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 SEPTEMBER 30, 1999
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 November 8, 1999:
27,311,430
FRONTIER OIL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
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 6
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)
Nine Months Ended Three Months Ended
September 30 September 30
1999 1998 1999 1998
--------- --------- --------- ---------
Revenues:
Refined products $ 261,098 $ 233,605 $ 116,253 $ 80,598
Other 1,829 1,208 191 265
--------- --------- --------- ---------
262,927 234,813 116,444 80,863
--------- --------- --------- ---------
Costs and Expenses:
Refining operating costs 235,111 197,343 100,975 64,910
Selling and general expenses 6,331 6,425 2,251 2,210
Depreciation 8,706 7,926 2,971 2,728
--------- --------- --------- ---------
250,148 211,694 106,197 69,848
--------- --------- --------- ---------
Operating Income 12,779 23,119 10,247 11,015
Interest Expense, Net 4,971 5,305 1,680 1,567
--------- --------- --------- ---------
Income Before Income Taxes 7,808 17,814 8,567 9,448
Provision for Income Taxes 382 - 209 -
--------- --------- --------- ---------
Income Before Extraordinary Item 7,426 17,814 8,358 9,448
Extraordinary Loss on Retirement of Debt - 3,013 - -
--------- --------- --------- ---------
Net Income $ 7,426 $ 14,801 $ 8,358 $ 9,448
========= ========= ========= =========
Basic Earnings (Loss) Per Share
of Common Stock:
Continuing Operations $ .27 $ .63 $ .31 $ .34
Extraordinary Loss - (.11) - -
--------- --------- --------- ---------
Net Income $ .27 $ .52 $ .31 $ .34
========= ========= ========= =========
Diluted Earnings (Loss) Per Share
of Common Stock:
Continuing Operations $ .27 $ .62 $ .30 $ .33
Extraordinary Loss - (.11) - -
--------- --------- --------- ---------
Net Income $ .27 $ .51 $ .30 $ .33
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
- 1 -
FRONTIER OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except shares)
September 30, 1999 (unaudited) and December 31, 1998 1999 1998
--------- ---------
ASSETS
Current Assets:
Cash, including cash equivalents of
$24,587 in 1999 and $31,781 in 1998 $ 26,024 $ 33,589
Trade and other receivables, less allowance for
doubtful accounts of $500 in 1999 and 1998 26,540 11,021
Inventory of crude oil, products and other 31,323 20,269
Other current assets 334 560
--------- ---------
Total current assets 84,221 65,439
--------- ---------
Property, Plant and Equipment, at cost:
Refinery and pipeline 170,882 164,664
Furniture, fixtures and other equipment 4,695 3,426
--------- ---------
175,577 168,090
Less - Accumulated depreciation 64,919 56,217
--------- ---------
110,658 111,873
Other Assets 6,409 4,714
--------- ---------
$ 201,288 $ 182,026
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 42,501 $ 23,492
Accrued turnaround cost 1,722 1,339
Accrued liabilities and other 2,908 4,167
Accrued interest 798 2,403
Revolving credit facility - 3,800
--------- ---------
Total current liabilities 47,929 35,314
--------- ---------
Long-Term Debt, net of current maturities:
9-1/8% Senior Notes 70,000 70,000
Deferred Credits and Other 7,312 5,238
Deferred Income Taxes 879 1,121
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,
28,542,330 and 28,385,584 shares issued in 1999 and 1998 57,294 57,278
Paid-in capital 87,028 86,305
Retained earnings (deficit) (62,635) (70,061)
Treasury stock, 1,230,900 shares and 605,700 shares
in 1999 and 1998 (6,519) (3,169)
--------- ---------
Total Shareholders' Equity 75,168 70,353
--------- ---------
$ 201,288 $ 182,026
========= =========
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 nine months ended September 30, 1999 1998
--------- ---------
OPERATING ACTIVITIES
Net income $ 7,426 $ 14,801
Depreciation 8,706 7,926
Deferred income taxes (242) (366)
Deferred credits and other 215 (259)
Extraordinary loss on retirement of debt - 3,013
Change in working capital from operations (8,102) (1,861)
--------- ---------
Net cash provided by operating activities 8,003 23,254
INVESTING ACTIVITIES
Additions to property and equipment (8,113) (14,304)
Other (861) -
--------- ---------
Net cash used in investing activities (8,974) (14,304)
FINANCING ACTIVITIES
Borrowings:
9-1/8% Senior Notes - 70,000
Repayments of debt:
Refining credit facility (3,800) -
12% Senior Notes, including redemption premium - (25,423)
7-3/4% Convertible Subordinated Debentures, including
redemption premium - (45,971)
Debt issuance costs (70) (2,575)
Issuance of common stock 739 510
Purchase of treasury stock (3,361) (919)
Other (102) (294)
--------- ---------
Net cash provided by (used in) financing activities (6,594) (4,672)
--------- ---------
Increase (decrease) in cash and cash equivalents (7,565) 4,278
Cash and cash equivalents, beginning of period 33,589 21,735
--------- ---------
Cash and cash equivalents, end of period $ 26,024 $ 26,013
========= =========
The accompanying notes are an integral part of these financial statements.
- 3 -
FRONTIER OIL CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
1. Financial statement presentation
Financial statement presentation
The condensed consolidated financial statements include the accounts of
Frontier Oil Corporation, a Wyoming Corporation, and its wholly owned
subsidiaries, including Frontier Holdings Inc. (the "Refinery"), collectively
referred to as Frontier or the Company. 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 we believe 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 our annual report on Form
10-K for the year ended December 31, 1998.
Frontier conducts its refining operations in the Rocky Mountain region of
the United States. Our 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.
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:
Nine Months Ended Three Months Ended
September 30 September 30
1999 1998 1999 1998
---------- ---------- ---------- ----------
Basic 27,394,338 28,138,086 27,305,828 28,154,984
Diluted 27,790,546 28,826,136 28,083,659 28,726,516
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, as amended, is effective for fiscal years beginning after June
15, 2000. 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 currently does not expect the impact of adopting Statement 133 to
be material to the financial statements.
- 4 -
2. Schedule of major components of inventory
September 30, December 31,
1999 1998
------------- ------------
(in thousands)
Crude oil $ 7,893 $ 1,407
Unfinished products 5,227 2,644
Finished products 10,459 8,602
Chemicals 1,568 1,333
Repairs and maintenance supplies and other 6,176 6,283
------------- ------------
$ 31,323 $ 20,269
============= ============
3. Acquisition of El Dorado Refinery
On October 20, 1999, the Company announced that it had signed the asset
purchase and sale agreement with Equilon Enterprises LLC ("Equilon") for the
acquisition of Equilon's 110,000 barrel per day crude oil refinery located in El
Dorado, Kansas. The purchase price will be $170 million plus a contingency
payment of up to $40 million to be paid over the next eight years, not to exceed
an annual cap of $7.5 million, if cash flow generated by the El Dorado Refinery
exceeds certain thresholds. The Company will also purchase from Equilon the
crude oil, intermediate product and finished product inventories at the plant at
closing.
The Company is in the process of finalizing its acquisition financing and
will issue $190 million face amount of 11-3/4% Senior Notes due 2009. The
Company is also replacing its revolving credit facility with a new
collateral-based facility with total capacity of up to $175 million. Regulatory
review of the acquisition is pending and when completed the acquisition will
close.
- 5 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Nine months ended September 30, 1999 compared with the same period in 1998
We had net income for the nine months ended September 30, 1999 of $7.4
million, or $.27 per share, compared to net income from continuing operations
for the same period in 1998 of $17.8 million, or $.62 per diluted share. Net
income for the nine months ended September 30, 1998 was $14.8 million, or $.51
per diluted share. The results for the nine months ended September 30, 1998
included a $3.0 million extraordinary loss on early retirement of debt.
Operating income decreased $10.3 million in the nine months ended September
30, 1999 versus the same period in 1998 due to a decrease in the refined product
spread (revenues less material costs) of $11.5 million, an increase in
depreciation of $780,000, offset by an increase in other income of $621,000, and
decreases in refining operating expenses of $1.2 million and selling and general
costs of $94,000.
The refined product spread was $5.28 per barrel for the nine months ended
September 30, 1999 compared to $6.40 per barrel for the same period in 1998.
This decrease was due to lower light product margins, a significant decrease in
the light/heavy crude spread and lower byproduct margins due to higher crude oil
prices offset by inventory profits. High nationwide levels of gasoline and
diesel inventories in early 1999 kept margins for gasoline and diesel at their
lowest levels since 1995 during the first six months. Although margins improved
during the third quarter of 1999, Frontier's market place was accordingly
impacted with decreases in average gasoline and diesel margins of 9% and 10%,
respectively, from the first nine months of 1998.
The light/heavy spread was $2.01 per barrel for the nine months ended
September 30, 1999, the lowest ever experienced by Frontier for such a lengthy
period. In comparison, the light/heavy spread for the same period in 1998 was
$4.40 per barrel. The tightening spread has been caused by low crude oil prices
during 1998 and the resulting reduced supply of heavy crude oil as certain heavy
crude oil was uneconomic to produce. With the increase in crude oil prices
beginning in the second quarter of 1999, the light/heavy spread had slowly began
to widen, but has recently tightened. The light/heavy spread during the third
quarter of 1999 was $1.89 per barrel compared to $2.21/barrel in the second
quarter and $1.94 per barrel in the first quarter. Because of the higher cost
of heavy crude oil, fewer heavy barrels have been contracted for at a fixed
price above postings than in prior years and the length of the 1999 contracts
has shortened to average approximately three to six months. Consequently, any
sustained improvement in crude oil prices may enable us to purchase a higher
percentage of heavy crude oil and benefit from an improvement in the light/heavy
spread.
The price of crude oil reached its low point in December 1998 when crude
closed at below $10.75 per barrel on the New York Mercantile Exchange and stayed
at or below $13.00 per barrel during January and February 1999. Commencing in
March, with the announcement of OPEC production cuts, the price of crude oil
increased and ended September at $24.51 per barrel. In the nine months ended
September 30, 1999, we realized a benefit to the refined product spread for
inventory profits of approximately $12.7 million because of increasing crude
prices. In the nine months ended September 30, 1998, we realized a reduction to
the refined product spread of approximately $3.9 million because of declines in
crude oil prices. Inventories are recorded at the lower of cost on a first in,
first out (FIFO) basis or market.
Refined product revenues increased $27.5 million or 12% for the nine months
ended September 30, 1999 from the same period in 1998. The increase in refined
product revenues resulted from a $2.36 per barrel increase in average gasoline
sales prices and a $2.27 per barrel increase in average diesel sales prices.
Yields of gasoline increased 8% while yields of diesel decreased 3% in the nine
months ended September 30, 1999 compared to the same period in 1998.
Other income increased $621,000 to $1.8 million in the nine months ended
September 30, 1999 compared to the same period in 1998 due to a $516,000 legal
settlement received in 1999.
Refining operating costs increased $37.8 million or 19% for the nine months
ended September 30, 1999 compared to the same period in 1998 due to an increase
in material costs offset by a decrease in refining operating expenses. Material
costs per barrel increased 21% or $2.82 per barrel in 1999 primarily due to
higher oil prices, the use of a lower percentage of less expensive heavy crude
oil and a lower light/heavy spread. Expressed as a percentage of the total crude
oil charge, the heavy crude oil utilization rate decreased to 88% in the nine
months ended September 30, 1999 from 94% in the same period in 1998. The
light/heavy spread decreased 54% to average $2.01 per barrel in the nine months
ended September 30, 1999. Refining operating
- 6 -
expense per barrel decreased $.20 per barrel to $3.14 per barrel in 1999 due to
higher thruput, lower chemical usage and lower maintenance costs.
Selling and general expenses decreased $94,000 or 1% for the nine months ended
September 30, 1999 as a result of lower salaries and benefits.
Depreciation increased $780,000 or 10% in the nine months ended September 30,
1999 as compared to the same period in 1998, which was attributable to increases
in capital investment. The 1998 depreciation provision also included a write-off
of certain equipment replaced in connection with turnaround work.
The interest expense decrease of $334,000 or 6% for the nine months ended
September 30, 1999 was attributable to refinancing higher coupon debt and lower
overall debt levels. Average debt decreased from $80.7 million for the nine
months ended September 30, 1998 to $75.8 million for the nine months ended
September 30, 1999.
Income tax expense for the nine months ended September 30, 1999 is for state
income taxes.
Three months ended September 30, 1999 compared with the same period in 1998
We had net income for the three months ended September 30, 1999 of $8.4
million, or $.30 per diluted share, compared to net income of $9.4 million, or
$.33 per diluted share, for the same period in 1998.
Operating income decreased $768,000 in the three months ended September 30,
1999 versus the same period in 1998 due to a decrease in the refined product
spread (revenues less material costs) of $1,348,000, an increase in depreciation
of $243,000 and selling and general costs of $41,000, a decrease in other income
of $74,000, offset by a decrease in refining operating expenses of $938,000.
The refined product spread was $6.26 per barrel for the three months ended
September 30, 1999 compared to $7.14 per barrel for the same period in 1998.
This decrease was due to a significant decrease in the light/heavy crude spread
and lower byproduct margins due to higher crude oil prices offset by inventory
profits. The light/heavy spread was $1.89 per barrel for the three months ended
September 30, 1999, the lowest quarter ever experienced by Frontier. In
comparison the light/heavy spread for the same period in 1998 was $3.66 per
barrel. The tightening spread has been caused by low crude oil prices during
1998 and the resulting reduced supply of heavy crude oil as certain heavy crude
oil has been uneconomic to produce. With the increase in crude oil prices
during 1999, the light/heavy spread had slowly began to widen in the second
quarter of 1999, but has recently tightened. In the three months ended
September 30, 1999, we realized a benefit to the refined product spread for
inventory profits of approximately $6.1 million because of increasing crude
prices. Inventories are recorded at the lower of cost on a first in, first
out (FIFO) basis or market.
Refined product revenues increased $35.7 million or 44% for the three months
ended September 30, 1999 from the same period in 1998. The increase in refined
product revenues resulted from a $9.37 per barrel increase in average gasoline
sales prices, a $9.51 per barrel increase in average diesel sales prices and a
refined product sales volumes increase of 9% in 1999 from 1998 levels. Yields of
gasoline increased 7% while yields of diesel increased 10% in the three months
ended September 30, 1999 compared to the same period in 1998.
Other income decreased $74,000 to $191,000 in the three months ended September
30, 1999 compared to the same period in 1998 due to lower refining processing
fee income.
Refining operating costs increased $36.1 million or 56% for the three months
ended September 30, 1999 from the same period in 1998 due to an increase in
material costs offset by a decrease in refining operating expenses. Material
costs per barrel increased 59% or $7.22 per barrel in 1999 primarily due to
higher oil prices. Expressed as a percentage of the total crude oil charge, the
heavy crude oil utilization rate decreased to 89% in the three months ended
September 30, 1999 from 94% in the same period in 1998. The light/heavy spread
decreased 48% to average $1.89 per barrel in the three months ended September
30, 1999. Refining operating expense per barrel decreased $.48 per barrel to
$2.87 per barrel in 1999 due to higher thruput and lower maintenance costs.
Selling and general expenses increased $41,000 or 2% for the three months
ended September 30, 1999 resulting from acquisition analysis expenses offset by
lower salaries and benefits.
Depreciation increased $243,000 or 9% for the three months ended September 30,
1999 as compared to the same period in 1998, which was attributable to increases
in capital investment.
The interest expense increase of $113,000 or 7% for the three months ended
September 30, 1999 as compared to the same period in 1998 was attributable to
more borrowings under the Company's revolving credit facility resulting from
increased working capital requirements due to rising crude oil prices.
Income tax expense for the three months ended September 30, 1999 is for state
income taxes.
- 7 -
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $8.0 million for the nine months
ended September 30, 1999 while $23.3 million cash was provided by operating
activities for the nine months ended September 30, 1998. Working capital changes
required $8.1 million and $1.9 million of cash flows for the first nine months
of 1999 and 1998, respectively. During the nine months ended September 30,
1999, increases in receivables, inventory and payables occurred due to rising
crude oil prices. Consistent with the seasonality of our business, we invest in
working capital during the first half of the year and recover working capital
investment in the second half of the year.
At September 30, 1999, we had $26.0 million of cash and $36.3 million of
working capital.
Capital expenditures in the first nine months of 1999 of $9.0 million
decreased $5.3 million from the first nine months of 1998. Capital expenditures
of approximately $10.5 million are planned for the full year 1999.
On September 1, 1998, we announced that the Board of Directors had approved a
stock repurchase program of up to three million shares of common stock. In
1998, 469,700 shares of common stock were purchased for $2.3 million. Through
September 1999, an additional 627,700 shares of common stock have been purchased
for $3.4 million.
YEAR 2000
Many of the computer systems used by us today were designed and developed
using two digits, rather than four, to specify the year. As a result, such
systems will recognize the year 2000 as "00". This could cause many computer
applications to fail completely or to create erroneous results unless corrective
measures are taken. We utilize software and related information technology
essential to our operations that may be affected by the year 2000 issue. We
also rely on non-information technology systems in our daily operations, such as
fax machines, radios, voice mail systems, alarms, monitors and other
miscellaneous systems. Additionally we are dependent upon third party
relationships with both suppliers and customers.
We initiated a company wide task force to assess and resolve the business
risks associated with the year 2000 issues. The process implemented by the task
force included identification of possibly effected systems, assessment of
probability of and implications of noncompliance, alternative modifications to
or replacements of existing systems or technology and cost and timetables for
completion. The analysis has been substantially completed by internal resources
with third party vendor verification when available.
We have completed a review of our information technology, accounting and
operational, systems for year 2000 compliance. The review of our primary
financial computer systems, including its accounting system, indicated only
minor modifications were required to make them year 2000 compliant. The process
control system has been documented as year 2000 compliant by the vendor
literature, but continued testing is being done to verify this. We believe we
have implemented the necessary corrections to all of our critical information
technology and non-information technology systems. Systems identified as
non-critical noncompliant will be addressed at later dates.
We do significant business with and are dependent upon various third party
entities. These relationships include customers, critical suppliers of products
and utilities, financial institutions, transportation companies and others. We
are also reviewing the possible impact of year 2000 noncompliance by our outside
providers. Communications with critical third parties regarding their plans and
progress addressing the year 2000 has been initiated and continues. We are
dependent upon the reliability and completeness of the third parties
representations in assessing their year 2000 readiness.
The estimated costs of the software and hardware modifications and some
consultant support identified to date will not exceed $150,000 to implement and
will be financed from operating cash flows. Expenditures incurred through
September 30, 1999 totaled approximately $110,000. We do not separately track
the internal costs for the year 2000 project, and such costs are principally the
related payroll costs for our information systems group.
Our refinery operations are very dependent upon outside providers and in
certain areas an alternative to us is not available. Failure to correct a
material year 2000 issue could result in an interruption in, or a failure of,
certain normal business activities or operations. Although we are taking steps
to reduce the likelihood of interruption or failure of normal operations, there
can be no guarantee that other companies' systems, on which our systems rely,
will be timely year 2000 compliant. To date, we are not aware of any significant
year 2000
- 8 -
problems with these outside providers that would have a material adverse effect
on our business or results of operations, liquidity and financial operations.
We are in the process of developing contingency plans to address issues
associated with the reasonably likely worst case scenarios. We expect to have
such contingency plans formulated by the end of November 1999.
- 9 -
REFINING OPERATING STATISTICAL INFORMATION
Nine Months Ended Three Months Ended
September 30, September 30,
--------------------- ---------------------
1999 1998 1999 1998
--------- --------- --------- ---------
Raw material input (bpd)
Light crude 4,454 2,235 4,316 2,176
Heavy crude 32,446 32,549 35,840 33,902
Other feed and blend stocks 5,552 5,581 5,617 5,704
--------- --------- --------- ---------
Total 42,452 40,365 45,773 41,782
Manufactured product yields (bpd)
Gasoline 16,809 15,619 17,437 16,233
Diesel 12,412 12,801 13,115 11,951
Asphalt and other 11,834 10,572 13,671 11,818
--------- --------- --------- ---------
Total 41,055 38,992 44,223 40,002
Total product sales (bpd)
Gasoline 22,037 21,746 22,154 21,373
Diesel 12,592 12,365 12,934 12,246
Asphalt and other 9,918 9,167 13,896 11,391
--------- --------- --------- ---------
Total 44,547 43,278 48,984 45,010
Operating margin information (per sales bbl)
Average sales price $ 21.47 $ 19.77 $ 25.80 $ 19.46
Material costs (under FIFO inventory accounting) 16.19 13.37 19.54 12.32
--------- --------- --------- ---------
Product spread 5.28 6.40 6.26 7.14
Operating expenses excluding depreciation 3.14 3.34 2.87 3.35
Depreciation .71 .66 .65 .64
--------- --------- --------- ---------
Operating margin $ 1.43 $ 2.40 $ 2.74 $ 3.15
Manufactured product margin
before depreciation (per bbl) $ 2.21 $ 3.15 $ 3.44 $ 3.89
Purchased product margin (per purchased product bbl) $ .17 $ 1.66 $ .79 $ 1.31
Light/heavy crude spread (per bbl) $ 2.01 $ 4.40 $ 1.89 $ 3.66
Average sales price (per sales bbl)
Gasoline $ 24.81 $ 22.45 $ 31.25 $ 21.88
Diesel 22.76 20.49 28.33 18.82
Asphalt and other 12.40 12.46 14.75 15.63
- 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
27 - Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K was filed on October 21, 1999. This report
included Item 5 for the reporting of Other Events.
- 11 -
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: November 10, 1999