 383 213 235 201 212 231 232 152 144 140 124 64 101 830 895 1,353 _2,878 _2,218 1,979 3,788 4,208 6,088 5,142 4,266 3,929 $8,930 $8,474 $10,017 The provision for income taxes includes the following amounts 302 Years ended December 31, Millions of dollars $ 367 1987 1986 1985 Current: II,S. Federal State and local Outside Baited States Deferred: 13.S. Federal Outside United States Total $ 227 $ (3) $ 180 13 (31) 76 1,172 1,065 2.020 1,412 1.031 2,276 (1,241) (100) 269 (91) 164 211 (1,332) 64 480 $ 80 $1,095 $2.756 31 The provision for deferred income taxes includes the following amounts: Years ended December 31, Millions of dollars 1987 1986 1985 Depreciation inventory Intangible drilling posts Nonproductive leases Depletion Windfall profit tax Pennzoil settlement Restructuring and associated charges Other Total $ 64 $181 $302 (149) 146 109 (103) (123) 70 (63) 13 11 (16) (46) 1 (6) (64) (37) (204) — — (823) -- — (32) (43) 24 $(1,332) 1 64 $480 The following schedule reconciles the difference between the U.S. Federal income tax rate and the effective tax rate: Years ended December 31, 1987 1986 1985 U.S. Federal income tax rate assumed to be applicable -charge (benefit) Net effect of earnings and dividends attributable to companies accounted for on the equity method Aggregated effect of earnings and losses from foreign operations Effect of LS investment tax credit Excess book value of acquired Getty assets over tax basis Effect of Pennzoil settlement Effect of restructuring and associated charges Other Effective income tax rate as reflected in the Companyk accounts (40.0)% 46.0% (3.5) 12.6 (.1) 2.5 23.0 11.4 (4.1) 2.7 1.8% 60.2% 460% (5.1) 23.4 (1.9) 5.9 8 69.1% The effective tax rate for 1987 was 63.0%, exclusive of the Pennzoil settlement and the restructuring and associated charges. Before provision for income taxes, companies operating in the United States had losses of $6,259 million in 1987, $721 million in 1986, and earnings of $786 million in 1986. For companies with operations located outside the United States, earnings before income taxes aggre- gated $1,932 million in 1987, $2,541 million in 1986, and $3,203 million in 1985. The undistributed earnings of subsidiary companies and of nonsub- sidiary corporate joint -venture companies accounted for on the equity method, for which deferred income taxes have not been provided at December 31,1987, because of the permanent reinvestment of earnings by the companies involved, amounted to $2,131 million and $940 million, respectively. At December 31,1987, Texaco had worldwide operating loss carryfor- wards of approximately $1,504 million for tax purposes, including $1,206 million which do not have an expiration date. The remainder expire at various dates through 2002. Due to differences between tax and financial reporting, deferred income tax provisions may be required as the tax operating loss carryforwards are recognized. For financial reporting purposes, such loss carryforwards amounted to approximately $488 million. Foreign tax credit carryforwards available for U.S. Federal income tax purposes amounted to approximately $697 million at December 31,1987, expiring at various dates through 1992. U.S. investment tax credits, which are being phased out under the Tax Reform Act of 1986, are accounted for by applying such credits as a reduction of the provision for income taxes in the year that such credits arise. Note 15. Employee Benefit Plans Reserves for employee plans are provided principally for separation benefits payable to employees, for incentive compensation plans, and Ow the unfunded costs of various pension plans. Texaco Inc. and certain of its foreign subsidiaries have various savings plans, as well as unfunded health care and life insurance plans, the costs of which are shared by the employers and the employees. The Company's costs in connection with these plans are charged to expense currently. The Company's total expense in connection with retired employees' health care and life insurance benefits in 1987,1986, and 1985 was $32 million, $27 million, and $26 million, respectively Substantially all of these amounts relate to retired I1.S. employees. Pension Plan—I4brldutide: Texaco Inc. and certain of its subsidiary companies have pension plans available to substantially all of their employees. Amounts charged to worldwide pension expense, as well as amounts funded, are generally based on actuarial studies. In general, pension obligations are funded by deposits with insurance companies and corporate trustees. During 1986, Texaco adopted, for the U.S. plans only, the pension accounting principles set forth in Financial Accounting Standards Board (FASB) Statement Nos. 87 and 88. The impact of adopting these statements for plans maintained outside the United States has not been determined. These statements will be adopted by January 1,1989. Information on pension plans outside the United States is not avail- able on a basis comparable to U.S. pension plans which are subject to the requirements of the Employee Retirement Income Security Act. However, the aggregate assets and balance sheet, accruals relative to Texaco's various worldwide plans exceed the actuarially computed value of vested benefits. The total expense for employee pension plans of Texaco Inc. and subsidiary companies was $134 million in 1987, $79 million in 1986, and $171 million in 1985. Pension Plans —In the hailed States: In general,Texaco's domestic plans provide defined pension benefits based on final average pay. Pension plan assets are principally invested in corporate equity securities or deposits with insurance companies. The components of U.S. pension expense were as follows: Years ended December 31, Millions of dollars 1987 198 Benefits earned during the year $ 63 $ 4 Actual investment return on plan assets (92) (14 Interest cost on projected pension benefit obligations 116 10 Amortization of net deferred amounts (36) 1 Total pension expense $ 51 $ 1 The assumed long-term investment return on plan assets was 988 in 1987 and 1986, NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 32 1praco Ina and Subsidiary Companies The funded status of all United States pension plans was: As of December 31, Millions of dollars 1987 1986 Present value of the estimated pension benefits to be paid in the future (based on discount rates of 9% for 1987 and 8% for 1986): Vested benefits Nonvested benefits Accumulated benefit obligations Effect of projected future salary increases (based on weighted average salary progression rates of approximately 6.3%) Total projected benefit obligations Amount of assets available for benefits: Funded assets of the plans, at Fair value Net pension liability recorded on Texaco's Consolidated Balance Sheet Total assets Assets in excess of projected benefit obligations* 'Consisting of: Net assets existing at the date of adoption of FASB Statement No. 87 not yet recognized Effect of changes in assumptions and difference between actual and estimated experience $(704) $ (857) (106) (129) (810) (986) (474) (468) (1,284) (1,454) 1,273 1,365 177 158 1,450 1,523 $ 166 $ 69 $ 259 (190) $ 69 $ 215 (49) $ 166 The actuarial present value of projected pension benefit obligations excludes the effect of future years of employees' service. However, the actuarial assumptions utilized for funding and expense purposes for employee pension plans include the estimated effect of such service. Note 16. Contingent Liabilities Pennzoil litigation State Court Action— On December 10,1985, the 151st District Court of Harris County,Texas entered judgment for Pennzoil Company against Texaco Inc. in the amount of $11.1 billion, comprised of $75 billion actual damages, $3 billion punitive damages, and approximately $600 million prejudgment interest in Pennzoil Company vs. 7&aco Inc., an action in which Pennzoil claimed that Texaco Inc. tortiously interfered with Pennzoil's alleged contract to acquire a 3/7ths interest in Getty Oil Company. Interest began accruing on the judgment at the simple rate of 10% per annum from the date of judgment. Texaco Inc. filed its appeal in the Court of Appeals for the First Supreme Judicial District of Texas (Texas Court of Appeals) located in Houston on March 7,1986.On February 12,1987, the Texas Court of Appeals affirmed the judgment of the trial court, except for the $3 billion punitive damages award which it deemed excessive by $2 billion. Pennzoil subsequently filed a remittitur of $2 billion, which resulted in a reduction of the judgment to $9.1 billion. Under relevant law, the ulti- mate allowed amount of any claim of Pennzoil will be determined in Texaco Inc.'s Chapter 11 case. On June 15,1987, Texaco Inc. submitted an application for a Writ of Error to the Texas Supreme Court (Court) asking the Court to review the decision of the Texas Court of Appeals. On November 2,1987, the Court refused to grant the Writ of Error so that under Texas law, the $9.1 billion Pennzoil, judgment became final, subject only to discretionary review by the Supreme Court of the United States (U.S. Supreme Court). Texaco Inc.'s only remaining avenue of direct review of the Pennzoil judgment is by petition for a writ of certiorari to the U.S. Supreme Court. Texaco Inc. does not have an absolute right of review by the U.S. Supreme Court. If the U.S. Supreme Court were either to deny Texaco Inc.'s petition for a writ of certiorari or to grant such petition and affirm the Pennzoil judgment, Texaco Inc. would be relegated to a collateral attack on the validity and the amount of the Pennzoil judgment in a court of com- petent jurisdiction. Although Texaco Inc. would intend to litigate such issues and propose a reorganization plan that would provide for the treatment of the Pennzoil judgment claim that would minimize its adverse impact on the continuing operations of Texaco Inc., there can be no assurances whatsoever that Texaco Inc. would be successful. If such efforts were not successful,Texaco Inc. would be liable for the full amount of the Pennzoil judgment plus postjudgment interest. If the U.S. Supreme Court were to grant Texaco Inc.'s petition for a writ of certiorari and hold in favor of Texaco Inc., it could either enter final judgment in Texaco Inc.'s favor or remand the case to the Texas courts for a new trial or further proceedings. If final judgment were entered in Texaco Inc.'s favor by the U.S. Supreme Court, Pennzoil would receive no payment from Texaco Inc. 7&ras Bond and Lien Pmvisions —Texas law provides that an unse- cured judgment creditor (such as Pennzoil) may enforce its judgment by, among other things, executing on the judgment or imposing judgment liens on the property of the judgment debtor, thereby becoming a secured creditor. Texas law also provides that the judgment debtor may, in order to stay execution on the judgment during the pendency of appeals, post a supersedeas bond; that such bond must be in an amount at least equal to the amount of the judgment, interest and costs; and that, even if such a bond is posted, a ,judgment creditor may place liens upon the judgment debtor's real property in Texas. After the U.S. Supreme Court dissolved the injunction earlier granted by the United States District Court for the Southern District of New York, which had protected Texaco Inc. against the attachment of judg- ment liens, Texaco Inc. on April 7,1987 filed an action in the Court of Appeals in Houston, Texas, seeking emergency relief from the Texas bond and lien provisions. The Texas Court of Appeals temporarily stayed enforcement of the judgment pending a hearing. Notwithstanding earlier representations to the contrary, Pennzoil vigorously opposed reasonable security arrangements and sought to delay resolution of the security issue in the Texas courts. The resulting financial and commer- cial crisis made it necessary for the Debtor Companies to each file a voluntary Chapter 11 petition. Meets of Chapter II —Commencing on April 12,1987, Texaco Inc. ceased payment of dividends on its common stock. and Texaco Inc. and the other Debtor Companies ceased making payments on account of their respective prepetition obligations, except as subsequently permit- ted by orders of the Bankruptcy Court. Interest expense continued to be accrued, as appropriate, on obligations of the Debtor Companies. Such interest cannot be paid without Bankruptcy Court approval. During the pendency of the Chapter 11 proceedings, Texaco Inc. cannot issue common or preferred stock, or debt securities without Bankruptcy Court approval. The Bankruptcy Court approved the issuance of Texaco Inc. common stock for conversions of the 4'/z% debentures of Texaco International Trader Inc., the 8% debentures of Texaco International Financial Corporation, and the 11%% and 117/8% debentures of Texaco Capital NM, as well as the issuance of common stock to employee benefit plans of Texaco Inc. Approval has not been requested for Texaco Inc. to issue any other debt or equity securities. Certain non -filing subsidiary companies and unconsolidated affiliates have outstanding debt obligations that are either directly guaranteed by Texaco Inc., or supported by such arrangements as charter hire, leases, 33 and throughput/processing agreements further supported by the guarantee of Texaco Inc. The Chapter 11 filing by Texaco Inc. constitutes an event of default under many of these agreements. At December 31, 1987, there was approximately $1.3 billion of such debt, $847 million of which is recorded on the Consolidated Balance Sheet as current liabili- ties, including $507 million that would ordinarily be classified as long- term debt and capital lease obligations of subsidiaries. Such companies have continued to make all payments of principal and interest on the debt, and the Plan of Reorganization (Plan) reinstates the direct and indirect guarantees of Texaco Inc. Settlement— On December 19, 1'387, Texaco Inc. announced that it had reached an agreement with Pennzoil Company that would settle the Texaco -Pennzoil litigation, subject to confirmation of the Plan by the Bankruptcy Court. In connection with the Plan, Texaco Inc. requested an extension of its time to file its petition for a writ of certiorari until March 31,1988, the maximum extension permitted by the U.S. Supreme Court Rules. That extension was granted by the U.S. Supreme Court on January 15,1988. If confirmation of the Plan and the effective date do not occur by the extended date by which Texaco Inc. must file its petition for a writ of certiorari, Texaco Inc. will preserve its right to seek U.S. Supreme Court review by timely filing its petition for a writ of certiorari. For additional information on the proposed settlement and the Plan, reference is made to Note 1. Department of Energy Matters Texaco Inc. is involved in several pending and potential disputes with the U.S. Department of Energy (DOE) relating to the pricing practices of Texaco from September,1973 through January,1981, when Federal crude oil and refined petroleum product price controls were in effect. DOE has asserted that its claims arising from all such disputes may total approximately $2.1 billion in overcharges and interest accrued through January, 1988. On February 22,1988, Texaco Inc. and DOE reached an agreement in principle on the general terms and conditions whereby all of these disputes, as well as remaining disputes between DOE and Getty Oil Company, will be settled by Texaco's payment of $1.25 billion over a 51/2 year period.The initial payment of $400 million will be due within 30 days of finalization of a formal Consent Order; the balance is to be paid in five installments, plus interest, with the first installment of $190 million due eighteen months after finalization of the formal Consent Order and the remaining installments of $165 million each due at twelve-month intervals thereafter. The settlement, which has been fully reserved for in the Company's accounts at December 31,1987, is subject to agreement on the terms of a definitive Consent Order, the solicitation of comments and scheduling of a public hearing in accordance with DOE regulations, and either approval of the settlement itself by the U.S. Bankruptcy Court or final approval of Texaco's Plan of Reorganization. The most notable of the disputes covered by the agreement relates to Texaco's crude oil pricing policies, particularly Texaco Inc.'s method of calculating the proportions of new, old, and stripper crude oil produced on properties primarily in Louisiana and Texas. In connection with that dispute DOE had in May,1979 issued a Proposed Remedial Order (PRO) alleging violations of approximately $888 million, consisting of $743 million in overcharges, plus interest, from September, 1973 through March, 1979. On August 7,1986, DOS's Office of Hearings and Appeals (OHM) issued an Order (Order) regarding certain aspects of those disputes, finding overcharges of $235 million through August,1976 plus interest estimated at $568 million through August,1986.That Order currently is under review by the Federal Energy Regulatory Commission (FERE), and further reviews through the Federal court system are available to Texaco. Other aspects of the crude oil pricing disputes not disposed of by the Order remain pending before OHA, including an additional allegation of $120 million plus interest. Other disputes with DOE relate to Texaco Inc.'s pricing policies regarding sales of refined petroleum products. The most notable of th disputes involves allegations that Texaco Inc. improperly calculated it - increased refiner costs under federal regulations pertaining to price - controlled natural gas liquid products (i.e. propane, butane, and natui gasoline) used largely as refiner feedstocks. Specifically, in January, It. the Federal Government, on behalf of DOE, filed complaints against several companies including Texaco Inc. in the United States District Court for the District of Columbia. The complaint against Texaco Inc. alleged that Texaco Inc. improperly calculated by at least $224 millioi through 1978 its increased costs under federal regulations pertaining price -regulated natural gas liquid products. Texaco Inc. denied the rI • gations and, together with other similarly situated companies, contesr the Government's interpretation of certain of those regulations in a declaratory judgment action against DOE in the United States Distric Court for the Northern District of Texas. That declaratory judgment effort was decided in DOE's favor in December,1984, by the Tempera?, Emergency Court of Appeals (TECA), and in May,1985.. the Supreme Court of the United States denied review of the TECA decision. Although the Government could then have pursued its noncompliant; allegations against Texaco Inc. and other companies in the District Court for the District of Columbia, the Government subsequently witl drew those complaints. However, in September 1987, DOE published a notice of a Proposed Remedial Order, which Texaco Inc. currently is contesting in proceedings before (MIA, alleging that during the price control period Texaco Inc.'s calculation of increased refined costs ava able for pass -through in petroleum product. prices exceeded those pe mitted by applicable regulations by an estimated $308 million, which turn may result in an undetermined amount of alleged overcharges plus interest. Louisiana Royalties On March 11,1987, Texaco Inc. filed a Petition for Declaratory Judgme. in the 19th Judicial District Court in East Baton Rouge Parish, Louis. ana asking the court to declare that Texaco Inc. has properly paid natural gas royalties to the State of Louisiana. On March 16,1987, Texaco Inc. received demand letters from the Attorney General of the State of Louisiana demanding, on behalf of State, payment by Texaco Inc. of alleged unpaid royalties with respet gas produced on State lands for the period 1970 through December 3 1985. He stated in his letters that a study done by the State would support a claim l'er underpaid royalties and interest thereon of app.(' mately $387 million. His letters also stated that, in the event the alle-r• underpayment of royalties was not made within the 30 day period, tl State would reserve its right to seek an accounting for production, cancellation of the leases, double royalties, and attorneys fees. Under applicable Louisiana law, in the event of an unreasonable failure to p royalties due under a lease, the State may seek an accounting for production, double royalties, interest from the due date, and attorney fees, and the court may, in its discretion, dissolve the leases. However under the applicable statute, the remedy of dissolution should be granted only if the conduct of the lessee is such that the remedy of damages is inadequate to do justice. A principal claim is that Texaco Inc. is obligated to make payer ! + royalties on the basis of the current market value of natural gas rail than on the basis of actual, long-term contractual prices received by NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 34 7Yxa o Inc acrd Subsuleary Companies Texaco Inc. for third -party sales of gas. In its Petition for Declaratory Judgment, as well as in its response tothe Attorney General's demand letters, Texaco Inc. stated that. it. had entered into these contracts with the full support and knowledge of the Slate of Louisiana and that the Louisiana Supreme Court over the past few years has upheld the princi- ples which Texaco Inc. has followed.'I'he State's other principal claim is at Texaco Inc. in recent years should have allocated, tin• royalty purposes, a port ion of the gas horn State leases to pm contracts entered into by a pipeline subsidiit y at higher prices. For several years, the State lease gas has been insufficient, to supply Texaco Inc.'s customers. Texaco Inc. believes that the remaining supply, which is still insufficient, is owed to the old customers, and that ro part of that supply should be allocated to the new contracts of the pipeline subsidiary. Texaco Inc. will also assert other defenses to these rlairns. On September 15, 1987, Texaco Inc. sought approval from the Bankruptcy Court to assume certain oil and gas leases which'I'exaco Inc. had entered into with the State of Louisiana prior to its Chapter 11 filing, including house leases which were the subject of the Petition Ihr Declaratory Judgment described abt ve.. as well as the remaining State leases. In view of Texaco Inc.'s pending Chapter 11 ease, the Petition for Deolaratory Judgment was dismissed by Texaco Inc.The State of Louisi- ana has filed objections to Texaco Inc.'s assumption if the oil and gas leases, asserting that these leases cannot he assumed, and t hat Texaco Ines alleged underpayment of royalties thereunder constitutes an uncured default which prevents such &sump ion. The State has also contended I hat its consent is a prerequisite under Louisiana law for the assignment or assumption of the State leases. The State of Louisiana, in addition to its claim for underpayment of royalties, is seeking lease cancellation, double damages, and attorneys fees. The State of Louisiana has also petitioned the Bankruptcy Court to change the venue of the proceedings, in respect if'Iexaco Inca motion to assume the leases, from the Bankruptcy Court in White Plains, New York to the Bankruptcy Court, in Baton Rouge, Louisiana and asked the United States District Court for the Southern District of New York to revoke the reference of this matter to the Bankruptcy Court On January 14, 11)88, the Bankruptcy Court in White Plains, New York rendered a report recommending to the United States Distric. Court for the Southern District, of New York that the reference not. he revoked.'1'his matter is now pending before the District Courrt.'the petition by the State of Louisiana to change the venue of the proceeding has been held in abeyance by the Bankruptcy Court, pending the Final outcome of the reference motion. Internal Revenue Service Claim In connection with the bankruptcy proceedings, the U.S. Internal Rev- enue Service (IRS) in early 1988 asserted that the Company has a tax liability of approximately $6.5 billion consisting of income tux and windfall profit. tax. including accrued interest thereon through April 12, 1987, involving disputed claims for c rtain open tax years. Texaco has Federal tax years that. have not been finalized dating hack to 1965. 'These tax years involve refunds or liabilities for income tax and wind- fall profit tax applicable to Texaco Inc. and Getty Oil Company. Cur- rently.. the Company is under examination by the IRS for the eight years Riau 1979 to 1686 and is invnlvcd in Iinrdizing protested tax issues with the IRS Appeals Office for certain caller years. The $6.5 billion IRS tax claim is comprised of $6,958 million for income taxes, including interest, through 1982 Mr Texaco Inc. and through 1984 for (Jetty. The balance of the tax claim amounts to $426 million for windfall profit taxes, including interest., through 1982 for Texaco and through 1985 fur (Ietty.'I'hese aunuunts rin not reflect liabili- ties, if any, of Texaco fur income or windfall profit taxes for tax years 1983 through 1986, which currently are in the preliminary stages of audit, and the audit may result in an increase in the IRS $6.5 billion tax claim. Other Contingent. Liabilities The Company was contingently liable in the amount of $11 million as of December 31,1987, as guarantors, directly or indirectly, on loans out- standing, principally of certain associated companies. AIso,Texaco Inc. and certain of its subsidiary companies have guaranteed sufficient, revenue, from petroleum processing or shipments, to associated pipeline companies, an offshore oil port, and refining companies, or in lieu thereof, have agreed to advance funds sufficient to meet their individual debt obligations. No loss is anticipated by reason of such obligations. For a discussion of the effect of Texaco Inc.'s Chapter It filing on these guarantees, reference is made to the section Pennzoil Litigation —Effects of Chapter 11 included in this note. As of December :31,1987, several states had suits pending against Texaco Inc. and a number of other petroleum companies alleging, among other things, that the defendants combined and conspired to restrain trade in the exploration, production, transportation, and sale of crude oil and in the refining, distribution, and marketing of petroleum products in violation of the antitrust laws of the United States.These here suits seek divestiture of certain of Texaco Inc.'s operations. and treble damages in unspecified amounts. Texaco leet has denied all such allegations, and is vigorously defending against these actions. On November 26,1986, these suits were dismissed by the United States District Court for the Southern District. of California (Los Angeles District Court). Plaintiffs have appealed to the United States Court of Appeals for the Ninth Circuit (Ninth Circuit). In 1951, the Federal Trade Corn mission dismissed its complaint against Texaco Inc. and seven other companies involving similar allegations. In June, 1985, the suit. by the municipality of Long Beach and the State of California charging violations of the United States and California stale antitrust laws with respect to the purchase and sale of crude oils in California was dis- missed by the Los Angeles District Court. Plaintiffs appealed to the Ninth Circuit and TECA. On August 18,1987, the TECA appeal was dismissed.The appeal to the Ninth Circuit is still pending. On February 19,1986, Long Beach and the State of California filed a new case similar to that already dismissed by the Los Angeles District Court (but for a later period) in a California state court against. many of the same defendants, alleging that defendants' practices concerning crude oil purchases and sales, posted prices, and their operation of crude oil pipelines, violated various California state laws. This case was removed by the defendants to the same Los Angeles District Court which had previously dismissed plaintiffs' antitrust claims in the earlier Long Beach case. Upon cross motion by the parties the court dismissed the case in part. (on certain contract issues), remanded the case in part to the state court (on the pipeline claims) and retained, jurisdiction over the part of the case alleging violations of the state antitrust laws. Texaco Inc. has denied the allegations and will continue to vigorously defend against these charges. In the opinion of Texaco Ines General Counsel, while it is impossible to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits, claims, guarantees, Federal taxes, Federal regulations, etc., the aggregate amount of such liability. with the possible exception of the Pennzoil judgment if the Plan is not consummated, is not anticipated to be materially important in relation to the consolidated financial position of Texaco Inc. and its subsidiaries 35 Note 17. Segmented Financial Data Texaco Inc. and its subsidiary companies, together with nonsubsidiary companies, represent a vertically integrated enterprise principally engaged in the worldwide exploration for and production, transporta- tion, refining, and marketing of crude oil, natural gas, and petroleum products, including petrochemicals. Information relative to the Ccmpany's operations is provided in the following tables, segregated between petroleum, natural gas, and other (nonpetroleum operations such as insurance and real estate), and petro- chemical. Intersegment sales and services shown are based on prices which are generally representative of market prices or arm's -length negotiated prices. Operating profit (loss) represents total sales and services as shown in the Statement of Consolidated Income, less operating costs and expenses. Nonoperating income includes dividends, interest, and other income. General corporate items include interest expense, general corporate expenses, and minority interest in net income of subsidiary companies. For information regarding the proposed Pennzoil setth men:. reference is made to Note 1. The petroleum, natural gas, and other segment for 1987 include if an operating loss before income taxes of $2,717 million ($2,125 mill ion net of related income taxes) relative to the write -down of selected assets and a provision of financial reserves in connection with the initial phase of the Company's planned restructuring. Reference it, m:ui to Note 2 for additional information regarding the restructuring aed associated charges. Operating profit. for 1985 included a benefit of $121 million due tc worldwide inventories accounted for on the LIFO basis being partially liquidated.This resulted in inventory costs prevailing in prior years. which were lower than current year's costs, being charged to 1985 u,tsl of sales. Of the amount realized in 1985, the petrochemical segment included a benefit of $5 million.There was no comparable LIFO dr. rv` down effect in 1987 or 1986. Years ended December 31, Millions of dollars Petroleum, Petro - natural chemical gas, and other 1987 Consol- idated Sales and services: Outside Intersegment. Total sales and services Operating profit (loss) Equity in net income (loss) of companies mounted for on the equity method: United States Other Western Hemisphere Eastern Hemisphere, including &mope Nonoperating income Pennzoil settlement General corporate items Provision for income taxes Net income (loss) Geographical segregation of operating earnings (losses) after income taxes: Petroleum, natural gas, and petmchernical: United States Other Western Hemisphere Eastern Hemisphere, including Europe Marine transportation Total petroleum, natural gas, and petrochemical Nonpetroleum Currency translation net. gains Total operating earnings (losses) Corporate and nonoperating: Pennzoil settlement Other corporate and nonoperating Total corporate and nonoperating Net income (loss) $33,092 $1,280 $34,372 371 307 — $33,463 $1,587 $34,372 $ (956) $ 129 $ (827) 65 11 365 441 65 - 11 — 365 $ (1,768) $ 30 225 5 382 39 (41) — (1,202) 17 44 74 2 $ (1,141) $ 76 441 502 (3,000) (1,443) (80) Petroleum, Petro - natural chemical gas, and other 1986 Consol- idated Petroleum, Petro- Cnnnnl natural chemical !dated gas, and other $30,649 $ 964 $31,613 $45,077 $1,220 295 315 — 532 289 $30,944 $ 1,279 $31,613 $45.609 $1,509 t4r - $ 2.219 $ 91 $ 2,310 $ 4,507 $ 12 $ 51 (6) 420 465 51 (6) 5 425 5 470 508 (1,468) (1,095) $ (4,407) $ 725 $ (1,738) 230 421 (41) $ (7) $ 24 300 4 838 28 15 — (1,128) 1,146 56 17 36 46 128 2 (1,065) $ 1,310 $ 58 (2,796) (546) (3,342) $ (4,407) Depreciation, depletion, and amortization (excludes amounts for general eor?orate assets) $ 2,478 $ 62 $ 2,540 Capital expenditures (excludes amounts for general corporate assets) $ 1,533 $ 89 $ 1,622 $ 17 304 866 15 49 5 432 486 $ 940 398 524 (57) $ (4) 2 7 1,202 1,805 5 36 26 130 23 5 1,368 $ 1,854 $ 10 (643) (643) $ 725 $ 2,670 $ 47 $ 2,717 S 2.960 $ 54 $ 1.651 $ 121 $ 1,772 S 2,003 $ 32 1 AI NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 36 Thames Inc wu7 Subsai my Outman' es The geographical segregation of Iota! sales and services is as follows: Years ended December 31, 1987 1986 1985 Millions of dollars Outside Interarea Total Outside Interarea Total Outside Interarea Total Sales and senicea: I in 'led Scopus Other Westru'u Ile risphere Eastern hemisphere, including Europe Marine t to115pnrl al lnrt Elinitwit ions Consolidated sales and services $17,252 $ 59 $17,311 $14119 $ 56 $16,175 $24,433 $ 61 $24,494 6,213 313 6,526 5,907 483 6,390 8,338 t.416 9,714 10,744 2,220 12,964 9,466 1,596 11.067 13,409 2,194 15.603 163 384 547 121 494 615 117 369 486 — (2,976) (2,976) (2,629) (2,629) )4,040) (4.040 $34,372 $ — $34,372 $31,613 $ $31,613 $46.297 $ $46,297 Assets applicable io each s' gnn°ltt are shown below. Identifiable assets are those which t',1.II be directly idenlilicd or associated with the segments Marketable securities, receivables which are corporate in nature, and corporate properties, plant, and equipment are included in cash, cash investments, and other corporate assets. As or December al, 1987 Petroleum, Petro- Consol Petroleum, Petro - natural chemical idated natural chemical gas, gas, Millions of dollars and other and other Petroleum, nut nra l gas. ;nrd pets ud a rnical: IIlent16;0plc asu4s: 1'nited SGnus usher Western Hemisphere t:aslern hemisphere, in( lndile, lump.. Marine. rtnnsportul.ion I mea lnents in net assets of companies accuunled I'or nn 1 he equity method_ Eninrl Stares ocher w'cstem Ilatdspherc F:asnr-r Ileniisphere. (To Riding Eurnp', G arpcl ci dean 'I'nlal t ash, rr vh mvesl.rnems anti DI her curpnrale assets ( tonsul,datrd assets $15,911 $ 915 $16,826 3,305 - 3,305 4,896 264 5,160 315 - 315 126 34 1,733 789 3 $27,109 $ 1,182 126 34 1,736 789 1986 1985 Consol- idated $18,223 3,199 4,883 :345 98 26 1.568 757 28,291 $29,099 5,671 $33,962 241 10 51,114 S 856 $19,079 7 3,206 5,124 345 Petroleum, Petro- Consol- natural chemical idated gas, and other $21,417 3,536 5,515 413 $ 818 $22.235 - 3.506 167 5 682 413 98 11 26 38 -- 1,578 1,438 25 757 836 - )1 38 1 5,3 816 34213 $33,294 $1.010 34 3174 4,727 3 399 $34,940 $37 793 Note 18. Caltex Group of Companies Texaco has [most merits in the Caltex group of companies. owned 50°,S by Texaco and 50'lH by Checruu Corporation.Phe Cakes group of compa- nies consists of Cahex Petroleum Corporation and subsidiaries, P T Caltex Pacific Indonesia, a nd American Overseas Petroleum limited and subsid is ries. Th is groan of companies, on a combined basis, tonsil lutes an integrated organization engaged in the exploration lit and production. transport.atiou. relining, and marketing of crude oil and products Ihereol, in the Middle and Far hasl,.Africa, and Australia. Sornrnorized financial information for the Cakes group, a significant nonsubsidiary company, is presented below: As of December 31, Millions of dollars 1987 1986 l lurtera. assets \uncurrem. nss,'l Curless Iial IlitScs Noncurrent habilu i,'• :aid de1'er,ed troth( Minoritu iulrn 9l in suhsi(1ieq l nmpunirc Nel. avct,, $2,1544 $2,382 $1,999 $1811 3,265 2,939 (1,1665) (1,393) (937) (859) (118) (116) Years ended December 31, Millions of dollars 1987 1966 1885 Operating revenue Operating income, belbre income tax Net income $10,053 770 434 $9.526 $14,784 731 1,326 568 701 Texaco's equity in the net income of the Caltex group her the years ended December 31,1987 1986, and 1985, was $225 million, $318 million, and $328 million, respectively. Dividends received in 1987,1986, and 1985 were $222 million, $290 million, and $427 million, respectively. Texaco's equity in the net income of the Caltex group does not represent the ultimate effect upon Texacos consolidated net income. Crude oil and petroleum products purchased by the Company from Caltex are processed, transported, and sold by Texaco on a worldwide basis at market prices, except when prices set or limited by governments are applicable. Revenues from sales of such crude and products by Texaco are reflected as income from sales and services and the related costs and expenses are reflected as such in the income statement. Texaco's consolidated net, income reflects all producing, transportation. refining, and marketing net income related to crude oil and petroleum products purchased front and sold to the Caltex group. AUDITORS' REPORT 7✓',xaco hm and Subsidiary Companies 37 ARTHUR ANDERSEN & CO. NEW Youtt, N. Y. To the Stockholders, Texaco Inc.: We have examined the consolidated balance sheet of Texaco Inc. (a Delaware corporation) and subsidiary companies as of December 31,1987 and 1986, and the related statements of consolidated income, retained earnings and changes in financial position for each of the three years in the period ended December 31,1987. Our examin- ations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. As more fully described in Notes I and 16 to the consolidated financial statements, a judgment, which may be subject to further appeal, has been rendered against Texaco Inc. in the Pennzoil litigation. On April 12,1987,Texaco Inc. and two of its subsidiaries (the Debtor Companies) each filed a Voluntary Petition for Relief under Chapter 11, Title 11 of the United States Code.The Debtor Companies are operating their businesses as debtors -in -possession subject to the jurisdiction of the U.S. Federal Court. The accompanying financial statements have been prepared on a going -concern basis which contemplates the realization of assets and payment of liabilities in the ordinary course of business.The financial statements do not give effect to all reclassifications and may not give effect to all adjustments that could result from any plans, arrangements or actions which might arise out of the reorganization proceedings, as the eventual outcome of these proceedings is not presently determinable. In our opinion, subject to the effect, if any, that might have been required had the outcome of the uncertainties referred to in the preceding paragraph been known, the financial statements referred to above present fairly the financial pcsition of Texaco Inc. and subsidiary companies as of December 31,1987 and 1986, and the results of their operations and the changes in their financial position for each of the three years in the period ended December 31,1987, in conformity with generally accepted accounting principles applied on a consistent basis. February 25,1988. AUDIT COMMITTEE DUTIES The Audit Committee of Texaco Inc. was established in 1939 and is presently comprised of five nonemployee Directors. Two meetings were held it 1987. Depending on the nature of the matters under review, the outside auditors, as well as certain officers and employees of the Company, may at ; all or part of a meeting. The Committee reviews and evaluates the Company's accounting policies and reporting practices, internal auditing, inter• controls, security procedures, and other matters deemed appropriate. The Audit Committee also reviews the quality standards maintained by AI - Andersen & Co. in their audit of Texaco's financial statements and evaluates their independence and professional competence, as well as the sca of their audit. SUPPLEMENTAL OIL AND GAS INFORMATION 38 7Fraco Inc and Subsidiary Companies The following information is presented in accordance with Financial Accounting Standards Board (FASB)'Statement No. Fig, Disclosures about Oil and Gas Producing Activities. Estimated Proved Reserves —Pages 39 and 40 'Ile proved liquid and gas reserves reported herein are believed to be reasonable estimates consistent with currentknowledge of the charac teristics and production history of the reserves. They include only such reserves as can reasonably he classified as proved. Net reserves repre- sent the volume estimated to he available after deduction of the royalty interests of others from gross reserves. Estimates of reserve quantities are based on sound geological and engineering principles, but, by their very nature, are still estimates that are subject to substantial upward or downward revision as additional information regarding producing lields and technology becomes available. Since estimating underground reserves is not, and does not purport to be, an exact science, the potential for subsequent revisions in estimates is high. The significant upward revisions to U.S. oil and gas reserves were rttributahle to several factors. Production decline rates have not been as severe as originally anticipated. Increased thermal activities resulted in oil reserve additions in California. In -fill drilling operations and improved nerfnrrnance in many major secondary recovery operations provided significant additions in the Mid -Continent area. Drilling and workover }pennons in South Louisiana, both onshore and offshore, also provided iddit ions to liquid reserves. Additions to U.S. gas reserves resulted from ievelopment operations in South Texas and revisions to developed reserves in West Texas. General increases in estimated gas reserves re- sulted from improved performance trends and the additional dissolved ,us that will be recovered from anticipated increased oil recovery. Additions to Europe's estimated liquid reserves were mainly due to xpansions or improved performance in the North Sea fields. European ;as additions were mainly attributed to continued development in Ger- -nany's prolific Permian gas plays. Other Eastern Hemisphere gas revi- sions were principally in the Partitioned Neutral Zone. Canada's down- ward gas revisions were mainly in the Elmworth Field in Northwestern hlberta and were performance related. The nonsubsidiary company's ;stimated reserves include volumes projected to be recovered as reim- oursement for a portion of costs incurred and accordingly these olumes will fluctuate annually with the price of crude oil. Early in 1985,Texaco sold additional shares of Texaco Canada Ines common stock which brought the minority interest in Texaco Canada o approximately 22% and Texaco also concluded the sale of onshore eserves in Trinidad to the Government of Trinidad and Tobago. The impany maintains equity interests in reserves offshore Trinidad. In addition to the estimated proved reserves, the Company has substantial volumes of crude oil supplies available because of its long- standing relationship with the Government of Saudi Arabia. Texaco Inc. annually provides information concerning oil and gas -eserves to the U.S. Department of Energy and to certain other govern- nental bodies. Such information has peen compatible with the inlbrma- ion presented in this Annual Report. The Company presently expects that, (luring 1988, net production of tatural gas will be approximately 2,258 million cubic feet ;t day.This -stimate is based on past performance and on the assumption that ;here quantities of gas can be produced under operating and economic :onditions existing at December [31.1987, both in the United States and (broad, and without any attempt to predict possible change in prices or world economic conditions. These expected production volumes for 1988 if natural gas, together with normal related supply arrangements, ire sufficient to meet anticipated delivery requirements under contrac- tual arrangements. Approximately 85% of Texaco's proved natural gas reserves in the United States are covered by long-term sales contracts or required for use in its own operations. The balance is sold under short-term arrangement. Capitalized Costs —Page 41 Capitalized costs represent the amounts of capitalized proved and unproved property costs, including support equipment and facilities, along with the related accumulated depreciation, depletion, and amortization. Costs Incurred —Page 41 Costs incurred represent amounts capitalized or charged against income as expended, except for support equipment and facilities for which the related depreciation charges are included. Results of Operations —Page 42 The results of operations from net production should not be construed to be total upstream operating earnings, which include such elements as: the cost of purchased oil and gas, including royalties; sale of such purchases; equity in the earnings of certain nonsubsidiary companies; and miscellaneous operating income. Income tax expense has been computed by applying the statutory income tax rates, including state and local income taxes, for the various countries with oil and gas producing activities to the pretax results of operations after permanent differences and reflects tax credits and allowances relating to the oil and gas producing activities. Average Sales Prices and Production Costs —Per Unit —Page 42 Average sales prices per unit and average production costs per compos- ite barrel are based on the gross revenues and production costs, respec- tively, as reported in the Results of Operations table. Production costs include cash lifting costs, exclusive of payments for royalties and income taxes. However, it is important to note that such income taxes and royal- ties substantially add to the total cost of producing operations and sub- stantially reduce the profitability and cash flow from such operations. Standardized Measure of Discounted Future Net Cash Flows — Page 43 The purpose of tins disclosure is to provide data with respect to estimated future net cash flows from estimated future production of estimated net proved developed and undeveloped reserves of crude oil, natural gas liquids, and natural gas. This information is based on estimated net proved reserves as pre- sented in the section, Estimated Net Proved Developed and Undeveloped Reserves, and these data should be read in corpunction with that disclosure.Texaco is presenting this information in good faith compli- ance with the requirements of the FASB. While Texaco has exercised all due care in developing the data, it is necessary to caution investors and other users of this information to avoid its simplistic use. In this respect, since the FASB prescribes use of year-end prices and costs, which may not prevail in the future, the results are not necessarily indicative of Texaco's perception of the future cash flows to be derived from these reserves, Users should carefully read the financial information presented in conjunction with the following qualifications and caveats. There are many variables, assumptions, and imprecisions inherent in the development of estimated future net cash flows to be derived from estimated production of net proved oil and gas reserves and the discounted amount of such estimated future net cash flows. As prescribed by the FASB, future net cash flows are generally based on revenues and estimated production and development costs prevailing at the respective year -ends, taking into consideration price changes provided by contractual arrangements and fixed and determinable price 39 escalations allowed under the Natural Gas Policy Act of 1978. Accord- ingly, year-end projections do not give effect to events which have occurred since the year-end dates or which may occur subsequently. In addition, the projections of estimated future net cash flows are affected by a multiplicity of factors which are subject to fluctuation, thereby unavoidably making the projections subject to the possibility of a wide range of variation. These factors include such items as revisions in the estimated quantities of producible reserves; timing of production; future technological and economic conditions; and future governmental actions regarding production, taxes, royalties, ere. Since projections of future cash inflows and costs are highly subjec- tive, actual net cash flows to be derived by Texaco from future produc- tion could differ substantially from the estimated amounts set forth in the tables. Accordingly,Texaco urges that extreme care be exercised in the use of the data. The accretion of discount is the amount by which the discounted estimated future net cash flows from estimated net production of proved oil and gas reserves at the beginning of the year increased during the year due to the passage of time. The amount of adjustment was computed under a compound interest method which resulted in an effective rate of approximately 10.5%. The estimated income tax expenses were computed by applying the statutory income tax rates, including state and local income taxes, to the future pretax net cash flows less appropriate tax deductions, giving effect to tax credits. Effective rates were used for certain foreign areas, where appropriate. Estimated Net Proved Developed and Undeveloped Reserves of Crude Oil and Natural Gas Liquids Millions of barrels United Canada States 1987 1986 1985 1987 1986 1985 Other Western Hemisphere Europe Other Eastern Hemisphere Worldwide 1987 1986 1985 1987 1986 1985 1987 1986 1985 1987 1986 1985 Crude Oil Texaco Inc. and consolidated subsidiaries As of January 1 1,457 1,554 1,667 217 211 224 Increase (decrease) attributable to: Revisions of previous estimates 129 76 61 (4) 16 14 Improved recovery 5 — 7 13 14 3 Purchases (sales) of minerals -in -place (71 (1I (1) 1 -- -- Extensions, discoveries, and other additions 6 8 16 3 3 2 Production (163) (1801 (196) (25) (27) (32) TexactI Inc. and consolidated subsidiaries as of December 31' Equity in reserves of a nonsubsidiary company as of December 31 Total as of December 31 198 220 292 165 174 198 507 534 548 2,544 2,693 2,929 (4) 9 5 51 28 23 11 14 14 183 143 117 — — — 5 6 — — — — 23 20 10 — — (47) (2) (3) — (2) — (10) (4) (48 8 6 8 2 9 3 18 7 18 37 33 47 (24) (37) (38) (55) (49) (50) (46) (48) (46) (313) (341) (362 1,427 1,457 1,554 205 217 211 178 198 220 166 165 174 488 507 534 2,464 2,544 2,692 — — -_ — — — — — — — 326 364 307 326 364 307 1,427 1,457 1,554 205 217 211 178 198 220 166 165 174 814 871 841 2,790 2,908 3,00( Natural Gas Liquids Texaco Inc. and consolidated subsidiaries As of January 1 Increase (decrease) attributable to: Revisions of previous estimates Purchases of minerals -in -place Extensions, discoveries, and other additions Production Texaco Inc. and consolidated subsidiaries as of December 31" Equity in reserves of a nonsubsidiary company as of December 31 Total as of December 31 176 197 212 105 99 99 197 212 220 99 99 84 11 19 26 10 7 2 1 3 — 5 13 (34) (35) (37) (4) (5) (5) 176 197 212 105 99 99 15 16 16 — — 311 327 32( 2 (1) 2 — — 23 18 3(. — — 1 — — — 2 7 1(. — — (4) (1) (2) — - — (42) (41) (44 — -- — 13 15 16 13 15 16 - 294 311 321 5 6 6 5 6 I 5 6 6 299 317 33: Grand total crude oil and natural gas liquids as of December 31 1,603 1,654 1,766 310 316 310 178 198 220 179 180 190 819 877 847 3,089 3,225 3,33: 'Includes net proved developed reserves •'Includes net proved developed reserves 173 194 206 104 99 99 1,250 1,265 1,329 193 211 210 174 193 213 144 146 129 459 475 489 2,220 2,290 2,37: — 12 12 13 — — 289 305 31 SUPPLEMENTAL OIL AND GAS INFORMATION (continued) 40 Thrace Inc and Subsidiary Companies Estimated Net Proved Developed and Undeveloped Reserves of Natural Gas Billions of cubic feet United Canada Other Western Europe Other Eastern Worldwide States Hemisphere Hemisphere _ 1987 1986 1985 1987 1986 1985 1987 1986 1985 1987 1986 1985 1987 1986 1985 1987 1986 1985 Texaco Inc. and consolidated subsidiaries As of January 1 5,132 5,803 6,539 1,625 1,616 1,626 536 579 680 682 691 714 44 27 31 8,019 8,716 9,590 Increase (decrease) attributable to: Revisions of previous estimates 330 11 53 (82) 31 15 33 (8) 3 92 19 1 61 22 (1) 434 75 71 Purchases (sales) of minerals -in -place (51) (2) (2) 1 — — — — (72) (1) — (1) — — (52) (2) (74 Extensions, discoveries, and other additions 120 54 89 24 19 8 2 3 5 24 14 11 — -- 3 170 90 111 Production (748) (734) (876) (39) (41) (33) (38) (38) (37) (52) (42) (35) (8) (5) (6) (885) (860) (987 Texaco Inc. and consolidated subsidiaries as of December 31" 4,783 5,132 5,803 1,529 1,625 1,616 533 536 579 745 682 691 96 44 27 7,686 8,019 8,711 Equity in reserves of a nonsubsidiary company — — — — — — — - — 161 146 153 161 146 152 Total as of December 31 4,783 5.132 5,803 1,529 1,625 1,616 533 536 579 745 682 691 257 190 180 7,847 8,165 8,86E "Includes net proved developed reserves 4,547 4,938 5,537 1,496 1,557 1,529 375 376 418 520 488 467 94 41 25 7,032 7,400 7,97E Estimated Gross Proved Reserves of Crude Oil, Natural Gas Liquids (NGL), and Natural Gas As of December 31, Minions of barrels 1987 1986 1981 Crude Oil NGL Total Crude Oil NGL Total Crude Oil NGL Tota Texaco Inc. and consolidated subsidiaries United States 1,573 193 1,766 1,601 216 1,817 1,712 232 1,94, Canada 254 126 380 269 127 396 289 128 4T Usher Western Hemisphere 216 — 216 240 — 240 266 — 261 Europe 180 16 196 181 16 197 199 18 21 Other Eastern Ilemisphere 588 7 595 617 __ 617 647 _ 64: Texaco Inc. and consolidated subsidiaries 2,811 342 3,153 2,908 359 3,267 3,113 378 3,49 Equity in reserves of a nonsubsidiary company 326 5 331 364 6 370 307 6 31 Worldwide 3,137 347 3,484 3,272 365 3,637 3,420 384 3,80 Billions of cubic feet Natural Gas Texaco Inc. and consolidated subsidiaries I' rited States 5,636 Canada 1,977 01 bet Western Hemisphere 674 Europe 822 Other Eastern Hemisphere 114 Texaco Inc. and consolidated subsidiaries 9,223 Equity in reserves of a nonsubsidiary company 161 Worldwide 9,384 Natural Gas Natural Ga 6,053 2,148 679 801 50 6.83 2,21 73 84 2 9,731 10,65 146 15 9,877 10,81 Capitalized Costs Millions of dollars As of December 31, United Canada Other Western Europe Other Eastern States Hemisphere Hemisphere 1987 1986 1987 1986 1987 1986 1987 1986 1987 1986 1987 Worldv Capitalized costs: Proved properties Unproved properties Support equipment and facilities Total Accumulated depreciation, depletion, and amortization consolidated subsidiaries 9,311 10,702 1,017 994 223 217 674 844 526 595 11,751 Texaco Inc. and Equity interest in a nonsubsidiary — — 441 a19 441 company — — — _ -- — __.---9 44 Total $ 9,311 $10702 $1,017 $ 994 $223 $217 $ 674 $ 844 $ 967 $1,014 $12,192 $0 $18,516 1,271 151 ,207 147 $18,277 $1,274 $1S445 $374 21 109 77 1,527 $2,335 $2,337 $ 808 $ 703 $2 $22 1,190 I 434 473 18 15 103 160 134 131 166 130 855 20,140 20,021 1,443 1,369 567 555 2,578 2,545 1,032 1,020 25,760 25 10,829 9,319 426 375 344 338 1,904 1,701 506 425 14,009 12 Costs Incurred Millions of dollars United Canada Other Europe Other World States Western Eastern Hemisphere Hemisphere For the year ended December 31,1987 Costs incurred: Proved property acquisition Unproved property acquisition Exploration Development Texaco Inc. and consolidated subsidiaries Equity interest in a nonsubsidiary company Total For the year ended December 31,1986 Costs incurred: Proved property acquisition Unproved property acquisition Exploration Development. Texaco Inc. and consolidated subsidiaries Equity interest in a nonsubsidiary company Total For the year ended December 31,1985 Costs incurred: Proved property acquisition Unproved property acquisition Exploration Development Texaco Inc. and consolidated subsidiaries Equity interest in a nonsubsidiary company Total $ 27 $ 4 $— $ — $ — $ ;. 77 14 — 264 54 20 68 38 i4.', 688 56 27 142 65 1,056 128 47 210 103 1 :,a $1,056 $128 $47 $210 $158 $1 3,, $ 25 $ — $ 3 $ -- $ 4 34 6 339 51 19 63 53 742 85 23 174 80 1,140 142 45 237 139 69 $ 1,140 $ 142 $ 45 $237 $ 208 $ 69 $ — $ 3 $ 32 $ 6 56 14 1 603 58 30 72 107 1,069 63 25 131 5? 1,797 135 59 235 165 52 $ 1,797 $ 135 $ 59 $ 235 $217 SUPPLEMENTAL OIL AND GAS INFORMATION (continued) 42 7kraco Ina and Subsidiary Companies Results of Operations Millions of dollars United Canada Other Europe Other Worldwide States Western Eastern Hemisphere Hemisphere For the year ended December 31,1987 9mss revenues from: Sales and transfers to nonsubsidiary companies and to divisions and subsidiaries within Texaco Sales to unaffiliated entities production costs Exploration expenses Depreciation, depletion, and amortization expense Other expenses rota) before estimated income tax Estimated income tax Texaco Inc. and consolidated subsidiaries dquity interest in a nonsubsidiary company Dotal For the year ended December 31,1986 vross revenues from: Sales and transfers to nonsubsidiary companies and to divisions and subsidiaries within Texaco Sales to unaffiliated entities 'roduction costs ':xploration expenses Tepreciation, depletion, and amortization expense )ther expenses Total before estimated income tax Estimated income tax Texaco Inc. and consolidated subsidiaries Equity interest in a nonsubsidiary company fatal ?Lr the year ended December 31,1985 tress revenues from: Sales and transfers to nonsubsidiary companies and to divisions and subsidiaries within Texaco Sales to unaffiliated entities 'roduction costs 'ixploration expenses Depreciation, depletion, and amortization expense )ther expenses Total before estimated income tax stimated income tax Pexaco Inc. and consolidated subsidiaries Equity interest, in a nonsubsidiary company loyal $2,315 $471 $114 $679 $625 $4,204 1,592 63 217 471 93 2,436 (1,532) (132) (84) (299) (164) (2,211) (211) (37) (19) (56) (33) (356) (1,548) (66) (31) (276) (78) (1,999) (176) (5) (3) (8) (10) (202) 440 294 194 511 433 1,872 (290) (143) (161) (286) (411) (1,291) 150 151 33 225 22 561 130 130 $150 $151 $ 33 $225 $ 152 $ 711 $ 2,063 $ 439 $ 205 $ 422 $ 508 $ 3,637 1,925 65 221 396 90 2.697 (1,759) (174) (115) (218) (169) (2,435) (290) (32) (19) (60) (44) (445) (1,768) (56) (36) (276) (66) (2,202) (210) (4) (8) (5) (10) (237) (39) 238 248 259 309 1,015 (185) (131) (212) (231) (267) (1,026) (224) 107 36 28 42 (11) -- -- — -- 87 87 $ (224) $107 $ 36 $ 28 $ 129 $ 76 $ 3,628 $ 574 $ 436 $ 677 $ 901 $ 6,216 3,274 378 297 816 193 4,958 (2,342) (283) (140) (299) (163) (3,227) (463) (46) (27) (70) (93) (699) (1,912) (66) (38) (450) (60) (2,526) (236) (2) (2) (5) (9) (254) 1,949 555 526 669 769 4,468 (1,131) (338) (415) (523) (718) (3,125) 818 217 111 146 51 1,343 -- .-- -- — 137 137 $ 818 $ 217 $ 111 $ 146 $ 188 $ 1,480 kverage Sales Prices and Production Costs —Per Unit Average sales prices 1987 1986 1985 Crude oil Natural Crude oil Natural Crude oil Natural and gas per and gas per and gas per Average production costs natural gas thousand natural gas thousand natural gas thousand (per composite barrel) liquids cubic liquids cubic liquids cubic --------------- -- per barrel feet per barrel feet per barrel feet 1987 1986 '985 anted States lanada lther Western Hemisphere Europe )ther Eastern Hemisphere $14.84 $1.55 $13.62 $1.86 $2342 $2.22 $4.84 $5.24 $621 17.39 1.27 14.97 1.64 25.33 2.02 3.78 4-80 6.56 11.81 .93 10.45 1.09 '8.18 1.56 3.02 3-00 8-38 17.81 2.42 14.32 3.27 26.56 3.38 4.49 4.63 520 15.71 1.96 1249 1.35 24.44 1.42 3.75 3-87 3.64 43 Standardized Measure of Discounted Future Net Cash Flows United States Millions of dollars Canada Other Europe Other Worldwide Western Eastern Hemisphere Hemisphere 1987 Future: Cash inflows $ 28,624 $ 6,341 $ 2,758 $ 4,977 $ 6,340 $ 49,046 Production costs (16,308) (2,242) (830) (1,229) (1,684) (22,2931 Development costs (2,062) (297) (90) (656) (304) (3,4091 Income tax expenses (3,007) (1,773) (1,361) (1,802) (3,472) (11,4151 Net cash flows 7,247 2,029 477 1,290 880 11,923 Discount for estimated timing of future cash flows (2,750) (1,242) __. (168) (482) (417) (5,059) Standardized measure of discounted future net cash flows: Texaco Inc. and consolidated subsidiaries 4,497 787 309 808 463 6,864 Equity interest in a nonsubsidiary company — — — — 790 790 Total $ 4,497 $ 787 $ 309 $ 808 $ 1,253 $ 7,654 1986 Future: Cash inflows $ 30,569 $ 7,211 $ 2,664 $ 5,243 $ 7,680 $ 53,8 Production costs (16,939) (1,993) (905) (1,342) (2,192) ;23,€ Development costs (2,309) (241) (129) (564) (275) (3,5 Income tax expenses (3,320) (2,267) (1,202) _., (1,918) (3,405) (12,1 Net cash flows 8,001 2,710 428 1,419 1,808 14,5 Discount for estimated timing of future cash flows (3,246) (1,577) _ (126) (524) (897) (6,5 Standardized measure of discounted future net cash flows: Texaco Inc. and consolidated subsidiaries 4,755 1.133 302 895 911 Equity interest in a nonsubsidiary company — — — — 431 Total $ 4,755 $ 1,133 $ 302 $ 895 $ 1,342 $ 8,z 1985 Future: Cash inflows Production costs Development costs Income tax expenses Net cash flows Discount for estimated timing of future cash flows Standardized measure of discounted future net cash flows: Texaco Inc. and consolidated subsidiaries Equity interest in a nonsubsidiary company Total $ 54,762 $ 10,543 $ 4,456 $ 7,881 $ 12.368 $ 90,1 • : (25,950) (1,857) (977) (1,677) (2,652) (33: (2,872) (307) (160) (612) (301) (4,; (11,225) (4,357) (2,343) _ (3,561) (8,043) (29,! 14,715 4,022 976 2,031 1,372 23, (5,682) (2,150) _ (340) (766) — (515) (9_ 9,033 1,872 636 1.265 857 131 • — — 1,333 1,: $ 9033 $ 1,872 $ 636 $ 1,265 $ 2,190 $ 141 Sources of Change in the Worldwide Standardized Measure of Discounted Future Net Cash Flows Texaco Inc. and subsidiary companies Millions of dollars 1987 1986 Beginning of period Sales and transfers of oil and gas produced, net of production costs Net changes in prices and production costs Extensions, discoveries, and improved recovery, less related costs Development costs incurred during the period Timing of production and revisions of previous quantity estimates Accretion of discount Net change in income taxes Sales of minerals -in -place Other End of period $ 6,864 $ 7,996 $ 13.663 $ 16. (4,657) (4,081) (8, (307) (15,246) (1, 410 317 1,026 1,161 1, 1,025 (1,017) 1,544 3,197 3, • 331 10,081 1, (114) (61) (• (390) (18) $ 7,996 $ 13 STATISTICAL SUMMARY 44 Texaco Inc. and Subsidiary Companies Production of Crude Oil and Natural Gas Liquids (including interests in nonsubsidiary companies) Thousands of barrels a day For the years ended December 31, Gross Net 1987 1986 1985 1984 1983 1987 1986 1385 1984 1983 United States Crude oil: California Louisiana Texas Other states 04al crude oil Natural gas liquids United States 152 167 191 189 45 145 158 181 178 40 112 136 142 132 96 93 113 118 111 78 142 143 163 170 119 122 122 139 149 105 104 117 115 121 73 88 100 99 106 63 510 563 611 612 333 448 493 537 544 286 93 97 103 86 60 92 97 103 82 60 603 660 714 698 393 540 590 €40 626 346 Other Western Hemisphere Crude oil: Canada Colombia Ecuador Trinidad rota) crude oil Natural gas liquids )ther Western Hemisphere Western Hemisphere 92 99 133 148 131 69 73 89 98 86 14 20 20 17 15 12 18 18 16 15 51 88 88 83 79 42 72 72 67 64 13 12 15 23 24 12 11 13 20 21 170 219 256 271 249 135 174 192 201 186 11 13 14 15 16 11 13 14 15 16 181 232 270 286 265 146 187 206 216 202 784 892 984 984 658 686 777 846 842 548 ;astern Hemisphere rude oil: Africa Europe Far East Middle East Total crude oil Natural gas liquids :astern Hemisphere* Worldwide 21 23 20 23 18 17 18 16 18 14 164 148 154 132 50 151 135 137 116 43 117 129 111 148 293 117 129 110 148 292 105 104 235 387 595 83 83 215 367 588 407 404 520 690 956 368 365 478 649 937 11 4 4 4 1 11 4 4 4 1 418 408 524 694 957 379 369 482 653 938 1,202 1,300 1,508 1,678 1,615 1,065 1,146 1,328 1,495 1,486 ncludes crude oil purchases under special arrangements. 9 11 148 312 559 9 11 148 312 559 Vet Production of Natural Gas** (Texaco Inc. and subsidiary companies) Millions of cubic feet a day abr the years ended December 31, 1987 1986 1985 1984 1983 Cnited States •1anada •Ither Western Hemisphere Flu rope • )ther Eastern Hemisphere Worldwide 2,082 1,959 2,352 2,764 1,855 1,766 1,682 2,071 2,487 1,596 85 82 87 90 75 100 96 94 98 106 122 87 86 71 55 9 12 14 18 23 =represents marketable production on an "as sold" basis and not total gas recovered at the surface from producing wells. Excluded are quantities not sold, such as those applicable to flared gas, injected gas, and gas consumed in producing operations. Net production represents gross production after deduction of the royalty interests of others. 45 Number of Wells Capable of Producing (including interests in nonsubsidiary companies) As of December 31, 1967 1986 1985 1184 198' Gross Net Gross Net Gross Net Gross Net, Gross Net Oil wells: tithed States Canada Other Western hemisphere Europe Other Eastern Item isphere Worldwide' Gas wells: United Stales Canada Other Western Hemisphere Europe Other Eastern Hemisphere Worldwide' 92,600 38,061 09,478 40,244 108,472 41210 117877 42.004 63,932 8,969 2,037 8,3/9 1,932 7,943 1,913 7750 1.822 4,883 (I]'7 1,070 511 980 485 1.151 622 1761 1,286 1,669 230 581 354 601 335 763 402 762 401 592 2-'1 3,939 1,697 4,130 1,644 4,031 1,604 3 /74 1,490 2.675 .134 107,159 42,660 113,568 44,740 122,330 45,757 126874 4/ 003 73751 2 151 9,985 4,034 10.002 4,125 10461 4:316 10.637 4,319 5.8311 2,292 522 7.314 511 2494 458 7177 480 24 12 27 13 24 I? 46 29 42 80 30 76 30 95 42 76 37 47 35 13 40 12 44 16 42 13 38 12,416 4,611 12,959 4.691 12,818 4.844 12978 /178 7.134 'Includes 1,013 gross and 510 net multiple completion oil wells and 148 gross and 228 net. multiple imnpletion gas wells in 198'7 Oil, Gas, and Dry Wells Completed (Texaco Inc. and subsidiary companies) fbr the years ended December 31, 1967 Oil Gas Dry 1916 Oil Gas Dry lulls Oil Gas Dry 19x4 Oil Gas Dry Oil Gas Dr) Net exploratory wells: United States 7 3 28 :0 14 41 23 28 63 214 31 .'9 10 29 9 Other Western Hemisphere. including Canada 22 6 40 IO 9 20 33 5 45 hi 28 10 62' Eastern Hemisphere, including Europe 1 1 9 4 — 9 6 '? 13 I' 5 1 1" Worldwide 30 10 77 24 23 70 62 35 121 39 111 45 6 12' Net development wells: tinned States 602 34 25 288 30 17 1,039 65 28 951 77 .11 339 0' Oi her Western Hemisphere, including Canada 61 7 7 73 7 5 58 9 4 191 3 6 S2 Eastern Hemisphere, im:luding Europe 14 — I 1)) 3 2 65 2 Sit - 9 d I Worldwide 677 41 33 409 10 24 1.162 14 34 1,1 1' 76 14 422 4( Gross exploratory and development wells: United States 1,026 65 97 1,012 12/ 131 7637 27/ 7(18 2,253 24) 232 961 1)' 22 Other Western Hemisphere. including Camula 240 28 81 388 114 45 277 '2.7 96 .H3 8l 112 I i 4 Eastern Hemisphere, including Europe 54 6 217 lib 7 39 227 8 54 186 57 111 1 4 Worldwide 1,320 99 205 1,556 748 715 2,541 312 358 2,772 326 356 1,174 169 30 Additional Well Data (including interests in nonsubsidiary companies) As of December 31,1987 United Other Western Eastern States Hemisphere, Hemisphere, including Canada including Europe Worldwio Wells in the process of drilling: Gross Net Pressure maintenance and waterllood installations in operation Watertlood projects in the process of being installed 93 47 538 2 111 68 164 6 41 18 170 24 13 87 STATISTICAL SUMMARY (continued) 46 ?brat° Inc and Subsidiary Companies Oil and Gas Acreage (including interests in nonsubsidiary companies) As of December 31, 1987 Thousands of acres Gross Net Gross Net Gross Net Gross Net Gross Net 1986 1985 1984 1983 Producing United States 5,030 3,232 5,362 3,220 7,515 3,327 8,234 3,468 3,572 2,426 Canada 1,991 786 2,007 801 1,934 793 1,600 707 1,221 557 Other Western Hemisphere 712 507 768 566 821 610 985 714 1,579 1,076 Europe 406 191 547 230 536 215 601 221 386 161 Other Eastern Hemisphere 675 220 1,097 298 1,021 267 1,058 280 893 238 Worldwide 8,814 4,936 9,781 5,115 11,827 5.212 12,478 5,390 7,651 4,458 Undeveloped United States 12,812 9,683 13,520 11,073 16,817 14,013 21,881 15,635 17,046 11,345 Canada 6,788 4,937 8,385 5,384 12,444 6,799 16,999 8,419 9,956 5,436 Other Western Hemisphere 25,878 22,456 36,236 34,360 38,362 36,616 50,983 47,802 2,989 1,346 Europe 10,406 4,620 14,668 5,968 19,945 7,785 22,574 8,061 26,063 9,231 Other Eastern Hemisphere 38,481 16,375 33,199 12,307 33,709 11,322 83,167 21,217 77,650 27,769 Worldwide 94,365 58,071 106,008 69,092 121,277 76,535 195,604 101,134 133,704 55,127 Total 103,179 63,007 115,789 74,207 133,104 81,747 208,082 106,524 141,355 59,585 Refinery Input of Crude Oil, Natural Gas Liquids, and Distillates (including interests in nonsubsidiary companies) Ebr the years ended December 31, Thousands of barrels a day 1987 1986 1985 1984 1983 United States Other Western Hemisphere: Canada Iluatemala Panama frin idarl Other Other Western Hemisphere Western Hemisphere Eastern Hemisphere, including Europe: Europe: lermany Netherlands Sweden United Kingdom Other Total Europe 4trica 'ar East 'diddle East. Eastern Hemisphere, including Europe Worldwide 836 920 838 946 676 116 115 115 117 135 12 10 14 14 12 31 22 30 38 42 — — 9 60 62 7 5 8 9 9 166 152 176 238 260 1,002 1.072 1.014 1,184 936 169 169 159 149 147 131 150 139 106 55 67 65 54 56 57 190 153 145 146 116 — — 14 17 20 557 537 511 474 395 5 7 6 7 8 273 270 283 328 346 55 48 34 32 23 890 862 834 841 772 1,892 1,934 1,848 2,025 1.708 Refinery Crude Oil Capacity (including interests in nonsubsidiary companies) is of December 31, Thousands of barrels a day 1987 1986 1985 1984 1983 'I,inited States Other Western Hemisphere Eastern Hemisphere, including Europe Worldwide 2,139 2,180 2,235 2.585 2398 886 886 903 1,059 937 246 247 247 466 494 1,007 1,047 1,085 1,060 967 Texaco Inc. and subsidiary companies included above: Nefinery input lielinery crude oil capacity 1,457 1,504 1,397 1,516 1 180 1,636 1,658 1,670 2,014 1.799 47 Petroleum Product Sales —by Principal Products (Texaco Inc. and subsidiary companies) Fbr the years ended December 31, Thousands of barrels a day 1987 1986 1985 1981 198? United States: Gasolines Middle distillates Avjet fuels Residual fuel oils Lubricating oils Other United States Other Western Hemisphere: Gasolines Middle distillates Avjet fuels Residual fuel oils Lubricating oils Other Other Western Hemisphere Eastern Hemisphere, including Europe: Gasolines Middle distillates Avjet fuels Residual fuel oils Lubricating oils Other Eastern hemisphere, including Europe Worldwide 563 570 560 565 421 223 244 228 234 157 102 108 88 83 68 84 109 104 128 108 16 15 19 20 18 171 _ 181 156 145 54 1,159 1227 1.155 1.175 826 179 175 163 161 154 140 137 134 139 132 18 20 19 20 21 45 40 46 59 61 6 5 5 5 `. 18 18 23 27 2 406 395 390 4 n 39/ 227 211 208 198 16t 238 224 236 228 701 42 38 37 41 4/ 144 153 151 152 15/ 7 6 7 7 65 58 41 44 31 723 696 680 670 60.` 2,288 2,312 2,225 2,256 1,82 Petroleum Product Sales (including interests in nonsubsidiary companies) United States Other Western Hemisphere Eastern Hemisphere, including Europe Worldwide 1,159 1,227 1.156 1,180 83' 406 395 390 411 39z 1,169 1,118 1,117 1,134 1 044 2,734 2,740 2,663 2,725 2,27, Natural Gas Sales (including interests in nonsubsidiary companies) Millions of cubic feet a day United States Outside United States Worldwide 2,392 2,363 2,883 2,983 2,091 375 342 345 307 27. 2,767 2,705 3,228 3,290 2.37: Transportation (Texaco Inc. and subsidiary companies) Marine Owned and term -chartered vessels (at year-end): Number of vessels' Tonnage (thousands of deadweight tons)' 'Excludes vessels in lay-up during 1984-1186 Pipe Lines (wholly owned)t Mileage (at year-end): Crude oil Products Total mileage tin addition, the Company and its subsidiary companies owned varying equity interests in the following pipeline mileage: Crude oil Products 49 51 51 62 7 5,874 5.774 5,081 6,470 '582 9,615 9,595 9,679 3.888 x,19 1,910 1,882 1,790 1787 1,33 11,525 11,477 11,469 11,675 1,53 12,078 12.348 12,508 12,411 1 t87 14,046 14,085 14.766 14,971 1:'.97 Total mileage 26,124 26,433 27,274 27,382 2 i,85 OFFICERS OF TEXACO The executive officers of Texaco Inc. include those officers pictured or listed on this page and Mr. Kinnear, President. and Chief Executive Officer, and Mc DeCrane, Chairman of the Board, whose photographs appear on pages 2 and 3, respectively. They average 56 years in age and 30 years in service with Left to right: Senior Vice Presidents James L. Dunlap (seated), Roland M. IGmthier, William S. Barrack, Jr., Willis B. Beals, and Richard G. Brinkman. Mr. Brinkman is also Chief Financial Officer. OTHER OFFICERS OF TEXACO INC. Robert S. Bevan General Tax Counsel Albert J. Bradford Comptroller David C. Crikelair Treasurer Carl B. Davidson Vice President and Secretary B. R. Dickinson Vice President/Technology DIVISION OFFICERS Texaco U.S.A. *.lames L. Dunlap President Exploration, Producing and ties Activites 'Gerald F. Rome Executive Vice President Donald E. Hyer Senior Vice President/ Exploration Jack F. Burns Vice President/Gas L. Paul Teague Vice President/ Producing Operations Division Vice Presidents Donald A. Bennett Exploration and Production 'I'cchnology .Joseph G. Butera I entral Exploration Gene F. Clarke Los Angeles Producing Ramsey W. Farley New Orleans Producing Floyd E. Ferguson Gas Pipelines Charles F. Gee Natural Gas Plants Louis F. Goss Southern Exploration Alan R. McDaniel Midland Producing Andrew C. Overpeck, III Gas Sales and Purchases Manufacturing and Marketing Activities Donald H. Schmude Vice President./ Manufacturing Glenn F. Tilton Vice President / Marketing Trading and Transportation Activities James E. Shamas President/ Texaco Trading and Transportation Inc. J. Edward Johnson Group Vice President/ Crude Oil Marketing Ronald G. Lawrence Group Vice President./ Finance and Administration Charles R. Hoffman President./ Texaco Pipeline Inc. Texaco. In addition, the officers of the Company's major divisions are listed, These officers —both corporate and division —are directly responsible for Texaco) operations. Left to right: Senior Vice Presidents William C. Weitzel, Jr., William K. Tell, Jr., Elton G. Yates, and Paul B. hicks, Jr. Mr. Weitzel is also General Counsel. Public and Government Activities J. Donald Annett Vice President/ Washington Office Frank W. Miller Vice President/ Public & Government Affairs Texaco Europe *Paul B. Hicks, Jr. President. William P. Doyle Vice President/ Exploration and Producing Anthony J. Dalessio Vice President/ Manufacturing and Marketing Texaco Latin America/ West Africa C. Robert Black President Gene R. Bates Senior Vice President/ Exploration and Producing Stephen T. O'Farrell Vice President./ Manufacturing and Marketing Texaco Middle East/ Far East tEarl L. Johnson President Jerry H. Jones Vice President Don E. Six Vice President Texaco Chemical Company *Willis B. Reals Chairman and President Norman R. Young Senior Vice President Ralph M. Lewis Vice President/ Marketing Robert Tesoro Vice President/ Operations Texaco Oil Trading and Supply Company Raymond A. O'Doherty President John W. McHale Vice President Texaco Development Corporation H. Richard Horner President Craig M. McLaughlin Executive Vice President *Also a Senior Vice President of Texaco Inc. *Also a Vice President of Texaco Inc. Hello