*Strong gas prices and increased production helped propel Exploration & Production to exceptional results.

*Petroleum Services recorded its sixth consecutive year of record results.
The ethanol production/marketing business boosted these results by returning to profitability in the second half of the year.

*Market volatility and major transactions in the second half of the year sparked a major improvement for Energy Marketing & Trading, which posted its third year of record operating profit.

*Higher gas prices (which helped Exploration & Production) and lower  per-unit gas liquids margins prevented Field Services from meeting 1996’s record operating profit. Results in both 1997 and 1996 were affected by insurance recoveries. Increased processing and gas liquids volumes enabled us to perform again at or near the top of our peer group. Exciting expansion projects, particularly in the Gulf Coast area, continue to fuel our growth objectives for this business.

We move into 1998 armed with the proven ability to grow our existing
businesses and the excitement of adding greatly to our capabilities and potential through the pending MAPCO acquisition, which includes a major natural gas liquids pipeline, propane distribution, two refineries and more than 250 convenience stores.

We are prepared to move quickly when this acquisition closes, removing redundancies and creating efficiencies, leveraging newly combined purchasing power, and identifying and pursuing business opportunities across the board.

This group’s capital budget for 1998 is $1.3 billion. In addition to projects identified in the accompanying business unit narratives, we are prepared to move forward with major capital improvements within the acquired assets, including increasing refinery capabilities in Alaska and Tennessee.

We hope to see operating profit double in 1998, primarily as a result of the addition of the acquired businesses, increases in retail energy and power marketing, and incremental earnings provided by expansions.