HOUSTON, May 1 /PRNewswire-FirstCall/ -- Frontier Oil Corporation
(NYSE: FTO) announced a net loss of ($3.7) million, or ($0.14) per share, for
the first quarter ended March 31, 2003, compared to net income of $261,000, or
$0.01 per share, for the same period of 2002. While the Cheyenne Refinery
experienced attractive margins, operations and profits, those results were
overshadowed by losses at the El Dorado Refinery, resulting primarily from the
scheduled turnaround of the crude unit in March 2003.
Operating results from the Company's Cheyenne Refinery reflected a
significant increase consistent with improved refined product markets and
higher throughput. The operating margin before depreciation at the Cheyenne
Refinery was $13.3 million for the first quarter of 2003 compared to
$3.7 million for the same period of 2002. This meaningful increase at
Cheyenne was due to an increase in production, higher gasoline and distillate
crack spreads as well as a wider light/heavy crude oil spread, partially
offset by higher natural gas prices and a negative by-product margin due to
high crude oil prices. The gasoline and distillate crack spreads were
$7.41 per barrel and $8.22 per barrel, respectively, for the first quarter of
2003 compared to $5.48 and $4.23 for the same period of 2002. The light/heavy
spread was $6.27 per barrel for the quarter ended March 31, 2003 compared to
$3.75 for the quarter ended March 31, 2002. Total sales barrels increased to
49,863 barrels per day (bpd) in the first quarter of 2003 from 40,530 bpd for
the same period in 2002. Refinery operating expense before depreciation
increased by $1.3 million to $14.6 million for the first quarter 2003 compared
to the same period in 2002, due to a $1.1 million increase in natural gas cost
in 2003. However, due to increased sales volumes, refinery operating expense
before depreciation declined to $3.25 per sales barrel in the first quarter of
2003 compared to $3.64 per sales barrel in the first quarter of 2002.
The scheduled 18-day crude unit turnaround at the El Dorado Refinery that
began March 12, 2003 negatively impacted operating results. El Dorado
recorded an operating loss before depreciation of $2.2 million for the first
quarter 2003 compared to operating margin before depreciation of $12.0 million
for the same period of 2002. As a point of reference, lost volumes at average
March crack spreads would have improved El Dorado's operating margin by almost
$12 million, net of inventory effects. Though this major turnaround was
completed on schedule and only exceeded its planned $12.3 million cost by
$700,000, the effect on volumes charged and processed throughout the quarter
was significant. Sales volumes for the first quarter of 2003 were 95,057 bpd
compared to 113,349 bpd for the first quarter of 2002. Most of the volume
reduction occurred in March, when the El Dorado gasoline crack spread averaged
$7.07 and the distillate crack spread averaged $4.98. Despite higher average
light product margins than last year, the high crude price environment
weakened by-product margins. In addition to turnaround volume loss, increased
refinery operating expenses also negatively affected gross margin. Refinery
operating expenses before depreciation at El Dorado increased by almost
$7.0 million from the year-ago first quarter, due primarily to a $3.5 million
increase in natural gas cost, $700,000 turnaround expense in excess of accrual
and $600,000 in overtime.
Commenting on the turnaround, Frontier's Chairman, President, and CEO,
James Gibbs said, "Our staff did an excellent job finishing the turnaround on
schedule and only slightly over budget. Unfortunately, our turnaround
occurred when both the diesel and gasoline crack spreads were well above the
five-year averages and the WTI/WTS spread was also above the five-year
average. The opportunity cost was high, but the good news is we do not have
to do this again at El Dorado for five years."
Frontier's balance sheet remains very strong with $113.9 million in cash
and cash equivalents at quarter ended March 31, 2003. Net debt to book
capitalization was 43% (as calculated on the attached sheet) at the end of the
first quarter 2003. This is an important indicator of a company's leverage
position, with a lower percent indicating a less leveraged company.
The recent quarter's results include an after-tax inventory gain of
approximately $5.2 million, or $0.20 per share, compared to $8.6 million, or
$0.32 per share, for first quarter of 2002 on a FIFO basis. Inventory gains
in January and February due to increasing crude and product prices were
partially offset by inventory losses (including lower of cost or market
adjustments to inventory) during March because of decreasing crude and product
prices. The lower of cost or market adjustment was exacerbated at El Dorado
due to the turnaround and rapid price decline at the end of March.
Holly Merger
Frontier filed its request for early termination under the Hart-Scott-
Rodino Antitrust Improvements Act the week of April 14, 2003 and expects to
file its S-4 Registration Statement in early May in conjunction with the
recently announced merger with Holly Corporation. The Company also recently
closed $220 million of 8% senior notes into escrow pending the close of the
merger and is currently renegotiating its bank working capital facility.
Gibbs continued, "The merger will further diversify our asset base and
will allow us to stagger our turnarounds going forward, which should reduce
the turnaround effects to the Company's bottom line. We continue to progress
toward completion of the merger and hope to be able to close in July."
Conference Call
A conference call is scheduled for tomorrow morning, May 2, 2003 at
11:00 am EDT, to discuss first quarter results. To access the call, please
dial (800) 915-4836. For those outside the U.S., please call (973) 317-5319.
A replay may be heard through May 16 by dialing (800) 428-6051 and entering
the passcode 290397. To access the call or the replay via the Internet, go to
http://www.frontieroil.com and register on the Investor Relations page.
Frontier operates a 110,000 barrel-per-day refinery located in El Dorado,
Kansas, and a 46,000 barrel-per-day refinery located in Cheyenne, Wyoming, and
markets its refined products principally along the eastern slope of the Rocky
Mountains and in other neighboring plains states.
FRONTIER OIL CORPORATION
Three Months Ended
March 31,
2003 2002
INCOME STATEMENT DATA ($000's except per share)
Revenues $ 499,384 $ 336,350
Refining operating costs 486,615 319,278
Selling and general expenses 4,678 3,803
Operating income before depreciation (EBITDA) 8,091 13,269
Depreciation 6,960 6,598
Operating income 1,131 6,671
Interest expense, net 7,053 6,312
Provision (benefit) for income taxes (2,222) 98
Net income (loss) $ (3,700) $ 261
Net income (loss) per diluted share $ (0.14) $ 0.01
Diluted average shares outstanding (000's) 25,864 27,024
OTHER FINANCIAL DATA ($000's)
Cash flow before changes in working capital $ 2,658 $ 7,355
Working capital changes (21,997) (17,399)
Net cash provided (used) by operating activities (19,339) (10,044)
Net cash provided (used) by investing activities (6,607) (15,635)
Net cash provided (used) by financing activities 27,513 29,591
BALANCE SHEET DATA ($000's)
Cash, including cash equivalents (a) $ 113,931 $ 107,907
Working capital 100,223 107,033
Short-term and current debt (b) 29,100 30,400
Total long-term debt (c) 208,013 208,922
Shareholders' equity (d) 163,285 170,269
Net debt to book capitalization calculation
((b+c-a)/(b+c-a+d)) 43.0% 43.6%
FRONTIER OIL CORPORATION
Three Months Ended
March 31,
2003 2002
OPERATIONS
Cheyenne Refinery
Operations (bpd)
Total charges 48,905 40,710
Gasoline yields 20,866 16,512
Diesel yields 14,093 12,640
Total sales 49,863 40,530
Operating Margins ($ per bbl)
Revenues $ 38.31 $ 24.14
Raw material, freight and other costs 32.09 19.48
Refined product margin 6.22 4.66
Refinery operating expenses excluding depreciation 3.25 3.64
Margin before depreciation 2.97 1.02
Depreciation 0.85 0.96
Net margin $ 2.12 $ 0.06
Light/Heavy crude spread ($ per bbl) $ 6.27 $ 3.75
El Dorado Refinery
Operations (bpd)
Total charges 95,919 116,601
Gasoline yields 53,748 65,592
Diesel and jet fuel yields 28,667 38,633
Total sales 95,057 113,349
Operating Margins ($ per bbl)
Revenues $ 38.08 $ 24.21
Raw material, freight and other costs 34.05 20.11
Refined product margin 4.03 4.10
Refinery operating expenses excluding depreciation 4.29 2.92
Margin (loss) before depreciation (0.26) 1.18
Depreciation 0.38 0.29
Net margin (loss) $ (0.64) $ 0.89
WTI/WTS Differential ($ per bbl) $ 2.38 $ 1.53
KEY TERMS: bpd = barrels per day; bbl = barrel
This news release includes forward-looking statements concerning the
Company. These may include statements of plans or objectives for future
operations, statements about future economic performance or assumptions or
estimates. The accuracy of these forward-looking statements is subject to a
wide range of business risks and changes in circumstances that are described
in our reports that are filed from time to time with the Securities and
Exchange Commission. Actual results and outcomes often differ from
expectations.
SOURCE Frontier Oil Corporation
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CONTACT:
Doug Aron of Frontier Oil Corporation,
+1-713-688-9600, ext. 145
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