OLD GREENWICH, Conn., Oct. 28 /PRNewswire-FirstCall/ -- Premcor Inc.
(NYSE: PCO) today reported net income from continuing operations before
special items of $59.5 million, or $.79 per share, for its third quarter ended
September 30, 2003, compared to a net loss from continuing operations before
special items of $15.5 million, or $.27 per share, in the third quarter of
2002.
Special items for the third quarter of 2003 included pretax charges
totaling $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 $.2 million related to non-operating assets. In the third
quarter of 2002, pretax special items of $14.5 million included $10.1 million
related to the restructuring of the company's workforce at its Port Arthur,
Texas and Lima, Ohio facilities and reductions in the St. Louis general and
administrative operations, $4.2 million related to the write-down of our
5 percent investment in the Clark Retail Group, Inc. as a result of its
bankruptcy filing, and a $.2 million loss related to the repurchase of
portions of our long-term debt.
For the nine months ended September 30, 2003, Premcor reported net income
from continuing operations before special items of $152.1 million, or $2.08
per share, compared to a net loss from continuing operations before special
items of $45.2 million, or $.98 per share, for the first nine months of 2002.
For the first nine months of 2003, pretax special items of $29.0 million
included a loss of $16.6 million related to the 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, a loss of $3.4 million related to
the planned relocation of the St. Louis office, and a loss of $.2 million
related to non-operating assets. The pretax special items for the first nine
months of 2002 of $192.4 million included losses of $137.4 million related to
the closure of the Hartford refinery, $27.4 million related to the
restructuring of the St. Louis general and administrative operations,
$19.5 million related to the early retirement of long-term debt, $4.2 million
related to the write-down of the Clark Retail Group, Inc. minority interest,
$2.5 million related to the Sabine restructuring, and $1.4 million for idled
equipment.
In addition to the special items, in the third quarter and first nine
months of 2003, Premcor had an after-tax loss from discontinued operations of
$.4 million and $6.9 million, respectively, related to certain retail lease
obligations resulting from the bankruptcy proceedings of Clark Retail
Enterprises, Inc., 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 $57.2 million, or $.76
per share, for the third quarter of 2003, compared to a net loss of
$24.5 million, or $.43 per share, for the third quarter of 2002. Including
the effect of the special items and the loss from discontinued operations, for
the first nine months of 2003, Premcor reported net income of $127.0 million,
or $1.74 per share, compared to a net loss of $164.3 million, or $3.57 per
share, during the first nine 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, unaudited):
Q3 2003 Q3 2002
Net Net
Income Per Income Per
(Loss) Share (Loss) Share
Net income (loss) from continuing
operations, excluding special items $59.5 $0.79 $(15.5) $(0.27)
After-tax special items:
Refinery restructuring and other
charges (1.9) (0.02) (9.0) (0.16)
Net income (loss) from continuing
operations 57.6 0.77 (24.5) (0.43)
Loss from discontinued operations (0.4) (0.01) - -
Net income (loss) available to common
stockholders $57.2 $0.76 $(24.5) $(0.43)
Nine Months 2003 Nine Months 2002
Net Net
Income Per Income Per
(Loss) Share (Loss) Share
Net income (loss) from continuing
operations, excluding special items $152.1 $2.08 $(45.2) $(0.98)
After-tax special items:
Refinery restructuring and other
charges (11.7) (0.16) (107.2) (2.33)
Loss on extinguishment of debt (6.5) (0.09) (11.9) (0.26)
Net income (loss) from continuing
operations 133.9 1.83 (164.3) (3.57)
Loss from discontinued operations (6.9) (0.09) - -
Net income (loss) available to common
stockholders $127.0 $1.74 $(164.3) $(3.57)
Premcor's results include after-tax stock-based compensation expense of
$2.9 million, or $.04 per share, and $2.6 million, or $.05 per share, for the
third quarter of 2003 and 2002, respectively. Premcor is currently one of the
few major U.S. independent refiners that expense this non-cash compensation
item. Absent the stock-based compensation expense, Premcor's third quarter
net income (loss) from continuing operations, excluding special items, would
have been $.83 per share and $(.22) per share in 2003 and 2002, respectively.
Thomas D. O'Malley, Premcor's Chairman and Chief Executive Officer, said,
"Premcor's third quarter results reflected strong refining margins in our Gulf
Coast and Midwestern markets. Our refineries ran well during the period.
Crude oil throughputs at Port Arthur and Memphis were lower than normal due to
planned turnaround activity during the quarter, including work related to Tier
II clean gasoline production and the Port Arthur expansion project, as well as
market-related operating adjustments. Our Lima refinery ran extremely well
during the period, especially considering the common-carrier pipeline outages
and other logistical challenges raised by the August blackout.
"Natural gas, an important part of our cost structure, remains expensive.
Our natural gas cost in the third quarter averaged $5.13 per mmbtu, compared
to $3.22 per mmbtu in the year-ago period. Approximately 80 percent of our
29 million mmbtu annual natural gas consumption is at Port Arthur, so the
higher prices raised our processing cost there by 52 cents per barrel compared
to the third quarter of 2002. The balance of our natural gas usage is at
Lima, and added 18 cents per barrel to our processing costs there compared to
the year-ago period. Our natural gas cost for October month-to-date has
averaged approximately $4.30 per mmbtu. We expect the November and December
costs to exceed this number.
"During the third quarter, Premcor continued its program of matching the
timing of crude oil intake and pricing to the outflow and pricing of products.
Because our domestic sweet crude oil purchases for Lima and Memphis are priced
several weeks before we take title to them, we have a price risk exposure on
roughly 10 million barrels above and beyond our physical inventories.
Management initiated a price risk management program due to concern about oil
market volatility, and 2003 has indeed been a volatile year for oil prices.
WTI crude oil began the year at $31.20 per barrel, ended September at $29.20
per barrel, and moved as high as $37.83 per barrel and as low as $25.24 per
barrel in the intervening months. We believe our program has worked well so
far this year, and we have continued the program during the fourth quarter.
In fact, due to the recent flatter market structure, we will avoid any
significant cost for hedging October and November crude oil deliveries. We
are, however, currently reviewing the price risk management program as we look
ahead to 2004. There is generally a cost to maintain such activities, and we
believe the cost may exceed the benefit the company derives from this added
layer of risk protection during more normal oil market conditions.
"Premcor's financial position continues to strengthen. During the third
quarter, we generated solid earnings and positive cash flow, and we made a
scheduled $10 million amortization payment on our high-cost Port Arthur Coker
Company debt. In addition, we completed the sale of our Hartford, Illinois
refinery assets to ConocoPhillips for $40 million. We ended the quarter with
an improved debt-to-capitalization ratio of just under 56 percent and a robust
cash balance of $542 million. We are on target to meet our 2003 capital
expenditure forecast of approximately $275 million, which will include
approximately $150 million of activity in the fourth quarter. The Tier II
gasoline project at Port Arthur will be completed and in service by year-end,
on schedule and under budget. In addition, Tier II gasoline construction is
well underway at Memphis. We do not anticipate having any difficulties in
funding our capital requirements from operating cash flows and available cash
during the coming clean fuels transition years of 2004 and 2005."
Looking ahead, O'Malley said, "During the fourth quarter, we will have
scheduled maintenance at certain back-end conversion units at both Port Arthur
and Lima, which will result in increased production of intermediate products
and a corresponding reduction in the production of transportation fuels during
the maintenance period. The impact on our fourth quarter earnings will of
course depend on market conditions at the time of each turnaround.
Historically, fourth quarter performance for a refiner depends largely on the
weather. Longer term, I continue to be very optimistic about industry
conditions. U.S. refined product inventories are at historic lows on a
demand-adjusted basis. Demand continues to show improvement, which can be
expected in a recovering economy. The phase-in of new clean fuel
specifications in the U.S. begins on January 1, less than three months from
now. I believe the continuing Balkanization of the worldwide refined product
pool, combined with the reduction in U.S. production that seems to be
resulting from our industry's preparation efforts, bodes very well for
Premcor's earnings going forward."
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, 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) 2003 2002 2003 2002
Operating revenues $2,878.2 $1,899.8 $7,874.4 $4,807.1
Cost of sales 2,565.8 1,757.8 7,029.3 4,342.8
Gross margin 312.4 142.0 845.1 464.3
Operating expenses 134.8 109.6 386.4 338.2
General and administrative
expenses 21.9 11.9 49.3 40.8
Stock-based compensation 4.5 4.2 13.2 9.9
Depreciation and amortization 27.9 20.8 77.1 64.9
Restructuring and other charges 2.9 14.3 18.6 172.9
Operating income (loss) 120.4 (18.8) 300.5 (162.4)
Interest expense and finance
income, net (30.5) (20.5) (84.9) (81.5)
Loss on extinguishment of long-
term debt - (0.2) (10.4) (19.5)
Income tax benefit (provision) (32.3) 15.0 (71.3) 99.9
Minority interest - - - 1.7
Net income (loss) from
continuing operations 57.6 (24.5) 133.9 (161.8)
Discontinued operations, net of
tax (0.4) - (6.9) -
Preferred stock dividends - - - (2.5)
Net income (loss) available to
common stockholders $57.2 $(24.5) $127.0 $(164.3)
Net income (loss) per common share
(fully-diluted):
Income (loss) from continuing
operations $0.77 $(0.43) $1.83 $(3.57)
Discontinued operations (0.01) - (0.09) -
Net income (loss) $0.76 $(0.43) $1.74 $(3.57)
Weighted average common shares
outstanding (in millions) 75.0 57.5 73.1 46.0
September December
30, 31,
Summarized Balance Sheet Information 2003 2002
Cash and short-term investments:
Premcor Inc. $52.0 $40.7
Premcor USA Inc. 1.0 10.2
The Premcor Refining Group Inc. 434.9 121.4
Consolidated cash and short-term
investments 487.9 172.3
Cash restricted for debt service 53.9 61.7
Other working capital 438.4 86.9
Total assets 3,411.1 2,323.0
Long-term debt, including current
maturities:
Premcor USA Inc. - 40.1
The Premcor Pipeline Co. 10.4 -
The Premcor Refining Group Inc. 1,440.9 884.8
Consolidated long-term debt 1,451.3 924.9
Total common stockholders' equity 1,150.9 704.0
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended Nine months ended
September 30, September 30,
(unaudited) 2003 2002 2003 2002
Selected Volumetric and Per Barrel
Data
Production (Mbbls per day) 565.7 455.0 531.7 455.4
Crude oil throughput (Mbbls per day) 526.5 415.4 501.7 432.4
Total crude oil throughput (millions
of barrels) 48.4 38.2 137.0 118.0
Per barrel of throughput:
Gross margin $6.45 $3.72 $6.17 $3.93
Operating expenses 2.78 2.87 2.82 2.87
Market Indicators (dollars per barrel)
West Texas Intermediate, or "WTI"
(sweet) $30.20 $28.34 $31.13 $25.41
Crack Spreads:*
Gulf Coast 2/1/1 4.32 2.22 4.23 2.42
Chicago 3/2/1 8.03 4.80 6.98 4.59
Crude Oil Differentials:
WTI less Maya (heavy sour) 5.82 4.92 6.88 4.90
WTI less WTS (sour) 2.63 1.31 2.84 1.26
WTI less Dated Brent (foreign) 1.82 1.37 2.49 1.01
Natural Gas (per mmbtu) 4.84 3.19 5.49 2.92
* 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
Third quarter ended September 30, 2003
Price
Port Risk
Selected Refinery Data (unaudited) Arthur Lima Memphis Results Total
Operating results (dollars in
millions):
Gross margin:
Gulf Coast 2/1/1 $88.1 $- $61.5 $- $149.6
Chicago 3/2/1 - 110.9 - - 110.9
Crude oil differentials to
benchmark 104.0 (7.1) (2.3) - 94.5
Product differentials to benchmark (50.2) (13.4) 23.0 - (40.6)
Price risk results - - - (2.1) (2.1)
Realized gross margin 141.9 90.4 82.2 (2.1) 312.4
Operating expenses 71.1 30.4 33.3 - 134.8
Net refining margin $70.8 $60.0 $48.9 $(2.1) $177.6
Depreciation and amortization $16.4 $6.2 $2.1 $24.7
Per barrel of throughput (in dollars):
(Based on crude oil throughput data
shown on following page)
Gross margin:
Gulf Coast 2/1/1 $4.32 $- $4.32 $- $3.09
Chicago 3/2/1 - 8.03 - - 2.29
Crude oil differentials to
benchmark 5.10 (0.52) (0.16) - 1.95
Product differentials to benchmark (2.46) (0.97) 1.62 - (0.84)
Price risk results - - - (0.04) (0.04)
Realized gross margin 6.96 6.54 5.78 (0.04) 6.45
Operating expenses 3.49 2.20 2.34 - 2.78
Net refining margin $3.47 $4.34 $3.44 $(0.04) $3.67
Depreciation and amortization $0.80 $0.45 $0.15 $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 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.
Premcor Inc. and Subsidiaries
Earnings Release
Nine months ended September 30, 2003
Price
Port Risk
Selected Refinery Data (unaudited) Arthur Lima Memphis(1) Results Total
Operating results (dollars in
millions):
Gross margin:
Gulf Coast 2/1/1 $273.7 $- $132.2 $- $405.8
Chicago 3/2/1 - 264.7 - - 264.7
Crude oil differentials to
benchmark 376.2 (30.4) (13.9) - 331.8
Product differentials to
benchmark (157.4) (21.0) 59.8 - (118.6)
Price risk results - - - (38.6) (38.6)
Realized gross margin 492.4 213.3 178.0 (38.6) 845.1
Operating expenses 214.8 98.9 72.7 - 386.4
Net refining margin $277.6 $114.4 $105.3 $(38.6) $458.7
Depreciation and amortization $43.2 $18.2 $5.4 $66.8
Per barrel of throughput (in dollars):
(Based on crude oil throughput
data shown on following page)
Gross margin:
Gulf Coast 2/1/1 $4.23 $- $3.85 $- $2.96
Chicago 3/2/1 - 6.98 - - 1.93
Crude oil differentials to
benchmark 5.81 (0.80) (0.41) - 2.42
Product differentials to
benchmark (2.43) (0.55) 1.74 - (0.87)
Price risk results - - - (0.28) (0.28)
Realized gross margin 7.61 5.62 5.18 (0.28) 6.17
Operating expenses 3.32 2.61 2.12 - 2.82
Net refining margin $4.29 $3.02 $3.07 $(0.28) $3.35
Depreciation and amortization $0.67 $0.48 $0.16 $0.49
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.
(1) Acquired March 2003. Operating results reflect 212 days of
operations from acquisition through September 30, 2003. Actual crude
oil throughput for the 212 days was 161,900 bpd.
Premcor Inc. and Subsidiaries
Earnings Release
Selected Volumetric Data Third quarter ended September 30, 2003
(in thousands of barrels per day, Port
unaudited) Arthur Lima Memphis Total
Feedstocks:
Crude oil throughput:
Sweet - 147.9 154.7 302.6
Light/Medium sour 29.6 2.2 - 31.8
Heavy sour 192.1 - - 192.1
Total crude oil 221.7 150.1 154.7 526.5
Unfinished and blendstocks 24.3 (9.2) 15.1 30.2
Total feedstocks 246.0 140.9 169.8 556.7
Total crude oil throughput, in
millions of barrels 20.4 13.8 14.2 48.4
Production:
Light products:
Conventional gasoline 79.2 71.2 69.3 219.7
Premium and reformulated
gasoline 33.8 15.0 18.8 67.6
Diesel fuel 72.7 21.8 45.3 139.8
Jet fuel 16.5 22.4 23.3 62.2
Petrochemical products 18.8 7.3 7.5 33.6
Total light products 221.0 137.7 164.2 522.9
Petroleum coke and sulfur 22.9 2.6 0.2 25.7
Residual oil 11.9 1.8 3.4 17.1
Total production 255.8 142.1 167.8 565.7
Premcor Inc. and Subsidiaries
Earnings Release
Selected Volumetric Data Nine months ended September 30, 2003
(in thousands of barrels per day, Port
unaudited) Arthur Lima Memphis(1) Total
Feedstocks:
Crude oil throughput:
Sweet - 136.0 125.5 261.5
Light/Medium sour 31.4 2.9 0.3 34.6
Heavy sour 205.6 - - 205.6
Total crude oil 237.0 138.9 125.8 501.7
Unfinished and blendstocks 17.0 (5.3) 6.7 18.4
Total feedstocks 254.0 133.6 132.5 520.1
Total crude oil throughput, in
millions of barrels 64.7 37.9 34.3 137.0
Production:
Light products:
Conventional gasoline 83.2 67.0 54.5 204.7
Premium and reformulated
gasoline 33.8 12.8 12.0 58.6
Diesel fuel 79.5 23.5 37.0 140.0
Jet fuel 17.3 19.7 19.2 56.2
Petrochemical products 18.5 7.0 6.1 31.6
Total light products 232.3 130.0 128.8 491.1
Petroleum coke and sulfur 27.3 2.4 0.2 29.9
Residual oil 6.2 1.8 2.7 10.7
Total production 265.8 134.2 131.7 531.7
(1) Acquired March 2003. Volumetric data for production and consumption
reflects 212 days of operations averaged over the first three
quarters of 2003.
Actual crude oil throughput during the 212 days of operations was
161,900 bpd.
SOURCE Premcor Inc.
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Related links:
http://www.premcor.com
CONTACT:
Media-Investors, Joe Watson, +1-203-698-7510,
Investors, Karen Davis, +1-314-854-1424, or Investors, Michael
Taylor, +1-314-719-2304, all of Premcor Inc.
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