OLD GREENWICH, Conn., Oct. 27 /PRNewswire-FirstCall/ -- Premcor Inc.
(NYSE: PCO) today reported net income from continuing operations excluding
special items of $144.8 million, or $1.59 per share, for its third quarter
ended September 30, 2004, compared to net income from continuing operations
excluding special items of $59.5 million, or $.79 per share, in the third
quarter of 2003. Including the impact of special items and the loss from
discontinued operations, Premcor reported net income of $141.3 million, or
$1.55 per share, for the third quarter ended September 30, 2004, compared to
net income of $57.2 million, or $.76 per share, in the third quarter of 2003.
For the nine months ended September 30, 2004, Premcor reported net income
from continuing operations before special items of $337.6 million, or $3.98
per share, compared to net income from continuing operations before special
items of $152.1 million, or $2.08 per share, for the nine months of 2003.
Including the impact of special items and the loss from discontinued
operations, Premcor reported net income of $324.5 million, or $3.83 per share,
for the nine months ended September 30, 2004, compared to net income of $127.0
million, or $1.74 per share, for the nine months of 2003.
Management Changes
In addition to the earnings report, Premcor today announced that Jefferson
F. Allen will join the company as Chief Executive Officer effective January 1,
2005. In this capacity he succeeds Thomas D. O'Malley, who will continue as
Chairman of the Board of Directors and an executive employee. The company
also announced that Joseph D. Watson, currently Premcor's Senior Vice
President and Treasurer, will be named Chief Financial Officer effective
January 1, 2005. In this capacity he succeeds William E. Hantke, who is
stepping down from the position.
Mr. Allen, age 59, has over 25 years of experience in all segments of the
international oil industry. Most recently he served as President and Chief
Financial Officer of Tosco Corporation until its acquisition by ConocoPhillips
in September 2001, and as a director of Premcor since February 2002. Mr.
Allen is a graduate of Lehigh University and the Harvard Graduate School of
Business.
Commenting on the management changes, O'Malley said, "We are extremely
pleased to have Jay Allen assume the leadership role on Premcor's management
team. Jay has been a very active board member for the past three years, and
will remain on the board in addition to his new duties. He brings a wealth of
experience to our management from an operational, financial, commercial, and
strategic perspective. During our twelve years together at Tosco, Jay was, in
fact if not in name, co-CEO, the key member of the management team that
transformed that company from a single refinery operation into the largest
independent refiner and marketer in the United States before it was acquired
by ConocoPhillips. He adds depth and breadth to Premcor's management,
reflecting the significant development of the company over the past several
years and its plans for continued growth going forward.
"Joe Watson assumes the Chief Financial Officer role after serving in
various senior financial and administrative capacities since joining Premcor
in March 2002. Prior to that, Joe worked with me at Tosco for nine years,
concentrating in areas related to the company's financial management. In his
new position Joe will have primary responsibility for further improving the
company's balance sheet and overall financial strength, which are high
priorities at Premcor. Joe, age 39, is a graduate of Princeton University and
the Harvard Business School Executive Education Program. Bill Hantke, who
will be leaving the company in 2005, has been a key member of the Premcor
management team since February 2002 and was instrumental in the impressive
transformation the company has undergone since then. We wish him all the
best.
"Personally, I look forward to continuing in my role as Chairman of the
Board of Directors and will remain an active participant at Premcor, in
particular focusing my efforts on growth initiatives for the company.
Premcor's board and I share the view that the Chairman and the board itself
are the primary advocates for a company's shareholders, bearing ultimate
responsibility for ensuring that management functions reasonably, ethically,
and in the shareholders' best interests. Maintaining a singular focus on that
responsibility is at the core of good corporate governance. As the largest
individual shareholder of Premcor, I intend to do just that. I look forward
to continuing to contribute to the company's future growth, strengthening, and
generation of shareholder value."
Third Quarter Results
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 September 30,
2004 2003
Net Per Net Per
Income Share Income Share
Net income from continuing
operations excluding
special items $144.8 $1.59 $59.5 $0.79
Special items:
Refinery restructuring and other
charges, net of $0.4 and $1.0 tax
benefit (1) (0.7) (0.01) (1.9) (0.02)
Net income from continuing
operations 144.1 1.58 57.6 0.77
Loss from discontinued
operations (2.8) (0.03) (0.4) (0.01)
Net income available to common
stockholders $141.3 $1.55 $57.2 $0.76
(1) Third quarter of 2004 included a pretax charge totaling $1.1 million,
related to non-operating assets. Third quarter of 2003 included a
pretax charge of $2.9 million, consisting of $2.7 million related to
the planned relocation of the company's St. Louis general office to
its Connecticut headquarters and $0.2 million related to non-
operating assets.
For the nine months ended
September 30,
2004 2003
Net Per Net Per
Income Share Income Share
Net income from continuing operations
excluding special items $337.6 $3.98 $152.1 $2.08
Special items:
Refinery restructuring and other
charges, net of
$4.1 and $6.9 tax benefit (1) (6.3) (0.07) (11.7) (0.16)
Loss on extinguishment of debt, net
of $1.4 and $3.9 tax benefit (2) (2.2) (0.03) (6.5) (0.09)
Net income from continuing operations 329.1 3.88 133.9 1.83
Loss from discontinued operations (4.6) (0.05) (6.9) (0.09)
Net income available to common
stockholders $324.5 $3.83 $127.0 $1.74
(1) Nine months of 2004 included a pretax charge totaling $10.4 million,
consisting of $7.3 million related to the relocation of the company's
St. Louis general office to its Connecticut headquarters and
$3.1 million related to non-operating assets. Nine 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, $3.4 million pretax charge related to the planned relocation
of the company's St. Louis general office to its Connecticut
headquarters and a loss of $0.2 million related to non-operating
assets.
(2) Nine months of 2004 special items included a pretax loss of
$3.6 million on the early retirement of debt. Nine months of 2003
special items included a pretax loss of $10.4 million on the early
retirement of debt.
Concerning the results, O'Malley, said, "We are very pleased with our
record earnings results for the third quarter, which were over 100% greater
than the third quarter of 2003. The world refining market continues to
experience high manufacturing margins. These margins have been enhanced by
what appears to be a longer term widening of the differential between light
low-sulfur crude oil and heavy high-sulfur crude oil. Premcor processes over
50% heavy high-sulfur crude oil."
Regarding the company's operations, O'Malley commented, "Our refineries
ran reasonably well during the quarter. Port Arthur throughput rates were
restricted due to an unplanned shutdown of the crude unit for about 10 days at
the beginning of the quarter. Memphis throughput rates were slightly reduced
in September due to Hurricane Ivan. The Port Arthur, Lima and Memphis
refineries averaged 240,000, 147,000 and 154,000 barrels per day of total
throughput, respectively. Our recently acquired Delaware City refinery
averaged 181,000 barrels per day of total throughput. Overall, the Delaware
City refinery has performed very well. Operating expenses for the refinery
have been reduced from the second quarter 2004 levels. Our cash operating
expenses during the third quarter for the Delaware City refinery averaged
approximately $24 million per month or about $4.31 per barrel. The Delaware
City refinery began a scheduled turnaround of its cat cracker on September 25.
The turnaround is expected to be completed during the first week of November.
There is no other scheduled major maintenance for our refineries for the
remainder of 2004."
Concerning Premcor's capital structure, O'Malley commented, "With strong
earnings and the modest scheduled pay down of our high-cost PACC debt, our
debt-to-capitalization crossed the 50% threshold to end the third quarter at
48%. We had $710 million in cash at September 30, and over $500 million in
available credit under the new bank facility. In view of the extraordinary
improvement in the company's balance sheet and the bright prospects for the
future, Premcor's Board of Directors has declared a dividend of $.02 per share
payable on December 15 to shareholders of record on December 1. Premcor's
Board believes that the institution of a regular quarterly dividend is
important for our shareholders and, while modest at the start, our goal is to
grow the dividend over the coming years."
Looking ahead, O'Malley said, "The basic worldwide level of refining
capacity to manufacture clean transportation fuels and heating oils cannot be
dramatically expanded in the short term. This will work to the economic
benefit of all refiners, but companies that own refineries capable of
converting heavy high-sulfur crude oil into clean light products should enjoy
even better margins for the next few years. Premcor is well placed in this
regard. Based on current margins, current differentials, and planned
operating rates, Premcor expects to exceed the current fourth quarter Thomson
First Call earnings estimate of $0.89 per share. Throughput rates, including
intermediate feedstocks, for the entire fourth quarter should average
approximately as follows: Port Arthur at 240,000 to 250,000 bpd; Lima at
140,000 to 150,000 bpd; Memphis at 145,000 to 155,000 bpd; and Delaware City
at 170,000 to 180,000 bpd."
The company's regular conference call concerning the quarter's results
will be webcast live tomorrow at 10:00 a.m. Eastern Time on the Investor
Relations section of the Premcor Inc. website 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 Nine months ended
September 30, September 30,
(in millions except per share
amounts, unaudited) 2004 2003* 2004 2003*
Net sales and operating revenues $4,407.7 $2,431.5 $10,533.1 $6,547.8
Cost of sales 3,845.0 2,119.1 9,114.2 5,702.7
Gross margin 562.7 312.4 1,418.9 845.1
Operating expenses 219.2 134.8 563.7 386.4
General and administrative
expenses 36.6 21.9 92.5 49.3
Stock-based compensation 4.9 4.5 14.7 13.2
Depreciation and amortization 40.5 27.9 111.4 77.1
Restructuring and other charges 1.1 2.9 10.4 18.6
Operating income 260.4 120.4 626.2 300.5
Interest and finance expense,
net (33.4) (30.5) (96.7) (84.9)
Loss on extinguishment of debt - - (3.6) (10.4)
Income tax provision (82.9) (32.3) (196.8) (71.3)
Income from continuing
operations 144.1 57.6 329.1 133.9
Loss from discontinued
operations, net of tax (2.8) (0.4) (4.6) (6.9)
Net income $141.3 $57.2 $324.5 $127.0
Net income per common share
(fully-diluted):
Income from continuing
operations $1.58 $0.77 $3.88 $1.83
Discontinued operations (0.03) (0.01) (0.05) (0.09)
Net income $1.55 $0.76 $3.83 $1.74
Weighted average common shares
outstanding (in millions) 91.3 75.0 84.8 73.1
* 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.
Summarized Balance Sheet September 30, December 31,
Information 2004 2003
Cash and short-term investments:
Premcor Inc. $118.2 $52.8
Premcor USA Inc. 7.3 1.2
The Premcor Refining Group Inc. 530.2 378.6
Consolidated cash and short-term
investments 655.7 432.6
Cash restricted for debt service 54.6 66.6
Other working capital 491.7 360.9
Total assets 5,319.1 3,715.3
Long-term debt, including current
maturities:
Premcor USA Inc. 10.0 10.3
The Premcor Refining
Group Inc. 1,817.6 1,441.8
Consolidated long-term debt 1,827.6 1,452.1
Total common stockholders' equity 1,977.4 1,145.2
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended Nine months ended
September 30, September 30,
(unaudited) 2004 2003 2004 2003
Selected Volumetric and Per Barrel
Data
Production (Mbbls per day) 737.8 517.6 625.0 527.6
Crude unit throughput (Mbbls per
day) 680.6 526.5 577.5 501.4
Total throughput (Mbbls per day) 721.4 558.6 610.9 518.7
Total throughput (millions of
barrels) 66.4 51.4 167.4 141.6
Per barrel of total throughput:
Gross margin $8.47 $6.08 $8.48 $5.97
Operating expenses 3.30 2.62 3.37 2.73
Market Indicators (dollars per
barrel)
West Texas Intermediate, or "WTI"
(sweet) $43.80 $30.20 $39.12 $31.13
Crack Spreads:*
Gulf Coast 2/1/1 5.84 4.32 6.13 4.23
Chicago 3/2/1 7.40 8.03 8.41 6.98
NYH RFG 3/2/1 (since May 1, 2004) 7.80 ** 9.32 **
Crude Oil Differentials:
WTI less Maya (heavy sour) 11.64 5.82 9.91 6.88
WTI less Arab Medium (since May 1,
2004) 6.02 ** 5.97 **
WTI less WTS (light sour) 3.86 2.63 3.41 2.84
WTI less Dated Brent (foreign) 2.22 1.82 2.82 2.49
Natural Gas (per mmbtu) 5.40 4.84 5.60 5.49
* 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.
**Not meaningful
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended September 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 $128.5 $- $82.9 $- $- $211.4
Chicago 3/2/1 - 99.9 - - - 99.9
NYH RFG 3/2/1 - - - 129.5 - 129.5
Throughput differentials
to benchmark 205.5 (3.9) (3.8) 86.0 - 283.8
Product differentials to
benchmark (85.3) (5.7) 15.1 (80.6) - (156.5)
Price risk results - - - - (5.4) (5.4)
Realized gross
margin 248.7 90.3 94.2 134.9 (5.4) 562.7
Operating expenses (81.5) (32.1) (34.0) (71.6) - (219.2)
Net refining margin $167.2 $58.2 $60.2 $63.3 $(5.4) $343.5
Depreciation and
amortization $18.0 $8.2 $4.5 $6.9 $- $37.6
Per barrel of throughput (in
dollars):
(Based on total throughput
data
shown on following page)
Gross margin:
Gulf Coast 2/1/1 $5.84 $- $5.84 $- $- $3.18
Chicago 3/2/1 - 7.40 - - - 1.50
NYH RFG 3/2/1 - - - 7.80 - 1.95
Throughput differentials
to benchmark 9.30 (0.29) (0.27) 5.18 - 4.27
Product differentials to
benchmark (3.86) (0.42) 1.06 (4.86) - (2.36)
Price risk results - - - - (0.08) (0.08)
Realized gross margin 11.28 6.69 6.63 8.13 (0.08) 8.47
Operating expenses (3.69) (2.38) (2.39) (4.31) - (3.30)
Net refining margin $7.60 $4.31 $4.24 $3.81 $(0.08) $5.17
Depreciation and
amortization $0.81 $0.61 $0.32 $0.42 $- $0.57
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
Nine months ended September 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 $386.8 $- $259.3 $- $- $646.1
Chicago 3/2/1 - 290.9 - - - 290.9
NYH RFG 3/2/1 - - - 254.4 254.4
Throughput
differentials to
benchmark 503.5 (27.7) (34.3) 147.4 - 588.9
Product differentials
to benchmark (209.2) (39.5) 59.7 (141.1) - (330.1)
Price risk results - - - - (31.3) (31.3)
Realized gross
margin 681.1 223.7 284.7 260.7 (31.3) 1,418.9
Operating expenses (247.3) (92.5) (103.5) (120.4) - (563.7)
Net refining
margin $433.8 $131.2 $181.2 $140.3 $(31.3) $855.2
Depreciation and
amortization $52.6 $25.9 $11.5 $12.1 $- $102.1
Per barrel of throughput
(in dollars):
(Based on total
throughput data
shown on following
page)
Gross margin:
Gulf Coast 2/1/1 $6.13 $- $6.13 $- $- $3.86
Chicago 3/2/1 - 8.41 - - - 1.74
NYH RFG 3/2/1 - - - 9.32 - 1.52
Throughput
differentials to
benchmark 7.97 (0.80) (0.81) 5.40 - 3.52
Product differentials
to benchmark (3.31) (1.14) 1.41 (5.17) - (1.97)
Price risk results - - - - (0.19) (0.19)
Realized gross
margin 10.79 6.47 6.73 9.55 (0.19) 8.48
Operating expenses (3.91) (2.67) (2.45) (4.41) - (3.37)
Net refining
margin $6.87 $3.79 $4.28 $5.14 $(0.19) 5.11
Depreciation and
amortization $0.83 $0.75 $0.27 $0.44 $- $0.61
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 September 30,
2004
Selected Volumetric Data
(in thousands of barrels per day, Port Delaware
unaudited) Arthur Lima Memphis City(1) Total
Throughput:
Crude unit throughput 226.0 144.3 140.4 169.9 680.6
Other throughputs 13.5 2.8 13.5 11.0 40.8
Total throughput 239.5 147.1 153.9 180.9 721.4
Total throughput, in millions of
barrels 22.1 13.5 14.2 16.6 66.4
Production:
Light products:
Conventional gasoline 95.9 59.4 63.6 57.3 276.2
Premium and reformulated gasoline 20.9 24.3 11.3 30.6 87.1
Diesel fuel 59.7 19.7 42.3 37.3 159.0
Jet fuel 23.7 24.3 25.2 23.3 96.5
Other products / blendstocks, net 18.9 15.2 6.2 15.9 56.2
Total light products 219.1 142.9 148.6 164.4 675.0
Solid by products / residual oil 32.2 5.5 5.2 19.9 62.8
Total production 251.3 148.4 153.8 184.3 737.8
(1) We acquired the Delaware City refinery effective May 1, 2004 and
the total throughput for the nine months ended September 30, 2004
reflected 153 days of operations over that period. Total throughput
was 178,600 bpd during the 153 days of operations in 2004.
Premcor Inc. and Subsidiaries
Earnings Release
Nine months ended September 30,
2004
Selected Volumetric Data
(in thousands of barrels per day, Port Delaware
unaudited) Arthur Lima Memphis City(1) Total
Throughput:
Crude unit throughput 215.6 126.1 141.4 94.4 577.5
Other throughputs 14.8 0.3 13.0 5.3 33.4
Total throughput 230.4 126.4 154.4 99.7 610.9
Total throughput, in millions of
barrels 63.2 34.6 42.3 27.3 167.4
Production:
Light products:
Conventional gasoline 86.7 53.2 64.3 32.4 236.6
Premium and reformulated gasoline 21.8 19.7 10.3 18.3 70.1
Diesel fuel 58.8 17.6 44.0 19.4 139.8
Jet fuel 22.8 19.8 24.1 14.4 81.1
Other products / blendstocks, net 23.2 12.5 6.0 7.5 49.2
Total light products 213.3 122.8 148.7 92.0 576.8
Solid by products / residual oil 28.7 4.4 5.3 9.8 48.2
Total production 242.0 127.2 154.0 101.8 625.0
(1) We acquired the Delaware City refinery effective May 1, 2004 and
the total throughput for the nine months ended September 30, 2004
reflected 153 days of operations over that period. Total throughput
was 178,600 bpd during the 153 days of operations in 2004.
SOURCE Premcor Inc.
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Related links:
http://www.premcor.com
CONTACT:
Media-Investors, Karyn Ovelmen of Premcor
Inc., +1-203-698-5669
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