================================================================================


                                  United States

                       Securities and Exchange Commission

                             Washington, D.C. 20549

                                    Form 10-Q


                                   ----------

               Quarterly Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934


For the quarterly period ended June 30, 1999         Commission file number 1-27


                                   Texaco Inc.
           (Exact name of the registrant as specified in its charter)


         Delaware                                               74-1383447
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


         2000 Westchester Avenue
         White Plains, New York                                     10650
(Address of principal executive offices)                          (Zip Code)



        Registrant's telephone number, including area code (914) 253-4000


                                   ----------

     Texaco Inc. (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past 90 days.

     As of July 30, 1999,  there were outstanding  552,731,443  shares of Texaco
Inc. Common Stock - par value $3.125.

================================================================================


<PAGE>

                         PART I - FINANCIAL INFORMATION

                                   TEXACO INC.
                        STATEMENT OF CONSOLIDATED INCOME
            FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 1999 AND 1998
            ---------------------------------------------------------
                     (Millions of dollars, except as noted)

<TABLE>
<CAPTION>

                                                                                             (Unaudited)
                                                                        ------------------------------------------------
                                                                        For the six months          For the three months
                                                                          ended June 30,               ended June 30,
                                                                        ------------------          --------------------
                                                                         1999           1998          1999           1998
                                                                         ----           ----          ----           ----
         REVENUES
<S>                                                                    <C>            <C>           <C>           <C>
              Sales and services                                       $15,030        $15,651       $ 8,116       $ 7,729
              Equity in income of affiliates, interest,
                  asset sales and other                                    429            540           153           315
                                                                       -------        -------       -------       -------
                                                                        15,459         16,191         8,269         8,044
                                                                       -------        -------       -------       -------
         DEDUCTIONS
              Purchases and other costs                                 11,806         12,086         6,356         5,972
              Operating expenses                                         1,109          1,225           550           645
              Selling, general and administrative expenses                 601            572           311           296
              Exploratory expenses                                         210            231            80            90
              Depreciation, depletion and amortization                     726            763           365           375
              Interest expense                                             245            234           124           116
              Taxes other than income taxes                                148            225            72           109
              Minority interest                                             35             30            16            15
                                                                       -------        -------       -------       -------
                                                                        14,880         15,366         7,874         7,618
                                                                       -------        -------       -------       -------

         Income before income taxes and cumulative
              effect of accounting change                                  579            825           395           426

         Provision for income taxes                                        107            224           122            84
                                                                       -------        -------       -------       -------

         Income before cumulative effect of
              accounting change                                            472            601           273           342

         Cumulative effect of accounting change                              -           (25)             -             -
                                                                       -------        -------       -------       -------

         NET INCOME                                                    $   472        $   576       $   273       $   342
                                                                       =======        =======       =======       =======

         Preferred stock dividend requirements                         $    23        $    27       $    10       $    13
                                                                       -------        -------       -------       -------

         Net income available for common stock                         $   449        $   549       $   263       $   329
                                                                       =======        =======       =======       =======

         Per common share (dollars)
              Basic net income                                         $  0.85        $  1.03       $  0.50       $  0.62
              Diluted net income                                       $  0.85        $  1.03       $  0.50       $  0.61

              Cash dividends paid                                      $  0.90        $  0.90       $  0.45       $  0.45

         Average shares outstanding for computation
               of earnings per share (thousands)
              Basic                                                    526,965        531,232       527,700       530,550
              Diluted                                                  529,640        550,598       530,236       549,775



<FN>
                              See  accompanying   notes  to  consolidated financial statements.
</FN>
</TABLE>


                                      - 1 -

<PAGE>

<TABLE>
<CAPTION>
                                   TEXACO INC.
                           CONSOLIDATED BALANCE SHEET
                    AS OF JUNE 30, 1999 AND DECEMBER 31, 1998
                    -----------------------------------------
                              (Millions of dollars)
                                                                                         June 30,                December 31,
                                                                                           1999                      1998
                                                                                        -----------              ------------
                                                                                        (Unaudited)
                                                                                        -----------
<S>                                                                                          <C>                    <C>
ASSETS
   Current Assets
      Cash and cash equivalents                                                              $   323                $   249
      Short-term investments - at fair value                                                      26                     22
      Accounts and notes receivable, less allowance for doubtful
           accounts of  $27 million in 1999 and $28 million in 1998                            3,593                  3,955
      Inventories                                                                              1,366                  1,154
      Deferred income taxes and other current assets                                             285                    256
                                                                                             -------                -------
           Total current assets                                                                5,593                  5,636

   Investments and Advances                                                                    6,671                  7,184

   Properties, Plant and Equipment - at cost                                                  35,499                 35,494
   Less - accumulated depreciation, depletion and amortization                                20,604                 20,733
                                                                                             -------                -------
      Net properties, plant and equipment                                                     14,895                 14,761

   Deferred Charges                                                                            1,036                    989
                                                                                             -------                -------

           Total                                                                             $28,195                $28,570
                                                                                             =======                =======

LIABILITIES AND STOCKHOLDERS' EQUITY
   Current Liabilities
      Short-term debt                                                                        $   590                $   939
      Accounts payable and accrued liabilities
           Trade liabilities                                                                   2,247                  2,302
           Accrued liabilities                                                                 1,121                  1,368
      Estimated income and other taxes                                                           701                    655
                                                                                             -------                -------
           Total current liabilities                                                           4,659                  5,264

   Long-Term Debt and Capital Lease Obligations                                                6,787                  6,352
   Deferred Income Taxes                                                                       1,476                  1,644
   Employee Retirement Benefits                                                                1,272                  1,248
   Deferred Credits and Other Noncurrent Liabilities                                           1,487                  1,550
   Minority Interest in Subsidiary Companies                                                     700                    679
                                                                                             -------                -------
           Total                                                                              16,381                 16,737
   Stockholders' Equity
      Market Auction Preferred Shares                                                            300                    300
      ESOP Convertible Preferred Stock                                                             -                    428
      Unearned employee compensation and benefit plan trust                                     (320)                  (334)
      Common stock (authorized: 700,000,000 shares, $3.125 par value;
           567,576,504 shares issued in 1999; 567,606,290 shares issued in 1998)               1,774                  1,774
      Paid-in capital in excess of par value                                                   1,302                  1,640
      Retained earnings                                                                        9,536                  9,561
      Other accumulated nonowner changes in equity
         Currency translation adjustment                                                        (107)                  (107)
         Minimum pension liability adjustment                                                    (24)                   (24)
         Unrealized net gain on investments                                                        8                     30
                                                                                             -------                -------
           Total other accumulated nonowner changes in equity                                   (123)                  (101)
                                                                                             -------                -------
                                                                                              12,469                 13,268
      Less - Common stock held in treasury, at cost                                              655                  1,435
                                                                                             -------                -------
         Total stockholders' equity                                                           11,814                 11,833
                                                                                             -------                -------
           Total                                                                             $28,195                $28,570
                                                                                             =======                =======


<FN>
                                   See  accompanying  notes to consolidated financial statements.
</FN>
</TABLE>

                                       -2-

<PAGE>

<TABLE>
<CAPTION>
                                   TEXACO INC.
                 CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
                 FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                 -----------------------------------------------
                              (Millions of dollars)
                                                                                                   (Unaudited)
                                                                                              -----------------------
                                                                                               For the six months
                                                                                                 ended June 30,
                                                                                              -----------------------
                                                                                              1999               1998
                                                                                              ----               ----
<S>                                                                                         <C>                <C>
OPERATING ACTIVITIES
   Net income                                                                               $   472            $   576
   Reconciliation to net cash provided by (used in)
      operating activities
         Cumulative effect of accounting change                                                  --                 25
         Depreciation, depletion and amortization                                               726                763
         Deferred income taxes                                                                  (96)               (21)
         Exploratory expenses                                                                   210                231
         Minority interest in net income                                                         35                 30
         Dividends from affiliates, greater (less) than
            equity in income                                                                     58               (116)
         Gains on asset sales                                                                   (62)               (58)
         Changes in working capital                                                            (267)              (316)
         Other - net                                                                            (23)                 9
                                                                                            -------            -------
            Net cash provided by operating activities                                         1,053              1,123

INVESTING ACTIVITIES
   Capital and exploratory expenditures                                                      (1,109)            (1,503)
   Proceeds from asset sales                                                                    219                113
   Purchases of investment instruments                                                         (283)              (405)
   Sales/maturities of investment instruments                                                   606                458
   Collection of note/formation payments from U.S. affiliate                                    101                463
   Other - net                                                                                   --                 25
                                                                                            -------            -------
            Net cash used in investing activities                                              (466)              (849)

FINANCING ACTIVITIES
   Borrowings having original terms in excess
      of three months
         Proceeds                                                                             1,843                967
         Repayments                                                                            (298)              (454)
   Net increase (decrease) in other borrowings                                               (1,522)               201
   Purchases of common stock                                                                     --               (404)
   Dividends paid to the company's stockholders
      Common                                                                                   (474)              (479)
      Preferred                                                                                 (23)               (28)
   Dividends paid to minority stockholders                                                      (15)               (35)
                                                                                            -------            -------
            Net cash used in financing activities                                              (489)              (232)

CASH AND CASH EQUIVALENTS
   Effect of exchange rate changes                                                              (24)                (8)
                                                                                            -------            -------
   Increase during period                                                                        74                 34
   Beginning of year                                                                            249                311
                                                                                            -------            -------
   End of period                                                                            $   323            $   345
                                                                                            =======            =======




<FN>
                                See  accompanying   notes  to  consolidated financial statements.
</FN>
</TABLE>



                                       -3-

<PAGE>

<TABLE>
<CAPTION>
                                   TEXACO INC.
           CONDENSED STATEMENT OF CONSOLIDATED NONOWNER CHANGES IN EQUITY
                FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 1999 AND 1998
           --------------------------------------------------------------
                              (Millions of dollars)
                                                                                    (Unaudited)
                                                                -------------------------------------------------
                                                                 For the six months          For the three months
                                                                   ended Jurne 30,               ended June 30,
                                                                -------------------          --------------------
                                                                1999             1998         1999           1998
                                                                ----             ----         ----           ----

<S>                                                            <C>             <C>          <C>            <C>
   Net income                                                  $   472         $   576      $   273        $    342
   Other nonowner changes in equity (net of tax)
      Currency translation adjustment                                -              (2)           -               -
      Minimum pension liability adjustment                           -               2            -               -
      Unrealized net gain (loss) on investments                    (22)              7           (2)              2
                                                               -------         -------      -------        --------
                                                                   (22)              7           (2)              2
                                                               -------         -------      -------        --------
   Total nonowner changes in equity                            $   450         $   583      $   271        $    344
                                                               =======         =======      =======        ========
</TABLE>



                                                      TEXACO INC.
                                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1. Segment Information
---------------------------

<TABLE>
<CAPTION>

                                                                    For the six months ended June 30,
                                           -------------------------------------------------------------------------------
                                                               1999                                   1998
                                           --------------------------------------    -------------------------------------
                                               Sales and Services       After          Sales and Services        After
                                                     Inter-              Tax                 Inter-               Tax
                                           Outside  Segment   Total Profit (Loss)    Outside  Segment   Total Profit (Loss)
                                           -------  -------   ----- -------------    -------  -------   ----- -------------
                                                                        (Millions of dollars)
                                                                             (Unaudited)
<S>                                       <C>       <C>     <C>         <C>        <C>       <C>      <C>          <C>
Exploration and production
     United States                        $   826   $  666  $ 1,492     $ 186      $   926   $  905   $ 1,831      $208
     International                          1,022      724    1,746        56        1,027      663     1,690       109
Refining, marketing and distribution
     United States                          1,440        7    1,447        87        1,358       78     1,436       111
     International                          9,856       74    9,930       371        9,883       26     9,909       376
Global gas marketing                        1,854       51    1,905        13        2,430       44     2,474         1
                                          -------   ------   ------      ----      -------   ------    ------      ----
     Segment totals                       $14,998   $1,522   16,520       713      $15,624   $1,716    17,340       805
                                          =======   ======                         =======   ======
Other business units                                             45        (5)                             44        --
Corporate/Non-operating                                           4      (236)                              2      (204)
Intersegment eliminations                                    (1,539)       --                          (1,735)       --
                                                             ------      ----                          ------      ----
     Consolidated, before
     cumulative effect of
     accounting change                                      $15,030     $ 472                         $15,651      $601
                                                            =======     =====                         =======      ====

</TABLE>







                                      - 4 -


<PAGE>

<TABLE>
<CAPTION>
                                                                    For the three months ended June 30,
                                           -------------------------------------------------------------------------------
                                                               1999                                   1998
                                           --------------------------------------   --------------------------------------
                                               Sales and Services       After          Sales and Services        After
                                                     Inter-              Tax                 Inter-               Tax
                                           Outside  Segment   Total Profit (Loss)    Outside  Segment   Total Profit (Loss)
                                           -------  -------   ----- -------------    -------  -------   ----- -------------
                                                                        (Millions of dollars)
                                                                             (Unaudited)
<S>                                        <C>        <C>    <C>        <C>        <C>         <C>     <C>         <C>
Exploration and production
     United States                         $  477     $370   $  847      $148      $   438     $451    $  889      $100
     International                            577      485    1,062        76          498      367       865        61
Refining, marketing and distribution
     United States                            835        4      839        24          642       23       665        64
     International                          5,304       35    5,339       151        4,929       15     4,944       194
Global gas marketing                          906       27      933         1        1,213       25     1,238        10
                                           ------     ----    -----      ----      -------     ----     -----      ----
     Segment totals                        $8,099     $921    9,020       400      $ 7,720     $881     8,601       429
                                           ======     ====                         =======     ====
Other business units                                             22         1                              18        (2)
Corporate/Non-operating                                           3      (128)                             --       (85)
Intersegment eliminations                                      (929)       --                            (890)       --
                                                              -----      ----                           -----       ---
     Consolidated                                            $8,116      $273                          $7,729      $342
                                                             ======      ====                          ======      ====

</TABLE>


<TABLE>
<CAPTION>
                                                                                       Assets as of
                                                                          --------------------------------------------
                                                                          June 30,                        December 31,
                                                                            1999                              1998
                                                                         -----------                      ------------
                                                                         (Unaudited)
                                                                                    (Millions of dollars)
<S>                                                                        <C>                              <C>
Exploration and production
     United States                                                         $ 8,681                          $ 8,699
     International                                                           4,561                            4,352
Refining, marketing and distribution
     United States                                                           3,666                            4,095
     International                                                           8,745                            8,306
Global gas marketing                                                           822                              879
                                                                           -------                          -------
     Segment totals                                                         26,475                           26,331
Other business units                                                           557                              506
Corporate/Non-operating                                                      1,486                            1,945
Intersegment eliminations                                                     (323)                            (212)
                                                                           -------                          -------
     Consolidated                                                          $28,195                          $28,570
                                                                           =======                          =======

</TABLE>




                                      - 5 -
<PAGE>


Note 2. Inventories
-------------------

The inventory accounts of Texaco are presented below (in millions of dollars):

<TABLE>
<CAPTION>
                                                                                                 As of
                                                                                --------------------------------------
                                                                                 June 30,                 December 31,
                                                                                   1999                       1998
                                                                                -----------               ------------
                                                                                (Unaudited)

<S>                                                                               <C>                      <C>
     Crude oil                                                                    $  203                   $   116
     Petroleum products and petrochemicals                                           932                       799
     Other merchandise                                                                37                        40
     Materials and supplies                                                          194                       199
                                                                                  ------                   -------
          Total                                                                   $1,366                   $ 1,154
                                                                                  ======                   =======
</TABLE>


Note 3. Redemption of Series B and Series F ESOP Convertible Preferred Stock
----------------------------------------------------------------------------

On June 30, 1999,  each share of Series B ESOP  Convertible  Preferred Stock was
converted into 25.736 shares,  or 15.1 million shares in total,  of Common Stock
of Texaco Inc., after we called the Series B for redemption.

On February 16, 1999,  each share of Series F ESOP  Convertible  Preferred Stock
was converted into 20 shares, or 1.1 million shares in total, of Common Stock of
Texaco Inc., after we called the Series F for redemption.

These noncash financing  activities for the first six months of 1999 resulted in
reductions of $391 million in preferred  stock  outstanding  and $308 million in
paid-in  capital.  This was offset by a $699  million  reduction  in the cost of
shares held in treasury.

Note 4. Other Financial Information, Commitments and Contingencies
------------------------------------------------------------------

Information  relative to  commitments  and  contingent  liabilities of Texaco is
presented  in Note 16,  pages  67-68,  of our 1998 Annual  Report and in Note 4,
pages 5 and 6, of our first quarter, 1999 Form 10-Q.

It is impossible for us to ascertain the ultimate legal and financial  liability
with respect to  contingencies  and commitments.  However,  we do not anticipate
that the  aggregate  amount of such  liability in excess of accrued  liabilities
will be materially important in relation to our consolidated  financial position
or results of operations.

Note 5. Investments in Significant Equity Affiliates
----------------------------------------------------

U.S. Downstream Alliances

Summarized unaudited financial  information for Equilon,  formed January 1, 1998
and jointly owned 44% by Texaco and 56% by Shell Oil Company, is presented below
on a 100% Equilon basis (in millions of dollars):

<TABLE>
<CAPTION>
                                                                       For the six months        For the three months
                                                                         ended June 30,             ended June 30,
                                                                      --------------------       --------------------
                                                                      1999            1998           1999         1998
                                                                      ----            ----           ----         ----
<S>                                                                 <C>             <C>             <C>          <C>
Gross revenues                                                      $13,787         $12,095         $8,008       $6,070
Income (loss) before income taxes                                   $    48         $   310         $ (123)      $  198

</TABLE>


                                      - 6 -

<PAGE>

Summarized unaudited financial  information for Motiva,  formed July 1, 1998 and
jointly  owned  32.5%  each by Texaco  and Saudi  Refining,  Inc.  (a  corporate
affiliate of Saudi Aramco) and 35% by Shell Oil Company, is presented below on a
100% Motiva basis (in millions of dollars):

<TABLE>
<CAPTION>
                                                                       For the six months        For the three months
                                                                       ended June 30, 1999        ended June 30, 1999
                                                                       -------------------        -------------------
<S>                                                                         <C>                           <C>
         Gross revenues                                                     $5,315                        $3,073
         Income (loss) before income taxes                                  $   20                        $  (21)
</TABLE>

We account for our  interests in Equilon and Motiva  using the equity  method of
accounting.  Under this method,  we record our share of  Equilon's  and Motiva's
results of operations  on a one-line  basis to Equity in Income of Affiliates in
the Statement of Consolidated Income. Additionally, since Equilon and Motiva are
limited liability  companies,  we record the provision and related liability for
income taxes applicable to our share of Equilon's and Motiva's pre-tax income in
our consolidated financial statements.

Caltex Group of Companies

Summarized  unaudited  financial  information for the Caltex Group of Companies,
owned 50% by Texaco and 50% by Chevron Corporation, is presented below on a 100%
Caltex Group basis (in millions of dollars):

<TABLE>
<CAPTION>
                                                                       For the six months        For the three months
                                                                         ended June 30,             ended June 30,
                                                                     ---------------------       --------------------
                                                                      1999            1998       1999            1998
                                                                      ----            ----       ----            ----
<S>                                                                  <C>             <C>        <C>             <C>
         Gross revenues                                              $8,666          $8,555     $4,706          $4,249
         Income before income taxes and cumulative
              effect of accounting change                            $  518          $  590     $  229          $  270
         Income before cumulative effect
              of  accounting change                                  $  343          $  427     $  140          $  222
         Net income                                                  $  343          $  377     $  140          $  222

</TABLE>

Effective January 1, 1998, Caltex adopted a new accounting  standard,  Statement
of Position 98-5, "Reporting on the Costs of Start-Up Activities," issued by the
American Institute of Certified Public Accountants. This resulted in a change in
accounting  for  start-up  costs at Caltex'  Thailand  refinery.  Caltex'  first
quarter 1998 results  included a $50 million charge (no tax benefit)  associated
with this accounting change.

Note 6. Subsequent Events
-------------------------

In  July  1999,  the  Governing  Council  of  the  United  Nations  Compensation
Commission  (UNCC)  approved  an award to Saudi  Arabian  Texaco Inc.  (SAT),  a
wholly-owned  subsidiary of Texaco Inc., of about $505 million, plus unspecified
interest,  for  damages  sustained  as a result of Iraq's  invasion of Kuwait in
1990. Payments to SAT are subject to income tax in Saudi Arabia at an applicable
tax rate of 85%.  SAT is party to a  concession  agreement  with the  Kingdom of
Saudi  Arabia  covering  the  Partitioned  Neutral  Zone in Southern  Kuwait and
Northern Saudi Arabia.

UNCC funds compensation awards by retaining 30% of Iraqi oil sales revenue under
an agreement with Iraq. We do not know when we will receive this award since the
timing of  payments  by UNCC  depends on several  factors,  including  the total
amount of all compensation  awards, the ability of Iraq to produce and sell oil,
the price of Iraqi oil and the duration of U.N.  trade  sanctions on Iraq.  This
award will be recognized in income when collection is assured.


                                      - 7 -
<PAGE>

Caltex Corporation, our 50% owned affiliate,  announced on July 28, 1999 that it
had entered into a non-binding, written understanding with Nippon Mitsubishi Oil
Corporation  (NMOC)  relating to a public tender offer for shares of Koa Oil Co.
Ltd. (Koa), a Japanese  refining  enterprise.  Caltex  currently owns 72,600,000
shares,  or 50 percent,  of Koa. The  understanding  sets forth conditions under
which NMOC would undertake a public tender in Japan for 72,600,000 shares of Koa
at 360 Yen (about  $3.10) per share.  If  formalized,  the public  tender  would
commence in late August and run until mid-September.  The public tender offer is
subject to pricing,  market conditions and due-diligence reviews by NMOC. Caltex
has  not  committed  to  tendering  its  shares  to  NMOC.  There  are  numerous
uncertainties  surrounding  the ultimate  outcome of the tender offer. If Caltex
were to tender its  shares to NMOC for the  equivalent  of $3.10 per share,  the
impact on us from this transaction would be a loss in the third quarter.


                              * * * * * * * * * * *


We have  consistently  applied the accounting  policies we used in preparing the
financial  statements  we issued  in our 1998  Annual  Report  to our  unaudited
financial statements for the six and three-month periods ended June 30, 1999 and
1998. In our opinion, we have made all adjustments and disclosures  necessary to
present  fairly our results of operations  for such periods.  These  adjustments
include normal  recurring  adjustments.  The  information is subject to year-end
audit by independent public accountants. We make no forecasts or representations
with respect to the level of net income for the year 1999.




                              * * * * * * * * * * *



                      SUPPLEMENTAL MARKET RISK DISCLOSURES

We are exposed to the following types of market risks:
o  The price of crude oil, natural gas and petroleum products
o  The value of foreign currencies in relation to the U.S. dollar
o  Interest rates

We use derivative financial instruments,  such as futures, forwards, options and
swaps, in managing these risks.  There were no material changes during the first
six months of 1999 in our exposure to losses from possible future changes in the
price of crude oil, natural gas and petroleum products,  or from possible future
changes in the value of foreign currencies in relation to the U. S. dollar.

The Liquidity and Capital  Resources section of the MD&A appearing on page 14 of
this Form 10-Q describes  financing and related hedging  transactions we entered
into during the first six months of 1999. As a result of those transactions, our
variable rate debt,  before the effects of interest rate swaps,  now totals $2.2
billion,  as compared with $2.7 billion at year-end 1998. The notional amount of
interest rate swaps increased $850 million and now totals $1.6 billion. Based on
our present  interest  rate  exposure on variable  rate debt and  interest  rate
swaps, a hypothetical increase or decrease in interest rates of 200 basis points
would not materially affect our consolidated  financial position,  net income or
cash flows.






                                      - 8 -
<PAGE>


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                  ---------------------------------------------

RESULTS OF OPERATIONS
---------------------

Texaco's net income for the second  quarter of 1999 was $273  million,  or $0.50
per share,  as compared  with $342 million,  or $0.61 per share,  for the second
quarter of 1998.  Net income for the first six months of 1999 was $472  million,
or $0.85 per share, as compared with $576 million,  or $1.03 per share,  for the
first six months of 1998. Both the 1999 and 1998 periods included special items.

Income before special items for the second quarter of 1999 was $286 million,  or
$0.52 per share,  as compared  with $335  million,  or $0.60 per share,  for the
second quarter of 1998. For the first six months of 1998,  income before special
items was $391 million,  or $0.70 per share,  as compared with $594 million,  or
$1.06 per share, for the first six months of 1998.

Our second quarter earnings,  while below last year,  showed marked  improvement
over this year's first  quarter as we  benefited  from the recovery in crude oil
and natural gas prices.  The benchmark price for crude has risen into the $19 to
$20 per barrel range  signaling  higher  upstream  earnings in the months ahead.
Refining  margins,  however,  remain at historically low levels in most areas of
the world.  A bright spot in our  downstream  was the solid  performance  of our
Western U.S.  operations.  Also, our Latin American  operations continue to grow
led by solid earnings in the Caribbean and Central American areas.

While we maintain our focus on strategic growth  opportunities,  our accelerated
$650 million cost reduction program continues to produce benefits.  Expenses per
barrel  declined nine percent versus a year ago, the U.S.  downstream  alliances
are ahead of schedule in capturing  synergy  benefits and the cost reduction and
restructuring  programs  by  Caltex  should  enhance  its  returns  as the Asian
economies recover.

Recent  successes  in our  pursuit of  high-impact  exploration  and  production
opportunities include:
o  June start-up production from the Gemini project in the Gulf of Mexico;
o  The acquisition of an additional 10 percent equity  ownership in  the  Hamaca
   oil project in Venezuela, raising our ownership share to 30 percent;
o  An agreement  with  Petrobras,  Brazil's  national oil company,  to become an
   equity  partner in the Campos  exploration  and the Frade  development  areas
   offshore Brazil; and
o  A  successful  bid on three  high  potential  offshore exploration  blocks in
   Brazil's First License Round.

Results for 1999 and 1998 are  summarized  in the table on the  following  page.
Details on special items are included in the segment analysis which follows this
table.








                                      - 9 -
<PAGE>

<TABLE>
<CAPTION>
                                                                                            (Unaudited)
                                                                         -------------------------------------------------
                                                                         For the six months           For the three months
                                                                           ended June 30,                ended June 30,
                                                                         ------------------           --------------------
                                                                         1999           1998          1999           1998
                                                                         ----           ----          ----           ----
                                                                                       (Millions of Dollars)
<S>                                                                    <C>            <C>            <C>             <C>
Income before special items                                            $   391        $   594        $  286          $ 335
                                                                       -------        -------        ------          -----

Inventory valuation adjustments                                            138              -            55              -
Write-down of assets                                                       (76)             -           (76)             -
Tax issues                                                                  65             19            54             19
Gains on major asset sales                                                  21             20            21             20
Reorganization, restructuring and employee separation costs                (67)           (32)          (67)           (32)
                                                                       -------        -------        ------          -----

Special items                                                               81              7           (13)             7
                                                                       -------        -------        ------          -----

Adoption of new accounting standard
   Cumulative effect of accounting change                                    -            (25)            -              -
                                                                       -------        -------        ------          -----

Net income                                                             $   472        $   576        $  273          $ 342
                                                                       =======        =======        ======          =====
</TABLE>



Effective  January 1, 1998,  our  affiliate,  Caltex,  adopted a new  accounting
standard,  Statement  of  Position  98-5,  "Reporting  on the Costs of  Start-Up
Activities,"  issued by the American Institute of Certified Public  Accountants.
This  resulted in a change in  accounting  for  start-up  costs at its  Thailand
refinery.  Our  first  quarter  1998  results  included  a  $25  million  charge
associated with this accounting change.



OPERATING RESULTS

     EXPLORATION AND PRODUCTION

        United States

Exploration  and production  earnings in the U.S. for the second quarter of 1999
were $148 million, as compared with $100 million for the second quarter of 1998.
For the first six months of 1999 and 1998,  earnings  were $186 million and $208
million.  Results for 1999 included a second quarter special gain of $21 million
from the sale of our interest in six California onshore and offshore fields, and
a special charge of $11 million for employee  separation  costs. See the section
entitled,  Reorganizations,   Restructurings  and  Employee  Severance  Programs
beginning on page 14 of this Form 10-Q for additional  information.  Results for
the first six months of 1999 also  included a first quarter  special  benefit of
$11 million for a production tax refund.  Excluding these special items, results
for the second  quarter and first six months of 1999  totaled  $138  million and
$165 million.

U.S.  exploration  and  production  earnings in the second  quarter of 1999 were
above last year's levels mostly due to higher crude oil prices. Prices continued
to rise in the second  quarter as there was high  compliance by OPEC and several
non-OPEC countries with previously  announced  production  cutbacks leading to a
decline in worldwide inventory levels. Average realized crude oil prices for the
second quarter 1999 were $12.80 per barrel, a 40 percent increase over the first
quarter and 19 percent  above last year.  Average  natural gas prices were $2.05
per MCF in the second quarter, the same as last year.

Earnings  for the first six  months  of 1999 were  below  last year due to lower
production and depressed  natural gas prices during the first  quarter.  Average
natural  gas prices  were $1.92 per MCF,  nine  percent  below last year.  Also,
average  realized  crude oil prices were $10.95 per barrel,  three percent below
last year.


                                     - 10 -
<PAGE>

Production  decreased  12 percent for the second  quarter and first half of 1999
due to natural field declines and asset sales.  Focusing on capital  efficiency,
Texaco and our  operating  partners  reduced  developmental  activities  such as
infill  drilling,   recompletions  and  secondary  recovery  projects,  normally
undertaken to offset production declines within mature fields.

Expenses were lower for the second quarter and first half of 1999 as a result of
cost savings from the  restructuring  of our  worldwide  upstream  organization.
Exploratory  expenses  for the  second  quarter  and first half of 1999 were $38
million and $92 million  before tax, $13 million and $55 million  below the same
periods of 1998.

         International

Exploration and production  earnings  outside the U.S. for the second quarter of
1999 were $76 million,  as compared  with $61 million for the second  quarter of
1998.  For the first six months of 1999 and 1998,  earnings were $56 million and
$109 million.  Results for 1999 included  second quarter  special  charges of $2
million   for   employee   separation   costs.   See   the   section   entitled,
Reorganizations,  Restructurings  and Employee  Severance  Programs beginning on
page 14 of this Form 10-Q for  additional  information.  Excluding  the  special
charges, results for the second quarter and first six months of 1999 totaled $78
million and $58 million.

International  exploration  and  production  operating  results  for the  second
quarter of 1999 were above last  year's  levels  mostly due to higher  crude oil
prices. Crude oil prices for the second quarter of 1999 continued to rise due to
worldwide production cutbacks and inventory declines. Average realized crude oil
prices for the  second  quarter of 1999 were  $13.73  per  barrel,  a 39 percent
increase over the prior quarter and 20 percent above last year.

Operating  results  for the first six months of 1999 were below last year mostly
due to higher exploratory expenses. Also, average realized crude oil prices were
$11.60 per barrel,  slightly lower than last year and average natural gas prices
were $1.37 per MCF, 15 percent below last year.

Daily  production  in the second  quarter  and first six months of 1999 was flat
with last year. During the first half of 1999 production  declines from the U.K.
North Sea, due to temporary  operating problems in the first quarter,  and lower
gas  production  in Latin  America  were offset by increased  production  in the
Partitioned  Neutral Zone,  Indonesia and Karachaganak.  Expenses were lower for
the second quarter of 1999 as a result of cost savings from the restructuring of
our worldwide upstream organization. Exploratory expenses for the second quarter
of 1999  were  $42  million  before  taxes,  slightly  higher  than  last  year.
Exploratory  expenses for the first six months of 1999 were $118 million  before
taxes,  $34 million higher than last year due to an  unsuccessful  first quarter
exploratory well in a new offshore area of Trinidad.

Looking Forward in the Worldwide Upstream

We intend to  cost-effectively  explore for,  develop and produce  crude oil and
natural gas reserves.  Our areas of focus  include the U.S. Gulf of Mexico,  the
U.K.  North Sea,  Kazakhstan,  Latin America and West Africa,  where we recently
announced two major oil discoveries offshore Nigeria.

We have begun to capture  the  expected  $200  million  in annual  pre-tax  cash
expense savings from our worldwide upstream  restructuring  program announced in
November,  1998.  The  program is  designed  to place  greater  emphasis  on our
long-term   production  and  reserve  growth,   and  to  address  the  need  for
streamlining  costs and improving  competitiveness.  These savings include lower
people-related and operating expenses.





                                     - 11 -
<PAGE>

     REFINING, MARKETING AND DISTRIBUTION

         United States

We conduct our U.S. downstream activities primarily through Equilon, our western
alliance with Shell Oil Company, and Motiva, our eastern alliance with Shell Oil
Company and Saudi Refining, Inc.

Our share of refining,  marketing and distribution  earnings in the U.S. for the
second  quarter of 1999 were $24 million,  as compared  with $64 million for the
second quarter of 1998. For the first six months of 1999 and 1998, earnings were
$87 million and $111 million.  Results for 1999 included  second quarter special
charges of $76 million for asset write-downs to their estimated sales values due
to the pending sales by Equilon of its El Dorado and Wood River  refineries  and
$11 million for alliance  reorganization,  restructuring and employee separation
costs.  Results for 1999 included a first quarter  special benefit of $8 million
due to higher  inventory values on March 31, 1999. This follows a fourth-quarter
1998 charge of $34  million to reflect  lower  prices on  December  31, 1998 for
inventories of crude oil and refined products. We value inventories at the lower
of  cost or  market,  after  initial  recording  at  cost.  Inventory  valuation
adjustments  are reversed when the  associated  physical  units of inventory are
sold.  Excluding  these special items,  results for the second quarter and first
six months of 1999 were $111  million and $166  million.  The second  quarter of
1998  included a special  charge of $32 million,  mainly for  alliance  employee
separation costs.  Excluding this special charge, results for the second quarter
and first six months of 1998 were $96 million and $143 million.

During the second quarter and first half of 1999,  Equilon's  earnings benefited
from improved West Coast refining and marketing  margins,  although  operational
problems  at the Puget  Sound  refinery  and  scheduled  maintenance  at the Los
Angeles  refinery had a negative  impact on earnings.  Margins on the West Coast
remained  strong as a result of  refinery  outages  leading to  industry  supply
disruptions.

Motiva  continued to experience weak refining  margins during the second quarter
due to high industry wide inventory levels.  These effects were partially offset
by higher gasoline volumes.

The second quarter and first half of 1999 also benefited from the realization of
synergies  for  Equilon  and  Motiva,   which  included  higher  utilization  of
proprietary  pipelines,  marketing  staff and function  consolidations,  reduced
additive costs, and hydrotreater realignment at the Convent refinery.

         International

Refining,  marketing and  distribution  earnings outside the U.S. for the second
quarter of 1999 were $151 million,  as compared with $194 million for the second
quarter of 1998.  For the first six months of 1999 and 1998,  earnings were $371
million and $376  million.  Results for 1999 included  first and second  quarter
special  benefits of $75 million  and $55 million to reflect  higher  prices for
crude oil and refined  products.  This  follows a  fourth-quarter  1998  special
charge of $108 million to reflect  lower prices on December 31, 1998, as well as
additional  charges  previously  recorded.  We value inventories at the lower of
cost or market, after initial recording at cost. Inventory valuation adjustments
are reversed when the associated  physical units of inventory are sold.  Results
for the  second  quarter  of 1999 also  included  a Korean  tax  benefit  of $54
million,  as well as Caltex  restructuring  charges of $25 million and  employee
separation  costs in Europe and Latin  America of $9  million.  See the  section
entitled,  Reorganizations,   Restructurings  and  Employee  Severance  Programs
beginning  on page 14 of this Form 10-Q for  additional  information.  Excluding
these special items, results for the second quarter and first six months of 1999
were $76 million and $221 million.

International refining and marketing operating results for the second quarter of
1999 declined  significantly  from 1998.  The decline was due to the  protracted
weakness of international refining margins in both the Caltex and European areas
of operation.  Results in Latin America declined due to weak economic conditions
in Brazil and poor refining margins in Panama.


                                     - 12 -
<PAGE>

Results for the first half of 1999 were  similarly  affected  by lower  refining
margins and intensified  competitive pressures.  Improved economic conditions in
Asia,  resulting in higher sales volumes and reduced currency  volatility,  were
more than offset by lower margins in the Caltex region. Results in Latin America
and Europe were down due to the economic  situation in Brazil and poor  refining
margins in the U.K.,  Netherlands  and  Panama.  In the  Caribbean  and  Central
American areas,  marketing  results increased due to lower acquisition costs and
increased sales in the industrial sector.

Looking Forward in the Worldwide Downstream

Our U.S.  joint  ventures with Shell and Saudi  Refining,  Inc. will continue to
lower costs and  capture  synergies.  We expect  that our share of these  annual
pre-tax cost reductions  will be over $300 million.  These savings include lower
people-related  expenses  and  reductions  in  cash  operating  expenses  due to
efficiencies.  We will continue to expand our  operations in Latin  America.  We
have begun to capture the  expected  $25 million in annual  pre-tax cost savings
from  our  international   downstream   operations'   announced   restructuring,
representing  lower  people-related  expenses.  In addition,  we expect that our
share of the annual pre-tax cost savings from the Caltex  reorganization will be
over $25 million, representing lower people-related expenses.

Global Gas Marketing

Global gas marketing earnings for the second quarter of 1999 were $1 million, as
compared  with $10  million  for the second  quarter of 1998.  For the first six
months of 1999 and 1998,  earnings were $13 million and $1 million.  Results for
1999  included  a second  quarter  special  charge of $3  million  for  employee
separation costs. See the section entitled, Reorganizations,  Restructurings and
Employee  Severance  Programs  beginning  on  page  14 of  this  Form  10-Q  for
additional  information.  Excluding this special charge,  results for the second
quarter  and first six months of 1999 were $4 million and $16  million.  Results
for 1998 included a second quarter  special gain of $20 million from the sale of
a partial interest in a pipeline.  Excluding this special gain,  results for the
second  quarter  and first six months of 1998 were losses of $10 million and $19
million.

Global gas marketing  operating results for the second quarter of 1999 benefited
from the  continued  improvement  of natural gas margins.  Results for the first
half of 1999 reflected  gains on normal asset sales  including our interest in a
U.K.  retail  gas  marketing  operation  and the  sale of a U.S.  gas  gathering
pipeline.

We have begun to capture  over $20 million in annual  pre-tax  cost savings from
the global gas marketing restructuring announced in November 1998. These savings
include lower  people-related  expenses and benefits from our exiting the United
Kingdom gas marketing business.

Other Business Units

Results for the second quarter of 1999 were $1 million,  as compared with a loss
of $2 million for the second  quarter of 1998.  Results for the first six months
of 1999 were a loss of $5 million,  while  there were no earnings  for the first
six months of 1998.  Our other  business  units include  insurance  activity and
power generation and gasification operations.

     CORPORATE/NON-OPERATING

Corporate/Non-operating  charges  for  the  second  quarter  of 1999  were  $128
million, as compared with charges of $85 million for the second quarter of 1998.
For the first six months of 1999 and 1998,  charges  were $236  million and $204
million. Results for 1999 included a second quarter special charge of $6 million
for  employee  separation  costs.  See the  section  entitled,  Reorganizations,
Restructurings and Employee Severance Programs beginning on page 14 of this Form
10-Q for additional information.  Excluding this special charge, charges for the
second  quarter and first six months of 1999 were $122 million and $230 million.
Results for 1998  included a second  quarter  special tax benefit of $19 million
attributable to the sale of an interest in a subsidiary.  Excluding this special
gain,  charges  for the  second  quarter  and first six months of 1998 were $104
million and $223 million.



                                     - 13 -
<PAGE>

Corporate/Non-operating  results  for the second  quarter and first half of 1999
reflect  higher net  interest  expense  due to  decreased  interest  income from
investments  and higher  interest  expense  due to  increased  debt.  First half
results  this year  included  gains on the  first  quarter  sales of  marketable
securities.

We have begun to capture the expected $60 million in annual pre-tax cost savings
as a result of the fourth quarter 1998 corporate center reorganization and other
cost-cutting  initiatives,  mainly lower  people-related  expenses and operating
expenses.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

Our cash, cash equivalents and short-term  investments were $349 million at June
30, 1999, as compared with $271 million at year-end 1998.

During 1999, our operations  provided cash of $1,053  million.  We also had cash
inflows  of $219  million  from  asset  sales,  $323  million  from net sales of
investment instruments and $23 million from net borrowings.  Early collection of
a note receivable from our affiliate  Equilon provided another $101 million.  We
spent  $1,109  million on our  capital  and  exploratory  program  and paid $512
million in common, preferred and minority interest dividends.

At June 30, 1999, our ratio of total debt to total borrowed and invested capital
was 37.1%,  as  compared  with 36.8% at year-end  1998.  At June 30,  1999,  our
long-term  debt included  $2.05  billion of debt  scheduled to mature within one
year,  which we have both the intent and  ability to  refinance  on a  long-term
basis.  During the first six months of 1999,  our debt activity  included a $400
million  borrowing due 2009,  $1,242 million issued under our  medium-term  note
program  and a $100  million  borrowing  associated  with  one of our  producing
interests located in the U.K. North Sea. In addition,  we reduced our commercial
paper by $1,568 million, to $49 million at June 30, 1999, while decreasing other
debt  obligations  by $151  million.  During  the first six  months of 1999,  we
entered into $850 million of floating rate pay interest rate swaps. All floating
rate swaps entered into to date in 1999 are indexed to LIBOR.  We maintain $2.05
billion in revolving credit  facilities,  which were unused at June 30, 1999, to
provide additional support for liquidity and our commercial paper program.

Subsequent to June 30, 1999, we established a new "shelf"  registration for $1.5
billion, bringing our total capacity under this program to $2.0 billion.

We  consider  our  financial  position  to be  sufficiently  strong  to meet our
anticipated future financial requirements.

REORGANIZATIONS, RESTRUCTURINGS AND EMPLOYEE SEVERANCE PROGRAMS
---------------------------------------------------------------

In the fourth quarter of 1998, we announced that we were reorganizing several of
our operations and implementing  other cost-cutting  initiatives.  The principal
units  affected  were  our  worldwide  upstream  operations;  our  international
downstream  operations,  principally  our  marketing  operations  in the  United
Kingdom  and  Brazil  and our  refining  operations  in  Panama;  our global gas
marketing  operations;  and  our  corporate  center.  The  reorganizations  were
substantially completed by the end of the first quarter of 1999. We accrued $115
million ($80 million,  net of tax) for employee  separations,  curtailment costs
and special termination benefits associated with these announced  restructurings
in the fourth  quarter of 1998.  During the second  quarter of 1999, we expanded
the employee  severance  programs and  recorded an  additional  provision of $48
million ($31 million,  net of tax).  For the most part,  severance  accruals are
shown as operating expenses in the Statement of Consolidated Income.

The table on the following page, which identifies each of our four restructuring
initiatives,  provides the provision  recorded in the fourth quarter of 1998 and
the additional  provision recorded in the second quarter of 1999, along with the
payments made through June 30, 1999 and the remaining obligations as of June 30,
1999. We will pay the remaining obligations in future periods in accordance with
plan provisions.


                                     - 14 -


<PAGE>

<TABLE>
<CAPTION>
                                                   Provision Recorded in the
                                                   -------------------------            Payments            Remaining
                                             Fourth Quarter,    Second Quarter,       Made Through      Obligations as of
                                                   1998               1999            June 30, 1999       June 30, 1999
                                             ---------------    ---------------       -------------     -----------------
                                                                           (Millions of Dollars)

<S>                                                <C>                 <C>               <C>                 <C>
          Worldwide upstream                       $  56               $20               $(30)               $ 46
          International downstream                    25                13                (18)                 20
          Global gas marketing                         5                 4                 (2)                  7
          Corporate center                            29                11                (13)                 27
                                                   -----               ---               ----                ----
                  Total                            $ 115               $48               $(63)               $100
                                                   =====               ===               ====                ====
</TABLE>

At the time we initially announced these programs,  we estimated that over 1,400
employee  reductions would result.  Employee  reductions of 800 in our worldwide
upstream  operations,  300 in our  international  downstream  areas,  100 in our
global gas marketing  operations and 200 in our corporate  center were expected.
During the second  quarter of 1999,  we  expanded  the  program by almost  1,100
employees,  comprised of 600 employees in our worldwide upstream operations, 250
employees in our international downstream areas, 100 employees in our global gas
marketing operations and 150 employees in our corporate center. Through June 30,
1999,  employee  reductions totaled 1,232 in our worldwide upstream  operations,
339 in our  international  downstream  areas,  144 in our global  gas  marketing
operations  and  349 in  our  corporate  center.  Almost  all  of the  remaining
reductions will occur during the third quarter of this year.

CAPITAL AND EXPLORATORY EXPENDITURES
------------------------------------

Capital and exploratory  expenditures  were $1,458 million for the first half of
1999, compared with $1,881 million for 1998.

Upstream  expenditures  in the  U.S.  for the  first  six  months  of 1999  were
significantly  below 1998 levels due to reductions  and deferrals of exploratory
and  developmental  spending related to market  conditions.  Continuing areas of
focus included  platform  development  in deepwater Gulf of Mexico  projects and
developmental drilling in California.

Internationally,  expenditures  increased  slightly  as we raised our  ownership
interest in the  Venezuelan  Hamaca  project and continued to focus spending for
Nigerian  lease  acquisitions  and  developmental  work in the U.K.  North Sea -
Captain B field.  These  increases were offset by decreased  spending in Eurasia
where a significant investment in the Karachaganak project was made in the first
half of 1998.  Exploratory  expenditures  increased  due to activity in offshore
Trinidad.

Downstream capital expenditures decreased following refinery project completions
in the U.S. and the slowing of re-imaging and brand  initiatives in the U.S. and
Caltex  areas of  operation.  There was also lower  spending  on a gas  pipeline
project which incurred peak  expenditures in 1998.  Other  operations  showed an
increase in spending for  Indonesia,  California  and  Philippines  cogeneration
facilities.

NEW ACCOUNTING STANDARD
-----------------------

In June 1998, the Financial  Accounting  Standards Board (FASB) issued Statement
of  Financial  Accounting  Standards  (SFAS)  133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."  SFAS 133 establishes new accounting rules
and  disclosure   requirements   for  most  derivative   instruments  and  hedge
transactions.  In July  1999,  the FASB  issued  SFAS 137,  which  deferred  the
effective date of SFAS 133. We will adopt SFAS 133 effective January 1, 2001 and
are currently assessing the initial effects of adoption.



                                     - 15 -
<PAGE>

EURO CONVERSION
---------------

On  January  1,  1999,  11 of the 15  member  countries  of the  European  Union
established  fixed conversion rates between their existing legacy currencies and
one  common  currency--the  euro.  The euro  began  trading  on  world  currency
exchanges  and may be used in  business  transactions.  On January 1, 2002,  new
euro-denominated  bills and coins will be issued,  and legacy currencies will be
completely withdrawn from circulation by June 30 of that year.

Prior to  introduction of the euro, our operating  subsidiaries  affected by the
euro conversion  completed  computer  systems  upgrades and fiscal and legal due
diligence to ensure our euro  readiness.  Computer  systems have been adapted to
ensure that all our operating  subsidiaries  have the  capability to comply with
necessary business  requirements and  customer/supplier  preferences.  Legal due
diligence was conducted to ensure post-euro continuity of contracts,  and fiscal
reviews were completed to ensure  compatibility with our banking  relationships.
We, therefore, experienced no major impact to our current business operations.

We continue to review our marketing and  operational  policies and procedures to
ensure our  ability to  continue  to  successfully  conduct  all  aspects of our
business  in this  new,  price-transparent  market.  We  believe  that  the euro
conversion will not have a material adverse impact on our financial condition or
results of operations.

YEAR 2000
---------

On  pages  39 and 40 of our  1998  Annual  Report,  we  discussed  our  state of
readiness and our costs,  risks and contingency plans for dealing with potential
Year 2000 (Y2K) date change problems.  We reported that approximately 95% of the
computers and computer  software involved in corporate  financial  applications,
and about 5% of our industrial automation systems used in refineries,  lubricant
and gas plants and oil well operations  needed  modification  or upgrade.  Since
that time, we have not identified any additional material Y2K risks. We continue
to believe that the worst case  scenario we described in our 1998 Annual  Report
is not likely to occur. However, if it occurs, Y2K failures, if not corrected on
a timely basis or otherwise  mitigated by our  contingency  plans,  could have a
material  adverse  effect on our results of  operations,  liquidity  and overall
financial condition.

As of the end of the second quarter of 1999, we completed modifying or upgrading
99% of the corporate financial applications and 99% of the industrial automation
systems that required such work. We are not able to complete a small  percentage
of upgrades  until our  vendors  provide the  required  equipment.  We expect to
complete the last of these  upgrades by September 1, 1999. If these upgrades are
delayed  beyond  that date,  we will use  contingency  plans to work  around any
noncompliant  systems  or  seek  alternative  vendors,  as  appropriate.  We are
approximately  99% through our review of our critical  suppliers and  customers,
and the  development of  contingency  plans,  as required.  If we cannot satisfy
ourselves that these critical suppliers and customers will be able to operate in
2000, we will seek alternatives and/or utilize contingency plans.

We have  identified  over 45,000 systems for assessment of potential Y2K issues.
These were categorized as: Applications, Telecommunications, Computer Systems or
Embedded  Systems   (Industrial   Automation).   We  assessed  each  system  and
prioritized them as Critical, Essential or Important. Critical systems are those
related to Safety,  Health and Environment,  including monitoring and regulatory
reporting systems.  Essential systems are those required to accomplish  business
objectives.  Important  systems  are those  used in a  support  role and are not
required for day-to-day operations. As of July 1, 1999, we have 129 Critical and
Essential  systems  pending  upgrades,  which are all scheduled  for  completion
during the third quarter.

We are also evaluating the business  resumption  plans of all our business units
for any Year 2000 issues,  and we have begun implementing  end-of-year  rollover
plans.  This  effort is part of our  Contingency  Planning  project,  and is 99%
complete.



                                     - 16 -
<PAGE>

During the second  quarter of 1999,  we spent $5 million in readying our systems
for Y2K,  bringing  our total spent  through  June 30, 1999 to $49  million.  We
estimate  that we will spend about $11  million  during the second half of 1999,
most in December as we implement our Early Alert System.

FORWARD-LOOKING STATEMENTS
--------------------------

Portions of the foregoing discussion of RESULTS OF OPERATIONS;  REORGANIZATIONS,
RESTRUCTURINGS AND EMPLOYEE SEVERANCE PROGRAMS; EURO CONVERSION;  and, YEAR 2000
contain  "forward-looking  statements"  within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the  Securities  Exchange Act of 1934.
These  statements  are  based  on  our  current   expectations,   estimates  and
projections.  Therefore,  they could ultimately prove to be inaccurate.  Factors
which could affect our expectations for worldwide crude oil production, upstream
earnings and downstream margins in 1999 are changes in business conditions, such
as energy prices, world economic conditions, demand growth and inventory levels.
The  extent  and  timing of our  anticipated  cost  savings  and  reorganization
programs will depend upon worldwide and industry  economic  conditions.  Factors
that could alter the financial impact of our euro conversion include: changes in
current  governmental  regulations  and  interpretations  of  such  regulations;
unanticipated  implementation  costs;  and the effect of the euro  conversion on
product  prices and  margins.  Factors  that could affect our ability to be Year
2000  compliant  by the end of  1999  include:  the  failure  of our  customers,
suppliers,  governmental  entities  and  others to  achieve  compliance  and the
inaccuracy of  certifications  received from them; our inability to identify and
remediate  every  possible  problem;  and a shortage of  necessary  programmers,
hardware and software. For a further discussion of additional factors that could
cause  actual  results to  materially  differ from those in the  forward-looking
statements, please refer to the section entitled "Forward-Looking Statements and
Factors That May Affect Our Business" in our 1998 Annual Report on Form 10-K.






                                     - 17 -
<PAGE>

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings
-------------------------

     We have provided information about legal proceedings pending against Texaco
in Note 4 to the Consolidated  Financial Statements of this Form 10-Q, in Item 1
of our first quarter,  1999 Form 10-Q and in Item 3 of our 1998 Annual Report on
Form 10-K.  Note 4 of this Form 10-Q, Item 1 of our first quarter 1999 Form 10-Q
and Item 3 of our 1998 Form 10-K are incorporated here by reference.

     The  Securities  and  Exchange  Commission  ("SEC")  requires  us to report
proceedings  that were instituted or  contemplated  by governmental  authorities
against  us  under  laws  or  regulations  relating  to  the  protection  of the
environment.  None of these proceedings is material to our business or financial
condition.  Following is a brief  description of a proceeding  that was resolved
during the second quarter of 1999.

o    We previously  reported  that the U.S.  Department of Justice filed suit in
     U.S. District Court in Nevada against our affiliates,  Nevada  Cogeneration
     Associates  #1 and  Nevada  Cogeneration  Associates  #2.  The suit  sought
     penalties  under  the  Clean  Air Act for  alleged  excess  emissions  from
     cogeneration  facilities  in Clark  County,  Nevada.  The  defendants  have
     installed  emission control  equipment at each facility and agreed to pay a
     fine of $100,000 for each facility,  pursuant to a Consent Decree  settling
     the lawsuit, expected to be approved by the Court later this month.













                                     - 18 -
<PAGE>


Item 5. Other Information
-------------------------

<TABLE>
<CAPTION>

                                                                                             (Unaudited)
                                                                          ------------------------------------------------
                                                                         For the six months           For the three months
                                                                           ended June 30,                ended June 30,
                                                                         ------------------           --------------------
                                                                          1999          1998           1999          1998
                                                                          ----          ----           ----          ----
                                                                                        (Millions of dollars)


<S>                                                                     <C>            <C>           <C>            <C>
CAPITAL AND EXPLORATORY EXPENDITURES
   Exploration and production
         United States                                                  $  463       $    816        $  207         $  374
         International                                                     568            551           346            261
                                                                        ------       --------        ------         ------
           Total                                                         1,031          1,367           553            635
                                                                        ------       --------        ------         ------
   Refining, marketing and distribution
         United States                                                     158            183            85             95
         International                                                     176            228            99            129
                                                                        ------       --------        ------         ------
           Total                                                           334            411           184            224
                                                                        ------       --------        ------         ------

   Global gas marketing                                                     25             83            14             49
                                                                        ------       --------        ------         ------
         Total operating segments                                        1,390          1,861           751            908
   Other business units                                                     68             20            38              6
                                                                        ------       --------        ------         ------
           Total                                                        $1,458         $1,881        $  789         $  914
                                                                        ======         ======        ======         ======

   Exploratory expenses included above
         United States                                                  $   92       $    147        $   38         $   51
         International                                                     118             84            42             39
                                                                        ------       --------        ------         ------
           Total                                                        $  210       $    231        $   80         $   90
                                                                        ======       ========        ======         ======

</TABLE>






                                     - 19 -
<PAGE>

<TABLE>
<CAPTION>
                                                                                             (Unaudited)
                                                                        --------------------------------------------------
                                                                         For the six months           For the three months
                                                                           ended June 30,                ended June 30,
                                                                         ------------------           --------------------
                                                                         1999            1998         1999            1998
                                                                         ----            ----         ----            ----
<S>                                                                     <C>            <C>           <C>            <C>
OPERATING DATA
--------------
Exploration and Production
--------------------------

United States
-------------
     Net production of crude oil and natural
         gas liquids (000 BPD)                                             404            449           399            447
     Net production of natural gas - available
         for sale (000 MCFPD)                                            1,483          1,721         1,479          1,703
                                                                        ------         ------        ------         ------

         Total net production (000 BOEPD)                                  651            736           646            731

     Natural  gas sales (000 MCFPD)                                      3,295          3,908         3,015          3,934

     Average U.S. crude (per bbl)                                       $10.95         $11.26        $12.80         $10.72
     Average U.S. natural gas (per mcf)                                 $ 1.92         $ 2.10        $ 2.05         $ 2.05
     Average WTI (Spot) (per bbl)                                       $15.44         $15.26        $17.66         $14.62
     Average Kern (Spot) (per bbl)                                      $ 9.49         $ 8.31        $11.26         $ 7.75

International
-------------
     Net production of crude oil and natural
         gas liquids (000 BPD)
         Europe                                                            136            154           143            149
         Indonesia                                                         165            155           150            156
         Partitioned Neutral Zone                                          119            106           121            105
         Other                                                              67             69            69             67
                                                                        ------         ------        ------         ------
              Total                                                        487            484           483            477
     Net production of natural gas - available
         for sale (000 MCFPD)
         Europe                                                            265            251           244            245
         Colombia                                                          157            196           160            185
         Other                                                             111            118           112            112
                                                                        ------         ------        ------         ------
              Total                                                        533            565           516            542
                                                                        ------         ------        ------         ------

         Total net production (000 BOEPD)                                  576            578           569            567

     Natural gas sales (000 MCFPD)                                         557            721           549            665

     Average International crude (per bbl)                              $11.60         $11.68        $13.73         $11.42
     Average International natural gas (per mcf)                        $ 1.37         $ 1.61        $ 1.23         $ 1.59
     Average U.K. natural gas (per mcf)                                 $ 2.39         $ 2.64        $ 2.17         $ 2.64
     Average Colombia natural gas (per mcf)                             $ 0.62         $ 0.91        $ 0.59         $ 0.92

Worldwide
---------
     Total worldwide net production (000 BOEPD)                          1,227          1,314         1,215          1,298

</TABLE>




                                     - 20 -

<PAGE>

<TABLE>
<CAPTION>
                                                                                           (Unaudited)
                                                                                           -----------
                                                                         For the six months           For the three months
                                                                           ended June 30,                ended June 30,
                                                                         -------------------          --------------------
                                                                         1999           1998          1999            1998
                                                                         ----           ----          ----            ----
OPERATING DATA
--------------

Refining, marketing and distribution
------------------------------------

United States
-------------
<S>                                                                      <C>            <C>           <C>            <C>
     Refinery input (000 BPD)
         Equilon area                                                      369            377           373            396
         Motiva area                                                       307            323           313            333
                                                                         -----          -----         -----          -----
              Total                                                        676            700           686            729

     Refined product sales (000 BPD)
         Equilon area                                                      669            561           741            590
         Motiva area                                                       378            337           376            341
         Other                                                             299            234           291            234
                                                                         -----          -----         -----          -----
              Total                                                      1,346          1,132         1,408          1,165


International
-------------
     Refinery input (000 BPD)
     Europe                                                                367            371           368            367
     Caltex area                                                           427            428           416            419
     Latin America/West Africa                                              73             64            72             70
                                                                         -----          -----         -----          -----
         Total                                                             867            863           856            856

     Refined product sales (000 BPD)
     Europe                                                                619            582           601            602
     Caltex area                                                           667            589           663            586
     Latin America/West Africa                                             489            444           501            460
     Other                                                                  93             51            82             56
                                                                         -----          -----         -----          -----
     Total                                                               1,868          1,666         1,847          1,704

</TABLE>


                                     - 21 -

<PAGE>

Item 6. Exhibits and Reports on Form 8-K
----------------------------------------

(a)  Exhibits

     --   (3.1)  Copy of Restated Certificate of Incorporation of Texaco Inc.,
                 as  amended   to   and  including  August  4,  1999,  including
                 Certificate  of   Designations,    Preferences  and  Rights  of
                 Series  D  Junior  Participating  Preferred  Stock  and  Series
                 G,  H,  I and J  Market  Auction  Preferred Shares.

     --    (11)  Computation of Earnings Per Share of Common Stock.

     --    (12)  Computation of  Ratio of Earnings to Fixed Charges of Texaco on
                 a Total Enterprise Basis.

     --    (20)  Copy  of  Texaco  Inc.'s  Annual  Report  on  Form 10-K for the
                 fiscal  year ended  December  31, 1998  (including  portions of
                 Texaco Inc.'s Annual Report to Stockholders  for the year 1998)
                 and a copy of Texaco Inc.'s  Quarterly  Report on Form 10-Q for
                 the quarterly  period ended March 31, 1999, as previously filed
                 by the Registrant with the Securities and Exchange  Commission,
                 File No. 1-27.

     --    (27)  Financial Data Schedule.

(b) Reports on Form 8-K:

     During the second quarter of 1999, the Registrant  filed Current Reports on
Form 8-K for the following events:

     1.   April 27, 1999

          Item 5. Other Events -- reported that Texaco issued an Earnings  Press
          Release for the first quarter 1999.

     2.   April 28, 1999

          Item 5.  Other  Events  --  provided  a  description  of an  Officers'
          Certificate  dated April 28, 1999  executed by Texaco  Capital Inc., a
          wholly-owned subsidiary of the Registrant, which established the terms
          and  provisions  of a series of  securities  designated  "Series  1999
          Medium-Term Notes," for up to $1.5 billion.






                                     - 22 -

<PAGE>

                                   SIGNATURES
                                   ----------



     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.




                                                                 Texaco Inc.
                                                           ---------------------
                                                                (Registrant)




                                                   By:        G.J. Batavick
                                                           ---------------------
                                                              (Comptroller)




                                                   By:          R.E. Koch
                                                           ---------------------
                                                           (Assistant Secretary)




Date:    August 12, 1999
         ---------------






                                     - 23 -