OLD GREENWICH, Conn., Aug. 6 /PRNewswire-FirstCall/ --
Premcor Inc. (NYSE: PCO) today reported a net loss of $40.1 million, or $.82
per share, in the second quarter of 2002 compared to net earnings of $174.5
million, or $5.06 per share, in the second quarter of 2001. Excluding the
effect of the special items discussed below, the second quarter 2002 net loss
was $17.3 million, or $.35 per share.
For the six months ended June 30, 2002, Premcor reported a net loss of
$139.8 million, or $3.47 per share, as compared to net earnings of $142.8
million, or $4.14 per share, in the first six months of 2001. Excluding the
effect of the special items discussed below, the first six months of 2002
resulted in a net loss of $29.7 million, or $.74 per share, compared to net
earnings of $218.4 million, or $6.33 per share, in the first six months of
2001.
Thomas D. O'Malley, Premcor's Chairman, Chief Executive Officer, and
President, said, "Results for the second quarter were disappointing. The
basic West Texas Intermediate 3-2-1 crack spread (manufacturing margin) was
reasonable, but the price spreads between WTI and medium sulfur crude oil and
most importantly Mexican Maya crude oil were well below historical averages
and had a significant negative impact on our quarterly results. The company's
refineries operated well during the quarter."
O'Malley continued, "Despite the poor market conditions, we made
tremendous progress toward reshaping Premcor's balance sheet and cost
structure during the quarter. Most significantly, in April we completed the
successful initial public offering of our common stock, raising net proceeds
of $482 million. We promptly repurchased $346 million of debt using a portion
of the IPO proceeds. These repurchases were followed in early June by the
restructuring of our Sabine River Holdings and Premcor Refining Group
subsidiaries in a transaction that allowed us to simplify our corporate
structure and retire an additional $221 million of debt using available cash
and IPO proceeds. These steps have reduced our annual interest burden by $52
million. In the back office, to date we have reduced cash G&A expenditures by
more than $8 million on an annual basis, and we will achieve additional
savings by year-end. These steps have dramatically reduced the breakeven
economics for our ongoing operations, and they began to have an impact during
June."
Looking ahead, O'Malley said, "The third quarter got off to a reasonable
start, but we have witnessed a deterioration during the second half of July,
which, if it continues, will make it difficult to achieve a profit during the
third quarter. The main problem is the continuing narrow price differential
between WTI and the very heavy crude oil run by our Port Arthur Refinery.
This light/heavy crude oil spread is one of the important economic effects of
the continuing OPEC cutbacks, which have been concentrated in heavy crude oil.
Results for the company may not improve significantly until we see a widening
of the light/heavy spread."
Commenting on recent events concerning corporate accountability, O'Malley
said, "Investors must have confidence in the management of their companies.
To that end, our board of directors, audit committee, and management team are
reviewing Premcor's corporate governance policy and will make adjustments as
needed to ensure that it is fully compliant with new legal and regulatory
initiatives. The CEO and CFO will attest to the correctness of Premcor's
financial statements in accordance with the SEC request."
On the subject of stock option accounting, O'Malley said, "Options have
become a controversial topic for public companies in the U.S. Premcor
believes it is appropriate to expense stock options in order to provide
clarity and present the most conservative picture to our investors.
Accordingly, Premcor's board has authorized management to expense options in
compliance with SFAS No. 123, "Accounting for Stock-Based Compensation." As
shown on the accompanying income statements, Premcor has recorded a $5.7
million expense for the first six months to cover all 2002 options issued to
date. These options represent approximately 73 percent of options currently
outstanding. Premcor expects to charge approximately $4.2 million per quarter
for the approximately ten quarters remaining in the 2002 option issuance
vesting period. Future option issues will be treated in the same manner."
For the second quarter of 2002, pre-tax special items of $35.9 million
included $6.5 million relating to the restructuring of the company's St. Louis
general and administrative operations, $2.5 million related to the
restructuring of the company's Premcor Refining Group and Sabine River Holding
Corp. subsidiaries, $6.2 million for the planned closure of the Hartford,
Illinois refinery, $1.4 million for idled equipment, and $19.3 million related
to the early retirement of long-term debt. The total after-tax effect of
these special items on the quarter was a net loss of $22.8 million, equal to
$.47 per share. There were no special items in the second quarter of 2001.
For the first six months of 2002, pre-tax special items of $177.9 million
included $137.4 million related to the planned closure of the Hartford
refinery, $17.3 million primarily for severance and other charges related to
the restructuring of the company's St. Louis general and administrative
operations, $2.5 million related to the PRG and Sabine restructuring, $1.4
million for idled equipment, and $19.3 million related to the early retirement
of long-term debt. The after-tax effect of these special items for the six
months of 2002 was $110.1 million, or $2.73 per share. Special items for the
first six months of 2001 included charges related to the closure of the Blue
Island, Illinois refinery and discontinued retail operations. The net after-
tax effect of these charges, partially offset by a $30 million income tax
benefit, was $75.6 million, or $2.19 per share.
The company's regular quarterly conference call concerning the quarter's
results will be webcast live today at 11:00 am EDT on the Investor Relations
section of the Premcor Inc. website at http://www.premcor.com. A 24-hour replay of
the call will be available until August 13, 2002 at (800) 396-1242, and the
call will be archived on the company's website.
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 future debt reductions. 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
subsidiaries, Premcor USA Inc. and The Premcor Refining Group Inc., including
the company's Form S-1 and the company's and its subsidiaries' 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,
(dollars in millions except per
share amounts, unaudited) 2002 2001 2002 2001
Operating revenues $1,679.0 $1,818.3 $2,907.3 $3,504.7
Cost of sales 1,523.4 1,337.3 2,585.0 2,742.9
Gross margin 155.6 481.0 322.3 761.8
Operating expenses 114.1 118.1 228.6 250.9
General and administrative
expenses 14.4 16.6 28.9 29.2
Stock option compensation expense 3.8 - 5.7 -
Adjusted EBITDA (1) 23.3 346.3 59.1 481.7
Depreciation and amortization 21.9 22.9 44.1 44.5
Restructuring and other charges 16.6 - 158.6 150.0
Operating income (loss) (15.2) 323.4 (143.6) 287.2
Interest expense and finance
income, net (30.0) (35.3) (61.0) (72.5)
Loss on extinguishment of long-
term debt (19.3) - (19.3) -
Income tax benefit (provision) 23.5 (103.3) 84.9 (47.3)
Minority interest 0.9 (7.6) 1.7 (10.9)
Net income from continuing
operations before
preferred stock dividends (40.1) 177.2 (137.3) 156.5
Discontinued operations, net of
tax - - - (8.5)
Preferred stock dividends - (2.7) (2.5) (5.2)
Net income (loss) available to
common
shareholders $(40.1) $174.5 $(139.8) $142.8
Net income (loss) per common share
(fully-diluted):
Income (loss) from continuing
operations $(0.82) $5.06 $(3.47) $4.39
Discontinued operations - - - (0.25)
Net income (loss) $(0.82) $5.06 $(3.47) $4.14
Weighted average common shares
outstanding (in millions) 48.7 34.5 40.3 34.5
(1) Earnings before interest, income taxes, depreciation,
amortization and restructuring and other charges.
June 30, December 31,
Summarized Balance Sheet Information 2002 2001
Cash and short-term investments:
Premcor Inc. $44.9 $2.1
Premcor USA Inc. 17.1 25.5
The Premcor Refining Group Inc. 120.2 482.5
Consolidated cash and short-term
investments 182.2 510.1
Cash restricted for debt service 65.4 30.8
Other working capital 87.9 (58.3)
Total assets 2,365.2 2,509.8
Long-term debt and exchangeable
preferred stock:
Premcor USA Inc. 43.5 239.2
The Premcor Refining Group Inc. 880.0 1,247.0
Consolidated long-term debt 923.5 1,486.2
Total common stockholders' equity 678.9 294.7
Three months ended Six months ended
June 30, June 30,
(unaudited) 2002 2001 2002 2001
Selected Volumetric and Per Barrel
Data
Production (Mbbls per day) 465.5 460.2 454.6 463.5
Crude oil throughput (Mbbls per day) 447.9 444.0 441.1 443.7
Per barrel of throughput:
Gross margin $3.82 $11.90 $4.04 $9.49
Operating expenses 2.80 2.92 2.86 3.12
Market Indicators (dollars per
barrel)
West Texas Intermediate, or "WTI"
(sweet) $26.28 $27.89 $23.94 $28.35
Crack Spreads:*
Gulf Coast 3/2/1 3.36 6.52 3.08 5.76
Chicago 3/2/1 5.29 11.97 4.48 8.95
Crude Oil Differentials:
WTI less WTS (sour) 1.15 3.23 1.24 3.66
WTI less Maya (heavy sour) 4.34 10.46 4.89 10.54
WTI less Dated Brent (foreign) 1.23 0.72 0.82 1.81
Natural Gas (per mmbtu) 3.38 4.68 2.79 5.84
* Per barrel margin achieved by converting three barrels of West Texas
Intermediate crude oil, priced at Cushing, Oklahoma, into two barrels of
conventional gasoline and one barrel of high sulfur diesel fuel, priced
in their respective regional market.
Three months ended June 30, 2002
Port
Selected Refinery Data (unaudited) Arthur Lima Hartford Total
Operating results (dollars in
millions):
Gross margin:
Gulf Coast 3/2/1 $73.4 $43.7 $19.9 $137.0
Chicago 3/2/1 vs. Gulf Coast 3/2/1 - 25.0 11.4 36.4
Crude oil differentials to
benchmark 79.4 (10.4) 6.1 75.1
Product differentials to benchmark (53.3) (22.3) (17.3) (92.9)
Realized gross margin 99.5 36.0 20.1 155.6
Operating expenses 66.7 28.5 18.9 114.1
Net refining margin 32.8 7.5 1.2 41.5
Depreciation and amortization 13.9 5.7 - 19.6
Per barrel of throughput (in
dollars):
Gross margin:
Gulf Coast 3/2/1 $3.36 $3.36 $3.36 $3.36
Chicago 3/2/1 vs. Gulf Coast 3/2/1 - 1.92 1.92 0.89
Crude oil differentials to
benchmark 3.64 (0.80) 1.03 1.84
Product differentials to benchmark (2.44) (1.71) (2.92) (2.28)
Realized gross margin 4.56 2.77 3.38 3.82
Operating expenses 3.06 2.19 3.18 2.80
Net refining margin 1.50 0.58 0.20 1.02
Depreciation and amortization 0.64 0.44 - 0.48
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.
Three months ended June 30, 2001
Port
Selected Refinery Data (unaudited) Arthur Lima Hartford Total
Operating results (dollars in
millions):
Gross margin:
Gulf Coast 3/2/1 $137.0 $86.6 $40.0 $263.6
Chicago 3/2/1 vs. Gulf Coast 3/2/1 - 72.4 33.4 105.8
Crude oil differentials to
benchmark 188.5 (28.3) 18.5 178.7
Product differentials to benchmark (41.8) (11.1) (14.2) (67.1)
Realized gross margin 283.7 119.6 77.7 481.0
Operating expenses 73.0 27.6 17.5 118.1
Net refining margin 210.7 92.0 60.2 362.9
Depreciation and amortization 12.6 5.9 3.9 22.4
Per barrel of throughput (in
dollars):
Gross margin:
Gulf Coast 3/2/1 $6.52 $6.52 $6.52 $6.52
Chicago 3/2/1 vs. Gulf Coast 3/2/1 - 5.45 5.45 2.62
Crude oil differentials to
benchmark 8.98 (2.13) 3.02 4.42
Product differentials to benchmark (1.99) (0.83) (2.32) (1.66)
Realized gross margin 13.51 9.01 12.67 11.90
Operating expenses 3.48 2.08 2.85 2.92
Net refining margin 10.04 6.93 9.82 8.98
Depreciation and amortization 0.60 0.44 0.64 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.
Three months ended Three months ended
June 30, 2002 June 30, 2001
Selected Volumetric
Data Port Port
(in thousands of Arthur Lima Hartford Total Arthur Lima Hartford Total
barrels per day)
Feedstocks:
Crude oil
throughput:
Sweet - 142.6 - 142.6 - 142.1 1.4 143.5
Light/Medium
sour 33.3 0.2 63.2 96.7 39.7 3.8 58.0 101.5
Heavy sour 206.6 - 2.0 208.6 191.0 - 8.0 199.0
Total crude
oil 239.9 142.8 65.2 447.9 230.7 145.9 67.4 444.0
Unfinished and
blendstocks 10.3 (12.4) 4.4 2.3 9.5 (6.2) (0.4) 2.9
Total
feedstocks 250.2 130.4 69.6 450.2 240.2 139.7 67.0 446.9
Production:
Light products:
Conventional
gasoline 85.3 70.7 29.4 185.4 85.3 71.8 26.3 183.4
Premium and
reformulated
gasoline 29.7 9.5 7.9 47.1 28.4 12.5 10.0 50.9
Diesel fuel 66.8 18.8 22.2 107.8 69.0 20.3 22.5 111.8
Jet fuel 30.2 20.7 - 50.9 23.5 24.8 - 48.3
Petrochemical
products 18.4 7.4 3.1 28.9 18.4 7.4 3.3 29.1
Total light
products 230.4 127.1 62.6 420.1 224.6 136.8 62.1 423.5
Petroleum coke and
sulfur 29.4 2.8 3.8 36.0 25.3 3.0 4.4 32.7
Residual oil 5.6 2.1 1.7 9.4 2.9 1.5 (0.4) 4.0
Total
production 265.4 132.0 68.1 465.5 252.8 141.3 66.1 460.2
Six months ended June 30, 2002
Port
Selected Refinery Data (unaudited) Arthur Lima Hartford Total
Operating results (dollars in
millions):
Gross margin:
Gulf Coast 3/2/1 $131.4 $78.7 $35.7 $245.8
Chicago 3/2/1 vs. Gulf Coast 3/2/1 - 35.8 16.2 52.0
Crude oil differentials to
benchmark 183.1 (12.2) 18.3 189.3
Product differentials to benchmark (114.4) (22.6) (27.8) (164.8)
Realized gross margin 200.1 79.7 42.4 322.3
Operating expenses 133.9 57.2 37.5 228.6
Net refining margin 66.2 22.5 4.9 93.7
Depreciation and amortization 26.4 11.6 2.9 40.9
Per barrel of throughput (in dollars):
Gulf Coast 3/2/1
Chicago 3/2/1 vs. Gulf Coast 3/2/1 $3.08 $3.08 $3.08 $3.08
Chicago 3/2/1 vs. Gulf Coast 3/2/1 - 1.40 1.40 0.65
Crude oil differentials to
benchmark 4.29 (0.48) 1.58 2.37
Product differentials to benchmark (2.68) (0.88) (2.40) (2.06)
Realized gross margin 4.69 3.12 3.66 4.04
Operating expenses 3.14 2.24 3.24 2.86
Net refining margin 1.55 0.88 0.42 1.17
Depreciation and amortization 0.62 0.45 0.25 0.51
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.
* Closed January 2001
Six months ended June 30, 2001
Port Blue
Arthur Lima Hartford Island* Total
Selected Refinery Data (unaudited)
Operating results (dollars in
millions):
Gross margin:
Gulf Coast 3/2/1 $240.0 $145.5 $68.8 $8.3 $462.6
Chicago 3/2/1 vs. Gulf Coast
3/2/1 - 80.5 38.1 4.6 123.2
Crude oil differentials to
benchmark 341.3 (41.4) 45.0 0.1 344.9
Product differentials to
benchmark (114.0) (17.7) (31.7) (5.6) (169.0)
Realized gross margin 467.2 166.9 120.2 7.4 761.8
Operating expenses 149.5 59.3 36.7 5.4 250.9
Net refining margin 317.7 107.6 83.6 2.0 510.9
Depreciation and amortization 22.9 10.6 7.8 1.1 42.4
Per barrel of throughput (in
dollars):
Gulf Coast 3/2/1
Chicago 3/2/1 vs. Gulf Coast
3/2/1 $5.76 $5.76 $5.76 $5.76 $5.76
Chicago 3/2/1 vs. Gulf Coast
3/2/1 - 3.19 3.19 3.19 1.53
Crude oil differentials to
benchmark 8.19 (1.64) 3.77 0.04 4.29
Product differentials to
benchmark (2.74) (0.70) (2.65) (3.86) (2.10)
Realized gross margin 11.21 6.61 10.06 5.13 9.49
Operating expenses 3.59 2.35 3.07 3.75 3.12
Net refining margin 7.62 4.26 6.99 1.38 6.36
Depreciation and amortization 0.55 0.42 0.65 0.76 0.53
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.
* Closed January 2001
Six months ended June 30, 2002
Selected Volumetric Data Port
(in thousands of barrels per day) Arthur Lima Hartford Total
Feedstocks:
Crude oil throughput:
Sweet - 138.5 - 138.5
Light/Medium sour 41.1 2.7 59.1 102.9
Heavy sour 194.8 - 4.9 199.7
Total crude oil 235.9 141.2 64.0 441.1
Unfinished and blendstocks (3.2) (5.7) 3.5 (5.4)
Total feedstocks 232.7 135.5 67.5 435.7
Production:
Light products:
Conventional gasoline 79.0 74.6 30.8 184.4
Premium and reformulated
gasoline 21.9 10.3 5.8 38.0
Diesel fuel 65.6 18.0 21.0 104.6
Jet fuel 28.6 21.7 - 50.3
Petrochemical products 17.2 7.7 3.2 28.1
Total light products 212.3 132.3 60.8 405.4
Petroleum coke and sulfur 31.3 2.8 4.4 38.5
Residual oil 7.4 1.8 1.5 10.7
Total production 251.0 136.9 66.7 454.6
* Closed January 2001
Six months ended June 30, 2001
Selected Volumetric Data Port Blue
Arthur Lima Hartford Island* Total
(in thousands of barrels per day)
Feedstocks:
Crude oil throughput:
Sweet - 132.7 2.6 6.4 141.7
Light/Medium sour 52.7 6.8 57.9 1.6 119.0
Heavy sour 177.5 - 5.5 - 183.0
Total crude oil 230.2 139.5 66.0 8.0 443.7
Unfinished and blendstocks 7.2 (4.0) 0.5 0.8 4.5
Total feedstocks 237.4 135.5 66.5 8.8 448.2
Production:
Light products:
Conventional gasoline 81.8 69.9 29.1 0.3 181.1
Premium and reformulated
gasoline 24.9 11.4 7.1 5.1 48.5
Diesel fuel 73.6 21.7 22.2 2.3 119.8
Jet fuel 18.9 21.8 - - 40.7
Petrochemical products 19.9 6.8 3.4 0.2 30.3
Total light products 219.1 131.6 61.8 7.9 420.4
Petroleum coke and sulfur 28.6 2.9 4.1 0.7 36.3
Residual oil 4.6 2.1 0.1 - 6.8
Total production 252.3 136.6 66.0 8.6 463.5
* Closed January 2001
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SOURCE Premcor Inc.
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Related links:
http://www.premcorinc.com
CONTACT:
Media, Joe Watson, +1-203-698-7510, or Karen
Davis, +1-314-854-1424, or Michael Taylor, +1-314-719-2304, all
of Premcor Inc.
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