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TEXACO CHIEF EXECUTIVE OFFICER KINNEAR REPORTS ON TEXACO'S FISCAL AND OPERATIONAL STRENGTH TO SECURITY ANALYSTS AND OUTLINES FUTURE CHALLENGES

TEXACO CHIEF EXECUTIVE OFFICER KINNEAR REPORTS ON TEXACO'S FISCAL AND OPERATIONAL STRENGTH TO SECURITY ANALYSTS AND OUTLINES FUTURE CHALLENGES
 WHITE PLAINS, N.Y., Dec. 10 /PRNewswire/ -- Texaco's President and Chief Executive Officer James W. Kinnear today told a meeting of 180 security analysts at the company's executive offices in Harrison, N.Y., "Texaco's strength and competitiveness have increased and its reputation in business and with the public has improved."
 Underscoring Texaco's recent accomplishments, Kinnear continued, "As we approach Texaco's 90th anniversary, our company has become a leader in the industry." And looking to the future, Kinnear emphasized that, "At a time of unprecedented and fundamental change in the world, Texaco is highly qualified to manage change, and improve our competitive position."
 Commenting on Texaco's earnings in the first nine months of 1991, Kinnear declared that the company had demonstrated that it can "produce solid results under the tough conditions caused by the worldwide economic slowdown." In spite of severe pressure on earnings and cash flows throughout the petroleum industry following the Gulf war, Kinnear said, Texaco has maintained -- and in some segments improved -- its competitive position.
 Although Texaco has felt the impact of flat crude oil prices, low natural gas prices, and narrow refining margins, Kinnear said, "Our U.S. organization has done an excellent job of dealing with the current situation." By increasing production and sales volumes, Texaco has been able to blunt price declines, Kinnear told the analysts. At the same time, he said, the company has held to its five-year capital spending plan, making mid-course corrections to adjust to changes in the marketplace.
 The result of Texaco's performance, Kinnear noted, is that by every significant measure -- debt-to-capital ratio, cost of debt, capital spending as a percentage of depreciation, depletion and amortization, reserve replacement and finding costs -- Texaco is in good financial and operational shape.
 Business trends for the fourth quarter show strength in international upstream and downstream business and satisfactory results in the U.S. upstream area, Kinnear said. The weaknesses in U.S. downstream margins and chemicals continue for the industry.
 Looking at the year ahead, Kinnear indicated that, "For 1992, Texaco's capital spending is estimated to be in line with our 1991 program of $3.6 billion. About 55 percent of what we spend will go to exploration and production, and 35 percent to refining and marketing -- roughly the same ratio as this year."
 Said Kinnear, "We're strong, fit and ready to achieve the ambitious goals of our aggressive five-year plan. But we're not waiting for the future to come to us. We're taking the bit in our teeth and running with it."
 Turning Challenges to Opportunities
 For the future, Kinnear sees several challenges for Texaco, and he outlined the company's plans for meeting each one.
 Planning for Economic Uncertainty and Industry Volatility
 In 1992, the uncertain world economy presents a major challenge, which Texaco will address by anticipating shifts in market conditions, adjusting to a changing workforce, and maintaining its leading-edge technology, Kinnear said. "We believe that Texaco's strict attention to containing costs and improving efficiency and productivity, combined with our solid financial planning and management, give us the tools to manage through stormy economic times -- which seem to have become the norm."
 Sound planning -- an area where Texaco excels -- is also important in meeting the challenge of volatility in the worldwide oil industry, Kinnear told the assembly. "In the years to come, good planning will grow even more crucial to business success, as competition gets tougher, margins for error get narrower, and the stakes grow higher."
 Replacing Reserves Economically
 Another perennial challenge in the oil business is finding new oil and gas reserves and producing them economically, and Kinnear explained that Texaco's upstream strategy is to balance high-risk/high-reward frontier exploration with lower-risk exploration in established areas. Texaco is aided in this endeavor by the use of what Kinnear described as "an array of advanced technology to find new oil, exploit the oil in the ground that we already have, and upgrade low-cost crudes into valuable finished products.
 "Two very promising projects," Kinnear continued, "are our CO2 enhanced oil recovery project in Midland, Texas, and our major new Strathspey development project in the North Sea." The $104-million CO2 project in Texas is expected to greatly increase recoverable reserves from the Mabee field and extend the life of that reservoir by 15 years.
 The $800 million Strathspey development project, in which Texaco is a two-thirds partner, will use subsea satellite technology to produce liquids and gas profitably from this area. Kinnear added that Texaco expects to apply the subsea expertise gained in the North Sea to develop deep-water wells in the Gulf of Mexico.
 Texaco Chairman Alfred C. DeCrane Jr., expanded on the importance the company places on searching for oil in other areas of the world. Giving analysts an overview of Texaco's international operations, DeCrane said, "For petroleum companies operating in today's economic environment, the international arena offers significant opportunities, particularly in the upstream area.
 "At Texaco," he continued, "we have allocated almost half of our capital expenditure program to international operations, with some 60 percent of that amount dedicated to upstream activities." Noting, in particular, recent contracts and exploration in frontier areas of Indonesia, Myanmar, Malaysia, Thailand, China and Australia, DeCrane concluded, "Texaco's extensive presence in the Pacific Rim is a critical element in the company's upstream strategy and gives us a solid base from which to expand in a rapidly growing region."
 Kinnear summed up Texaco's strategy on reserve replacement, saying, "The bottom line is this: Texaco knows how to find oil, and we know how to do it economically." To back up his assertion, he offered these facts: "Texaco's reserve replacement ratio for the past three years has been better than the average of its competitors. Our value added ratio on reserve additions has been well above its competitors' average. And our finding costs are below the competitor average for 1988 through 1990, at $3.47 a barrel. In addition," said Kinnear, "Texaco's production costs have been flat for the past three years, while our competitors' average rose 23 percent."
 Staying Ahead of the Competition
 Intensifying competition in other areas of the industry continues as another challenge for the future, and, said Kinnear, "Texaco is moving aggressively to make sure we get ahead, and stay ahead, of the competition." Already, he pointed out, Texaco's excellent manufacturing system, and its strong presence in key worldwide markets position the company well against its competitors. The completion of a new coker at Star Enterprise's Port Arthur, Texas, refinery in 1993 will make Texaco's U.S. refining system one of the best in the industry, he said. And with 2,500 on-site convenience stores at gas stations worldwide, Texaco is leading one of the most powerful marketing trends in the industry. "Our strong competitive results are in line with the trend of the last three years. From 1988 through 1990, among the nine major oil companies, Texaco rose from sixth to third in return on capital employed."
 Meeting Environmental Needs
 Another major challenge for Texaco -- and for the rest of the oil industry -- the CEO declared, are the "growing worldwide demands for environmental protection." Said Kinnear, "Texaco is committed to being in compliance with environmental standards. That's a given." The company, he added, is spending more than $700 million in 1991 on environmental projects, and will continue this level of spending in 1992.
 The company is equally committed to managing environmental issues with creative, cost-effective methods, Kinnear said. For example, "Texaco management has taken the industry lead in speaking out publicly on the dangers of extremely costly options being imposed under the Clean Air Act."
 As environmental issues continue to grow as major public policy issues, both in the United States and abroad, Kinnear expressed confidence that the company can depend on its advanced refining system, including planned oxygenate projects, to meet environmental needs and regulations. "I do want to point out," he said, "that should the extreme California mandates on reformulated gasolines spread to other parts of the U.S., Texaco is as well prepared as any of our competitors to provide that product nationwide."
 In addition, he observed, the company "is also out front in co- generation and gasification with all their environmental benefits. Our total Alternate Energy operations now provide Texaco with an earnings benefit of $80 million a year. Those benefits will grow through the 1990s."
 Achieving Steady Growth
 As Texaco moves to turn all of these challenges to opportunities, Kinnear affirmed that the company will use its assets fully to achieve steady growth needed to make the price of Texaco stock grow.
 In conclusion, Kinnear stated, "Texaco people fully appreciate and understand the dynamics of change," he said. "We have a management team that's been tempered in crisis. And we have the talent, the leadership and the resolve to not only respond to change, but to shape it to our advantage. We're doing it with innovation, intelligent planning, effective strategies and cutting edge technology, throughout our worldwide operations."
 -0- 12/10/91
 /CONTACTS: David J. Dickson, 914-253-4128, or Margaret C. Flesher, 914-253-6068, both of Texaco/
 (TX) CO: Texaco Inc. ST: New York IN: OIL SU:


CK -- NY050 -- 1108 12/10/91 14:56 EST
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Date:Dec 10, 1991
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