OLD GREENWICH, Conn., July 29 /PRNewswire-FirstCall/ -- Premcor Inc.
(NYSE: PCO) today reported net income from continuing operations excluding
special items of $140.1 million, or $1.61 per share, for its second quarter
ended June 30, 2004, compared to net income from continuing operations
excluding special items of $37.2 million, or $.50 per share, in the second
quarter of 2003. Including the impact of special items and the loss from
discontinued operations, Premcor reported net income of $133.5 million, or
$1.53 per share, for the second quarter ended June 30, 2004, compared to net
income of $32.3 million, or $.43 per share, in the second quarter of 2003.
For the six months ended June 30, 2004, Premcor reported net income from
continuing operations before special items of $192.9 million, or $2.37 per
share, compared to net income from continuing operations before special items
of $92.6 million, or $1.28 per share, for the six months of 2003. Including
the impact of special items and the loss from discontinued operations, Premcor
reported net income of $183.2 million, or $2.25 per share, for the six months
ended June 30, 2004, compared to net income of $69.8 million, or $.97 per
share, for the six months of 2003.
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 special items to the company's
results reported in accordance with generally accepted accounting principles
is as follows (in millions, except per share amounts, unaudited):
For the three months ended June 30,
2004 2003
Net Per Net Per
Income Share Income Share
Net income from continuing
operations excluding special
items $140.1 $1.61 $37.2 $0.50
Special items:
Refinery restructuring and
other charges, net of $1.8
and $0.2 tax benefit (a) (2.9) (0.03) (0.5) (0.01)
Loss on extinguishment of
debt, net of $1.4 and $1.2
tax benefit (b) (2.2) (0.03) (2.2) (0.03)
Net income from continuing
operations 135.0 1.55 34.5 0.46
Loss from discontinued operations (1.5) (0.02) (2.2) (0.03)
Net income available to
common stockholders $133.5 $1.53 $32.3 $0.43
(a) Second quarter of 2004 included a pretax charge totaling $4.7 million,
consisting of $3.3 million related to the planned relocation of the
company's St. Louis general office to its Connecticut headquarters and
$1.4 million related to non-operating assets. Second quarter of 2003
consisted of a $0.7 million pretax charge related to the planned
relocation of the company's St. Louis general office to its
Connecticut headquarters.
(b) Second quarter of 2004 special items included a pretax loss of
$3.6 million on the early retirement of debt. Second quarter of 2003
special items included a pretax loss of $3.4 million on the early
retirement of debt.
For the six months ended June 30,
2004 2003
Net Per Net Per
Income Share Income Share
Net income from continuing
operations excluding special
items $192.9 $2.37 $92.6 $1.28
Special items:
Refinery restructuring and
other charges, net of $3.6
and $5.9 tax benefit (a) (5.7) (0.07) (9.8) (0.13)
Loss on extinguishment of
debt, net of $1.4 and $3.9
tax benefit (b) (2.2) (0.03) (6.5) (0.09)
Net income from continuing
operations 185.0 2.27 76.3 1.06
Loss from discontinued operations (1.8) (0.02) (6.5) (0.09)
Net income available to
common stockholders $183.2 $2.25 $69.8 $0.97
(a) Six months of 2004 included a pretax charge totaling $9.3 million,
consisting of $7.3 million related to the planned relocation of the
company's St. Louis general office to its Connecticut headquarters and
$2.0 million related to non-operating assets. Six months of 2003
included a $16.6 million loss related to the expected disposition of
the company's Hartford, Illinois refinery assets, $1.6 million
reduction in the corporate office restructuring reserve established in
2002, and $0.7 million pretax charge related to the planned relocation
of the company's St. Louis general office to its Connecticut
headquarters.
(b) Six months of 2004 special items included a pretax loss of
$3.6 million on the early retirement of debt. Six months of 2003
special items included a pretax loss of $10.4 million on the early
retirement of debt.
Thomas D. O'Malley, Premcor's Chairman and Chief Executive Officer, said,
"The second quarter represents record earnings for Premcor since becoming a
public company in 2002. The growth in earnings per share of over 200% from
second quarter last year reflects strong refining margins and wide light-heavy
crude oil price differentials in world markets, and it validates our growth
strategy. Earnings were, however, limited by unscheduled downtime, forward
sales of crack spreads during the quarter, and operating expenses that ran
over our long-term expectations at our newly acquired Delaware City refinery.
The Lima refinery's first quarter turnaround, which was originally scheduled
to end April 2, was rescheduled such that it did not conclude until April 8 of
the second quarter. We also had an unscheduled shutdown of the crude unit at
our Port Arthur refinery lasting ten days in April. These maintenance
activities reduced second quarter pretax earnings by about $19 million. In
order to lock in a profitable base position on a portion of our future
production, we sold forward crack spreads in the futures markets. Had we not
sold these barrels forward, our second quarter pretax earnings would have been
about $23 million higher. As of today, our remaining open position in these
futures cover approximately 2.5 million barrels at a Gulf Coast crack of
approximately $5.80, expiring in the fourth quarter. We presently do not
intend to add to our forward crack positions."
Regarding the company's recent acquisition of the Delaware City refinery,
O'Malley said, "We are pleased to report the successful transition of these
assets into our system. The Delaware City refinery total throughput averaged
approximately 175,000 barrels per day (bpd) for May and June, and the refinery
has provided a positive contribution to our pretax earnings in this period.
May and June operating expenses were, as we expected and mentioned in investor
presentations this spring, impacted by start-up expenses related to the
ownership change and new operating procedures. Our cash operating expenses
during the two months were approximately $50 million or about $4.60 per
barrel. The monthly cash operating expenses should average approximately $20
to $23 million per month for the remaining six months of 2004. We hope to
lower costs in 2005 to an average of $18 to $20 million per month. Our
ultimate goal is a cash operating cost below $3.25 per barrel at Delaware
City. We think we will achieve this level during the second half of 2005.
Overall, Delaware City has performed a bit better than we expected, and should
be a strong ongoing contributor to our earnings. The refinery has had average
run rates of 178,000 bpd since July 1 and is operating on a reliable basis.
The gasification units at Delaware City are budgeted by Premcor to run at
approximately 1,150 tons per day of petroleum coke conversion capacity. At
this rate, the refinery is self-sufficient in steam and electricity. This is
an extremely important element in achieving our ultimate expected cash
operating expense levels. We have been putting a great deal of time and
effort into improving operations at the gasification units. We ran at an
average of 700 tons per day during May and June. This was higher than any
other two month period in recent history. Our average run rate in July is
close to 900 tons per day, and we are currently running the units above 1,000
tons per day. We are pleased with the improvements we have made at the
gasification units and are optimistic that we will meet or exceed our goals
for these units prior to year-end."
Concerning Premcor's capital structure, O'Malley commented, "During the
second quarter we continued to make meaningful progress in strengthening the
financial position of the company. We successfully financed the Delaware City
refinery acquisition with $490 million of new common equity and $400 million
of new long-term debt with an attractive blended coupon of 6.4%. We also put
in place a new five year $1 billion bank facility to support our letter of
credit and liquidity needs. At the end of the quarter our balance sheet was
in its best shape ever, with debt-to-capitalization at 50%, and our liquidity
position is excellent. We had $581 million in cash at June 30, and $596
million in available credit under the new bank facility. We are in a solid
position to fund our capital program including EPA clean fuels, and to pursue
additional high-return growth opportunities."
Looking ahead, O'Malley said, "The third quarter is off to a strong start,
with the combination of cracks and light-heavy differentials for the period
from July 1 through July 27 exceeding the averages we experienced in the
strong second quarter. We expect to continue to see wide light-heavy
differentials and above average cracks for the remainder of the third quarter.
The Delaware City refinery has a scheduled turnaround of the cat cracker at
the end of the third quarter for five days and the beginning of the fourth
quarter for 35 days. The major Port Arthur coker turnaround, originally
scheduled for the fourth quarter of 2004, has been moved to the first quarter
of 2005. The work performed at Port Arthur at the beginning of this year has
allowed us to safely reschedule this turnaround into next year. In the third
quarter we had an unscheduled shutdown of the crude unit at Port Arthur
lasting seven days during July. For the remainder of 2004, Port Arthur, Lima,
and Memphis have no major scheduled maintenance. Throughput rates, including
intermediate feedstocks, for the entire third quarter, after the unscheduled
downtime on the crude unit at Port Arthur, should average approximately as
follows: Port Arthur at 235,000 to 245,000 bpd; Delaware City at 170,000 to
180,000 bpd; Lima at 140,000 to 145,000 bpd; and Memphis at 155,000 to 165,000
bpd. Based on current margins, current differentials, and expected operating
rates, Premcor would expect to exceed the current third quarter Thomson First
Call earnings estimate of $1.19 per share."
The company's regular conference call concerning the quarter's 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 Six months ended
June 30, June 30,
(in millions except per share
amounts, unaudited) 2004 2003* 2004 2003*
Net sales and operating revenues $3,573.7 $2,147.4 $6,125.4 $4,116.3
Cost of sales 3,034.7 1,882.1 5,269.2 3,583.6
Gross margin 539.0 265.3 856.2 532.7
Operating expenses 197.5 134.4 344.5 251.6
General and administrative expenses 38.3 15.7 55.9 27.4
Stock-based compensation 4.9 4.4 9.8 8.7
Depreciation and amortization 36.8 25.1 70.9 49.2
Restructuring and other charges 4.7 0.7 9.3 15.7
Operating income 256.8 85.0 365.8 180.1
Interest and finance expense, net (33.7) (29.1) (63.3) (54.4)
Loss on extinguishment of debt (3.6) (3.4) (3.6) (10.4)
Income tax provision (84.5) (18.0) (113.9) (39.0)
Income from continuing operations 135.0 34.5 185.0 76.3
Loss from discontinued
operations, net of tax (1.5) (2.2) (1.8) (6.5)
Net income $133.5 $32.3 $183.2 $69.8
Net income per common share
(fully-diluted):
Income from continuing
operations $1.55 $0.46 $2.27 $1.06
Discontinued operations (0.02) (0.03) (0.02) (0.09)
Net income $1.53 $0.43 $2.25 $0.97
Weighted average common shares
outstanding (in millions) 87.3 74.8 81.5 72.2
* 2003 revenues and cost of sales have been reclassified to
reflect the 4th quarter 2003 application of EITF 03-11. The
reclassification had no effect on previously reported operating
income or net income.
June 30, December 31,
Summarized Balance Sheet Information 2004 2003
Cash and short-term investments:
Premcor Inc. $143.8 $52.8
Premcor USA Inc. 1.7 1.2
The Premcor Refining Group Inc. 366.3 378.6
Consolidated cash and short-term
investments 511.8 432.6
Cash restricted for debt service 69.8 66.6
Other working capital 571.3 413.1
Total assets 4,821.8 3,767.5
Long-term debt, including current
maturities:
Premcor USA Inc. 10.2 10.3
The Premcor Refining Group Inc. 1,831.9 1,441.8
Consolidated long-term debt 1,842.1 1,452.1
Total common stockholders' equity 1,831.2 1,145.2
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended Six months ended
June 30, June 30,
(unaudited) 2004 2003 2004 2003
Selected Volumetric and Per Barrel
Data
Production (Mbbls per day) 649.1 515.6 567.6 559.1
Crude unit throughput (Mbbls per
day) 594.1 547.6 525.4 539.1
Total throughput (Mbbls per day) 636.8 561.0 555.2 548.9
Total throughput (millions of
barrels) 57.9 51.1 101.0 99.4
Per barrel of total throughput:
Gross margin $9.30 $5.20 $8.47 $5.36
Operating expenses 3.41 2.63 3.41 2.53
Market Indicators (dollars per barrel)
West Texas Intermediate, or "WTI"
(sweet) $38.31 $29.08 $36.54 $31.60
Crack Spreads:*
Gulf Coast 2/1/1 7.18 2.84 6.17 4.18
Chicago 3/2/1 10.85 6.45 8.81 6.44
NYH RFG 3/2/1 (since May 1, 2004) 11.61 11.61
Crude Oil Differentials:
WTI less Maya (heavy sour) 8.73 7.21 9.11 7.42
WTI less Mars (medium sour) 4.91 3.32 4.77 4.10
WTI less WTS (light sour) 2.90 2.27 3.31 2.94
WTI less Dated Brent (foreign) 2.97 3.08 3.15 2.84
Natural Gas (per mmbtu) 6.00 5.58 5.60 5.82
* 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 gasoline, conventional unless
otherwise stated, and high sulfur diesel fuel produced,
priced in their respective regional market.
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended June 30, 2004
Price
Selected Refinery Data Port Delaware Risk
(unaudited) Arthur Lima Memphis City Results Total
Operating results (dollars
in millions):
Gross margin:
Gulf Coast 2/1/1 $154.4 $- $102.7 $- $- $257.1
Chicago 3/2/1 - 124.8 - - - 124.8
NYH RFG 3/2/1 - - - 124.2 - 124.2
Throughput differentials
to benchmark 150.0 (10.8) (14.0) 61.4 - 186.6
Product differentials to
benchmark (64.6) (28.6) 18.2 (58.6) - (133.6)
Price risk results - - - - (20.1) (20.1)
Realized gross
margin 239.8 85.4 106.9 127.0 (20.1) 539.0
Operating expenses (84.8) (28.8) (34.9) (49.0) - (197.5)
Net refining margin $155.0 $56.6 $72.0 $78.0 $(20.1) $341.5
Depreciation and
amortization $17.1 $7.4 $3.4 $5.2 $- $33.1
Per barrel of throughput
(in dollars):
(Based on total throughput
data shown on following page)
Gross margin:
Gulf Coast 2/1/1 $7.18 $- $7.18 $- $- $4.44
Chicago 3/2/1 - 10.85 - - - 2.15
NYH RFG 3/2/1 - - - 11.61 - 2.14
Throughput differentials
to benchmark 6.97 (0.94) (0.98) 5.75 - 3.22
Product differentials to
benchmark (3.00) (2.50) 1.27 (5.49) - (2.31)
Price risk results - - - - (0.35) (0.35)
Realized gross
margin 11.15 7.41 7.48 11.87 (0.35) 9.30
Operating expenses (3.94) (2.51) (2.44) (4.59) - (3.41)
Net refining margin $7.21 $4.90 $5.04 $7.28 $(0.35) $5.89
Depreciation and
amortization $0.79 $0.65 $0.24 $0.49 $- $0.57
Premcor Inc. and Subsidiaries
Earnings Release
Six months ended June 30, 2004
Price
Selected Refinery Data Port Delaware Risk
(unaudited) Arthur Lima Memphis City Results Total
Operating results (dollars
in millions):
Gross margin:
Gulf Coast 2/1/1 $253.6 $- $174.0 $- $- $427.6
Chicago 3/2/1 - 185.9 - - - 185.9
NYH RFG 3/2/1 - - - 124.2 124.2
Throughput differentials
to benchmark 298.0 (23.8) (30.4) 61.4 - 305.2
Product differentials to
benchmark (115.1) (28.6) 41.5 (58.6) - (160.8)
Price risk results - - - - (25.9) (25.9)
Realized gross
margin 436.5 133.5 185.1 127.0 (25.9) 856.2
Operating expenses (164.8) (60.1) (70.6) (49.0) - (344.5)
Net refining margin $271.7 $73.4 $114.5 $78.0 $(25.9) $511.7
Depreciation and
amortization $34.6 $17.7 $7.0 $5.2 $- $64.5
Per barrel of throughput
(in dollars):
(Based on total throughput
data shown on following page)
Gross margin:
Gulf Coast 2/1/1 $6.17 $- $6.17 $- $- $4.23
Chicago 3/2/1 - 8.81 - - - 1.84
NYH RFG 3/2/1 - - - 11.61 - 1.23
Throughput differentials
to benchmark 7.25 (1.13) (1.09) 5.75 - 3.02
Product differentials to
benchmark (2.80) (1.35) 1.46 (5.49) - (1.59)
Price risk results - - - - (0.26) (0.26)
Realized gross
margin 10.62 6.32 6.54 11.87 (0.26) 8.47
Operating expenses (4.01) (2.85) (2.52) (4.59) - (3.41)
Net refining margin $6.61 $3.48 $4.03 $7.28 $(0.26) 5.06
Depreciation and
amortization $0.84 $0.84 $0.24 $0.49 $- $0.64
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". Also included in
the price risk results are our forward sale of crack spreads. As a
result of this methodology, together with certain necessary 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 GAAP. The Company believes that this individual
refinery and price risk information is helpful in understanding our
overall operating results.
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended June 30, 2004
Selected Volumetric Data Delaware
(in thousands of barrels per day, Port City
unaudited) Arthur Lima Memphis (a) Total
Throughput:
Crude unit throughput 213.6 127.5 140.5 112.5 594.1
Other throughputs 22.9 (1.6) 16.6 4.8 42.7
Total throughput 236.5 125.9 157.1 117.3 636.8
Total throughput, in millions of
barrels 21.5 11.5 14.3 10.7 57.9
Production:
Light products:
Conventional gasoline 94.9 47.8 68.5 39.8 251.0
Premium and reformulated gasoline 22.8 20.3 11.2 24.1 78.4
Diesel fuel 59.2 17.4 40.6 20.9 138.1
Jet fuel 23.9 19.0 22.8 19.8 85.5
Other products / blendstocks, net 19.0 16.6 7.1 6.3 49.0
Total light products 219.8 121.1 150.2 110.9 602.0
Solid by products / residual oil 28.0 4.4 5.4 9.3 47.1
Total production 247.8 125.5 155.6 120.2 649.1
Six months ended June 30, 2004
Selected Volumetric Data Delaware
(in thousands of barrels per day, Port City
unaudited) Arthur Lima Memphis (a) Total
Throughput:
Crude unit throughput 210.3 116.9 141.9 56.3 525.4
Other throughputs 15.5 (0.9) 12.8 2.4 29.8
Total throughput 225.8 116.0 154.7 58.7 555.2
Total throughput, in millions of
barrels 41.1 21.1 28.2 10.7 101.0
Production:
Light products:
Conventional gasoline 82.0 50.1 64.7 19.9 216.7
Premium and reformulated
gasoline 22.3 17.5 9.8 12.0 61.6
Diesel fuel 58.4 16.3 44.9 10.4 130.0
Jet fuel 22.3 17.6 23.7 9.9 73.5
Other products / blendstocks,
net 24.5 11.1 5.8 3.2 44.6
Total light products 209.5 112.6 148.9 55.4 526.4
Solid by products / residual oil 27.1 4.0 5.4 4.7 41.2
Total production 236.6 116.6 154.3 60.1 567.6
(a) We acquired the Delaware City refinery effective May 1, 2004 and the
total throughput for the three and six months ended June 30, 2004
reflected 61 days of operations over that period. Total throughput
was 175,100 bpd during the 61 days of operations in 2004.
SOURCE Premcor Inc.
 back to top
Related links:
http://www.premcor.com
CONTACT:
Media & Investors, Karyn Ovelmen,
+1-203-698-5669 or Investors, Michelle Kilic, +1-203-698-5921,
both of Premcor Inc.
|
