OLD GREENWICH, Conn., Jan. 14 /PRNewswire-FirstCall/ -- Premcor Inc.
(NYSE: PCO) today announced that its wholly owned subsidiary The Premcor
Refining Group Inc. will purchase Motiva Enterprises LLC's Delaware City
Refining Complex located in Delaware City, Delaware. The assets to be
purchased include a heavy crude oil refinery capable of processing in excess
of 180,000 barrels per day (bpd), a 2,400 tons-per-day (tpd) petroleum coke
gasification unit, a 160 megawatt (MW) cogeneration facility, and related
assets. The asset purchase price will be $435 million, plus the assumption by
Premcor of Motiva's obligations associated with $365 million of tax-exempt
bonds issued by the Delaware Economic Development Authority (DEDA) in
connection with the gasification and cogeneration facilities, plus the value
of petroleum inventories at closing. At current petroleum prices, the
inventory value would be approximately $100 million. The assumption of the
tax-exempt bonds by Premcor is subject to the consent of the DEDA and other
parties involved in the financing. There is also a contingent purchase
provision that may result in an additional $25 million payment per year up to
a total of $75 million over a three-year period depending on the level of
industry refining margins during that period, and a gasifier performance
provision that may result in an additional $25 million payment per year up to
a total of $50 million over a two-year period depending on the achievement of
certain performance criteria at the gasification facility.
The Delaware City refinery is a high-conversion heavy crude oil refinery
with a Nelson complexity rating of 11.7. Major process units include a fluid
coking unit, a fluid catalytic cracking unit, a hydrocracking unit with a
hydrogen plant, a continuous catalytic reformer, an alkylation unit, and
several hydrotreating units. Primary products include regular and premium
conventional and reformulated gasoline, low-sulfur diesel, home heating oil,
and jet fuel. The refinery's production is sold in the U.S. Northeast via
pipeline, barge, and truck distribution. The refinery's petroleum coke
production is gasified to fuel the cogeneration facility, which supplies
electricity and steam to the refinery as well as outside sales to third
parties.
Thomas D. O'Malley, Premcor's Chairman and Chief Executive Officer, said,
"This transaction, which will increase our crude oil processing capability by
approximately 30 percent, represents a major step forward for Premcor. We are
extremely pleased to have the opportunity to acquire the most technologically
complex refinery on the East Coast. This will give us meaningful entry into
the attractive, product-short Northeast market. The refinery is capable of
processing heavy-sour and high-acid crude oils, which typically sell at a
substantial discount to the benchmark WTI crude oil. The refinery has a clean
product yield of approximately 95 percent. Refining margins in the Northeast
have historically seen premiums over Gulf Coast margins in the $2.00 per
barrel range for reformulated gasoline. The facility is in excellent
condition, having benefited from significant upgrades under Motiva and its
predecessors. It is capable of meeting the new E.P.A. low-sulfur fuel
specifications with only a modest investment. With all of these advantages, we
are confident in stating that this refinery acquisition will be immediately
and significantly accretive to Premcor's after-tax earnings per share and cash
flow."
O'Malley continued, "In addition to the refinery, this transaction
includes a coke gasification plant and cogeneration facility located on the
refinery site. These assets have a significant value above and beyond the
refinery proper, converting low-value petroleum coke into electricity, steam,
and commercial gases available to the refinery and outside third parties.
Depending on market and operating conditions, they can generate tens of
millions of dollars in annual cash operating earnings. As we move forward
toward completing this acquisition, we will determine the best means for
maximizing the value of this related but separate complex, whether that be to
own and operate it alongside the refinery or to monetize it via sale of all or
part of it to a third party."
Commenting on the acquisition financing, O'Malley said, "In line with our
long-stated goal of continuing to improve Premcor's balance sheet, we intend
to finance this purchase with an approximately 50 percent mix of equity and
debt, including the assumption of the DEDA obligations."
A letter of interest has been approved and executed by both companies.
Completion of the sale is subject to the satisfaction of certain conditions,
including execution of a definitive agreement and obtaining regulatory
approvals. The acquisition is expected to close during the second quarter of
2004.
Premcor will hold an analyst meeting at the Plaza Hotel in New York City
tomorrow, January 15, 2004 at 12:00 p.m. EST to review the Delaware City
acquisition in more detail. The analyst meeting will be webcast live on the
Investor Relations section of the Premcor Inc. web site at http://www.premcor.com ,
and will be archived on the web site thereafter.
Premcor Inc. is one of the largest independent petroleum refiners and
marketers of unbranded transportation fuels and heating oil in the United
States.
This press release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, including the
company's current expectations with respect to future market conditions,
future operating results, the future performance of its refinery operations,
and future acquisitions and related financing transactions. Words such as
"expects," "intends," "plans," "projects," "believes," "estimates," "may,"
"will," "should," "shall," and similar expressions typically identify such
forward-looking statements. Even though Premcor believes the expectations
reflected in such forward-looking statements are based on reasonable
assumptions, it can give no assurance that its expectations will be attained.
Factors that could cause actual results to differ materially from expectations
include, but are not limited to, operational difficulties, varying market
conditions, potential changes in gasoline, crude oil, distillate, and other
commodity prices, government regulations, and other factors contained from
time to time in the reports filed with the Securities and Exchange Commission
by the company and its subsidiary, The Premcor Refining Group Inc., including
quarterly reports on Form 10-Q, current reports on Form 8-K, and annual
reports on Form 10-K.
SOURCE Premcor Inc.
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Related links:
http://www.premcor.com
CONTACT:
Media-Investors, Joe Watson, +1-203-698-7510;
or Investors, Karyn Ovelmen, +1-203-698-5669, Karen Davis,
+1-314-854-1424, or Michael Taylor, +1-314-719-2304, all of
Premcor Inc.
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