OLD GREENWICH, Conn., July 24 /PRNewswire-FirstCall/ -- Premcor Inc.
(NYSE: PCO) today reported net income from continuing operations before
special items of $37.2 million, or $.50 per share, for its second quarter
ended June 30, 2003, compared to a net loss from continuing operations before
special items of $17.3 million, or $.35 per share, in the second quarter of
2002.
Special items for the second quarter of 2003 included a $3.4 million
pretax loss on the early retirement of long-term debt and a pretax charge of
$0.7 million related to the planned relocation of the company's St. Louis
general office to its Connecticut headquarters. In the second quarter of
2002, pretax special items included losses of $19.3 million related to the
early retirement of long-term debt, $6.5 million related to the restructuring
of the company's St. Louis general and administrative operations, $6.2 million
related to the closure of the Hartford, Illinois refinery, $2.5 million
related to the restructuring of the company's Sabine River Holdings Corp.
("Sabine") subsidiary, and $1.4 million for idled equipment.
For the six months ended June 30, 2003, Premcor reported net income from
continuing operations before special items of $92.6 million, or $1.28 per
share, compared to a net loss from continuing operations before special items
of $29.7 million, or $.74 per share, for the first six months of 2002.
For the first six months of 2003, pretax special items included a loss of
$16.6 million related to the expected disposition of the company's Hartford,
Illinois refinery assets, a loss of $10.4 million on the early retirement of
debt, a $1.6 million reduction in the corporate office restructuring reserve
established in 2002, and a loss of $0.7 million related to the planned
relocation of the St. Louis office. The pretax special items for the first
six months of 2002 included losses of $137.4 million related to the closure of
the Hartford refinery, $19.3 million related to the early retirement of long-
term debt, $17.3 million related to the restructuring of the St. Louis general
and administrative operations, $2.5 million related to the Sabine
restructuring, and $1.4 million for idled equipment.
In addition to the special items, in the second quarter and first six
months of 2003, Premcor had an after-tax loss from discontinued operations of
$2.2 million and $6.5 million, respectively, related to certain retail lease
obligations resulting from the bankruptcy of the purchaser of the company's
former retail operations. There were no results from discontinued operations
in either prior-year period. Including the effect of the special items and
the loss from discontinued operations, Premcor reported net income of $32.3
million, or $.43 per share, for the second quarter of 2003, compared to a net
loss of $40.1 million, or $.82 per share, for the second quarter of 2002.
Including the effect of the special items and the loss from discontinued
operations, for the first six months of 2003, Premcor reported net income of
$69.8 million, or $.97 per share, compared to a net loss of $139.8 million, or
$3.47 per share, during the first six months 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):
Q2 2003 Q2 2002
Net Net
Income Per Income Per
(Loss) Share (Loss) Share
Net income (loss) from continuing
operations, excluding special items $37.2 $0.50 $(17.3) $(0.35)
After-tax special items:
Refinery restructuring and other
charges (0.5) (0.01) (10.5) (0.22)
Loss on extinguishment of debt (2.2) (0.03) (12.3) (0.25)
Net income (loss) from continuing
operations 34.5 0.46 (40.1) (0.82)
Loss from discontinued operations (2.2) (0.03) - -
Net income (loss) available to common
stockholders $32.3 $0.43 $(40.1) $(0.82)
Six Months 2003 Six Months 2002
Net Net
Income Per Income Per
(Loss) Share (Loss) Share
Net income (loss) from continuing
operations, excluding special items $92.6 $1.28 $(29.7) $(0.74)
After-tax special items:
Refinery restructuring and other
charges (9.8) (0.13) (98.2) (2.43)
Loss on extinguishment of debt (6.5) (0.09) (11.9) (0.30)
Net income (loss) from continuing
operations 76.3 1.06 (139.8) (3.47)
Loss from discontinued operations (6.5) (0.09) - -
Net income (loss) available to common
stockholders $69.8 $0.97 $(139.8) $(3.47)
Premcor's results include pretax stock-based compensation expense of $4.4
million, or $.04 per share after-tax, and $3.8 million, or $.05 per share
after-tax, for the second quarter of 2003 and 2002, respectively. Premcor
remains 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 second quarter net income (loss) from continuing operations,
excluding special items, would have been $.54 per share and $(.30) per share
in 2003 and 2002, respectively.
Thomas D. O'Malley, Premcor's Chairman and Chief Executive Officer, said,
"Premcor's second quarter results were acceptable in light of the weakening
industry conditions as the quarter progressed. Refining margins and light-
heavy crude oil differentials fell during the period from their strong first
quarter levels. Weak industry conditions in June pushed our results to the
low end of our expectations. Cool wet weather, particularly in the Northeast,
continued to dampen demand for gasoline. The first six months of 2003,
according to the API, represented the first six-month decline in average U.S.
gasoline consumption in the last twelve years.
"On the expense side, Premcor's second quarter earnings were once again
reduced by high prices for natural gas, an important fuel for complex
refiners. Our average cost for natural gas for the first half of 2003 was
$5.84 per mmbtu, compared to less than $3.00 per mmbtu for the first half of
last year. Premcor has historically consumed approximately 29 million mmbtu
of natural gas annually, but we have taken steps to significantly reduce our
usage of this expensive fuel through the use of internally produced fuels and
other measures. These steps have partially mitigated the financial impact of
higher prices in the first half of the year and we will continue to take
appropriate action to minimize the impact of high natural gas prices on our
financial results going forward.
"Our refineries continued to operate well during the second quarter. In
particular, I am pleased to say that the Memphis refinery met all of our
operating and financial expectations during its first full quarter under
Premcor's ownership. Port Arthur ran extremely well, averaging over 245,000
barrels per day during the quarter. Lima fell short of its expected
throughput due to minor unscheduled maintenance during the period. Going
forward, Port Arthur has scheduled maintenance in the third quarter as we
begin our announced expansion project there with a turnaround and expansion of
the hydrocracker. Memphis and Lima have no major scheduled maintenance during
the third quarter.
"During the second quarter, Premcor took advantage of the historically low
interest rate environment to raise $300 million in twelve year 71/2% senior
unsecured debt at Premcor Refining Group. We intend to use the proceeds for
capital projects, including the Port Arthur expansion that begins this
quarter, as well as other corporate purposes. We continued to improve the
company's capital structure and lower its cost of capital by retiring $14.7
million of Port Arthur Coker Company's 121/2% notes, and by eliminating a
high-cost third party crude oil linefill arrangement through the purchase of
the $80 million of crude oil pipeline inventory needed to operate Lima. We
ended the quarter with $518.8 million in cash, and now are in a secure
position to complete our clean fuel investments and Port Arthur expansion over
the next three years with no additional financing.
"On the subject of clean fuel, we are pleased that our estimated spending
requirements to make the new clean fuels are dropping. Our engineers continue
to examine all technological alternatives, explore the synergies of our
changing collection of assets, and refine our capital investment plan
accordingly. We now estimate our total capital investment for Tier II
gasoline at $310 million, down from our earlier $335 million estimate. The
clean gasoline upgrade at Port Arthur will be completed well under its
original budget and in production prior to year-end, with Memphis to follow in
early 2004 and Lima by the end of 2005. Our investment to make ultra low-
sulfur diesel fuel by 2006, previously estimated at $347 million, is now
estimated at $330 million. These reductions, combined with the timing
flexibility that the addition of the Memphis refinery to our corporate pool
has given us, provide a meaningful improvement to Premcor's cash flow over the
next few years. We hope to further reduce the investment necessary to make
clean fuels."
Looking ahead, O'Malley said, "The Gulf Coast 2/1/1 crack spread has
improved for the month of July to-date versus its second quarter average, but
Chicago refining margins and light-heavy crude oil differentials are lower.
Inventory levels for oil products suggest that we will see an improvement
going forward. If the economy improves, as expected, we believe Premcor will
benefit from increased consumption."
The company's regular quarterly conference call concerning the quarters'
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, reports on Form 8-K, and annual reports on Form 10-K.
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended Six months ended
June 30, June 30,
(in millions except per share
amounts, unaudited) 2003 2002 2003 2002
Operating revenues $2,619.9 $1,679.0 $4,996.2 $2,907.3
Cost of sales 2,354.6 1,523.4 4,463.5 2,585.0
Gross margin 265.3 155.6 532.7 322.3
Operating expenses 134.4 114.1 251.6 228.6
General and administrative expenses 15.7 14.4 27.4 28.9
Stock-based compensation 4.4 3.8 8.7 5.7
Depreciation and amortization 25.1 21.9 49.2 44.1
Restructuring and other charges 0.7 16.6 15.7 158.6
Operating income (loss) 85.0 (15.2) 180.1 (143.6)
Interest expense and finance
income, net (29.1) (30.0) (54.4) (61.0)
Loss on extinguishment of long-
term debt (3.4) (19.3) (10.4) (19.3)
Income tax benefit (provision) (18.0) 23.5 (39.0) 84.9
Minority interest - 0.9 - 1.7
Net income (loss) from
continuing operations 34.5 (40.1) 76.3 (137.3)
Discontinued operations, net of tax (2.2) - (6.5) -
Preferred stock dividends - - - (2.5)
Net income (loss) available to
common stockholders $32.3 $(40.1) $69.8 $(139.8)
Net income (loss) per common share
(fully-diluted):
Income (loss) from continuing
operations $0.46 $(0.82) $1.06 $(3.47)
Discontinued operations (0.03) - (0.09) -
Net income (loss) $0.43 $(0.82) $0.97 $(3.47)
Weighted average common shares
outstanding (in millions) 74.8 48.7 72.2 40.3
June 30, Dec. 31,
Summarized Balance Sheet Information 2003 2002
Cash and short-term investments:
Premcor Inc. $51.6 $40.7
Premcor USA Inc. 0.6 10.2
The Premcor Refining Group Inc. 399.7 121.4
Consolidated cash and short-term
investments 451.9 172.3
Cash restricted for debt service 66.9 61.7
Other working capital 403.2 86.9
Total assets 3,391.1 2,323.0
Long-term debt, including current
maturities:
Premcor USA Inc. 10.5 40.1
The Premcor Refining Group Inc. 1,450.6 884.8
Consolidated long-term debt 1,461.1 924.9
Total common stockholders' equity 1,089.0 704.0
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended Six months ended
June 30, June 30,
(unaudited) 2003 2002 2003 2002
Selected Volumetric and Per Barrel Data
Production (Mbbls per day) 572.2 465.8 513.8 455.0
Crude oil throughput (Mbbls per day) 547.8 447.9 489.2 441.1
Total crude oil throughput (millions
of barrels) 49.8 40.8 88.5 79.8
Per barrel of throughput:
Gross margin $5.32 $3.82 $6.02 $4.04
Operating expenses 2.70 2.80 2.84 2.86
Market Indicators (dollars per barrel)
West Texas Intermediate, or "WTI"
(sweet) $29.08 $26.28 $31.60 $23.94
Crack Spreads:*
Gulf Coast 2/1/1 2.84 2.61 4.18 2.52
Chicago 3/2/1 6.45 5.29 6.44 4.48
Crude Oil Differentials:
WTI less WTS (sour) 2.27 1.15 2.94 1.24
WTI less Maya (heavy sour) 7.21 4.34 7.42 4.89
WTI less Dated Brent (foreign) 3.08 1.23 2.84 0.82
Natural Gas (per mmbtu) 5.58 3.38 5.82 2.79
* 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
First quarter ended March 31, 2003(a)
Price
Port Memphis Risk
Selected Refinery Data (unaudited) Arthur Lima (b) Results 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 135.9 (12.3) (0.2) - 123.4
Product differentials to
benchmark (68.8) (1.6) 5.8 - (64.6)
Price risk results - - - (15.4) (15.4)
Realized gross margin 188.2 62.9 31.8 (15.4) 267.4
Operating expenses 73.5 35.4 8.3 - 117.2
Net refining margin $114.7 $27.5 $23.5 $(15.4) $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 $- $3.80
Chicago 3/2/1 - 6.42 - - 1.98
Crude oil differentials to
benchmark 6.18 (1.03) (0.05) - 3.19
Product differentials to
benchmark (3.13) (0.13) 1.22 - (1.67)
Price risk results - - - (0.40) (0.40)
Realized gross margin 8.55 5.26 6.69 (0.40) 6.91
Operating expenses 3.34 2.96 1.74 - 3.03
Net refining margin $5.21 $2.30 $4.94 $(0.40) $3.88
Depreciation and amortization $0.62 $0.50 $0.19 $- $0.53
Second quarter ended June 30, 2003
Price
Port Memphis Risk
Selected Refinery Data (unaudited) Arthur Lima (b) Results Total
Operating results (dollars in
millions):
Gross margin:
Gulf Coast 2/1/1 $63.4 $- $43.6 $- $107.0
Chicago 3/2/1 - 78.5 - - 78.5
Crude oil differentials to
benchmark 140.2 (11.5) (7.3) - 121.4
Product differentials to benchmark (41.3) (7.0) 27.7 - (20.6)
Price risk results (21.0) (21.0)
Realized gross margin 162.3 60.0 64.0 (21.0) 265.3
Operating expenses 70.2 33.1 31.1 - 134.4
Net refining margin $92.1 $26.9 $32.9 $(21.0) $130.9
Depreciation and amortization $13.2 $6.0 $2.4 $- $21.6
Per barrel of throughput (in
dollars):
(Based on crude oil throughput data
shown on following page)
Gross margin:
Gulf Coast 2/1/1 $2.84 $- $2.84 $- $2.15
Chicago 3/2/1 - 6.45 - - 1.58
Crude oil differentials to
benchmark 6.28 (0.95) (0.47) - 2.44
Product differentials to
benchmark (1.85) (0.57) 1.80 - (0.41)
Price risk results - - - (0.42) (0.42)
Realized gross margin 7.27 4.93 4.17 (0.42) 5.32
Operating expenses 3.14 2.72 2.03 - 2.70
Net refining margin $4.12 $2.21 $2.15 $(0.42) $2.63
Depreciation and amortization $0.59 $0.49 $0.16 $- $0.43
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 individual refinery and price risk information is helpful in
understanding our overall operating results.
(a) The Company's calculation methodology was changed in the second
quarter of 2003 to separately identify price risk results.
Previously, these results had been allocated to the individual
refineries on the basis of crude oil throughput. The individual
refinery results for the first quarter of 2003 shown here have been
reclassified from the first quarter earnings release to conform to the
Company's current methodology. Comparative information for 2002 has
not been provided. However, the price risk results reflected in the
Company's historical first quarter and second quarter 2002 earnings
releases represented gains of $33 million and $8 million,
respectively.
(b) 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 was 163,972 bpd.
Premcor Inc. and Subsidiaries
Earnings Release
First quarter ended March 31, 2003
Selected Volumetric Data
(in thousands of barrels per day, Port Memphis
unaudited) Arthur Lima (a) 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
Second quarter ended June 30, 2003
Selected Volumetric Data
(in thousands of barrels per day, Port Memphis
unaudited) Arthur Lima (a) Total
Feedstocks:
Crude oil throughput:
Sweet - 131.7 168.6 300.3
Light/Medium sour 31.5 2.0 - 33.5
Heavy sour 214.0 - - 214.0
Total crude oil 245.5 133.7 168.6 547.8
Unfinished and blendstocks 13.0 (4.3) 3.8 12.5
Total feedstocks 258.5 129.4 172.4 560.3
Total crude oil throughput, in
millions of barrels 22.3 12.2 15.3 49.8
Production:
Light products:
Conventional gasoline 84.8 63.5 70.8 219.1
Premium and reformulated
gasoline 35.2 11.5 14.1 60.8
Diesel fuel 91.6 24.9 49.3 165.8
Jet fuel 8.5 18.8 25.4 52.7
Petrochemical products 18.6 7.2 8.2 34.0
Total light products 238.7 125.9 167.8 532.4
Petroleum coke and sulfur 31.2 2.4 0.3 33.9
Residual oil 1.4 0.9 3.6 5.9
Total production 271.3 129.2 171.7 572.2
(a) 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.
SOURCE Premcor Inc.
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Related links:
http://www.premcor.com
CONTACT:
Media or 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.
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