UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from . . . . to . . . .
Commission file number 1-7627
FRONTIER OIL CORPORATION
(Exact name of registrant as specified in its charter)
WYOMING 74-1895085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10000 MEMORIAL DRIVE, SUITE 600 77024-3411
HOUSTON, TEXAS (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (713) 688-9600
-------------------------------------------------------------
Former name, former address and former fiscal year, if
changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No . . .
Registrant's number of common shares outstanding as of July 24, 1998: 28,151,001
FRONTIER OIL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
INDEX
Page
Part I - Financial Information
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II - Other Information 11
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), including, without limitation,
statements that include the words "anticipates," "believes," "could,"
"estimates," "expects," "intends," "may," "plan," "predict," "project,"
"should," and similar expressions, and statements relating to the Company's
strategic plans, capital expenditures, industry trends and prospects and the
Company's financial position. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause actual results,
performance or achievements of the Company to differ materially from those
expressed or implied by such forward-looking statements. Although the Company
believes that its plans, intentions and expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
plans, intentions or expectations will be achieved. Important factors that could
cause actual results to differ materially from the Company's expectations
("Cautionary Statements") are set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
elsewhere in this document. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the Cautionary Statements.
Definitions of Terms
bbl(s) = barrel(s)
bpd = barrel(s) per day
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FRONTIER OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except per share amounts)
Six Months Ended Three Months Ended
June 30 June 30
1998 1997 1998 1997
--------- --------- --------- ---------
Revenues:
Refined products $ 153,007 $ 184,670 $ 83,984 $ 95,458
Other 943 1,230 275 872
--------- --------- --------- ---------
153,950 185,900 84,259 96,330
--------- --------- --------- ---------
Costs and Expenses:
Refining operating costs 132,433 174,383 68,243 83,234
Selling and general expenses 4,215 3,507 2,221 1,785
Depreciation 5,198 4,539 2,822 2,266
--------- --------- --------- ---------
141,846 182,429 73,286 87,285
--------- --------- --------- ---------
Operating Income 12,104 3,471 10,973 9,045
Interest Expense, Net 3,738 8,970 1,768 4,511
--------- --------- --------- ---------
Income (Loss) From Continuing
Operations Before Income Taxes 8,366 (5,499) 9,205 4,534
Provision for Income Taxes - - - -
--------- --------- --------- ---------
Income (Loss) From Continuing Operations 8,366 (5,499) 9,205 4,534
Discontinued Operations:
Income from oil and gas operations,
net of taxes - 1,721 - 167
Gain on disposal of Canadian oil and gas
properties, net of $800 of taxes - 23,301 - 23,301
Recognition of cumulative
translation adjustment - (9,862) - (9,862)
--------- --------- --------- ---------
Income Before Extraordinary Item 8,366 9,661 9,205 18,140
Extraordinary Loss on Retirement of Debt 3,013 - - -
--------- --------- --------- ---------
Net Income $ 5,353 $ 9,661 $ 9,205 $ 18,140
========= ========= ========= =========
Basic Earnings (Loss) Per Share of Common Stock:
Continuing Operations $ .30 $ (.20) $ .33 $ .17
Discontinued Operations - .55 - .49
Extraordinary Loss (.11) - - -
--------- --------- --------- ---------
Net Income $ .19 $ .35 $ .33 $ .66
========= ========= ========= =========
Diluted Earnings (Loss) Per Share of Common Stock:
Continuing Operations $ .29 $ (.20) $ .33 $ .17
Discontinued Operations - .55 - .49
Extraordinary Loss (.10) - - -
--------- --------- --------- ---------
Net Income $ .19 $ .35 $ .32 $ .66
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
- 1 -
FRONTIER OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands except shares)
June 30, 1998 and December 31, 1997 1998 1997
--------- ---------
ASSETS
Current Assets:
Cash, including cash equivalents of
$13,938 in 1998 and $19,981 in 1997 $ 15,116 $ 21,735
Trade and other receivables, less allowance for
doubtful accounts of $500 in 1998 and 1997 22,415 17,204
Inventory of crude oil, products and other 23,862 27,666
Other current assets 809 1,391
--------- ---------
Total current assets 62,202 67,996
--------- ---------
Property, Plant and Equipment, at cost:
Refinery and pipeline 158,458 149,201
Furniture, fixtures and other equipment 3,216 3,044
--------- ---------
161,674 152,245
Less - Accumulated depreciation 50,784 45,586
--------- ---------
110,890 106,659
Other Assets 4,281 3,260
--------- ---------
$ 177,373 $ 177,915
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 33,743 $ 33,527
Accrued turnaround cost 1,484 6,771
Accrued liabilities and other 3,658 5,240
Accrued interest 2,499 1,530
--------- ---------
Total current liabilities 41,384 47,068
--------- ---------
Long-Term Debt, net of current maturities:
9-1/8% Senior Notes 70,000 -
12% Senior Notes - 24,572
7-3/4% Convertible Subordinated Debentures - 46,000
--------- ---------
70,000 70,572
--------- ---------
Deferred Credits and Other 2,793 2,801
Deferred Income Taxes 1,442 1,540
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $100 par value, 500,000 shares
authorized, no shares issued
Common stock, no par, 50,000,000 shares
authorized, 28,281,401 and 28,111,289 shares
issued in 1998 and 1997 57,268 57,251
Paid-in capital 85,852 84,785
Retained earnings (deficit) (80,513) (85,866)
Treasury stock, 130,400 shares and 52,500 shares
in 1998 and 1997 (853) (236)
--------- ---------
Total Shareholders' Equity 61,754 55,934
--------- ---------
$ 177,373 $ 177,915
========= =========
The accompanying notes are an integral part of these financial statements.
- 2 -
FRONTIER OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
For the six months ended June 30, 1998 1997
--------- ---------
OPERATING ACTIVITIES
Net income $ 5,353 $ 9,661
Gain on disposal of Canadian oil and gas properties - (23,301)
Recognition of cumulative translation adjustment - 9,862
Extraordinary loss on retirement of debt 3,013 -
Depreciation, depletion and amortization 5,198 8,387
Deferred credits and other (655) (205)
Change in working capital from operations (6,896) (9,224)
--------- ---------
Net cash provided by (used in) operating activities 6,013 (4,820)
INVESTING ACTIVITIES
Additions to property and equipment:
Continuing operations (8,349) (2,226)
Discontinued operations - (3,298)
Sale of Canadian oil and gas properties,
net of transaction costs - 91,307
Other - (590)
--------- ---------
Net cash (used in) provided by investing activities (8,349) 85,193
FINANCING ACTIVITIES
Borrowings:
9-1/8% Senior Notes 70,000 -
Refining credit facility - 6,400
12% Senior Notes - 2,000
Repayments of debt:
12% Senior Notes, including redemption premium (25,423) -
7-3/4% Convertible Subordinated Debentures,
including redemption premium (45,971) -
Debt issuance costs (2,501) -
Issuance of common stock 353 -
Purchase of treasury stock (617) -
Other (124) (113)
--------- ---------
Net cash (used in) provided by financing activities (4,283) 8,287
Effect of exchange rate changes on cash - (10)
--------- ---------
(Decrease) increase in cash and cash equivalents (6,619) 88,650
Cash and cash equivalents, beginning of period 21,735 5,183
--------- ---------
Cash and cash equivalents, end of period $ 15,116 $ 93,833
========= =========
The accompanying notes are an integral part of these financial statements.
- 3 -
FRONTIER OIL CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
1. FINANCIAL STATEMENT PRESENTATION
FINANCIAL STATEMENT PRESENTATION
The condensed consolidated financial statements include the accounts of
Frontier Oil Corporation (formerly Wainoco Oil Corporation), a Wyoming
Corporation, and its wholly owned subsidiaries, including Frontier Holdings Inc.
(the "Refinery"), collectively referred to as Frontier or the Company. The
annual meeting of the Company was held April 27, 1998 with the shareholders
approving the change in corporate name from Wainoco Oil Corporation to Frontier
Oil Corporation. These financial statements have been prepared by the
registrant without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC) and include all adjustments (comprised
of only normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. It is suggested that
the financial statements included herein be read in conjunction with the
financial statements and the notes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1997.
Frontier conducts its refining operations in the Rocky Mountain region of
the United States. The Company's Cheyenne, Wyoming Refinery purchases the crude
oil to be refined and markets the refined petroleum products produced, including
various grades of gasoline, diesel fuel, asphalt and petroleum coke.
Prior to the third quarter of 1997, the Company also explored for and
produced oil and gas in Canada and prior to the first quarter of 1996 in the
United States (together, the "oil and gas operations"). Operating results for
the Company's oil and gas operations segment are presented as discontinued
operations in the accompanying statements of operations.
EARNINGS PER SHARE
Basic earnings per share has been computed based on the weighted average
number of common shares outstanding. Diluted earnings per share assumes the
additional dilution for the exercise of in-the-money stock options. No
adjustments to income are used in the calculation of earnings per share. The
basic and diluted average shares outstanding are as follows:
Six Months Ended Three Months Ended
June 30 June 30
1998 1997 1998 1997
---------- ---------- ---------- ----------
Basic 28,129,387 27,258,502 28,154,164 27,258,502
Diluted 28,887,049 27,258,502 28,911,826 27,437,537
COMPREHENSIVE INCOME
Total comprehensive income for the six months and three months ended June 30,
1998 and 1997 is as follows:
(in thousands)
Six Months Ended Three Months Ended
June 30 June 30
1998 1997 1998 1997
--------- --------- --------- ---------
Net income $ 5,353 $ 9,661 $ 9,205 $ 18,140
Cumulative translation adjustment - (1,361) - (658)
--------- --------- --------- ---------
Comprehensive income $ 5,353 $ 8,300 $ 9,205 $ 17,482
========= ========= ========= =========
- 4 -
REFINED PRODUCT REVENUES
Revenues are recognized when product ownership is transferred to the customer.
Excise and other taxes on products sold are netted against revenues.
NEW ACCOUNTING STATEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting.
Statement 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). Statement 133 cannot be applied retroactively. Statement 133 must
be applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997 (and, at the company's election, before January
1, 1998).
The Company has not yet quantified the impacts of adopting Statement 133 on
the financial statements and has not determined the timing of or method of the
adoption of Statement 133. However, the Statement could increase volatility in
earnings and other comprehensive income.
2. SCHEDULE OF MAJOR COMPONENTS OF INVENTORY
(in thousands)
June 30, December 31,
1998 1997
-------- --------
Crude oil $ 1,979 $ 3,904
Unfinished products 5,250 6,338
Finished products 8,859 9,929
Chemicals 1,512 1,534
Repairs and maintenance supplies and other 6,262 5,961
-------- --------
$ 23,862 $ 27,666
======== ========
3. ISSUANCE OF SENIOR NOTES
On February 9, 1998, the Company issued $70 million of 9-1/8% Senior Notes
due 2006. The Notes are redeemable, at the option of the Company, at a premium
of 104.563% after February 15, 2002, declining to 100% in 2005. Prior to
February 15, 2002, the Company at its option may redeem the Notes at a defined
make-whole amount. Interest is paid semiannually. The net proceeds were
utilized to fund redemptions of the Company's 12% Senior Notes and 7-3/4%
Convertible Subordinated Debentures as discussed in Note 4.
4. EXTRAORDINARY LOSS
On February 10, 1998, the Company called for redemption the remaining $24.8
million of its 12% Senior Notes and the $46 million 7-3/4% Convertible
Subordinated Debentures. The redemptions were completed on March 12, 1998.
Holders of $731,000 of 7-3/4% Convertible Subordinated Debentures elected to
convert into 83,542 shares of the Company's common stock. Based on the
redemptions, the Company has recognized a first quarter extraordinary loss of
$3,013,000 due to the redemption premiums on the Senior Notes and Convertible
Debentures and the write-off of the related remaining debt issuance costs. The
redemptions and retirement of these debt obligations were funded with proceeds
from the issuance of the 9-1/8% Senior Notes as discussed in Note 3.
- 5 -
5. REFINING CREDIT FACILITY
The Refinery credit facility was amended in 1998 to extend the maturity from
April 2, 1999 to June 30, 2000. An additional interest rate option was added
based on the prevailing Federal Funds Rate plus 2-1/4%.
- 6 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH THE SAME PERIOD IN 1997
The Company had net income for the six months ended June 30, 1998 of $5.4
million, or $.19 per share, compared to net income of $9.7 million, or $.35 per
share, for the same period in 1997. The 1998 results include a $3.0 million
extraordinary loss on early retirement of debt. The 1997 results included a
$23.3 million gain on the sale of the Canadian oil and gas operations which
closed on June 16, 1997, a $9.9 million reduction to income in recognition of
the cumulative translation adjustment and $1.7 million of income from Canadian
oil and gas operations. The sale of the Canadian oil and gas operations closed
on June 16, 1997, thus the 1997 operating results for the Company's oil and gas
exploration and production segment have been presented as discontinued
operations in the accompanying statements of operations. Frontier's primary
continuing operation is its refining operation in the Rocky Mountain region of
the United States.
Operating income increased $8.6 million in 1998 as compared to 1997 due to an
increase in the refined product spread (revenues less material costs) of $11.7
million offset by a decrease in other income of $287,000 and increases in
refining operating expenses of $1.4 million, selling and general expenses of
$708,000 and depreciation of $659,000.
Refined product revenues and refining operating costs are impacted by changes
in the price of crude oil. The price of crude oil was significantly lower in
1998 than in 1997. The refined product spread was $6.01 per bbl compared to
$4.75 per bbl in 1997. The 1998 refined product spread increased due to an
improved light/heavy crude oil spread and better by-product margins from lower
crude oil prices. Both periods' refined product spreads were negatively
impacted by first quarter declines in crude oil prices of approximately $3.7
million in 1998 and approximately $4.0 million in 1997. Inventories are
recorded at the lower of cost on a first in, first out (FIFO) basis or market.
Refined product revenues decreased $31.7 million or 17%. The decrease in
refined product revenues resulted from a $6.11 per bbl decrease in average
gasoline sales prices and a $6.98 per bbl decrease in average diesel sales
prices. Refined product sales volumes increased 6% in 1998 over 1997 levels.
Yields of gasoline and diesel decreased 9% and 2%, respectively in 1998 compared
to the same period in 1997. The decrease in yields was due to the major
turnaround, which commenced April 19, 1998 and was completed May 15, 1998, on
the fluid catalytic cracking unit and alkylation and related units.
Other income, which consists primarily of processing fees, decreased $287,000
to $943,000 in 1998 as compared to 1997. Other income for 1997 included a
$496,000 foreign currency transaction gain while other income for 1998 includes
sulfur credit sales of $360,000.
Refining operating costs decreased $42 million or 24% from 1997 levels due to
a decrease in material costs offset by an increase in operating expenses.
Material costs per bbl decreased 33% or $6.83 per bbl in 1998 due to lower oil
prices, increased use of heavy crude oil, an increase in the light/heavy spread
and a 2% decrease in charge rates. During 1998, the Refinery increased its use
of heavy crude oil by 1% and the heavy crude oil utilization rate expressed as a
percentage of total crude oil increased to 93% in 1998 from 91% in 1997. The
light/heavy spread increased 40% to average $4.77 per bbl in the six months of
1998. Refinery operating expenses increased $1.4 million in 1998 as compared to
1997, although refining operating expense per bbl decreased $.01 per bbl to
$3.32 per bbl in 1998 due to higher sales volumes in 1998 as compared to 1997.
The increase in refining operating expenses during 1998 was due to higher
natural gas usage during the turnaround, increased chemical usage and increased
transportation costs for asphalt and other product sales.
Selling and general expenses increased $708,000 or 20% for the six months
ended June 30, 1998 reflecting increases in salaries and benefits.
Depreciation increased $659,000 or 15% in the 1998 six-month period as
compared to the same period in 1997, attributable to increases in capital
investment and the write-off of certain equipment replaced in connection with
the turnaround work.
The interest expense decrease of $5.2 million or 58% in 1998 was attributable
to utilizing Canadian sale proceeds to retire debt during the third and fourth
quarters of 1997. Average debt for the six months decreased from $161 million
in 1997 to $85 million in 1998.
- 7 -
The price of light crude oil on the New York Mercantile Exchange has declined
from $17.64 per bbl at the beginning of 1998 to $14.18 per bbl at June 30, 1998.
The price of heavy crude oil has likewise declined. The low price of heavy
crude oil has caused the production of some heavy crude oil in both Wyoming and
Canada to become uneconomical. The Company is currently experiencing some
shortfalls in heavy crude oil deliveries from Wyoming and Canada due to the
shut-in of such production. Should the price of world crude oil remain at such
low levels, the Company expects the shortfalls to continue and may increase in
volume. The Company plans to utilize alternative crude oil for any shortfall;
however, the alternative crude oil will be more costly than currently contracted
heavy crude oil.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THE SAME PERIOD IN 1997
The Company had net income for the three months ended June 30, 1998 of $9.2
million, or $.33 per share, compared to net income of $18.1 million, or $.66 per
share, for the same period in 1997. The 1997 results included a $23.3 million
gain on the sale of the Canadian oil and gas operations which closed on June 16,
1997, a $9.9 million reduction to income in recognition of the cumulative
translation adjustment and $167,000 of income from Canadian oil and gas
operations. The sale of the Canadian oil and gas operations closed on June 16,
1997, thus the 1997 operating results for the Company's oil and gas exploration
and production segment have been presented as discontinued operations in the
accompanying statements of operations. Frontier's primary continuing operation
is its refining operation in the Rocky Mountain region of the United States.
Operating income increased $1.9 million in 1998 as compared to 1997 due to an
increase in the refined product spread (revenues less material costs) of $5.4
million offset by a decrease in other income of $597,000, increases in refining
operating expenses of $1.8 million, selling and general expenses of $436,000 and
depreciation of $556,000.
Refined product revenues and refining operating costs are impacted by changes
in the price of crude oil. The price of crude oil was significantly lower in
1998 than in 1997. The refined product spread was $7.15 per bbl compared to
$6.18 per bbl in 1997. The 1998 refined product spread increased due to an
improved light/heavy crude oil spread and better by-product margins from lower
crude oil prices. Refined product revenues decreased $11.5 million or 12%. The
decrease in refined product revenues resulted from a $4.97 per bbl decrease in
average gasoline sales prices and a $6.29 per bbl decrease in average diesel
sales prices. Refined product sales volumes increased 6% in 1998 over 1997
levels. Yields of gasoline and diesel decreased 19% and 10%, respectively in
1998 compared to the same period in 1997. The decrease in yields was due to the
major turnaround, which commenced April 19, 1998 and was completed May 15, 1998,
on the fluid catalytic cracking unit and alkylation and related units.
Other income, which consists primarily of processing fees, decreased $597,000
to $275,000 in 1998 as compared to 1997. Other income for 1997 included a
$496,000 foreign currency transaction gain.
Refining operating costs decreased $15 million or 18% from 1997 levels due to
a decrease in material costs offset by an increase in operating expenses.
Material costs per bbl decreased 28% or $5.28 per bbl in 1998 due to lower oil
prices, a 10% decrease in charge rates due to the turnaround and an increase in
the light/heavy spread. The light/heavy spread increased 45% to average $4.81
per bbl in the three months of 1998. Refining operating expense per bbl
increased $.28 per bbl to $3.26 per bbl in 1998 due to higher turnaround
accruals, higher natural gas usage during the turnaround and increased
transportation costs for asphalt and other product sales in 1998 compared to
1997.
Selling and general expenses increased $436,000 or 24% for the three months
ended June 30, 1998 reflecting increases in salaries and benefits and a
reallocation of certain costs in connection with the sale of the Canadian
assets.
Depreciation increased $556,000 or 25% in the 1998 three-month period as
compared to the same period in 1997, attributable to increases in capital
investment and the write-off of certain equipment replaced in connection with
the turnaround work.
The interest expense decrease of $2.7 million or 61% in 1998 was attributable
to utilizing Canadian sale proceeds to retire debt during the third and fourth
quarters of 1997. Average debt for the three months decreased from $161 million
in 1997 to $74 million in 1998.
- 8 -
REFINING OPERATING STATISTICAL INFORMATION
Six Months Ended Three Months Ended
June 30, June 30,
--------------------- ---------------------
1998 1997 1998 1997
--------- --------- --------- ---------
Raw material input (bpd)
Light crude 2,265 3,187 2,237 3,064
Heavy crude 31,862 31,529 31,004 34,421
Other feed and blend stocks 5,518 5,777 4,712 4,856
--------- --------- --------- ---------
Total 39,645 40,493 37,953 42,341
Manufactured product yields (bpd)
Gasoline 15,307 16,860 13,368 16,456
Diesel 13,233 13,559 12,248 13,676
Asphalt and other 9,939 9,129 10,820 11,062
--------- --------- --------- ---------
Total 38,479 39,548 36,436 41,194
Total product sales (bpd)
Gasoline 21,935 20,324 22,687 20,359
Diesel 12,426 12,516 12,360 12,343
Asphalt and other 8,036 7,147 9,432 9,146
--------- --------- --------- ---------
Total 42,397 39,987 44,479 41,848
Operating margin information
(per sales bbl)
Average sales price $ 19.94 $ 25.51 $ 20.75 $ 25.06
Material costs (under FIFO
inventory accounting) 13.93 20.76 13.60 18.88
--------- --------- --------- ---------
Product spread 6.01 4.75 7.15 6.18
Operating expenses excluding
depreciation 3.32 3.33 3.26 2.98
Depreciation .67 .62 .69 .59
--------- --------- --------- ---------
Operating margin $ 2.02 $ .80 $ 3.20 $ 2.61
Manufactured product margin
before depreciation (per bbl) $ 2.74 $ 1.42 $ 4.04 $ 3.22
Purchased product margin
(per purchased product bbl) $ 1.79 $ 1.74 $ 1.95 $ 1.74
Light/heavy crude spread (per bbl) $ 4.77 $ 3.40 $ 4.81 $ 3.32
Average sales price (per sales bbl)
Gasoline $ 22.73 $ 28.84 $ 23.57 $ 28.54
Diesel 21.32 28.30 21.87 28.16
Asphalts and other 10.18 11.19 12.51 13.15
- 9 -
LIQUIDITY AND CAPITAL RESOURCES
On February 9, 1998, the Company issued $70 million of 9-1/8% Senior Notes
due 2006 and received net proceeds of approximately $67.9 million. On February
10, 1998, the Company called for redemption the remaining $24.8 million of its
12% Senior Notes and $46 million of its 7-3/4% Convertible Subordinated
Debentures. This redemption was completed on March 12, 1998 resulting in the
payment of $71.4 million, including redemption premiums and the issuance of
83,542 shares of common stock. Under a stock repurchase plan, approved by the
board of directors, 77,900 shares of common stock have been repurchased by the
Company for $617,000.
During the first six months of 1998, $6.0 million of cash flows were provided
by operating activities. In 1997, $4.8 million of cash flows were used in
operating activities. Consistent with the seasonality of its business, the
Company invests in working capital during the first half of the year and
recovers working capital investment in the second half of the year. In addition
to normal seasonality, the impact of lower crude oil prices and the recently
completed turnaround impacted working capital during 1998. The declines in
crude oil prices reduced inventory values despite the increase in volumes of
unfinished inventory built during the turnaround. Such unfinished products are
currently being processed into finished products which will continue through the
third quarter of 1998. Accounts payable for crude oil payments decreased
because of lower crude prices while remaining accounts payable increased and
accrued turnaround costs declined as turnaround expenditures were incurred and
payments made.
At June 30, 1998, the Company had $15.1 million of cash and $20 million
available under the Refinery line of credit. The Company had working capital of
$20.8 million at June 30, 1998.
Additions to property and equipment in the first six months of 1998 of $8.3
million increased $2.8 million from the first six months in 1997 attributable to
an increase of $6.1 million in Refinery capital expenditures in 1998 offset by
the 1997 discontinued Canadian oil and gas operations capital expenditures of
$3.3 million. Capital expenditures of approximately $15.5 million are planned
for the Refinery in 1998, an increase of $2.5 million from prior plans as
additional capital expenditures were incurred concurrent with the turnaround.
- 10 -
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings -
None, which in the opinion of management would have a material
impact on the registrant.
ITEM 2. Changes in Securities -
There have been no changes in the constituent instruments defining the
rights of the holders of any class of registered securities during the
current quarter.
ITEM 3. Defaults Upon Senior Securities -
None.
ITEM 4. Submission of Matters to a Vote of Security Holders -
None.
ITEM 5. Other Information -
None.
ITEM 6. Exhibits and Reports on Form 8-K -
(a) Exhibits
10.01 - First Amendment to Amended and Restated Revolving Credit
and Letter of Credit Agreement dated June 30, 1998 among
Frontier Oil and Refining Company, certain banks and Union
Bank of California.
27 - Financial Data Schedule
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FRONTIER OIL CORPORATION
By: /s/ Jon D. Galvin
---------------------------
Jon D. Galvin
Vice President - Controller
Date: July 28, 1998