OLD GREENWICH, Conn., April 29 /PRNewswire-FirstCall/ -- Premcor Inc.
(NYSE: PCO) today reported net income from continuing operations before
special items of $55.4 million, or $.80 per share, for the first quarter ended
March 31, 2003, compared to a net loss from continuing operations before
special items of $12.4 million, or $.39 per share, in the first quarter of
2002.
Special items for the first quarter of 2003 included a pretax charge of
$16.6 million related to the expected disposition of the company's Hartford,
Illinois refinery assets and a pretax loss of $7.0 million on the early
retirement of debt. These charges were partially offset by a $1.6 million
pretax reduction in the reserve the company established last year for the
restructuring of its corporate office activities. In the first quarter of
2002, special items included a pretax charge of $131.2 million relating to the
plan to discontinue refining operations at the Hartford refinery and a pretax
charge of $10.8 million, primarily due to severance and other costs associated
with management changes and the company's corporate office restructuring. In
addition to the special items, in the first quarter of 2003, Premcor had an
after-tax loss from discontinued operations of $4.3 million related to certain
lease obligations resulting from the bankruptcy of the purchaser of the
company's former retail operations. There were no results of discontinued
operations in the prior-year period. Including the effect of the special
items and the loss from discontinued operations, Premcor reported net income
of $37.5 million, or $.54 per share, for the first quarter ended March 31,
2003, compared to a net loss of $99.7 million, or $3.14 per share, in the
first quarter of 2002.
The company believes the special items described above are not indicative
of its core operating performance. The company's Board of Directors typically
excludes these items in determining incentive compensation. A reconciliation
of these special items to the company's results reported in accordance with
generally accepted accounting principles is as follows (in millions, except
per share amounts):
2003 2002
Net Net
Income Per Income Per
(Loss) Share (Loss) Share
Net income (loss) from continuing
operations, excluding special items $55.4 $0.80 $(12.4) $(0.39)
After-tax special items:
Refinery restructuring and other
charges (9.3) (0.14) (87.3) (2.75)
Loss on extinguishment of debt (4.3) (0.06) - -
Net income (loss) from continuing
operations 41.8 0.60 (99.7) (3.14)
Loss from discontinued operations (4.3) (0.06) - -
Net income (loss) available to common
stockholders $37.5 $0.54 $(99.7) $(3.14)
Included in Premcor's first quarter results was stock-based compensation
expense of $4.3 million pretax, equal to $.04 per share after tax. Premcor is
one of the few major U.S. independent refiners that currently expense this
non-cash compensation item. Absent the stock-based compensation expense,
Premcor's first quarter net income from continuing operations, excluding
special items would have been $.84 per share.
Thomas D. O'Malley, Premcor's Chairman and Chief Executive Officer, said,
"We are pleased with Premcor's first quarter results. Industry conditions
were robust during February and March, after getting off to a weak start in
January. Refining margins and crude oil price differentials were the best we
have seen since 2001. Demand for refined products was extremely strong during
the period due to the cold weather in the Northeast and Midwest. We also saw
U.S. gasoline demand hit all-time highs. On the product supply side, the oil
workers' strike in Venezuela transformed that country from a major exporter to
an importer of refined products for most of the quarter. The strike, coupled
with unusually heavy U.S. refinery maintenance in February and March, reduced
product supplies during the quarter. This supply-demand dynamic brought U.S.
product inventories to their lowest levels in ten years on a demand-covered
basis. Light-heavy crude oil price differentials were wide during the quarter
as incremental OPEC shipments brought an increased supply of heavy-sour
barrels onto the market during a period of extremely high benchmark crude oil
prices."
O'Malley continued, "While the strong margins and light-heavy spread
helped Premcor during the quarter, high natural gas and prompt-month crude oil
prices hurt us in ways our investors need to understand clearly. As explained
in our SEC filings, natural gas is Premcor's largest single variable expense
item. Our operating costs are sensitive to the price of natural gas because
our refineries purchase and consume approximately 29 million mmbtus annually
to fuel their operations. Roughly 80 percent of this volume is at our Port
Arthur refinery, with the balance at Lima. Memphis does not purchase
meaningful quantities of natural gas. The majority of our natural gas
requirements are purchased through long-term contracts on a calendar month
basis that fix the price at the beginning of the month. Our current long-term
natural gas supply contracts expire in August. We have reduced -- and will
further reduce -- our reliance on this expensive fuel, and we are currently
exploring the most cost-effective purchasing strategy for Premcor going
forward. Nevertheless, natural gas will continue to be an important cost
component. Each $1.00/mmbtu change in the average natural gas price results
in a $29 million change in Premcor's cost structure on an annual basis. Our
budgeted production cost for 2003 was based on a natural gas price of
$3.00/mmbtu. Our actual cost for the first quarter was $6.32/mmbtu, and our
actual cost for the month of April is roughly $5.00/mmbtu.
"Turning to crude oil prices, with the addition of the Memphis refinery,
Premcor's domestic crude input is now over 300,000 barrels per day. As a
buyer of domestic crude for pipeline delivery, we are required to commit to
the volume and price of those crude supplies approximately one month in
advance of actually processing the crude into refined products. Our goal as a
merchant refiner is to achieve the refining margin available in the market on
a daily basis, but we are exposed to the risk of prices fluctuating
significantly between the time we enter into the crude oil purchase commitment
and the time we actually process the crude oil into refined products. As more
fully described in our SEC filings, which I urge our investors to read
carefully, our quarterly earnings may be materially impacted by changes in the
price of crude oil and the risk management activities we undertake to mitigate
those changes. Risk management measures may or may not be cost-effective
depending on market conditions, and it is at best an inexact science."
Commenting on Premcor's growth during the quarter, O'Malley said, "We took
a major step forward this quarter in our effort to grow Premcor's earnings
base by completing the Memphis refinery acquisition on schedule on March 3.
As a light-sweet refinery processing 170,000 barrels per day, Memphis has
increased Premcor's refining capacity by 45 percent and has added more
resiliency to our earnings profile. Our employees worked diligently to ensure
a seamless transition, and the refinery is operating well under Premcor
management. I am pleased to be able to say that Memphis has been profitable
from Day One."
Looking ahead, O'Malley said, "The second quarter is off to a solid start.
Refining margins and the light-heavy spread have declined from their first
quarter peaks, but nonetheless they have been strong quarter-to-date. The
WTI-Maya differential has averaged over $8.00 per barrel for the month, while
the Gulf Coast 2-1-1 crack spread has averaged over $3.80 per barrel, and the
Chicago 3-2-1 crack spread has stayed over $7.00 per barrel. These strong
indicators are supported by a tight U.S. inventory position in both middle
distillates and gasoline going into the summer driving season. We have seen
ample shipments of crude oil, and barring significant cutbacks by the heavy
crude oil producers, we expect the light-heavy spread to remain reasonably
wide. As for operations, while Premcor's first quarter results reflected
scheduled maintenance at the Lima refinery and only 29 days' contribution from
the Memphis refinery, our second quarter will benefit from an absence of major
scheduled maintenance and the availability of Memphis for the entire period.
Given the above margins, differentials, and natural gas prices, as well as a
stable crude oil price environment, we would expect the second quarter to
exceed our first quarter's profitability."
The company's regular quarterly conference call concerning the quarters'
results will be webcast live today at 10:00 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, reports on Form 8-K, and annual reports on Form 10-K.
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended
March 31,
(in millions except per share amounts,
unaudited) 2003 2002
Operating revenues $2,508.3 $1,228.3
Cost of sales 2,240.9 1,061.6
Gross margin 267.4 166.7
Operating expenses 117.2 114.5
General and administrative expenses 11.7 14.5
Stock-based compensation 4.3 1.9
Depreciation and amortization 24.1 22.2
Restructuring and other charges 15.0 142.0
Operating income (loss) 95.1 (128.4)
Interest expense and finance income, net (25.3) (31.0)
Loss on extinguishment of long-term debt (7.0) -
Income tax benefit (provision) (21.0) 61.4
Minority interest - 0.8
Net income (loss) from continuing operations 41.8 (97.2)
Discontinued operations, net of tax (4.3) -
Preferred stock dividends - (2.5)
Net income (loss) available to common
stockholders $37.5 $(99.7)
Net income (loss) per common share
(fully-diluted):
Income (loss) from continuing operations $0.60 $(3.14)
Discontinued operations (0.06) -
Net income (loss) $0.54 $(3.14)
Weighted average common shares
outstanding (in millions) 69.6 31.8
March 31, December 31,
Summarized Balance Sheet Information 2003 2002
Cash and short-term investments:
Premcor Inc. $54.1 $40.7
Premcor USA Inc. 0.6 10.2
The Premcor Refining Group Inc. 257.5 121.4
Consolidated cash and short-term
investments 312.2 172.3
Cash restricted for debt service 53.8 61.7
Other working capital 232.6 86.9
Total assets 3,221.0 2,323.0
Long-term debt, including current maturities:
Premcor USA Inc. 10.5 40.1
The Premcor Refining Group Inc. 1,165.2 884.8
Consolidated long-term debt 1,175.7 924.9
Total common stockholders' equity 1,052.4 704.0
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended
March 31,
(unaudited) 2003 2002
Selected Volumetric and Per Barrel Data
Production (Mbbls per day) 455.3 444.2
Crude oil throughput (Mbbls per day) 430.1 434.2
Total crude oil throughput (millions
of barrels) 38.7 39.1
Per barrel of throughput:
Gross margin $6.91 $4.27
Operating expenses 3.03 2.93
Market Indicators (dollars per barrel)
West Texas Intermediate, or "WTI" (sweet) $34.13 $21.59
Crack Spreads:*
Gulf Coast 2/1/1 5.51 2.44
Chicago 3/2/1 6.42 3.68
Crude Oil Differentials:
WTI less WTS (sour) 3.61 1.32
WTI less Maya (heavy sour) 7.62 5.43
WTI less Dated Brent (foreign) 2.60 0.42
Natural Gas (per mmbtu) 6.05 2.20
* 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.
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended March 31, 2003
Port
Selected Refinery Data (unaudited) Arthur Lima Memphis* Total
Operating results (dollars in millions):
Gross margin:
Gulf Coast 2/1/1 $121.1 $- $26.2 $147.3
Chicago 3/2/1 - 76.7 - 76.7
Crude oil differentials to benchmark 125.6 (17.4) (0.6) 107.6
Product differentials to benchmark (68.3) (1.4) 5.5 (64.2)
Realized gross margin 178.4 57.9 31.1 267.4
Operating expenses 73.5 35.4 8.3 117.2
Net refining margin 104.9 22.5 22.8 150.2
Depreciation and amortization 13.6 6.0 0.9 20.5
Per barrel of throughput (in dollars):
(Based on crude oil throughput data
shown on following page)
Gross margin:
Gulf Coast 2/1/1 $5.51 $- $5.51 $3.81
Chicago 3/2/1 - 6.42 - 1.98
Crude oil differentials to benchmark 5.71 (1.46) (0.13) 2.78
Product differentials to benchmark (3.11) (0.12) 1.16 (1.66)
Realized gross margin 8.11 4.84 6.54 6.91
Operating expenses 3.34 2.96 1.74 3.03
Net refining margin 4.77 1.88 4.80 3.88
Depreciation and amortization 0.62 0.50 0.19 0.53
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended March 31, 2002
Port
Selected Refinery Data (unaudited) Arthur Lima Hartford** Total
Operating results (dollars in millions):
Gross margin:
Gulf Coast 2/1/1 $50.9 $- $- $50.9
Chicago 3/2/1 - 46.2 20.8 67.0
Crude oil differentials to benchmark 101.0 (2.3) 11.7 110.4
Product differentials to benchmark (47.4) (2.5) (11.7) (61.6)
Realized gross margin 104.5 41.4 20.8 166.7
Operating expenses 65.7 29.7 19.1 114.5
Net refining margin 38.8 11.7 1.7 52.2
Depreciation and amortization 12.5 5.9 2.9 21.3
Per barrel of throughput (in dollars):
(Based on crude oil throughput data
shown on following page)
Gross margin:
Gulf Coast 2/1/1 $2.44 $- $- $1.30
Chicago 3/2/1 - 3.68 3.68 1.72
Crude oil differentials to benchmark 4.84 (0.18) 2.07 2.83
Product differentials to benchmark (2.27) (0.20) (2.07) (1.58)
Realized gross margin 5.01 3.30 3.68 4.27
Operating expenses 3.15 2.37 3.37 2.93
Net refining margin 1.86 0.93 0.31 1.34
Depreciation and amortization 0.60 0.47 0.51 0.55
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 a daily valuation of actual refinery
feedstocks at market and a daily valuation of actual refinery production
at market. The result of this calculation is a standard refinery gross
margin. Since it is not possible to ratably deliver daily priced
feedstocks to our refineries and since it is not possible to realize the
value of refinery production on the day it is produced, the actual
refinery gross margin differs from the standard. These differences
arise from the fact that 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 and is further
determined by the channel of trade through which it is marketed.
Inventory fluctuations and hedging activities with their attendant
product grade, location and time basis risks lead to further deviations
from the standard daily feedstock and product valuations. These
variations from the standard are allocated to each refinery on a
reasonable basis, usually driven by volume of crude input. As a result
of these allocations, the individual refinery realized gross margins
presented here do not reflect the results that would be reported if
separately accounted for in accordance with generally accepted
accounting principles. The Company believes this individual refinery
information is helpful in understanding its operating results.
* Acquired March 2003. Operating results reflect 29 days of operations
averaged over the first quarter of 2003. Actual crude oil throughput
for the 29 days of operations was 163,972 bpd.
** Closed September 2002
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended March 31, 2003
Selected Volumetric Data
(in thousands of barrels per day, Port
unaudited) Arthur Lima Memphis* Total
Feedstocks:
Crude oil throughput:
Sweet - 128.2 52.1 180.3
Light/Medium sour 33.4 4.6 0.8 38.8
Heavy sour 211.0 - - 211.0
Total crude oil 244.4 132.8 52.9 430.1
Unfinished and blendstocks 13.6 (2.5) 1.1 12.2
Total feedstocks 258.0 130.3 54.0 442.3
Total crude oil throughput, in
millions of barrels 22.0 12.0 4.8 38.7
Production:
Light products:
Conventional gasoline 85.8 66.2 22.8 174.8
Premium and reformulated gasoline 32.2 11.9 3.1 47.2
Diesel fuel 74.2 23.9 16.0 114.1
Jet fuel 27.0 17.8 8.8 53.6
Petrochemical products 17.3 6.4 2.6 26.3
Total light products 236.5 126.2 53.3 416.0
Petroleum coke and sulfur 27.9 2.3 0.1 30.3
Residual oil 5.2 2.7 1.1 9.0
Total production 269.6 131.2 54.5 455.3
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended March 31, 2002
Selected Volumetric Data
(in thousands of barrels per day, Port
unaudited) Arthur Lima Hartford** Total
Feedstocks:
Crude oil throughput:
Sweet - 134.4 - 134.4
Light/Medium sour 49.0 5.3 55.0 109.3
Heavy sour 182.7 - 7.8 190.5
Total crude oil 231.7 139.7 62.8 434.2
Unfinished and blendstocks (16.7) 1.1 2.6 (13.0)
Total feedstocks 215.0 140.8 65.4 421.2
Total crude oil throughput, in
millions of barrels 20.9 12.6 5.7 39.1
Production:
Light products:
Conventional gasoline 72.6 78.6 32.3 183.5
Premium and reformulated gasoline 13.9 11.2 3.8 28.9
Diesel fuel 64.3 17.4 20.1 101.8
Jet fuel 26.9 22.7 - 49.6
Petrochemical products 15.9 8.1 3.3 27.3
Total light products 193.6 138.0 59.5 391.1
Petroleum coke and sulfur 33.2 2.7 5.1 41.0
Residual oil 9.2 1.6 1.3 12.1
Total production 236.0 142.3 65.9 444.2
* Acquired March 2003. Volumetric data for production and consumption
reflects 29 days of operations averaged over the first quarter of 2003.
Actual crude oil throughput during the 29 days of operations was
163,972 bpd.
** Closed September 2002
SOURCE Premcor, Inc.
 back to top
Related links:
http://www.premcor.com
CONTACT:
Media-Investors, Joe Watson, +1-203-698-7510,
or Investors, Karen Davis, +1-314-854-1424, or Michael Taylor,
+1-314-719-2304, all of Premcor Inc.
|
