- --------------------------------------------------------------------------------

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 March 31, 2002

[_] 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 001-16827

PREMCOR INC.
(Exact name of registrant as specified in its charter)

Delaware 43-1851087
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

1700 East Putnam
Suite 500 06870
Old Greenwich, Connecticut (Zip Code)
(Address of principal executive offices)

Registrant's telephone number, including area code (203) 698-7500

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 ( )

Number of shares of registrant's common stock outstanding as of May 15,
2002 was 56,081,599 shares.

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Premcor Inc.
Form 10-Q
March 31, 2002
Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
Independent Accountants' Report ............................................................... 1
Consolidated Balance Sheets as of December 31, 2001 and March 31, 2002 ........................ 2
Consolidated Statements of Operations for the Three Months Ended March 31, 2001 and 2002 ...... 3
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2002 ...... 4
Notes to Consolidated Financial Statements 5

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ......... 13

Item 3. Quantitative and Qualitative Disclosures about Market Risk .................................... 23

PART II. OTHER INFORMATION

Item 1. Legal Proceedings ............................................................................. 24

Item 6. Exhibits and Reports on Form 8-K .............................................................. 25

Signature

FORM 10-Q - PART I
ITEM 1. FINANCIAL STATEMENTS

INDEPENDENT ACCOUNTANTS' REPORT
-------------------------------

To the Board of Directors of Premcor Inc.:

We have reviewed the accompanying consolidated balance sheet of Premcor Inc. and
subsidiaries (the "Company") as of March 31, 2002, and the related consolidated
statements of operations and cash flows for the three-month periods ended March
31, 2001 and 2002. These financial statements are the responsibility of the
Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of the
Company as of December 31, 2001, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated February 11, 2002 (March 29, 2002 as
to Note 15 and April 15, 2002 as to Notes 10 & 19), we expressed an unqualified
opinion on those consolidated financial statements.

Deloitte & Touche LLP

St. Louis, Missouri
April 29, 2002
May 17, 2002 as to Note 13

PREMCOR INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share data)

December 31, March 31,
2001 2002
---------------- --------------
ASSETS (unaudited)

CURRENT ASSETS:
Cash and cash equivalents ...................................................... $ 510.1 $ 387.7
Short-term investments ......................................................... 1.7 1.7
Cash and cash equivalents restricted for debt service .......................... 30.8 53.4
Accounts receivable, net of allowance of $1.3 and $1.3 ......................... 148.3 214.8
Inventories .................................................................... 318.3 332.1
Prepaid expenses and other ..................................................... 52.3 46.8
Net assets held for sale ....................................................... -- 61.0
----------- -----------
Total current assets ........................................................ 1,061.5 1,097.5

PROPERTY, PLANT AND EQUIPMENT, NET ............................................... 1,299.6 1,179.0
DEFERRED INCOME TAXES ............................................................ -- 45.1
OTHER ASSETS ..................................................................... 148.7 155.6
----------- -----------
$ 2,509.8 $ 2,477.2
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable ............................................................... $ 366.4 $ 464.2
Accrued expenses ............................................................... 95.4 111.3
Accrued taxes other than income ................................................ 35.7 28.1
Current portion of long-term debt .............................................. 81.4 28.3
----------- -----------
Total current liabilities ................................................... 578.9 631.9

LONG-TERM DEBT ................................................................... 1,391.4 1,378.0
DEFERRED INCOME TAXES ............................................................ 16.7 --
OTHER LONG-TERM LIABILITIES ...................................................... 109.1 143.9
COMMITMENTS AND CONTINGENCIES .................................................... -- --
MINORITY INTEREST ................................................................ 24.2 23.4

EXCHANGEABLE PREFERRED STOCK
($0.01 par value per share; 250,000 shares authorized;
92,284 shares issued and outstanding in 2001 and 2002) ......................... 94.8 97.3

COMMON STOCKHOLDERS' EQUITY:
Common, $0.01 par value per share, 53,000,000 authorized,
25,720,589 issued and outstanding in 2001 and 2002;
Class F Common, $0.01 par value per share, 7,000,000 authorized,
6,101,010 issued and outstanding in 2001 and 2002 .............................. 0.3 0.3
Paid-in capital .................................................................. 323.7 331.2
Retained deficit ................................................................. (29.3) (128.8)
----------- -----------
Total common stockholders' equity ........................................... 294.7 202.7
----------- -----------
$ 2,509.8 $ 2,477.2
=========== ===========

The accompanying notes are an integral part of these financial statements.

PREMCOR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; amounts in millions, except per share data)

For the Three Months
Ended March 31,
------------------------------
2001 2002
---------- -----------

NET SALES AND OPERATING REVENUES ............................................... $ 1,686.4 $ 1,228.3

EXPENSES:
Cost of sales ................................................................ 1,405.6 1,061.6
Operating expenses ........................................................... 132.8 114.5
General and administrative expenses .......................................... 12.6 16.1
Depreciation ................................................................. 13.0 12.4
Amortization ................................................................. 8.6 9.8
Refinery restructuring and other charges ..................................... 150.0 142.0
---------- -----------
1,722.6 1,356.4
---------- -----------

OPERATING LOSS ................................................................. (36.2) (128.1)

Interest and finance expense ................................................. (41.9) (34.5)
Interest income .............................................................. 4.7 3.5
---------- -----------

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
AND MINORITY INTEREST ........................................................ (73.4) (159.1)

Income tax benefit ........................................................... 56.0 61.3
Minority interest in subsidiary .............................................. (3.3) 0.8
---------- -----------

LOSS FROM CONTINUING OPERATIONS ................................................ (20.7) (97.0)

Discontinued operations:
Loss from operations, net of income tax benefit of $5.5 ................... (8.5) --
---------- -----------

NET LOSS ....................................................................... (29.2) (97.0)

Preferred stock dividends .................................................... (2.5) (2.5)
---------- -----------

NET LOSS AVAILABLE TO COMMON STOCKHOLDERS ...................................... $ (31.7) $ (99.5)
========== ===========
Net loss per common share
Basic and diluted:
Loss from continuing operations .............................................. $ (0.73) $ (3.13)
Discontinued operations ...................................................... (0.27) --
---------- -----------
Net loss ..................................................................... $ (1.00) $ (3.13)
========== ===========
Weighted average common shares outstanding ..................................... 31.8 31.8

The accompanying notes are an integral part of these financial statements.

PREMCOR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, dollars in millions)

For the Three Months
Ended March 31,
---------------------------
2001 2002
-------- --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................................................... $ (29.2) $ (97.0)
Discontinued operations ........................................................... 8.5 --

Adjustments
Depreciation ................................................................... 13.0 12.4
Amortization ................................................................... 11.2 12.4
Deferred income taxes .......................................................... (56.2) (61.7)
Refinery restructuring and other charges ....................................... 121.1 101.2
Inventory write-down to market value ........................................... 2.8 --
Minority interest .............................................................. 3.3 (0.8)
Other, net ..................................................................... 0.1 10.5

Cash provided by (reinvested in) working capital -
Accounts receivable, prepaid expenses and other ................................ 28.0 (61.0)
Inventories .................................................................... (42.8) (13.8)
Accounts payable, accrued expenses, and taxes other than income ................ (19.1) 106.3
Cash and cash equivalents restricted for debt service .......................... -- 4.3
-------- --------
Net cash provided by operating activities of continuing operations ........... 40.7 12.8
Net cash used in operating activities of discontinued operations ............. (2.5) (1.5)
-------- --------
Net cash provided by operating activities .................................... 38.2 11.3
-------- --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment .................................... (15.9) (14.8)
Expenditures for turnaround ....................................................... (29.8) (27.5)
Cash and cash equivalents restricted for investment in capital additions .......... -- 3.2
Purchases of short-term investments ............................................... (1.7) --
Sales and maturities of short-term investments .................................... 1.7 --
-------- --------
Net cash used in investing activities ........................................ (45.7) (39.1)
-------- --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt payments ........................................................... -- (66.2)
Cash and cash equivalents restricted for debt repayment ........................... -- (26.9)
Capital lease payments ............................................................ (0.4) (0.4)
Deferred financing costs .......................................................... -- (1.1)
-------- --------
Net cash used in financing activities ........................................ (0.4) (94.6)
-------- --------

NET DECREASE IN CASH AND CASH EQUIVALENTS ........................................... (7.9) (122.4)
CASH AND CASH EQUIVALENTS, beginning of period ...................................... 290.1 510.1
-------- --------
CASH AND CASH EQUIVALENTS, end of period ............................................ $ 282.2 $ 387.7
======== ========

The accompanying notes are an integral part of these financial statements.

FORM 10-Q - PART I
ITEM 1. FINANCIAL STATEMENTS (continued)

PREMCOR INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2002
(tabular dollar amounts in millions of U.S. dollars)

1. Basis of Preparation and Recent Developments

Premcor Inc. (individually, "Premcor Inc." and collectively with its
subsidiaries, the "Company"), a Delaware corporation, was incorporated in April
1999. Premcor Inc. owns all of the outstanding common stock of Premcor USA Inc.
("Premcor USA") and 90% of the outstanding common stock of Sabine River Holding
Corp. ("Sabine"). Premcor USA's principal operating subsidiary is The Premcor
Refining Group Inc. ("Premcor Refining Group") and Sabine's principal operating
subsidiary is Port Arthur Coker Company L.P. ("Port Arthur Coker Company"). As
of March 31, 2002, Premcor Inc.'s common equity was privately held and
controlled by Blackstone Capital Partners III Merchant Banking Fund L.P. and its
affiliates ("Blackstone"). Premcor Inc.'s other principal shareholder was a
subsidiary of Occidental Petroleum Corporation ("Occidental"). See Note 13,
Subsequent Events, for changes to Premcor Inc.'s ownership structure.

The Company comprises one of the largest independent petroleum refiners and
suppliers of unbranded transportation fuels, heating oil, petrochemical
feedstocks, petroleum coke and other petroleum products in the United States.
The Company owns and operates three refineries with a combined crude oil
throughput capacity of 490,000 barrels per day ("bpd"). The refineries are
located in Port Arthur, Texas; Lima, Ohio; and Hartford, Illinois.

On February 28, 2002, the Company announced its intention to discontinue
operations of its 70,000 bpd Hartford refinery in October 2002. The Company has
concluded that there is no economically viable manner of reconfiguring the
refinery to produce fuels which meet the new gasoline and diesel fuel
specifications mandated by the federal government. During the period prior to
closing the refinery, the focus will continue to be on employee safety and
environmental performance. Additionally, the Company intends to pursue all
opportunities, including a sale of the refinery, to mitigate loss of jobs and
refining capacity in the Midwest.

The accompanying unaudited consolidated financial statements of Premcor
Inc. and subsidiaries are presented pursuant to the rules and regulations of the
United States Securities and Exchange Commission in accordance with the
disclosure requirements for Form 10-Q. In the opinion of the management of the
Company, the unaudited consolidated financial statements reflect all adjustments
(consisting only of normal recurring adjustments) necessary to fairly state the
results for the interim periods presented. Operating results for the three-month
period ended March 31, 2002 were not necessarily indicative of the results that
may be expected for the year ending December 31, 2002. These unaudited financial
statements should be read in conjunction with the audited financial statements
and notes for the years ended December 31, 2001 and 2000 included in the
Company's Registration Statement on Form S-1/A dated April 29, 2002.

2. New and Proposed Accounting Standards

pronouncements to make various technical corrections. The provisions of SFAS No.
145 as they relate to the rescission of SFAS No. 4 shall be applied in fiscal
years beginning after May 15, 2002. The provision of this statement related to
the amendment to SFAS No. 13 shall be effective for transactions occurring after
May 15, 2002. All other provisions of this statement shall be effective for
financial statements on or after May 15, 2002. The Company is in the process of
evaluating the impact of the adoption of this standard on its financial position
and results of operations.

On January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other
Intangible Assets, and SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets. The adoption of these standards did not have a material
impact on the Company's financial position and results of operations; however,
SFAS No. 144 was utilized in the accounting for the Company's announced
intention to discontinue refining operations at the Hartford, Illinois refinery
in October 2002. See Note 3, Refinery Restructuring and Other Charges for
details of the Hartford refinery shutdown.

In July 2001, the Financial Accounting Standards Board approved SFAS No.
143, Accounting for Asset Retirement Obligations. SFAS No. 143 addresses when a
liability should be recorded for asset retirement obligations and how to measure
this liability. The initial recording of a liability for an asset retirement
obligation will require the recording of a corresponding asset that will be
required to be amortized. SFAS No. 143 is effective for fiscal years beginning
after June 15, 2002. The implementation of SFAS No. 143 is not expected to have
a material impact on the Company's financial position or results of operations.

The Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants has issued an exposure draft of a proposed
statement of position ("SOP") entitled Accounting for Certain Costs and
Activities Related to Property, Plant and Equipment. If adopted as proposed,
this SOP will require companies to expense as incurred turnaround costs, which
it terms as "the non-capital portion of major maintenance costs." Adoption of
the proposed SOP would require that any existing unamortized turnaround costs be
expensed immediately. If this proposed change were in effect at March 31, 2002,
the Company would have been required to write-off unamortized turnaround costs
of approximately $110 million. Unamortized turnaround costs will change in 2002
as maintenance turnarounds are performed and past maintenance turnarounds are
amortized. If adopted in its present form, charges related to this proposed
change would be taken in the first quarter of 2003 and would be reported as a
cumulative effect of an accounting change, net of income tax, in the
consolidated statements of operations.

3. Refinery Restructuring and Other Charges

In the first quarter of 2002, the Company recorded refinery restructuring
and other charges of $142.0 million. This charge consisted of a $131.2 million
charge related to the announced shutdown of refining operations at the Hartford,
Illinois refinery in October 2002, a $15.8 million charge related to the
restructuring of the Company's management team, and income of $5.0 million
related to the sale of a portion of the Blue Island refinery assets previously
written off. In 2001, refinery restructuring and other charges consisted of a
$150.0 million charge related to the January 2001 closure of the Company's Blue
Island, Illinois refinery.

Company Management Restructuring

In February 2002, the Company began the restructuring of its executive
management team and subsequently its administrative functions with the hiring of
Thomas D. O'Malley as chairman, chief executive officer, and president and
William E. Hantke as executive vice president and chief financial officer. In
the first quarter of 2002, related to the resignation of the officers who
previously held these positions, the Company recognized severance expense of
$5.0 million and non-cash compensation expense of $5.8 million resulting from
modifications of stock option terms. In addition, the Company incurred a charge
of $5.0 million for the cancellation of a monitoring agreement with an affiliate
of Blackstone. The Company will recognize additional expenses in the second
quarter of 2002 in relation to the continued restructuring of the Company's
administrative functions.

Hartford Refinery

In February 2002, the Company announced that it would shutdown refining
operations at the Hartford, Illinois refinery in October 2002. Although the
Hartford refinery has contributed to the Company's earnings in the past, the
Company has concluded that there is no economically viable manner of
reconfiguring the refinery to produce fuels which meet new gasoline and diesel
fuel standards mandated by the federal government. Additionally, the Company
intends to pursue all other options including the sale of the refinery, to
mitigate the loss of jobs and refinery capacity in the Midwest. Since the
Hartford refinery operation had been only marginally profitable over the last 10
years and since substantial investment would be required to meet new required
product specifications in the future, the Company's reduced refining capacity
resulting from the shutdown is not expected to have a significant negative
impact on net income or cash flow from operations. The only anticipated effect
on net income and cash flow in the future will result from the actual shutdown
process, including recovery of realizable asset value, and subsequent
environmental site remediation, which will occur over a number of years. Unless
there is a need to adjust the shutdown reserve in the future, there should be no
significant effect on net income beyond 2002.

A pretax charge of $131.2 million was recorded in the first quarter of
2002. This charge included $73.6 million of non-cash asset write-offs in excess
of an estimated $61.0 million net realizable value. The net realizable value was
recorded as a current asset under the caption "net assets held for sale" on the
balance sheet. The total charge also included a reserve for future costs of
$57.6 million, consisting of $16.6 million for employee severance, $8.0 million
for the safe shutdown of operations, and $33.0 million for site clean-up and
other environmental matters.

Management adopted an exit plan that details the shutdown of the process
units at the refinery and the subsequent environmental remediation of the site.
The shutdown of the process units will be completed in the fourth quarter of
2002. The Company estimates that 315 employees, both hourly (covered by
collective bargaining agreements) and salaried, will be terminated due to this
shutdown, 98% of which will be terminated in October of 2002. The site clean-up
and environmental reserve takes into account costs that are reasonably
foreseeable at this time. As the site remediation plan is refined and work is
performed, further adjustments of the reserve may be necessary.

Blue Island Closure Reserve

In the first quarter of 2002, the Company sold certain of the Blue Island
refinery equipment for proceeds of $5.0 million. Since no salvage value was
previously recorded, the proceeds from the sale were recorded as a reduction in
the restructuring charge. The Blue Island restructuring reserve balance and net
cash activity as of March 31, 2002 is as follows:

Reserve as of Reserve as of
December 31, Net Cash March 31,
2001 Outlay 2002
------------- ----------- -------------

Employee severance ......................... $ 2.1 $ 0.9 $ 1.2
Plant closure/equipment remediation ........ 13.9 1.3 12.6
Site clean-up/environmental matters ........ 20.5 1.2 19.3
---------- -------- --------
$ 36.5 $ 3.4 $ 33.1
========== ======== ========

The Company expects to spend approximately $16 million in 2002 related to
the reserve for future costs, with the majority of the remainder to be spent
over the next several years. The site clean-up and environmental reserve takes
into account costs that are reasonably foreseeable at this time. As the site
remediation plan is finalized and work is performed, further adjustments of the
reserve may be necessary.

4. Inventories

The carrying value of inventories consisted of the following:

December 31, March 31,
2001 2002
----------- ----------
Crude oil .............................. $ 77.0 $ 87.6
Refined products and blendstocks ....... 218.7 222.1
Warehouse stock and other .............. 22.6 22.4
----------- ----------
$ 318.3 $ 332.1
=========== ==========

The market value of crude oil, refined products and blendstocks inventories
at March 31, 2002 was approximately $118 million (December 31, 2001 - $5
million) above carrying value.

As of January 1, 2002, Port Arthur Coker Company changed its method of
inventory costing from first-in first-out ("FIFO") to last-in first-out ("LIFO")
for crude oil and blendstock inventories. Management believes this change is
preferable in that it achieves a more appropriate matching of revenues and
expenses. The adoption of this inventory accounting method on January 1, 2002
did not have an impact on pretax earnings. The use of the LIFO accounting method
resulted in $12.1 million less pretax income for the quarter ended March 31,
2002 than if the FIFO method had been used. Cost for warehouse stock continues
to be determined under the FIFO method.

5. Other Assets

Other assets consisted of the following:

December 31, March 31,
2001 2002
----------- ----------

Deferred turnaround costs ...................................... $ 97.9 $ 109.8
Deferred financing costs ....................................... 32.6 31.2
Investment in affiliate ........................................ 4.3 4.3
Cash restricted for investment in capital additions ............ 9.9 6.7
Other .......................................................... 4.0 3.6
----------- ----------
$ 148.7 $ 155.6
=========== ==========

Amortization of deferred financing costs for the three-month period ended
March 31, 2002 was $2.5 million (2001 - $3.0 million), and was included in
"Interest and finance expense". In the first quarter of 2002, the Company
incurred $1.1 million of deferred financing costs for fees to obtain a waiver
related to insurance coverage required under Port Arthur Coker Company's common
security agreement.

6. Long-term Debt

In January 2002, Port Arthur Coker Company made a $66.2 million principal
payment on its bank senior loan agreement with $59.7 million representing a
mandatory prepayment pursuant to the common security agreement and secured
account structure.

The common security agreement requires that Port Arthur Coker Company carry
insurance coverage with specified terms. However, due to the effects of the
events of September 11, 2001 on the insurance market, coverage meeting such
terms, particularly as it relates to deductibles, waiting periods and
exclusions, was not available on commercially reasonable terms and, as a result,
Port Arthur Coker Company's insurance program was not in full compliance with
the required insurance coverage at December 31, 2001. However, the requisite
parties to the common security agreement have waived the noncompliance provided
that Port Arthur Coker Company obtain a reduced deductible limit for property
damage, obtain additional contingent business interruption insurance by June 26,
2002 and continue to

monitor the insurance market on a quarterly basis to determine if additional
insurance coverage required by the common security agreement is available on
commercially reasonable terms, and if so, promptly obtain such insurance. The
required deductible limit for property damage has been secured. Port Arthur
Coker Company believes that it will be able to comply with the remaining
conditions of the waiver.

In March 2002, Premcor Refining Group received a waiver regarding the
maintenance of the tangible net worth covenant related to its $650 million
working capital credit agreement, which allows for the exclusion of $120 million
of the restructuring charge related to the closure of the Hartford refinery.

7. Exchangeable Preferred Stock of Subsidiary

Dividends related to the Exchangeable Preferred Stock for the three months
ended March 31, 2002 and 2001 were paid by issuing additional shares of
Exchangeable Preferred Stock. On April 1, 2002, the Company converted all of the
11 1/2% Exchangeable Preferred Stock for 11 1/2% Subordinated Debentures due
October 2009. The Company may pay the interest on these debentures in-kind until
the April 1, 2003 interest payment, at which time it is required to make
interest payments in cash.

8. Interest and Finance Expense

Interest and finance expense included in the statements of operations
consisted of the following:

For the Three Months
Ended March 31,
---------------------
2001 2002
-------- --------

Interest expense ................. $ 39.7 $ 32.1
Financing costs .................. 3.7 4.2
Capitalized interest ............. (1.5) (1.8)
------- -------
$ 41.9 $ 34.5
======= =======

Cash paid for interest for the three-month period ended March 31, 2002 was
$37.9 million (2001 - $43.9 million).

9. Income Taxes

The Company received net cash income tax refunds of $11.7 million during
the first quarter of 2002 (2001 - $2.1 million). The income tax benefit of $56.0
million on the loss from continuing operations before income taxes for the three
month period ended March 31, 2001 included the effect of a decrease of $30.0
million in the deferred tax valuation allowance. During the first quarter of
2001, the Company reversed its remaining deferred tax valuation allowance as a
result of the Company's analysis of the likelihood of realizing the future tax
benefit of its federal and state tax loss carryforwards, alternative minimum tax
credits and federal and state business tax credits.

10. Discontinued Operations

In 2001, the Company recorded a pretax charge of $14.0 million, $8.5
million net of income taxes, related to the environmental liabilities of the
discontinued retail operations. This charge represented an increase in estimate
regarding the Company's environmental clean up obligation and was prompted by
the availability of new information concerning site by site clean up plans and
changing postures of state regulatory agencies.

11. Stock Option Plans

In conjunction with the management change discussed in Note 3 above,
Premcor Inc. adopted two new stock incentive plans. The 2002 Special Stock
Incentive Plan was adopted in connection with the employment of Thomas D.
O'Malley and allows for the issuance of options for the purchase of Premcor Inc.
common stock. Under this plan, options on 3,400,000 shares of Premcor Inc.
common stock may be awarded. As of March 31, 2002, options on 2,200,000 shares
of Premcor Inc. common stock had been granted at an exercise price of $10 per
share, vesting 1/3 on each of the first three anniversaries of the date of
grant. The 2002 Equity Incentive Plan was adopted to award key employees,
directors, and consultants

with various stock options, stock appreciation rights, restricted stock,
performance-based awards and other common stock based awards of Premcor Inc.
common stock. Under the 2002 Equity Incentive Plan, options on 1,500,000 shares
of Premcor Inc. common stock may be awarded. As of March 31, 2002, options on
350,000 shares of Premcor Inc. common stock were granted at an exercise price of
$10 per share. Options granted under this plan vest 1/3 on each of the first
three anniversaries of the date of grant.

As a result of the granting of these options, the Company will record in
the aggregate non-cash compensation expense and additional paid-in capital of
$30.6 million over the applicable vesting periods. Additionally, during the
first quarter of 2002 the company modified the exercise period of stock options
previously granted under the 1999 Stock Incentive Plan for certain executives
severed during the restructuring. In March 2002, the Company recorded $5.8
million of non-cash compensation expense and paid-in capital related to these
option modifications and this amount is included in "refinery restructuring and
other charges". Also recorded in March 2002 was $1.7 million of noncash
compensation expense related to options granted under the two new plans
described above to our new management team and new outside directors. This
amount is included in "general and administrative expenses".

12. Commitments and Contingencies

Legal and Environmental

As a result of its activities, the Company is the subject of a number of
material pending legal proceedings, including proceedings related to
environmental matters. All such matters with material changes during the three
months ended March 31, 2002 or to which a governmental authority is a party and
which involve potential monetary sanctions of $100,000 or greater are described
below.

Blue Island: Federal and State Enforcement. In September 1998, the federal
government filed a complaint, United States v. Clark Refining & Marketing, Inc.,
alleging that the Blue Island refinery violated federal environmental laws
relating to air, water and solid waste. The Illinois Attorney General intervened
in the case. The State of Illinois and Cook County had also brought an action,
several years earlier, People ex rel. Ryan v. Clark Refining & Marketing, Inc.,
also alleging violations under environmental laws. In the first quarter of 2002,
the Company reached an agreement to settle both cases. The consent order in the
state case was formally approved and entered by the state court judge on April
8, 2002, and it is anticipated that the federal court will approve the proposed
settlement in the second quarter of 2002. The consent order in the federal case
requires the payment of $6.25 million as a civil penalty and requires limited
ongoing monitoring at the now-idled refinery. The Company has accrued for this
obligation in its legal and environmental reserves. The consent order in the
state case requires an ongoing tank inspection program along with enhanced
reporting obligations and requires that the parties enter a process to complete
an appropriate site remediation program at the Blue Island refinery. The consent
orders dispose of both the federal and state cases.

Legal and Environmental Reserves. As a result of its normal course of
business, the Company is a party to a number of legal and environmental
proceedings. As of March 31, 2002, the Company had accrued a total of
approximately $74 million (December 31, 2001 - $77 million), on an undiscounted
basis, for legal and environmental-related obligations that may result from the
matters noted above and other legal and environmental matters. The Company is of
the opinion that the ultimate resolution of these claims, to the extent not
previously provided for, will not have a material adverse effect on the
consolidated financial condition, results of operations or liquidity of the
Company. However, an adverse outcome of any one or more of these matters could
have a material effect on quarterly or annual operating results or cash flows
when resolved in a future period.

Environmental Product Standards

January 1, 2004. It is the Company's intent to meet these specifications from
the Port Arthur and Lima refineries on a timely basis. Modifications will be
required at the Port Arthur and Lima refineries as a result of the Tier 2
standards. The Company believes, based on current estimates, that compliance
with the new Tier 2 gasoline specifications will require capital expenditures in
the aggregate through 2005 of approximately $176 million at those refineries.
More than 95% of the total investment to meet the Tier 2 gasoline specifications
is expected to be incurred during 2002 through 2004 with the greatest
concentration of spending occurring in 2003.

Low Sulfur Diesel Standards. In January 2001, the EPA promulgated its
on-road diesel regulations, which will require a 97% reduction in the sulfur
content of diesel fuel sold for highway use by June 1, 2006, with full
compliance by January 1, 2010. Refining industry groups have filed two lawsuits,
which may delay implementation of the on-road diesel rule beyond 2006. The EPA
has estimated that the overall cost to fuel producers of the reduction in sulfur
content would be approximately $0.04 per gallon. The EPA has also announced its
intention to review the sulfur content in diesel fuel sold to off-road
consumers. If regulations are promulgated to regulate the sulfur content of
off-road diesel, the Company expects the sulfur requirement to be either 500
ppm, which is the current on-road limit, or 15 ppm, which will be the future
on-road limit. It is the Company's intent to meet these specifications from the
Port Arthur and Lima refineries on a timely basis. The Company estimates capital
expenditures in the aggregate through 2006 required to comply with the diesel
standards at our Port Arthur and Lima refineries, utilizing existing
technologies, is approximately $225 million. More than 90% of the projected
investment is expected to be incurred during 2004 through 2006 with the greatest
concentration of spending occurring in 2005.

Maximum Available Control Technology. On April 11, 2002, the EPA
promulgated regulations to implement Phase II of the petroleum refinery Maximum
Achievable Control Technology rule under the federal Clean Air Act, referred to
as MACT II, which regulates emissions of hazardous air pollutants from certain
refinery units. The Company expects to spend approximately $45 million in the
next three years related to these new regulations with the greatest
concentration of spending likely in 2003 and 2004.

Other Commitments

Crude Oil Purchase Commitment. In 1999, the Company sold crude oil linefill
in the pipeline system supplying the Lima refinery. An agreement is in place
that requires the Company to repurchase approximately 2.7 million barrels of
crude oil in this pipeline system on September 30, 2002 at then current market
prices. The Company has hedged the economic price risk related to the repurchase
obligations through the purchase of exchange-traded futures contracts.

Long-Term Crude Oil Contract

Port Arthur Coker Company is party to a long-term crude oil supply
agreement with PMI Comercio Internacional, S.A. de C.V ("PEMEX"), an affiliate
of Petroleos Mexicanos, the Mexican state oil company, which supplies
approximately 160,000 barrels per day of Maya crude oil. Under the terms of this
agreement, Port Arthur Coker Company is obligated to buy Maya crude oil from
PEMEX, and PEMEX is obligated to sell to Port Arthur Coker Company Maya crude
oil. An important feature of this agreement is a price adjustment mechanism
designed to minimize the effect of adverse refining margin cycles and to
moderate the fluctuations of the coker gross margin, a benchmark measure of the
value of coker production over the cost of coker feedstocks. This price
adjustment mechanism contains a formula that represents an approximation of the
coker gross margin and provides for a minimum average coker margin of $15 per
barrel over the first eight years of the agreement, which began on April 1,
2001. The agreement expires in 2011.

On a monthly basis, the actual coker gross margin is calculated and
compared to the minimum. Coker gross margins exceeding the minimum are
considered a "surplus" while coker gross margins that fall short of the minimum
are considered a "shortfall." On a quarterly basis, the surplus and shortfall
determinations since the beginning of the contract are aggregated. Pricing
adjustments to the crude oil the Company purchases are only made when there
exists a cumulative shortfall. When this quarterly aggregation first reveals
that a cumulative shortfall exists, the Company receives a discount on its crude
oil purchases in the next quarter in the amount of the cumulative shortfall. If
thereafter, the cumulative shortfall incrementally increases, the Company
receives additional discounts on its crude oil purchases in the succeeding
quarter equal to the incremental increase, and conversely, if thereafter, the
cumulative shortfall incrementally decreases, the Company repays discounts
previously received, or a premium, on its crude oil purchases in the succeeding
quarter equal to the incremental decrease. Cash crude oil discounts received by
the Company in any one quarter are limited to $30 million, while the Company's
repayment of previous crude oil discounts, or premiums, are limited to $20
million in any one quarter. Any amounts subject to the quarterly payment
limitations are carried forward and applied in subsequent quarters.

As of March 31, 2002, a cumulative quarterly surplus of $98.6 million
existed under the contract. As a result, to the extent the Company experiences
quarterly shortfalls in coker gross margins going forward, the price it pays for
Maya crude oil in succeeding quarters will not be discounted until this
cumulative surplus is offset by future shortfalls.

13. Subsequent Events

On May 3, 2002, Premcor Inc. completed an initial public offering of 20.7
million shares of common stock. The initial public offering, plus the concurrent
purchases of 850,000 shares in the aggregate by Thomas D. O'Malley, the
Company's chairman of the board, chief executive officer and president, and two
directors of the Company, netted proceeds to Premcor Inc. of approximately $482
million. The proceeds from the offering are committed to retire debt of Premcor
Inc.'s subsidiaries. As a result of these sales of the Company's common stock,
Blackstone's ownership is reduced to approximately 50% and Occidental's
ownership is reduced to approximately 11%.

On May 3, 2002, Premcor Refining Group called for the redemption of its
9 1/2% Senior Notes due 2004. The notes will be redeemed at par on June 3, 2002.
Additionally, Premcor USA gave notice of redemption on May 8, 2002 with respect
to its 10 7/8% Senior Notes due 2005. The notes will be redeemed on June 7, 2002
at 103.625% of their principal amount.

During May 2002, Premcor Inc. purchased, in the open market, $50.7 million
in aggregate principal amount of Premcor USA's 11 1/2% Subordinated Debentures
at 105.75% of their principal amount.

On May 16, 2002, Sabine announced that its subsidiary, Port Arthur Coker
Company, commenced a consent solicitation relating to its 12 1/2% Senior Notes
due 2009. Consents are being solicited for a series of proposed amendments to
the financing and security documents under which the 12 1/2% Senior Notes were
issued. The amendments would facilitate a proposed restructuring that would,
among other things, permit the prepayment of $221.4 million of Port Arthur Coker
Company's existing bank senior loan agreement and result in Sabine and its
subsidiary companies becoming wholly owned direct or indirect subsidiaries of
Premcor Refining Group. The restructuring also includes amendments to Premcor
Refining Group's $650 million working capital credit agreement principally to
permit letters of credit for crude oil purchases to be issued by Premcor
Refining Group but for the benefit of Port Arthur Coker Company. Additionally,
under this restructuring, the Winterthur International Insurance Company Limited
oil payment guaranty insurance policy related to Port Arthur Coker Company's
Maya crude oil purchases and the $35 million Port Arthur Coker Company working
capital facility for the purchases of non-Maya crude oil will be terminated.

If the amendments become effective, Premcor Refining Group will fully and
unconditionally guarantee the payment obligations under the 12 1/2% Senior
Notes. The consent solicitation will expire on May 29, 2002, unless extended by
the company. The consent solicitation is conditioned upon the receipt of valid
consents from at least a majority of the aggregate principal amount of the
outstanding 12 1/2% Senior Notes and the satisfaction or waiver of certain other
conditions, including the rating agencies reaffirming their credit ratings of
the 12 1/2% Senior Notes after giving effect to the proposed amendments and
restructuring.

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Forward-Looking Statements

Certain statements in this document are forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements are subject to the safe harbor
provisions of this legislation. Words such as "expects," "intends," "plans,"
"projects," "believes," "estimates," "will" and similar expressions typically
identify such forward-looking statements.

Even though we believe our expectations regarding future events are based
on reasonable assumptions, forward-looking statements are not guarantees of
future performance. Important factors that could cause actual results to differ
materially from those contained in our forward-looking statements include, among
others, changes in:

. Industry-wide refining margins;

. Crude oil and other raw material costs, the cost of transportation of
crude oil, embargoes, industry expenditures for the discovery and
production of crude oil, military conflicts between, or internal
instability in, one or more oil-producing countries, governmental
actions, and other disruptions of our ability to obtain crude oil;

. Market volatility due to world and regional events;

. Availability and cost of debt and equity financing;

. Labor relations;

. U.S. and world economic conditions;

. Supply and demand for refined petroleum products;

. Reliability and efficiency of our operating facilities which are
effected by such potential hazards as equipment malfunctions, plant
construction/repair delays, explosions, fires, oil spills and the
impact of severe weather;

. Actions taken by competitors which may include both pricing and
expansion or retirement of refinery capacity;

. Civil, criminal, regulatory or administrative actions, claims or
proceedings and regulations dealing with protection of the environment,
including refined petroleum product composition and characteristics;

. Acts of war or terrorism;

. Other unpredictable or unknown factors not discussed.

Because of all of these uncertainties, and others, you should not place
undue reliance on our forward-looking statements.

Results of Operations

Premcor Inc. owns all of the outstanding common stock of Premcor USA Inc.,
or Premcor USA, and 90% of the outstanding common stock of Sabine River Holding
Corp., or Sabine. Premcor USA's principal operating subsidiary is The Premcor
Refining Group Inc., or Premcor Refining Group, and Sabine's principal operating
subsidiary is Port Arthur Coker Company L.P., or Port Arthur Coker Company.
Premcor Inc., along with its subsidiaries, comprise one of the largest
independent petroleum refiners and suppliers of unbranded transportation fuels,
heating oil, petrochemical feedstocks, petroleum coke and other petroleum
products in the United States. We own and operate three refineries with a
combined crude oil throughput capacity of 490,000 barrels per day, or bpd. Our
refineries are located in Port Arthur, Texas; Lima, Ohio; and Hartford,
Illinois.

The following tables reflect our financial and operating highlights for the
three months ended March 31, 2001 and 2002.

Financial Results For the Three Months
(in millions, except as noted) Ended March 31,
---------------------------
2001 2002
----------- ----------

Net sales and operating revenues ................ $ 1,686.4 $ 1,228.3
Cost of sales ................................... 1,405.6 1,061.6
----------- ----------
Gross margin ................................. 280.8 166.7
Operating expenses .............................. 132.8 114.5
General and administrative expenses ............. 12.6 16.1
----------- ----------
Adjusted EBITDA .............................. 135.4 36.1
Depreciation & amortization ..................... 21.6 22.2
Refinery restructuring and other charges ........ 150.0 142.0
----------- ----------
Operating loss ............................... (36.2) (128.1)
Interest expense and finance income, net ........ (37.2) (31.0)
Income tax benefit .............................. 56.0 61.3
Minority interest in subsidiary ................. (3.3) 0.8
----------- ----------
Loss from continuing operations .............. (20.7) (97.0)
Discontinued operations ......................... (8.5) --
----------- ----------
Net loss ..................................... (29.2) (97.0)
Preferred stock dividends ....................... (2.5) (2.5)
----------- ----------
Net loss available to common stockholders .... $ (31.7) $ (99.5)
=========== ==========

Per common share
Basic and diluted:
Loss from continuing operations .............. $ (0.73) $ (3.13)

Weighted average common shares outstanding ...... 31.8 31.8

Market Indicators For the Three Months
(dollars per barrel, except as noted) Ended March 31,
------------------------------
2001 2002
---- ----

West Texas Intermediate (WTI) crude oil ......... $ 28.81 $ 21.59
Crack Spreads (3/2/1):
Gulf Coast ................................. 5.01 2.80
Chicago .................................... 5.94 3.68
Crude Oil Differentials:
WTI less WTS (sour) ........................ 4.08 1.32
WTI less Maya (heavy sour) ................. 10.62 5.43
WTI less Dated Brent (foreign) ............. 2.90 0.42
Natural gas (per mmbtu) ......................... 7.00 2.20

For the Three Months
Selected Volumetric and Per Barrel Data Ended March 31,
-----------------------------
(in thousands of barrels per day, except as noted) 2001 2002
---- ----

Crude oil throughput by refinery:
Port Arthur ..................................... 229.6 231.7
Lima ............................................ 133.1 139.7
Hartford ........................................ 64.5 62.8
Blue Island ..................................... 15.9 --
-------- ---------
Total throughput .............................. 443.1 434.2
======== =========
Per barrel of throughput (in dollars):
Gross margin .................................... $ 7.04 $ 4.27
Operating expenses .............................. 3.33 2.93

Three Months Ended Three Months Ended
March 31, 2001 March 31, 2002
-------------------------------------------- ----------------------------------------------
Selected Volumetric Data Port Percent Port Percent
(in thousands of barrels per day) Arthur Midwest Total of Total Arthur Midwest Total of Total
--------- ----------- ---------- --------- ----------- ----------- ---------- ----------

Feedstocks:
Crude oil throughput
Sweet -- 139.8 139.8 31.1% -- 134.4 134.4 32.0%
Light/medium sour 65.9 70.9 136.8 30.5 49.0 60.3 109.3 25.9
Heavy sour 163.7 2.8 166.5 37.1 182.7 7.8 190.5 45.2
-------- --------- --------- ------- -------- -------- -------- -------
Total crude oil 229.6 213.5 443.1 98.7 231.7 202.5 434.2 103.1
Unfinished and blendstocks 4.7 1.3 6.0 1.3 (16.7) 3.7 (13.0) (3.1)
-------- --------- --------- ------- -------- -------- -------- -------
Total feedstocks 234.3 214.8 449.1 100.0% 215.0 206.2 421.2 100.0%
======== ========= ========= ======= ======== ======== ======== =======

Production:
Light Products:
Conventional gasoline 78.2 100.6 178.8 38.3% 72.6 110.9 183.5 41.3%
Premium and reformulated gasoline 21.4 24.3 45.7 9.8 13.9 15.0 28.9 6.5
Diesel fuel 78.3 49.5 127.8 27.4 64.3 36.9 101.2 22.8
Jet fuel 14.3 18.8 33.1 7.1 26.9 22.7 49.6 11.2
Petrochemical feedstocks 21.3 10.1 31.4 6.7 15.9 11.4 27.3 6.2
-------- --------- --------- ------- -------- -------- -------- -------
Total light products 213.5 203.3 416.8 89.3 193.6 196.9 390.5 88.0
Petroleum coke and sulfur 31.9 6.5 38.4 8.2 33.2 7.8 41.0 9.3
Residual oil 6.3 4.8 11.1 2.5 9.2 2.9 12.1 2.7
-------- --------- --------- ------- -------- -------- -------- -------
Total production 251.7 214.6 466.3 100.0% 236.0 207.6 443.6 100.0%
======== ========= ========= ======= ======== ======== ======== =======

First Quarter 2002 Compared to First Quarter 2001

Overview. Net loss available to common stockholders increased $67.8
million to $99.5 million in the first quarter of 2002 from a loss of $31.7
million in the corresponding period in 2001. Operating loss increased $91.9
million to $128.1 million in the first quarter of 2002 from $36.2 million
in the corresponding period in 2001.

Operating loss included pretax refinery restructuring and other
charges of $142.0 million and $150.0 million for the first quarter of 2002
and 2001, respectively. Excluding the refinery restructuring and other
charges, we earned operating income of $13.9 million and $113.8 million in
the first quarter of 2002 and 2001,

respectively. Operating income, excluding the refinery restructuring and other
charges, decreased in the first quarter of 2002 compared to the same period in
2001 principally due to significantly weaker market conditions in the first
quarter of 2002.

In January of 2001, we shutdown our refining operations at our Blue Island,
Illinois refinery. Our operating results in the first quarter of 2001 include
one month of operating results of our Blue Island refinery.

Net Sales and Operating Revenue. Net sales and operating revenues decreased
$458.1 million, or 27%, to $1,228.3 million in the first quarter of 2002 from
$1,686.4 million in the corresponding period in 2001. This decrease was mainly
attributable to lower prices in the first quarter of 2002 as compared to the
same period of 2001 as evidenced by a $7.22 per barrel decrease in the average
value of WTI.

Gross Margin. Gross margin decreased $114.1 million to $166.7 million in
the first quarter of 2002 from $280.8 million in the corresponding period in
2001. The decrease was principally driven by significantly weaker market
conditions in the first quarter of 2002 compared to 2001. Refining margins
remained at depressed levels through most of the first quarter of 2002 as high
distillate and gasoline inventories and low demand continued. Mild winter
weather, decreased air travel compared to historic levels, a weak industrial
sector, and an overall sluggish economy resulted in inventories remaining at
high levels at 2001 year-end and into the first quarter of 2002. Refining
margins recovered somewhat in March 2002 as supply tightened due to heavy
maintenance turnaround activity in the industry. The average Gulf Coast and
Chicago crack spreads were approximately 40% lower in the first quarter of 2002
than the same period of 2001. The crude oil differentials on sour and heavy sour
crude oil were also significantly lower than the prior year with the heavy sour
crude oil discount approximately 50% lower than the prior year.

In February 2002, we shutdown our coker unit at our Port Arthur refinery
for ten days for unplanned maintenance. We took advantage of the coker outage to
make repairs to the distillate and naphtha hydrotreaters, including turnaround
maintenance that was originally planned for later in the year. Crude oil
throughput rates were restricted by approximately 18,000 barrels per day, or
bpd, during this time, but returned to near capacity of 250,000 bpd following
the maintenance. In January 2002, we shut down the fluid catalytic cracking
(FCC) unit, gas oil hydrotreating unit and sulfur plant for approximately 39
days at our Port Arthur refinery for planned turnaround maintenance. This
turnaround maintenance did not affect crude oil throughput rates but did lower
gasoline production. We sold more unfinished products during the first quarter
of 2002 due to this shutdown. Both the Lima and Hartford refineries experienced
restricted crude oil throughput rates during the first quarter of 2002 due to
poor refining market conditions.

In the first quarter of 2001, throughput rates at the Port Arthur refinery
were below capacity as units downstream were in start-up operations and did not
run at full capacity during the first quarter. In January of 2001, our new
hydrocracker was brought on-line and our new coker unit and sulfur plant were
still in start-up operations, having begun operations in December 2000. In the
first quarter of 2001, crude oil throughput rates were below capacity at our
Lima refinery due to crude oil delivery delays caused by bad weather in the Gulf
Coast as well as at our Hartford refinery due to coker unit repairs. We shutdown
the Blue Island refinery operations in January 2001, therefore first quarter
2001 reflected only one month of operations.

Operating Expenses. Operating expenses decreased $18.3 million to $114.5
million in the first quarter of 2002 from $132.8 million in the corresponding
period in 2001. The decrease in the first quarter of 2002 was principally due to
significantly lower natural gas prices partially offset by higher repair and
maintenance costs at our Port Arthur refinery.

General and Administrative Expenses. General and administrative expenses
increased $3.5 million to $16.1 million in the first quarter of 2002 from $12.6
million in the corresponding period in 2001. The increase was principally due to
higher employee benefit costs particularly related to non-cash compensation
expense recognized for stock options granted and employee medical benefit costs.

Depreciation and Amortization. Depreciation and amortization expenses were
relatively flat in the first quarter of 2002 as compared to the same period in
2001.

Refinery Restructuring and Other Charges. In 2002, we recorded refinery
restructuring and other charges of $142.0 million. This charge consisted of a
$131.2 million charge related to the announced shutdown of refining operations
at the Hartford, Illinois refinery in October 2002, a $15.8 million charge
related to the restructuring of our management team and administrative
functions, and income of $5.0 million related to the unanticipated sale of a
portion of the Blue Island refinery assets previously written off. In 2001,
refinery restructuring and other charges consisted of a $150.0 million charge
related to the January 2001 closure of the Blue Island, Illinois refinery.

Hartford Refinery

In February 2002, we announced that we would shut down refining operations
at our Hartford, Illinois refinery in October 2002. Although the Hartford
refinery has contributed to our earnings in the past, we have concluded that
there is no economically viable manner of reconfiguring the refinery to produce
fuels which meet new gasoline and diesel fuel standards mandated by the federal
government. Additionally, we intend to pursue all other options, including the
sale of the refinery, to mitigate the loss of jobs and refinery capacity in the
Midwest. Since the Hartford refinery operation had been only marginally
profitable over the last 10 years and since substantial investment would be
required to meet new required product specifications in the future, our reduced
refining capacity resulting from the shutdown is not expected to have a
significant negative impact on net income or cash flow from operations. The only
anticipated effect on net income and cash flow in the future will result from
the actual shutdown process, including recovery of realizable asset value, and
subsequent environmental site remediation, which will occur over a number of
years. Unless there is a need to adjust the shutdown reserve in the future,
there should be no significant effect on net income beyond 2002.

A pretax charge of $131.2 million was recorded in the first quarter of
2002. This charge included $73.6 million of non-cash asset write-offs in excess
of an estimated $61.0 million net realizable value. The net realizable value was
recorded as a current asset on the balance sheet. The total charge also included
a reserve for future costs of $57.6 million, consisting of $16.6 million for
employee severance, $8.0 million for the safe shutdown of operations, and $33.0
million for site clean-up and other environmental matters.

Management adopted an exit plan that details the shutdown of the process
units at the refinery and the subsequent environmental remediation of the site.
The shutdown of the process units is planned to be completed in the fourth
quarter of 2002. We estimate that 315 employees, both hourly (covered by
collective bargaining agreements) and salaried, will be terminated due to this
shutdown, 98% of which will be terminated in October of 2002. The site clean-up
and environmental reserve takes into account costs that are reasonably
foreseeable at this time. As the site remediation plan is refined and work is
performed, further adjustments of the reserve may be necessary.

Company Management Restructuring

In February 2002, we began the restructuring of our executive management
team and subsequently our administrative functions with the hiring of Thomas D.
O'Malley as chairman, chief executive officer, and president and William E.
Hantke as executive vice president and chief financial officer. In the first
quarter of 2002, related to the resignation of the officers who previously held
these positions, we recognized severance expense of $5.0 million and non-cash
compensation expense of $5.8 million resulting from modifications of stock
option terms. In addition, we incurred a charge of $5.0 million for the
cancellation of a monitoring agreement with an affiliate of our majority owner,
Blackstone Management Associates III L.L.C. We will recognize additional
expenses in the second quarter of 2002 in relation to the continued
restructuring of our administrative functions.

Interest Expense and Finance Income, net. Interest expense and finance
income, net decreased $6.2 million to $31.0 million in the first quarter of 2002
from $37.2 million in the corresponding period in 2001. This decrease related
primarily to lower interest rates on our floating rate debt securities and lower
interest expense due to the repurchase of certain debt securities in the third
quarter of 2001.

Income Tax Benefit. Income tax benefit increased $5.3 million to $61.3
million in the first quarter of 2002 from $56.0 million in the corresponding
period in 2001. The income tax benefit of $56.0 million for 2001 included the
effect of a decrease of $30.0 million in the deferred tax valuation allowance.
During the first quarter of 2001, we reversed our remaining deferred tax
valuation allowance as a result of the analysis of the likelihood of realizing
the future tax benefit of our federal and state tax loss carryforwards,
alternative minimum tax credits and federal and state business tax credits.

Discontinued Operations. In 2001, we recorded a pretax charge of $14.0
million, $8.5 million net of income taxes, related to environmental liabilities
of the discontinued retail operations. This charge represented an increase in
estimate regarding our environmental clean up obligation and was prompted by the
availability of new information concerning site by site clean up plans and
changing postures of state regulatory agencies.

Outlook

Market. Refining margins for the second and third quarter of 2002 are
expected to be considerably lower than the historical highs seen in 2001. In
2001, we entered the summer driving season with low product inventories and then
supply disruptions and unplanned refinery downtimes further limited supply and
spiked refining margins, particularly the Chicago crack spread. In 2002, despite
the typical demand increase for gasoline as we enter the summer driving season,
high inventories and very little projected downtime should provide adequate
supply.

Planned Cost Reductions. As part of our focus on continuing to be a
low-cost refiner, in the second quarter of 2002 we implemented a restructuring
of our organization that will result in a future reduction of our general and
administrative and other costs. We will recognize additional restructuring
expenses in the second quarter of 2002 in relation to this initiative.

Liquidity and Capital Resources

Cash Balances

As of March 31, 2002, we had a cash and short term investment balance of
$442.8 million of which $209.2 million was held by Premcor Refining Group, $25.6
million by Premcor USA, $205.9 million by Port Arthur Coker Company, and $2.1
million by Premcor Inc. Under a common security agreement related to Port Arthur
Coker Company's senior debt, all of Port Arthur Coker Company's cash balance,
including $53.4 million restricted for interest and principal payments on its
long-term debt, is reserved under a secured account structure for specific
operational uses and mandatory debt repayment. The operational uses include
various levels of spending, such as current and operational working capital
needs, interest and principal payments, taxes, and maintenance and repairs. Cash
is applied to each level until that level has been fully funded, upon which the
remaining cash then flows to the next level. Once these spending levels are
funded, any cash surplus satisfies obligations of a debt service reserve and
mandatory debt repayment with funding occurring semiannually on January 15th and
July 15th.

Cash Flows from Operating Activities

Net cash provided by operating activities for the three months ended March
31, 2002 was $11.3 million compared to $38.2 million in the same period of the
prior year. Working capital as of March 31, 2002 was $465.6 million, a 1.74-to-1
current ratio, versus $482.6 million as of December 31, 2001, a 1.83-to-1
current ratio.

In January 2001, we shutdown the refining operations at our Blue Island,
Illinois refinery. The Blue Island restructuring reserve balance and net cash
activity as of March 31, 2002 is as follows:

Reserve as of
December 31, Net Cash Reserve as of
2001 Outlay March 31, 2002
------------- ---------- --------------

Employee severance ............................. $ 2.1 $ 0.9 $ 1.2
Plant closure/equipment remediation ............ 13.9 1.3 12.6
Site clean-up/environmental matters ............ 20.5 1.2 19.3
------- -------- -------
$ 36.5 $ 3.4 $ 33.1
======= ======== =======

We expect to spend approximately $16 million in 2002 related to the reserve
for future costs, with the majority of the remainder to be spent over the next
several years. The site clean-up and environmental reserve takes into account
costs that are reasonably foreseeable at this time. As the site remediation plan
is finalized and work is performed, further adjustments of the reserve may be
necessary.

In 1999, we sold crude oil linefill in the pipeline system supplying the
Lima refinery. An agreement is in place that requires us to repurchase
approximately 2.7 million barrels of crude oil in this pipeline system in
September 2002 at market prices, unless extended by mutual consent. The Company
has hedged the economic price risk related to the repurchase obligation through
the purchase of exchange-traded futures contracts.

Credit Agreements

In general, our short-term working capital requirements fluctuate with the
price and payment terms of crude oil and refined petroleum products. Premcor
Refining Group has a credit agreement which provides for the issuance of letters
of credit, primarily for the purchases of crude oil, up to the lesser of $650
million or the amount of a borrowing base calculated with respect to its cash
and eligible cash equivalents, eligible investments, eligible receivables,
eligible petroleum inventories, paid but unexpired letters of credit, and net
obligations on swap contracts. The credit agreement provides for direct cash
borrowings up to $50 million. Borrowings under the credit agreement are secured
by a lien on substantially all of its cash and cash equivalents, receivables,
crude oil and refined product inventories and trademarks. The borrowing base
associated with such facility at March 31, 2002 was $728.6 million with $365.3
million of the facility utilized for letters of credit. As of March 31, 2002,
there were no direct cash borrowings under the credit agreement.

The credit agreement contains covenants and conditions that, among other
things, limit Premcor Refining Group's dividends, indebtedness, liens,
investments and contingent obligations. Premcor Refining Group is also required
to comply with certain financial covenants, including the maintenance of working
capital of at least $150 million, the maintenance of tangible net worth of at
least $150 million, and the maintenance of minimum levels of balance sheet cash
(as defined therein) of $75 million at all times. The covenants also provide for
a cumulative cash flow test that from July 1, 2001 must not be less than zero.
In March 2002, Premcor Refining Group received a waiver regarding the
maintenance of the tangible net worth covenant, which allows for the exclusion
of $120 million of the restructuring charge related to the closure of the
Hartford refinery.

In order to provide security to PMI Comercio Internacional, S.A. de C.V.,
or PMI, for Port Arthur Coker Company's obligation to pay for shipments of Maya
crude oil under a long term crude oil supply agreement, Port Arthur Coker
Company obtained from Winterthur International Insurance Company Limited, or
Winterther, an oil payment guaranty insurance policy for the benefit of PMI.
This oil payment guaranty insurance policy is in the amount of $150 million and
is a source of payment to PMI if Port Arthur Coker Company fails to pay PMI for
one or more shipments of Maya crude oil. Under certain senior debt documents,
Port Arthur Coker Company is required to reimburse Winterthur for any payments
they make on this policy. This reimbursement obligation to Winterthur has a
priority claim on all of the collateral held for the senior debt equal to the
note holders and holders of Port Arthur Coker Company's other senior debt,

except in specified circumstances in which it has a senior claim to these
parties. As of March 31, 2002, $115.5 million of crude oil purchase commitments
were outstanding related to this policy.

Port Arthur Coker Company also has in place a $35 million working capital
facility, which is primarily for the issuance of letters of credit for the
purchases of non-Maya crude oil. As of March 31, 2002, none of the facility was
utilized for letters of credit.

Cash Flows from Investing Activities

Cash flows used in investing activities in the three months ended March 31,
2002 were $39.1 million as compared to $45.7 million in the year-earlier period.
We classify our capital expenditures into two categories, mandatory and
discretionary. Mandatory capital expenditures, such as for turnarounds and
maintenance, are required to maintain safe and reliable operations or to comply
with regulations pertaining to soil, water and air contamination or pollution
and occupational, safety and health issues. Our total mandatory capital and
refinery maintenance turnaround expenditure budget, excluding Tier 2 gasoline
standards, on-road diesel regulations and the MACT II regulations described
below, is approximately $75 million in 2002, of which $31.4 million has been
spent as of March 31, 2002. Discretionary capital expenditures are undertaken by
us on a voluntary basis after thorough analytical review and screening of
projects based on the expected return on incremental capital employed.
Discretionary capital projects generally involve an expansion of existing
capacity, improvement in product yields and/or a reduction in operating costs.
Accordingly, total discretionary capital expenditures may be less than budget if
cash flow is lower than expected and higher than budget if cash flow is better
than expected. Our discretionary capital expenditure budget is approximately $30
million in 2002, of which $8.0 million has been spent as of March 31, 2002. We
plan to fund both mandatory and discretionary capital expenditures with cash
flow from operations.

In addition to mandatory capital expenditures, we expect to incur
significant costs in order to comply with environmental regulations discussed
below. The Environmental Protection Agency has promulgated new regulations under
the Clean Air Act that establish stringent sulfur content specifications for
gasoline and on-road diesel fuel designed to reduce air emissions from the use
of these products.

Tier 2 Motor Vehicle Emission Standards. In February 2000, the EPA
promulgated the Tier 2 Motor Vehicle Emission Standards Final Rule for all
passenger vehicles, establishing standards for sulfur content in gasoline. These
regulations mandate that the sulfur contents of gasoline at any refinery not
exceed 30 ppm during any calendar year by January 1, 2006. These requirements
will be phased in beginning on January 1, 2004. It is our intent to meet these
specifications from the Port Arthur and Lima refineries on a timely basis.
Modifications will be required at the Port Arthur and Lima refineries as a
result of the Tier 2 standards. We believe, based on current estimates, that
compliance with the new Tier 2 gasoline specifications will require capital
expenditures in the aggregate through 2005 of approximately $176 million at
those refineries. More than 95% of the total investment to meet the Tier 2
gasoline specifications is expected to be incurred during 2002 through 2004 with
the greatest concentration of spending occurring in 2003.

Low Sulfur Diesel Standards. In January 2001, the EPA promulgated its
on-road diesel regulations, which will require a 97% reduction in the sulfur
content of diesel fuel sold for highway use by June 1, 2006, with full
compliance by January 1, 2010. The EPA has estimated that the overall cost to
fuel producers of the reduction in sulfur content would be approximately $0.04
per gallon. The EPA has also announced its intention to review the sulfur
content in diesel fuel sold to off-road consumers. If regulations are
promulgated to regulate the sulfur content of off-road diesel, we expect the
sulfur requirement to be either 500 ppm, which is the current on-road limit, or
15 ppm, which will be the future on-road limit. It is our intent to meet these
specifications from the Port Arthur and Lima refineries on a timely basis. We
estimate capital expenditures in the aggregate through 2006 required to comply
with the diesel standards at our Port Arthur and Lima refineries, utilizing
existing technologies, is approximately $225 million. More than 90% of the
projected investment is expected to be incurred during 2004 through 2006 with
the greatest concentration of spending occurring in 2005.

Maximum Available Control Technology. On April 11, 2002, the EPA
promulgated regulations to implement Phase II of the petroleum refinery Maximum
Achievable Control Technology rule under the federal Clean Air Act, referred to
as MACT II, which regulates emissions of hazardous air pollutants from certain
refinery units. We expect to spend approximately $45 million in the next three
years related to these new regulations with the greatest concentration of
spending likely in 2003 and 2004.

Our budget for complying with the Tier 2, low sulfur diesel and MACT II
regulations is approximately $45 million in 2002, of which $1.4 million has been
spent as of March 31, 2002. In conjunction with the work being performed to
comply with the above regulations, we have initiated a project to expand the
Port Arthur refinery to 300,000 barrels per day of crude oil throughput
capacity.

Cash Flows from Financing Activities

Cash flows used in financing activities were $94.6 million for the three
months ended March 31, 2002 compared to $0.4 million in the prior year for the
same period. In January 2002, Port Arthur Coker Company made a $66.2 million
payment on its bank senior loan agreement with $59.7 million representing a
mandatory prepayment pursuant to the common security agreement and secured
account structure. In addition to this principal payment, Port Arthur Coker
Company restricted an additional $33.4 million of cash for future debt
repayments as required by the secured account structure. In the first quarter of
2002, Port Arthur Coker Company incurred $1.1 million of deferred financing
costs for fees necessary to obtain a waiver related to insurance coverage
required under the common security agreement.

We continue to evaluate the most efficient use of capital and, from time to
time, depending upon market conditions, may seek to purchase certain of our
outstanding debt securities in the open market or by other means, in each case
to the extent permitted by existing covenant restrictions.

In May 2002, Premcor Inc. completed a public offering of 20.7 million
shares of its common stock and a concurrent sale of 850,000 shares of common
stock in the aggregate to Thomas D. O'Malley, our chairman of the board, chief
executive officer and president, and two of our directors. We have committed to
using the net proceeds of approximately $482 million to prepay Premcor Refining
Group's 9 1/2% Senior Notes and pay down other debt of our subsidiaries. On May
3, 2002, Premcor Refining Group called for the redemption of its 9 1/2% senior
notes due 2004. These notes will be redeemed at par on June 3, 2002.
Subsequently, Premcor USA gave notice of redemption on May 8, 2002 with respect
to its 10 7/8% senior notes due 2005. These notes will be redeemed on June 7,
2002 at 103.625% of their principal amount.

On April 1, 2002, Premcor USA exchanged its 11 1/2% exchangeable preferred
stock for 11 1/2% subordinated debentures due October 2009. The October 1, 2002
interest payment on these debentures may be made in cash or by issuing
additional securities; however, as of April 1, 2003, Premcor USA will be
required to make cash interest payments for these debentures on a semiannual
basis. During May 2002, Premcor Inc. purchased, in the open market, $50.7
million in aggregate principal amount of Premcor USA's 11 1/2% subordinated
debentures at 105.75% of their principal amount.

Premcor USA, as a stand-alone company, relies on Premcor Refining Group for
substantially all of its liquidity in order to meet its interest and other
costs. Subsequent to the redemption of the 10 7/8% notes, Premcor USA's
liquidity requirements will consist of the interest payments on its 11 1/2%
subordinated debentures and any administrative costs. Premcor USA's ability to
access Premcor Refining Group's cash flows from operating activities is limited
by covenants governing certain of Premcor Refining Group's outstanding debt
securities. Under the most restrictive covenants, Premcor Refining Group is not
able to return additional capital to Premcor USA as of March 31, 2002. Cash,
cash equivalents, and short-term investments owned by Premcor USA amounted to
$25.6 million at March 31, 2002.

On May 16, 2002, Sabine announced that Port Arthur Coker Company commenced
a consent solicitation relating to its 12 1/2% senior notes due 2009. Consents
are being solicited for a series of proposed amendments to the financing and
security documents under which the 12 1/2% senior notes were issued. The
amendments would facilitate a proposed restructuring that would, among other
things, permit

the prepayment of $221.4 million of Port Arthur Coker Company's existing bank
senior loan agreement and result in Sabine and its subsidiary companies becoming
wholly owned direct or indirect subsidiaries of Premcor Refining Group. The
restructuring also includes amendments to Premcor Refining Group's $650 million
working capital credit agreement principally to permit letters of credit for
crude oil purchases to be issued by Premcor Refining Group but for the benefit
of Port Arthur Coker Company. Additionally, under this restructuring, the
Winterthur International Insurance Company Limited oil payment guaranty
insurance policy related to Port Arthur Coker Company's Maya crude oil
purchases and the $35 million Port Arthur Coker Company working capital facility
for the purchases of non-Maya crude oil will be terminated.

If the amendments become effective, Premcor Refining Group will fully and
unconditionally guarantee the payment obligations under the 12 1/2% senior
notes. The consent solicitation will expire on May 29, 2002, unless extended by
the company. The consent solicitation is conditioned upon the receipt of valid
consents from at least a majority of the aggregate principal amount of the
outstanding 12 1/2% senior notes and the satisfaction or waiver of certain other
conditions, including the rating agencies reaffirming their credit ratings of
the 12 1/2% senior notes after giving effect to the proposed amendments and
restructuring.

Funds generated from operating activities together with existing cash, cash
equivalents and short-term investments and proceeds from asset sales are
expected to be adequate to fund existing requirements for working capital and
capital expenditure programs for the next year. Due to the commodity nature of
our products, our operating results are subject to rapid and wide fluctuations.
While we believe that our maintenance of large cash, cash equivalents and
short-term investment balances and our operating philosophies will be sufficient
to provide us with adequate liquidity through the next year, there can be no
assurance that market conditions will not be worse than anticipated. Future
working capital, discretionary capital expenditures, environmentally mandated
spending and acquisitions may require additional debt or equity capital.

New and Proposed Accounting Standards

In April 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical
Corrections." SFAS 145 rescinds SFAS No. 4, "Reporting Gains and Losses from the
Extinguishment of Debt"; SFAS No. 44, "Accounting for Intangible Assets of Motor
Carriers"; and SFAS No. 64, "Extinguishment of Debt Made to Satisfy Sinking-Fund
Requirements." SFAS No. 145 also amends SFAS No. 13, "Accounting for Leases," as
it relates to sale-leaseback transactions and other transactions structured
similar to a sale-leaseback as well as amends other pronouncements to make
various technical corrections. The provisions of SFAS No. 145 as they relate to
the rescission of SFAS No. 4 shall be applied in fiscal years beginning after
May 15, 2002. The provision of this statement related to the amendment to SFAS
No. 13 shall be effective for transactions occurring after May 15, 2002. All
other provisions of this statement shall be effective for financial statements
on or after May 15, 2002. We are in the process of evaluating the impact of the
adoption of this standard on our financial position and results of operations.

The Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants has issued an exposure draft of a proposed
statement of position ("SOP") entitled Accounting for Certain Costs and
Activities Related to Property, Plant and Equipment. If adopted as proposed,
this SOP will require companies to expense as incurred turnaround costs, which
it terms as "the non-capital portion of major maintenance costs." Adoption of
the proposed SOP would require that any existing unamortized turnaround costs be
expensed immediately. If this proposed change were in effect at March 31, 2002,
we would have been required to write-off unamortized turnaround costs of
approximately $110 million. Unamortized turnaround costs will change in 2002 as
maintenance turnarounds are performed and past maintenance turnarounds are
amortized. If adopted in its present form, charges related to this proposed
change would be taken in the first quarter of 2003 and would be reported as a
cumulative effect of an accounting change, net of income tax, in the
consolidated statements of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The risk inherent in our market risk sensitive instruments and positions is
the potential loss from adverse changes in commodity prices and interest rates.
None of our market risk sensitive instruments are held for trading.

Commodity Risk

Our earnings, cash flow and liquidity are significantly affected by a
variety of factors beyond our control, including the supply of, and demand for,
commodities such as crude oil, other feedstocks, gasoline and other refined
products. The demand for these refined products depends on, among other factors,
changes in domestic and foreign economies, weather conditions, domestic and
foreign political affairs, planned and unplanned downtime in refineries,
pipelines and production facilities, production levels, the availability of
imports, the marketing of competitive fuels and the extent of government
regulation. As a result, crude oil and refined product prices fluctuate
significantly, which directly impacts our net sales and operating revenues and
costs of goods sold.

The movement in petroleum prices does not necessarily have a direct
long-term relationship to net income. The effect of changes in crude oil prices
on our operating results is determined more by the rate at which the prices of
refined products adjust to reflect such changes. We are required to fix the
price on our crude oil purchases approximately two to three weeks prior to the
time when the crude oil can be processed and sold. As a result, we are exposed
to crude oil price movements relative to refined product price movements during
this period. In addition, earnings may be impacted by the write-down of our LIFO
based inventory cost to market value when market prices drop dramatically
compared to our LIFO inventory cost. These potential write-downs may be
recovered in subsequent periods as our inventories turn and market prices rise.
We utilize limited risk management tools to mitigate risk associated with
fluctuations in petroleum prices on our normal operating petroleum inventories.
We believe this policy is appropriate since inventories are required to operate
the business and are expected to be owned for an extended period of time. We
believe the cost of using such tools on an extended basis to manage normal
operating petroleum inventories outweighs the benefits.

We occasionally use several strategies to minimize the impact on
profitability of volatility in feedstock costs and refined product prices. These
strategies generally involve the purchase and sale of exchange-traded,
energy-related futures and options with a duration of six months or less. To a
lesser extent we use energy swap agreements similar to those traded on the
exchanges, such as crack spreads and crude oil options, to better match the
specific price movements in our markets as opposed to the delivery point of the
exchange-traded contract. These strategies are designed to minimize, on a
short-term basis, our exposure to the risk of fluctuations in crude oil prices
and refined product margins. The number of barrels of crude oil and refined
products covered by such contracts varies from time to time. Such purchases and
sales are closely managed and subject to internally established risk standards.
The results of these hedging activities affect refining cost of sales and
inventory costs. We do not engage in speculative futures or derivative
transactions.

We prepared a sensitivity analysis to estimate our exposure to market risk
associated with derivative commodity positions. This analysis may differ from
actual results. The fair value of each derivative commodity position was based
on quoted futures prices. As of March 31, 2002, a 10% change in quoted futures
prices would result in a $14 million change to the fair market value of the
derivative commodity position and correspondingly the same change in operating
income.

PART II. - OTHER INFORMATION

ITEM 1. - Legal Proceedings

The following is an update of developments during the quarter of material
pending legal proceedings to which we or any of our subsidiaries are a party or
to which any of our or their property is subject, including environmental
proceedings that involve potential monetary sanctions of $100,000 or more and to
which a governmental authority is a party.

Blue Island: Federal and State Enforcement. In September 1998, the federal
government filed a complaint, United States v. Clark Refining & Marketing, Inc.,
alleging that the Blue Island refinery violated federal environmental laws
relating to air, water and solid waste. The Illinois Attorney General intervened
in the case. The State of Illinois and Cook County had also brought an action
several years earlier, People ex rel. Ryan v. Clark Refining & Marketing, Inc.,
also alleging violations under environmental laws. In the first quarter of 2002,
the Company reached an agreement to settle both cases. The consent order in the
state case was formally approved and entered by the state court judge on April
8, 2002, and it is anticipated that the federal court will approve the proposed
settlement in the second quarter of 2002. The consent order in the federal case
requires the payment of $6.25 million as a civil penalty and requires limited
ongoing monitoring at the now-idled refinery. The consent order in the state
case requires an ongoing tank inspection program along with enhanced reporting
obligations and requires that the parties enter a process to complete an
appropriate site remediation program at the Blue Island refinery. The consent
orders dispose of both the federal and state cases.

Legal and Environmental Reserves. As a result of its normal course of
business, we are a party to a number of legal and environmental proceedings. As
of March 31, 2002, we had accrued a total of approximately $74 million, on an
undiscounted basis, for legal and environmental-related obligations that may
result from the matters noted above and other legal and environmental matters.
We are of the opinion that the ultimate resolution of these claims, to the
extent not previously provided for, will not have a material adverse effect on
our consolidated financial condition, results of operations or liquidity.
However, an adverse outcome of any one or more of these matters could have a
material effect on quarterly or annual operating results or cash flows when
resolved in a future period.

ITEM 6 - Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit
Number Description
------ -----------
3.1 Amended and Restated Certificate of Incorporation of Premcor Inc.
(Incorporated by reference to Exhibit 3.1 filed with Premcor Inc.'s
Registration Statement on Form S-1/A (Registration No. 333-70314)).

3.2 Amended and Restated By-Laws of Premcor Inc. (Incorporated by
reference to Exhibit 3.2 filed with Premcor Inc.'s Registration
Statement on Form S-1/A (Registration No. 333-70314)).

4.1 Common Stock Certificate of Premcor Inc. (Incorporated by reference to
Exhibit 4.1 filed with Premcor Inc.'s Registration Statement on Form
S-1/A (Registration No. 333-70314)).

4.2 Indenture, dated as of August 10, 1998, between The Premcor Refining
Group Inc. ("PRG") (f/k/a Clark Refining & Marketing, Inc. and Clark
Oil & Refining Corporation) and Bankers Trust Company, as Trustee,
including the form of the 8 5/8% Senior Notes due 2008 (Incorporated
by reference to Exhibit 4.1 filed with PRG's Registration Statement on
Form S-4 (Registration No. 333-64387)).

4.3 Indenture, dated as of February 15, 1995, between PRG (f/k/a Clark
Refining & Marketing, Inc. and Clark Oil & Refining Corporation) and
NationsBank of Virginia, N.A., as Trustee, including the form of
9 1/2% Senior Notes due 2004 (Incorporated by reference to Exhibit 4.1
filed with PRG's Registration Statement on Form S-1 (File No.
33-50748)).

4.4 Supplemental Indenture dated February 17, 1995 between PRG (f/k/a
Clark Refining & Marketing, Inc. and Clark Oil & Refining Corporation)
and NationsBank of Virginia, N.A., as Trustee (Incorporated by
reference to Exhibit 4.6 filed with PRG's Annual Report on Form 10-K
for the year ended December 31, 1994 (File No. 33-59144)).

4.5 Indenture dated as of November 21, 1997, between PRG (f/k/a Clark
Refining & Marketing, Inc. and Clark Oil & Refining Corporation) and
Bankers Trust Company, as Trustee, including the form of 8 3/8% Senior
Notes due 2007 (Incorporated by reference to Exhibit 4.5 filed with
PRG's Registration Statement on Form S-4 (Registration No.
333-42431)).

4.6 Indenture dated as of November 21, 1997, between PRG (f/k/a Clark
Refining & Marketing, Inc. and Clark Oil & Refining Corporation) and
Marine Midland Bank, including the form of 8 7/8% Senior Subordinated
Notes due 2007 (Incorporated by reference to Exhibit 4.6 filed with
PRG's Registration Statement on Form S-4 (Registration No.
333-42431)).

4.7 Supplemental Indenture dated November 21, 1997, between PRG (f/k/a
Clark Refining & Marketing, Inc. and Clark Oil & Refining Corporation)
and Marine Midland Bank, (Incorporated by reference to Exhibit 4.61
filed with PRG's Registration Statement on Form S-4 (Registration No.
333-42431)).

4.8 Certificate of Designations of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of the 11 1/2% Senior
Cumulative Exchangeable Preferred Stock and Qualifications,
Limitations and Restrictions thereof (Incorporated by reference to
Exhibit 4.1 filed with Premcor USA Inc.'s (f/k/a Clark USA, Inc.)
Registration Statement on Form S-4 (Registration No. 333-42457)).

Exhibit
Number Description
------ -----------
4.9 Certificate of Amendment, dated July 31, 1998, to Certificate of
Designation of the Powers, Preferences and Relative, Participating,
Optional and Other Special Rights of the 11 1/2% Senior Cumulative
Exchangeable Preferred Stock and Qualifications, Limitations and
Restrictions thereof (Incorporated by reference to Exhibit 3.8 filed
with Premcor USA Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1998 (Commission File No. 1-13514)).

4.10 Indenture, dated as of October 1, 1997, between Premcor USA Inc.
(f/k/a Clark USA, Inc.) and Bankers Trust Company, as Trustee,
including form of 11 1/2% Subordinated Exchange Debentures due 2009
(Incorporated by reference to Exhibit 4.2 filed with Premcor USA
Inc.'s (f/k/a Clark USA, Inc.) Registration Statement on Form S-4
(Registration No. 333-42457)).

4.11 Supplemental Indenture, dated as of August 10, 1998, to Indenture,
dated as of October 1, 1997, between Premcor USA Inc. (f/k/a Clark
USA, Inc.) and Bankers Trust Company, as Trustee (Incorporated by
reference to Exhibit 4.4 filed with Premcor USA Inc.'s Annual Report
on Form 10-K for the year ended December 31, 1998 (Commission File No.
1-13514)).

4.12 Indenture, dated as of December 1, 1995, between Premcor USA Inc.
(f/k/a Clark USA, Inc.) and The Chase Manhattan Bank, N.A., as
Trustee, including the form of 10 7/8%, Senior Notes due December 1,
2005 (Incorporated by reference to Exhibit 4.1 filed with Premcor USA
Inc.'s (f/k/a Clark USA, Inc.) Form 8-K dated December 1, 1995 (File
No. 33-59144)).

4.13 Supplemental Indenture, dated as of August 10, 1998, to Indenture,
dated as of December 1, 1995, between Premcor USA Inc. (f/k/a Clark
USA, Inc.) and The Chase Manhattan Bank, N.A., as Trustee.
(Incorporated by reference to Exhibit 4.6 filed with Premcor USA
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998
(Commission file No. 1-13514)).

4.14 Indenture, dated as of August 19, 1999, among Sabine River Holding
Corp. ("Sabine River Holding"), Neches River Holding Corp. ("Neches
River"), Port Arthur Finance Corp. ("PAFC"), Port Arthur Coker
Company L.P. ("PACC"), HSBC Bank USA, the Capital Markets Trustee,
and Bankers Trust Company, as Collateral Trustee (Incorporated by
reference to Exhibit 4.01 filed with PAFC's Registration Statement on
Form S-4 (Registration No. 333-92871)).

4.15 Form of 12 1/2% Senior Secured Notes due 2009 (Incorporated by
reference to Exhibit 4.02 filed with PAFC's Registration Statement on
Form S-4 (Registration No. 333-92871)).

4.16 Common Security Agreement, dated as of August 19, 1999, among PAFC,
PACC, Sabine River Holding, Neches River, Bankers Trust Company, as
Collateral Trustee and Depositary Bank, Deutsche Bank AG, New York
Branch ("Deutsche Bank"), as Administrative Agent, Winterthur
International Insurance Company Limited, an English company
("Winterthur"), as Oil Payment Insurers Administrative Agent and HSBC
Bank USA, as Capital Markets Trustee (Incorporated by reference to
Exhibit 4.04 filed with PAFC's Registration Statement on Form S-4
(Registration No. 333-92871)).

4.17 Transfer Restrictions Agreement, dated as of August 19, 1999, among
PAFC, PACC, Premcor Inc. (f/k/a Clark Refining Holdings Inc.), Sabine
River Holding, Neches River, Blackstone Capital Partners III Merchant
Banking Fund L.P. ("BCP III"), Blackstone Offshore Capital Partners
III L.P. ("BOCP III"), Blackstone Family Investment Partnership III
("BFIP III"), Winterthur, as the Oil Payment Insurers Administrative
Agent, Bankers Trust Company, as Collateral Trustee, Deutsche Bank, as
Administrative Agent and HSBC Bank USA, as Capital Markets Trustee
(Incorporated by reference to Exhibit 4.05 filed with PAFC's
Registration Statement on Form S-4 (Registration No. 333-92871)).

Exhibit
Number Description
------ -----------
4.18 Stockholders' Agreement, dated as of August 4, 1999, among Sabine
River Holding, Premcor Inc. (f/k/a Clark Refining Holdings Inc.) and
Occidental Petroleum Corporation (Incorporated by reference to Exhibit
4.18 filed with Premcor Inc.'s Registration Statement on Form S-1
(Registration No. 333-70314)).

4.19 Second Amended and Restated Stockholders' Agreement, dated as of
November 3, 1997, between Premcor USA Inc. (f/k/a Clark USA, Inc.) and
Occidental C.O.B. Partners (Incorporated by reference to Exhibit 4.19
filed with Premcor Inc.'s Registration Statement on Form S-1
(Registration No. 333-70314)).

4.20 Stockholder Agreement, dated as of March 9, 1999, among Premcor Inc.
(f/k/a Clark Refining Holdings Inc.), BCP III and Marshall A. Cohen
(Incorporated by reference to Exhibit 4.20 filed with Premcor Inc.'s
Registration Statement on Form S-1 (Registration No. 333-70314)).

4.21 Registration Rights Agreement, dated as of April 16, 2002, between BCP
III, BOCP III, BFIP III and Premcor Inc. (Incorporated by reference to
Exhibit 4.21 filed with Premcor Inc.'s Registration Statement on Form
S-1/A (Registration No. 333-70314)).

10.1 Employment Agreement, dated as of January 30, 2002, of Thomas D.
O'Malley (Incorporated by reference to Exhibit 10.13 filed with PRG's
Annual Report on Form 10-K for the year ended December 31, 2001 (File
No. 001-11392)).

10.2 First Amendment to Employment Agreement, dated March 18, 2002, of
Thomas D. O'Malley (Incorporated by reference to Exhibit 10.14 filed
with PRG's Annual Report on Form 10-K for the year ended December 31,
2001 (File No. 001-11392)).

10.3 Employment Agreement, dated as of February 1, 2002, of William E.
Hantke (Incorporated by reference to Exhibit 10.16 filed with PRG's
Annual Report on Form 10-K for the year ended December 31, 2001 (File
No. 001-11392)).

10.4 First Amendment to Employment Agreement, dated as of March 18, 2002,
of William E. Hantke (Incorporated by reference to Exhibit 10.17 filed
with PRG's Annual Report on Form 10-K for the year ended December 31,
2001 (File No. 001-11392)).

10.5 Employment Agreement, dated as of March 1, 2002, of Joseph D. Watson
(Incorporated by reference to Exhibit 10.18 filed with PRG's Annual
Report on Form 10-K for the year ended December 31, 2001 (File No.
001-11392)).

10.6 Premcor Inc. 2002 Equity Incentive Plan (Incorporated by reference to
Exhibit 10.19 filed with PRG's Annual Report on Form 10-K for the year
ended December 31, 2001 (File No. 001-11392)).

10.7 Premcor Inc. 2002 Special Stock Incentive Plan (Incorporated by
reference to Exhibit 10.20 filed with PRG's Annual Report on Form 10-K
for the year ended December 31, 2001 (File No. 001-11392)).

10.8 Letter Agreement, dated as of February 1, 2002, between Premcor Inc.
and Wilkes McClave III (Incorporated by reference to Exhibit 10.21
filed with PRG's Annual Report on Form 10-K for the year ended
December 31, 2001 (File No. 001-11392)).

10.9 Letter Agreement, dated as of February 1, 2002, between Premcor Inc.
and Jefferson F. Allen (Incorporated by reference to Exhibit 10.22
filed with PRG's Annual Report on Form 10-K for the year ended
December 31, 2001 (File No. 001-11392)).

Exhibit
Number Description
------ -----------
10.10 Termination Agreement, dated as of January 31, 2002, between Premcor
Inc. and William C. Rusnack (Incorporated by reference to Exhibit
10.39 filed with Premcor Inc.'s Registration Statement on Form S-1/A
(Registration No. 333-70314)).

10.11 Termination Agreement, dated as of January 31, 2002, between Premcor
Inc. and Ezra C. Hunt (Incorporated by reference to Exhibit 10.40
filed with Premcor Inc.'s Registration Statement on Form S-1/A
(Registration No. 333-70314)).

10.12 Employment Agreement, dated as of April 26, 2002, between Premcor Inc.
and Henry M. Kuchta (Incorporated by reference to Exhibit 10.41 filed
with Premcor Inc.'s Registration Statement on Form S-1/A (Registration
No. 333-70314)).

15.01 Awareness letter dated May 28, 2002, from Deloitte & Touche LLP
concerning the unaudited interim financial information for March 31,
2002 and 2001 (filed herewith).

18.01 Preferability letter, dated May 8, 2002, from Deloitte & Touche LLP
concerning the Port Arthur Coker Company's change in method of
accounting for crude oil and blendstock inventories from first-in
first-out ("FIFO") to last-in first-out ("LIFO") (Incorporated by
reference to Exhibit 18.01 filed with Sabine River Holding's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2002 (File No.
333-92871)).

(b) Reports on Form 8-K

We have not filed any reports on Form 8-K during the period covered by this
report and up to and including the date of filing of this report.

SIGNATURE

Pursuant to the requirements 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.

PREMCOR INC.
(Registrant)

/s/ Dennis R. Eichholz
---------------------------------
Dennis R. Eichholz
Controller (principal
accounting officer and
duly authorized officer)

May 28, 2002