OLD GREENWICH, Conn., Jan. 29 /PRNewswire-FirstCall/ -- Premcor Inc.
(NYSE: PCO) today reported net income from continuing operations excluding
special items of $13.1 million, or $.18 per share, for its fourth quarter
ended December 31, 2003 and net income from continuing operations excluding
special items of $165.2 million, or $2.24 per share, for the year ended
December 31, 2003. These results compare to net income from continuing
operations excluding special items of $34.7 million, or $.60 per share, in the
fourth quarter of 2002 and a net loss from continuing operations excluding
special items of $10.5 million, or $.22 per share, for the year ended
December 31, 2002.
Including the impact of special items and discontinued operations, Premcor
reported a net loss of $10.4 million, or $.14 per share for the 2003 fourth
quarter, compared to net income of $34.7 million, or $.60 per share in the
fourth quarter of 2002. For the year ended December 31, 2003, Premcor's net
income including special items and discontinued operations was $116.6 million,
or $1.58 per share, compared to a net loss of $129.6 million, or $2.65 per
share for the year ended December 31, 2002.
The company believes the special items shown below are not indicative of
its core operating performance. The company's Board of Directors typically
excludes these items and stock option compensation expense in determining
incentive compensation. A reconciliation of net income before special items
and discontinued operations to the company's net income (loss) reported in
accordance with generally accepted accounting principles is as follows (in
millions, except per share amounts, unaudited):
Fourth quarter ended December 31,
2003 2002
Net Net
Income Per Income Per
(Loss) Share (Loss) Share
Net income from continuing
operations,excluding special items $13.1 $0.18 $34.7 $0.60
Special items:
Refinery restructuring and other
charges, net of $7.4
tax benefit (1) (12.5) (0.17) - -
Loss on extinguishment of debt, net
of $6.4 tax benefit (10.7) (0.15) - -
Net income (loss) from continuing
operations (10.1) (0.14) 34.7 0.60
Net loss from discontinued operations (0.3) - - -
Net income (loss) available to common
stockholders $(10.4) $(0.14) $34.7 $0.60
Year ended December 31,
2003 2002
Net Net
Income Per Income Per
(Loss) Share (Loss) Share
Net income (loss) from continuing
operations, excluding special items $165.2 $2.24 $(10.5) $(0.22)
Special items:
Refinery restructuring and other
charges, net of $14.3 and
$65.7 tax benefit (2) (24.2) (0.33) (107.2) (2.19)
Loss on extinguishment of debt, net
of $10.3 and $7.6 tax benefit (17.2) (0.23) (11.9) (0.24)
Net income (loss) from continuing
operations 123.8 1.68 (129.6) (2.65)
Net loss from discontinued operations (7.2) (0.10) - -
Net income (loss) available to common
stockholders $116.6 $1.58 $(129.6) $(2.65)
(1) Fourth quarter amounts in 2003 include pretax charges relating to the
planned relocation of the company's St. Louis office to its
Connecticut headquarters ($5.7 million), environmental remediation and
litigation costs associated with closed facilities including the
Hartford and Blue Island refineries and formerly-owned terminal
facilities ($10.0 million), and additional closure costs and asset
write-offs for the Hartford and Blue Island refineries ($4.2 million).
There were no charges in the fourth quarter of 2002.
(2) Full year amounts in 2003 include pretax charges relating to the
planned relocation of the company's St. Louis office to its
Connecticut headquarters ($7.5 million), environmental remediation and
litigation costs associated with closed facilities including the
Hartford and Blue Island refineries and formerly-owned terminal
facilities ($10.2 million), and closure and asset write-offs related
to the sale of the Hartford refinery assets and closure of the Blue
Island refinery ($20.8 million). Full year amounts in 2002 include
pretax charges related to the closure of the Hartford refinery ($137.4
million), costs related to the restructuring of the Port Arthur and
Lima refinery and St. Louis office administrative functions ($32.4
million), and other items ($3.1 million).
Thomas D. O'Malley, Premcor's Chairman and Chief Executive Officer, said,
"Premcor's fourth quarter results reflected weak refining margins in our Gulf
Coast and Midwestern markets and lower crude oil throughput, as all three of
our refineries had scheduled maintenance activity. The maintenance activity
included work previously scheduled for our Port Arthur, Texas and Lima, Ohio
refineries and an unscheduled acceleration of work originally due to be
carried out in January 2004 at our Memphis, Tennessee refinery. While the
downtime at Memphis had a substantial negative impact in December 2003,
significantly improved margins in January 2004 over December 2003 will result
in a net positive compared to our original maintenance schedule.
"Natural gas, our largest variable operating expense, continues to remain
well above historical averages. Our natural gas costs for the fourth quarter
and full year 2003 averaged $4.57 and $5.29 per mmbtu, respectively. We
continue to identify ways to reduce our overall dependency on natural gas
during times of severe price spikes. We will, however, remain a large
consumer of natural gas, and our processing cost structure will remain highly
correlated with movements in natural gas prices. Our natural gas cost for
January month-to-date has averaged approximately $5.70 per mmbtu. We expect
our February and March costs to match or exceed this number."
Commenting on the year, O'Malley said, "2003 was a year of significant
accomplishment for Premcor. We experienced four consecutive quarters of
positive core earnings due to a relatively strong margin environment and solid
operating results. We began the year with the acquisition of our Memphis
refinery in the first quarter. The $40 million sale of our shut-down
Hartford, Illinois refinery was completed in the second quarter. Also in the
second quarter, a major expansion project at our Port Arthur refinery was
announced and funded. Three of our long-term debt issues were refinanced in
the fourth quarter, lowering the average interest rate on $385 million of debt
from 8.7 percent to 7.2 percent and pushing out the average maturity by four
years. We continued to strengthen the balance sheet during 2003. Debt-to-
capitalization ended the year at just under 56 percent, a slight improvement
over year-end 2002. Cash and equivalents ended the year at just under $500
million, giving Premcor a substantial amount of liquidity heading into our
peak clean fuels spending period.
"We had significant capital expenditure activity in the final quarter of
2003, including turnarounds at each refinery and the completion of a gasoline
hydrotreater at the Port Arthur refinery that allows us to meet 100 percent of
the EPA-mandated Tier II gasoline sulfur requirements at Port Arthur. The
majority of the Tier II gasoline project at our Memphis refinery was
constructed during 2003, and the project will be completed in the second
quarter of 2004. Our Tier II gasoline project at Lima and ultra low sulfur
diesel projects at both Port Arthur and Memphis are well under way."
On the recently announced acquisition, O'Malley said, "Earlier this month
we announced that we will purchase our fourth refinery, the Delaware City
Refining Complex located in Delaware City, Delaware, from Motiva. We plan to
complete the acquisition during the second quarter before the demand from the
peak summer driving season commences. Once the acquisition is completed,
Premcor will have total operating capacity of approximately 790,000 barrels
per day."
Looking ahead, O'Malley said, "2004 has begun with margins exceeding our
expectations and budget. However, Premcor results will be negatively affected
by unusually heavy turnaround activity tied to our clean fuels projects,
particularly at our Lima refinery. During an investor meeting on January 15,
2004, we provided detailed information on our expectations for 2004 throughput
and after-tax profit at a certain price set. All of this information is
available on our web site at http://www.premcor.com ."
The company's regular quarterly conference call concerning the quarter and
full year results will be webcast live today at 11:00 a.m. Eastern Time on the
Investor Relations section of the Premcor Inc. web site at http://www.premcor.com .
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 other plans. 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.
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended Year ended
December 31, December 31,
(in millions except per share
amounts, unaudited) 2003 2002 2003 2002
Operating revenues (1) $2,256.1 $1,713.1 $8,803.9 $5,906.0
Cost of sales (1) (2,016.5) (1,506.4) (7,719.2) (5,235.0)
Gross margin 239.6 206.7 1,084.7 671.0
Operating expenses 138.5 94.0 524.9 432.2
General and administrative
expenses 17.8 11.0 67.1 51.8
Stock-based compensation 4.4 4.1 17.6 14.0
Depreciation and amortization 29.1 24.0 106.2 88.9
Restructuring and other charges 19.9 - 38.5 172.9
Operating income (loss) 29.9 73.6 330.4 (88.8)
Interest expense and finance
income, net (30.2) (20.3) (115.1) (101.8)
Loss on extinguishment of long-
term debt (17.1) - (27.5) (19.5)
Income tax benefit (provision) 7.3 (18.6) (64.0) 81.3
Minority interest - - - 1.7
Net income (loss) from
continuing operations (10.1) 34.7 123.8 (127.1)
Discontinued operations, net of
tax (0.3) - (7.2) -
Preferred stock dividends - - - (2.5)
Net income (loss) available to
common stockholders $(10.4) $34.7 $116.6 $(129.6)
Net income (loss) per common
share:
Income (loss) from continuing
operations $(0.14) $0.60 $1.68 $(2.65)
Discontinued operations - - (0.10) -
Net income (loss) $(0.14) $0.60 $1.58 $(2.65)
Weighted average common shares
outstanding (in millions) 74.1 58.1 73.6 49.0
(1) Cost of sales includes the net effect of the buying and selling of
crude oil to supply the Company's refineries. Prior period operating
revenue and cost of sales have been reclassifed to conform to the
fourth quarter application of EITF 03-11, effective as of the
beginning of the year. The current period presentation and prior
period reclassifications have no effect on current or previously
reported gross margin or net income (loss).
December 31, December 31,
Summarized Balance Sheet Information 2003 2002
Cash and short-term investments:
Premcor Inc. $52.8 $40.7
Premcor USA Inc. 1.2 10.2
The Premcor Refining Group Inc. 378.6 121.4
Consolidated cash and short-
term investments 432.6 172.3
Cash restricted for debt service 66.6 61.7
Other working capital 360.9 86.9
Total assets 3,715.3 2,323.0
Long-term debt, including current maturities:
Premcor USA Inc. 10.3 40.1
The Premcor Refining Group Inc. 1,441.8 884.8
Consolidated long-term debt 1,452.1 924.9
Total common stockholders' equity 1,145.2 704.0
Three months ended Year ended
December 31, December 31,
(unaudited) 2003 2002 2003 2002
Selected Volumetric and Per Barrel
Data
Production (Mbbls per day) 535.1 388.1 532.6 438.2
Crude oil throughput (Mbbls per day) 500.1 354.9 501.3 412.8
Total crude oil throughput (millions
of barrels) 46.0 32.7 183.0 150.7
Per barrel of crude throughput:
Gross margin $5.21 $6.33 $5.93 $4.45
Operating expenses 3.01 2.88 2.87 2.87
Market Indicators (dollars per barrel)
West Texas Intermediate, or "WTI"
(sweet) $31.20 $28.30 $31.15 $26.13
Crack Spreads:*
Gulf Coast 2/1/1 3.59 3.61 4.06 2.72
Chicago 3/2/1 4.66 6.24 6.39 5.00
Crude Oil Differentials:
WTI less WTS (sour) 2.38 1.72 2.73 1.38
WTI less Maya (heavy sour) 6.85 6.14 6.87 5.21
WTI less Dated Brent (foreign) 1.74 1.46 2.31 1.12
Natural Gas (per mmbtu) 4.94 3.92 5.36 3.17
* Per barrel margin indicator for the conversion of
crude oil into finished products. The first number
represents the number of barrels of West Texas
Intermediate crude oil, priced at Cushing, Oklahoma.
The second and third numbers represent the
number of barrels of conventional gasoline and
high sulfur diesel fuel produced, priced in their
respective regional market.
Fourth quarter ended December 31, 2003
Port Price Risk
Selected Refinery Data (unaudited) Arthur Lima Memphis Results Total
Operating results (dollars in
millions):
Gross margin:
Gulf Coast 2/1/1 $75.1 $- $43.2 $- $118.3
Chicago 3/2/1 - 60.6 - - 60.6
Crude oil differentials to
benchmark 125.4 (19.0) (6.0) - 100.4
Product differentials to
benchmark (61.4) (1.0) 11.6 - (50.8
Price risk results - - - 11.1 11.1
Realized gross margin 139.1 40.6 48.8 11.1 239.6
Operating expenses 71.1 33.6 33.8 - 138.5
Net refining margin $68.0 $7.0 $15.0 $11.1 $101.1
Depreciation and amortization $15.5 $7.8 $2.6 $25.9
Per barrel of crude throughput (in
dollars):
(Based on crude oil throughput data
shown on following page)
Gross margin:
Gulf Coast 2/1/1 $3.59 $- $3.59 $- $2.57
Chicago 3/2/1 - 4.66 - - 1.32
Crude oil differentials to
benchmark 5.98 (1.46) (0.50) - 2.18
Product differentials
to benchmark (2.93) (0.08) 0.96 - (1.10)
Price risk results - - - 0.24 0.24
Realized gross margin 6.64 3.12 4.05 0.24 5.21
Operating expenses 3.39 2.58 2.81 - 3.01
Net refining margin $3.24 $0.54 $1.25 $0.24 $2.20
Depreciation and amortization $0.74 $0.60 $0.22 $0.58
Fourth quarter ended December 31, 2003
Port Price Risk
Selected Refinery Data (unaudited) Arthur Lima Memphis Results Total
Operating results (dollars in
millions):
Gross margin:
Gulf Coast 2/1/1 $347.7 $- $174.1 $- $521.8
Chicago 3/2/1 - 325.2 - - 325.2
Crude oil differentials to
benchmark 502.9 (49.0) (19.4) - 434.6
Product differentials to
benchmark (219.1) (22.4) 72.1 - (169.4)
Price risk results - - - (27.5) (27.5)
Realized gross margin 631.5 253.9 226.8 (27.5) 1,084.7
Operating expenses 285.9 132.5 106.5 - 524.9
Net refining margin $345.6 $121.4 $120.3 $(27.5) $559.8
Depreciation and amortization $59.4 $26.3 $8.7 $94.4
Per barrel of crude throughput
(in dollars):
(Based on crude oil throughput
data shown on following page)
Gross margin:
Gulf Coast 2/1/1 $4.06 $- $3.75 $- $2.85
Chicago 3/2/1 - 6.39 - - 1.78
Crude oil differentials to
benchmark 5.87 (0.96) (0.42) - 2.37
Product differentials to
benchmark (2.56) (0.44) 1.55 - (0.93)
Price risk results - - - (0.15) (0.15)
Realized gross margin 7.37 4.99 4.89 (0.15) 5.93
Operating expenses 3.34 2.60 2.30 - 2.87
Net refining margin $4.03 $2.38 $2.59 $(0.15) $3.06
Depreciation and amortization $0.69 $0.52 $0.19 $0.52
Calculation Methodology:
Although the Company manages its refinery business, including feedstock
acquisition and product marketing, on an integrated basis, for
analytical purposes the business results shown here have been allocated
to the individual refineries. The foundation for determining realized
gross margin by refinery is the actual delivered cost of refinery
feedstocks and a daily valuation of actual refinery production at
market. Since crude oil is often purchased and priced well in advance
of the time that it is consumed and the value of refinery production can
be fixed before or after it is produced, our actual results may
significantly vary from those that would be determined with reference to
benchmark market indicators. We manage this inherent price risk on a
total Company basis and may purchase futures contracts that correspond
volumetrically with all or a portion of our fixed price purchase and
sale commitments. As a result, we have separately identified the
financial effects of this price risk, net of any risk mitigation
activities, under the caption "price risk results." As a result of this
methodology, together with certain necessary allocations, the individual
refinery realized gross margins presented here to do not reflect the
results that would be reported if separately accounted for in accordance
with generally accepted accounting principles. The Company believes
that this indivudal refinery and price risk information is helpful in
understanding our overall operating results.
(1) Acquired March 2003. Operating results reflect 304 days of operations
averaged over the calendar year ended December 31, 2003. Actual
crude oil throughput for the 304 days was 152,500 bpd.
Fourth quarter ended December 31,
2003
Selected Volumetric Data
(in thousands of barrels per day, Port
unaudited) Arthur Lima Memphis Total
Feedstocks:
Crude oil throughput:
Sweet - 136.4 130.9 267.3
Light/Medium sour 31.3 5.0 - 36.3
Heavy sour 196.5 - - 196.5
Total crude oil 227.8 141.4 130.9 500.1
Unfinished and blendstocks 14.6 0.4 4.5 19.5
Total feedstocks 242.4 141.8 135.4 519.6
Total crude oil throughput, in
millions of barrels 21.0 13.0 12.0 46.0
Production:
Light products:
Conventional gasoline 93.6 74.6 51.4 219.6
Premium and reformulated
gasoline 20.5 9.8 9.7 40.0
Diesel fuel 71.3 24.7 42.8 138.8
Jet fuel 25.1 20.2 22.2 67.5
Petrochemical products 17.1 8.2 5.9 31.2
Total light products 227.6 137.5 132.0 497.1
Petroleum coke and sulfur 27.3 2.5 0.2 30.0
Residual oil 1.8 2.9 3.3 8.0
Total production 256.7 142.9 135.5 535.1
Year ended December 31, 2003
Selected Volumetric Data
(in thousands of barrels per day, Port
unaudited) Arthur Lima Memphis(1) Total
Feedstocks:
Crude oil throughput:
Sweet - 136.1 126.9 263.0
Light/Medium sour 31.4 3.4 0.2 35.0
Heavy sour 203.3 - - 203.3
Total crude oil 234.7 139.5 127.1 501.3
Unfinished and blendstocks 16.4 (4.4) 6.2 18.2
Total feedstocks 251.1 135.1 133.3 519.5
Total crude oil throughput, in
millions of barrels 85.7 50.9 46.4 183.0
Production:
Light products:
Conventional gasoline 86.0 68.9 53.7 208.6
Premium and reformulated
gasoline 30.4 12.1 11.5 54.0
Diesel fuel 77.6 21.8 38.5 137.9
Jet fuel 19.3 21.8 19.9 61.0
Petrochemical products 18.2 7.2 6.1 31.5
Total light products 231.5 131.8 129.7 493.0
Petroleum coke and sulfur 27.0 2.4 0.2 29.6
Residual oil 5.1 2.1 2.8 10.0
Total production 263.6 136.3 132.7 532.6
(1) Acquired March 2003. Volumetric data for production and consumption
reflects 304 days of operations averaged over the year ended December
31, 2003. Actual crude oil throughput during the 304 days of
operations was 152,500 bpd.
SOURCE Premcor Inc.
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Related links:
http://www.premcor.com
CONTACT:
Media-Investors, Joe Watson, +1-203-698-7510,
Investors, Karyn Ovelmen, +1-203-698-5669, Karen Davis,
+1-314-854-1424, Michael Taylor, +1-314-719-2304, all of Premcor
Inc.
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