Document b5beV3R8z7ynNYOdmDL0noZxo

Peat, Marwick, Mitchell & Co. CERTIFIED PUBLIC ACCOUNTANTS 1400 ONE MAIN PLACE DALLAS, TEXAS 13250 ~?UVr.ip?t?r , il 77711^1 ' I .'*7 7- "\lj The Board of Directors Champlin Petroleum Company: We have examined the consolidated balance sheet of Champlin Petroleum Company and subsidiaries, a wholly-owned subsidiary of Celanese Corporation, as of December 31, 1968 and the related statement of income and retained income for the year then ended. Our examination was 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. In our opinion, the accompanying consolidated balance sheet and statement of consolidated income and retained income present fairly the financial position of Champlin Petroleum Company and subsidiaries at December 31, 1968 and the results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. January 24, 1969 CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) Statement of Consolidated Income and Retained Income Year ended December 31, 1968 with comparative figures for 1967 Sales Operating costs: Costs excluding items listed below Selling and administrative , Depreciation, depletion and amortization (note 3) Dry holes and surrendered leases Total operating costs Operating income Interest and other income Operating and other income Provision for income taxes (note 4) Net income Retained income at beginning of year Cash dividend Retained income at end of year Net income per common share 1968 1967 (Thousands of dollars except per share amounts) $ 101,308 99,859 - 57,383 12,493 13,999 5,015 88,890 12,418 1,026 13,444 3,125 10,319 27,985 38,304 6,700 $ 31,604 $ 230.09 52,828 12,081 12,385 3,532 80,826 19,033 779 19,812 5,300 14,512 19,954 34,466 6,481 27,985 323.59 See accompanying notes to consolidated financial statements. I I CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) Notes to-Consolidated Financial Statements December 31, 1968 (1) Principles of consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Harbor Service Stations, Inc., Midland Gasoline Corporation, Star Oil Company, Cycler Oil Company and Empire Oil Company (purchased in 1968) . All material intercompany accounts and transactions have been eliminated. (2) Inventories Inventories of crude oil and refined products are stated at average cost, which is less than market and does not include depreciation, depletion and amortization of property, plant and equipment. As of December 31, 1968 and 1967, the inventories were classified as follows: Crude oil and refined products Materials and supplies, at average cost 1968 1967 (Thousands of dollars) $ 7,300 7,214 1,687 $ 8,987 2,020 9,234 (3) Property, plant and equipment Allowances for depreciation, depletion and amortization of producing oil properties and depreciation of producing gas properties are provided on a modified straight-line method over asset lives ranging from 1 to 15 years. Allowances for depletion and amortization of producing gas properties are provided on the unit-of-production method determined by reference to periodic estimates of the gas reserves of the respective properties. Producing oil and gas properties aggregated $153,821,000 in 1968 and $150,512,000 in 1967. The remaining major classes of property, plant and equipment are depreciated on a modified straight-line method as follows: Refinery Gas plants Marketing facilities Pipelines Assets, at cost 1968 1967 (Thousands of dollars) $ 24,799 33,003 46,805 15,740 23,783 32,416 41,345 15,311 Years 10 15 5-20 10 2 CHAMPLIN PETROLEUM COMPANY AND SUBSIDIARIES (a wholly-owned subsidiary of Celanese Corporation) Notes to Consolidated Financial Statements, Continued (3) Property, plant and equipment, cont. Nonproducing leasehold and royalty costs aggregated $12,657,000 in 1968 and $9,560,000 in 1967. (4) Income taxes Significant variations in the relationship between the provision for Federal income taxes and income before taxes arise principally because of the deductions for tax purposes of intangible development costs and the excess of allowable depletion over cost depletion. Tax allocation accounting has been applied to all other timing differences. The policy of the Company is to take the investment tax credit into income as a reduction in the provision for income taxes over the estimated useful lives of the related assets. The Company will join with its parent in the filing of a consolidated Federal income tax return for 1968. The policy of the Company is to accrue its share of the income taxes payable and to make periodic remit tances to Celanese Corporation. The provision for income taxes is as follows: Current Deferred - 1968 1967 (Thousands of dollars) $ 3,923 (798) $ 3,125 5,261 39 5,300 (5) Pension and retirement plans \ The Company has a pension plan and a retirement plan covering substantially all of its employees over 29-1/2 years of age. Charges to operations for both plans aggregated $1,263,000 in 1968 and $1,150,000 in 1967, including amortization of prior service costs over periods ranging from 10 to 15 years. The Company's policy is to fund costs accrued. Based on actuarial determinations, the plans are fully funded with respect to all vested benefits. \i