OLD GREENWICH, Conn., Nov. 29 /PRNewswire-FirstCall/ -- Premcor Inc.
(NYSE: PCO) today announced that its indirect wholly owned subsidiary, The
Premcor Refining Group Inc., has reached agreement with EnCana Midstream &
Marketing, a partnership of EnCana Corporation ("EnCana") (NYSE: ECA), to
jointly conduct a preliminary design and engineering study of the
modifications necessary to upgrade Premcor's refinery located in Lima, Ohio,
to process Canadian heavy crude oil blends.
The design and engineering study is expected to be completed in
approximately six to nine months. Provided the study indicates an acceptable
investment plan, Premcor and EnCana intend to form a 50-50 joint venture.
Premcor's primary contribution to the joint venture would include the Lima
refinery and related assets, which today have a value in excess of $1 billion.
EnCana would contribute an equivalent amount in cash to the joint venture for
the upgrade project. If additional funding is necessary, each partner would
contribute 50 percent. Final capital and financial arrangements will be
negotiated as part of the project's definitive agreement. Major capital
expenditures are not expected to be required before 2006. The agreement
announced today also provides for the sale of Canadian heavy crude oil blends
to the joint venture by EnCana. Completion and start-up of the upgrade
project is expected in 2008.
Thomas D. O'Malley, Premcor's Chairman and Chief Executive Officer, said,
"This is an ideal project for Premcor. In 2001, we completed a similar but
larger project at our refinery in Port Arthur, Texas. It was completed on
time and on budget. That billion dollar project has, for almost four years,
achieved operating rates and economics above the levels forecast when the
project was originally conceived. The team that supervised that project is
largely intact and will form the base of the group managing the overall
project at Lima."
Jefferson F. Allen, Premcor's Chief Executive Officer-elect, said, "This
agreement lays out a very attractive structure for Premcor to pursue upgrading
the Lima refinery. EnCana is the logical partner for Premcor in this effort,
bringing a reliable, long-term, North American heavy crude oil supply and a
strong balance sheet and cash flow for the upgrade project. EnCana would be
able to grow its oilsands production, and the upgraded Lima refinery would be
able to process these incremental heavy, high-sulfur crude oil barrels. In
our preliminary evaluation of this project, we have used a 10% - 15% earnings
accretion hurdle. We believe this is achievable."
Allen went on to say, "Both EnCana and Premcor will benefit from this
arrangement. The heavy crude oil supply agreement would be structured to
provide an equitable investment return for both Premcor's share of the project
and for EnCana's investment in new crude oil production and the refinery
upgrade. The upgraded Lima refinery would have the ability to process 200,000
barrels per day of Canadian heavy crude oil blends, resulting in increased
production of higher-value finished transportation fuels. The upgraded
facility would produce more gasoline and on-road diesel to help better meet
the current regional demand. This project would also help ease some of the
burden on the demand for light, low-sulfur crude oil in the Midwest, which has
contributed to higher prices affecting the consumer. This is a much needed
project given the worldwide refining industry's current challenge to meet the
existing and growing demand for clean transportation products."
Henry M. Kuchta, Premcor's President and Chief Operating Officer, said,
"Working with local and state agencies, the upgrade project would bolster the
local and state economies. The Lima refinery currently employs more than 400
full-time employees. On an on-going basis, new permanent jobs and service
needs would be created to run the upgraded refinery. During construction, the
upgrade project would add more than 1,000 new construction jobs. Also, during
construction we would install advanced pollution control technologies to
assist in reducing emissions at the facility. Safety and the environment are
top priorities at Premcor. We are committed to the safe operation of the
facility, the welfare of our workers and local communities, and the protection
of the environment."
Premcor will host a conference call at 11:00 a.m. (EST) on Tuesday,
November 30, 2004 to discuss the agreement with EnCana. The meeting will also
be webcast live on the Investor Relations section of the Premcor Inc. website
at http://www.premcor.com . Slides for the conference call will also be
included on the Investor Relations section of our 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 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.
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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