Page 5 - GULF OIL CORPORATION ANNUAL REPORT DECEMBER 31, 1946

lar procedure under the ``last-in, first-out" valuation basis. Although these
inventories increased $9,loo,000, they are not considered excessive in
volume when measured with the current demand for petroleum products.
In value, they are carried at less than prevailing market prices.
Materials and supplies of $24,500,000 were $4,600,000 greater than
in 1945. This increase results primarily from the higher cost Of supplies

purchased.

I.ONG-TERM DEBT
New bank loans aggregating $54,coo,000, 'payable by or before
1950, were placed at an annual interest rate of lj4%. Proceeds were used
in pal`t to retire short-tern bank loans amounting to $29,000,000 and to
pay the annual installment of $5,000,000 due September 9, 1946 on the
ten-year 194% installment notes.
Long-term indebtedness to banks of $84,000,000 at the year-end, in-
cluding $5,000,000 due in 1947, was $20,000,000 more than at the close
of the previous year. This debt increase, contracted in the usual course of
corporate business, was considered advisable to maintain the Company's
working capital position.

Effective as of April 15, 1947, a 25-year loan of Sloo,000,000, with
interest at the I.ate of 23€% per annum, has been negotiated with an
insurance company, the proceeds Of which are being used to retire the
said $84,000,000 of long-term debt, leaving S16,COO,000 as an addition
to working capital.

PLANT AND RELATED iNVESTn[NTs
Additions to plant and related invesinents totaled S105,300,000 for
the year. Such expenditures were for crude oil production properties, pipe
line extensions and enlargements, refinery expansion and improvements,
modernization and acquisition of marketing properties and facilities, new
tankers, and other investments of a business capital nature. These neces-
sary capital outlays were linanced principally out Of current earnings and
depletion and depreciation provisions.

New petroleum reserves must constantly be found. Oil fields must be
developed, and wells drilled. Refinery and transportation equipment must
continually be improved and marketing facilities expanded. All of these
require lal`ge capital outlays if the Company is to maintain its position in
the industry and is to continue to give its customers the products and
services they expect from the Gulf organization.

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