EXHIBIT 99.1

RECENT DEVELOPMENTS

RECENT CRUDE OIL SUPPLY DISRUPTION

Our ultimate parent is PDVSA, the national oil company of the Bolivarian
Republic of Venezuela and our largest supplier of crude oil. We have long-term
crude oil supply agreements with PDVSA for a portion of the crude oil
requirements for our Lake Charles, Corpus Christi, Paulsboro and Savannah
refineries. See "-- CITGO Petroleum Corporation -- Crude Oil Supply Agreements"
and "Related Party Transactions."

A nation-wide work stoppage by opponents of President Hugo Chavez began in
Venezuela on December 2, 2002, and has disrupted most activity in that country,
including the operations of PDVSA. A large portion of PDVSA's employees
abandoned their jobs during the month of December. PDVSA has informed us that
these actions led to an employee termination process and an organizational
restructuring of PDVSA, which are expected to produce longer-term savings at
PDVSA. PDVSA also informed us that its production of crude oil and natural gas,
as well as the export of crude oil and refined petroleum products, were severely
affected by these events in December, but that since then the production and
export of crude oil has been progressively increasing. While operations have
been hampered by work stoppage, some members of PDVSA management have continued
to work and PDVSA has restored a portion of its output. PDVSA has reported that
some employees are returning to work and some qualified replacements are being
found.

We continue to be able to locate and purchase adequate crude oil, albeit at
higher prices than under the contracts with PDVSA, to maintain normal operations
at our refineries and to meet our refined products commitments to our customers.
In December 2002, we received approximately 59 percent of the crude oil volumes
that we received from PDVSA in December 2001. In January 2003, we received

approximately 94 percent of the crude oil volumes that we received from PDVSA in
January 2002. In February 2003, we expect to receive deliveries of approximately
80 percent of the crude oil volumes that we received from PDVSA in February
2002. Historically, we purchase approximately 50 percent of our total crude oil
requirements from PDVSA. The reduction in supply from PDVSA and the purchase of
crude oil from alternative sources has had the effect of increasing our crude
oil cost and decreasing our gross margin and profit margin from what they would
have been had the crude oil been purchased under our long-term crude oil supply
contracts with PDVSA.

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity has been adversely affected recently as a result of events
directly and indirectly associated with the disruption in our Venezuelan crude
oil supply from PDVSA. That disruption affected a portion of the crude oil
supplies that we receive from PDVSA, requiring us to replace those supplies from
other sources at higher prices and on payment terms generally less favorable
than the terms under our supply agreements with PDVSA. We received approximately
63% of our contracted crude oil volumes from PDVSA during December and
approximately 86% of our contracted crude oil volumes from PDVSA during January.
We expect to receive approximately 80% of our contracted crude oil volumes from
PDVSA during February. During this supply disruption, we have been successful in
covering any shortfall with spot market purchases, but those purchases generally
require payment fifteen days sooner than would be the case for comparable
deliveries under our supply agreements with PDVSA. This shortening of our
payment cycle has increased our cash needs and reduced our liquidity.

In addition, all three major rating agencies lowered our credit ratings
based upon, among other things, concerns regarding the supply disruption. This
downgrading caused a termination event under our existing accounts receivables
sale facility, which ultimately led to its repayment on January 31, 2003. That
facility had a maximum size of $225 million, of which $125 million was used at
the time of repayment.

Also, letter of credit providers for $76 million of our outstanding letters
of credit have indicated that they will not renew such letters of credit. These
letters of credit support approximately $75 million of tax-exempt bond issues
that were issued previously for our benefit. We have an additional $228 million
of letters of credit outstanding that back or support other bond issues that we
have issued through governmental entities, which are subject to renewal during
2003. We have not received notice from the issuers of these additional letters
of credit indicating an intention not to renew. We are working on replacing the
letters of credit that will not be renewed with letters of credit issued under
our revolving credit facilities. We are also considering arranging for the
redemption of certain tax-exempt bonds and the issuance of new tax-exempt bonds
that would not require letter of credit support. However, we cannot assure you
that any of our letters of credit will be renewed, that we will be successful in
obtaining replacements if they are not renewed, that any replacement letters of
credit will be on terms as advantageous as those we currently hold or that we
will be able to arrange for replacement tax-exempt bonds that will not require
letter of credit support.

Finally, a number of trade creditors have sought to tighten credit payment
terms on purchases that we make from them. That tightening, if pushed by all
creditors, would increase our cash needs and reduce our liquidity.

Operating cash flow represents a primary source for meeting our liquidity
requirements; however, the termination of our accounts receivable sale facility,
the possibility of additional tightened payment terms and the possible need to
replace non-renewing letters of credit has prompted us to undertake arrangements
to supplement and improve our liquidity. To date, we have undertaken the
following:

- We have reduced our planned discretionary capital expenditures in 2003 by
approximately $200 million.

- We are in advanced discussions with a financial institution to replace
our previous accounts receivable sale facility in the amount of $200
million. We expect the terms of the facility to be

similar to the terms of the previous facility. We anticipate receiving a
commitment letter from the financial institution in the near future.

In addition, we are working on a transaction that will provide us with up
to $100 million from the transfer of title to a third party of certain of our
refined products at the time those products are delivered into the custody of
interstate pipelines. We would expect the terms of any such agreement to include
an option to acquire identical products from the third party at prevailing
prices at predetermined transfer points.

Finally, we are also considering a $200 million three-year term loan. The
loan would bear interest at a floating rate based upon the London Interbank
Offered Rate plus a spread and would be secured by our equity interests in
Colonial Pipeline Company and Explorer Pipeline Company. At this point in time
we do not intend to borrow under this term loan but we have substantially
negotiated the terms of such term loan with a financial institution.
Accordingly, we consider this term loan facility an additional source of
liquidity we could establish if necessary.

OUR BOARD OF DIRECTORS

On January 22, 2003, at the direction of PDVSA, our immediate shareholder
replaced four of our seven board members. One of the four new directors had
previously served on our board. All of our newly appointed directors are
employees of PDVSA. See "Management -- Our Board of Directors." Our new board of
directors has met and conducted routine business for us, including the approval
of the Operating and Capital Budgets for 2003.

FOURTH QUARTER AND YEAR-END DATA

The following table is a summary of our financial data for the three months
and year ended December 31, 2002 as compared to the same periods in 2001:

<Table>
<Caption>
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------ ----------------------
2001 2002 2001 2002
------- ------- ------- -----------
(UNAUDITED) (UNAUDITED)
(IN MILLIONS, EXCEPT AS NOTED)

FINANCIAL DATA
Net sales....................................... $3,715 $5,483 $19,601 $19,358
EBITDA.......................................... 24 157 979 649
SELECTED OPERATING DATA(1)
Refining capacity (000's barrels per day)....... 644 644 644 644
Crude oil throughput (000's barrels per day).... 493 494 569 543
Total throughput (000's barrels per day)........ 630 579 698 653
Per barrel of throughput (dollars per barrel)...
Gross margin................................. $ 3.72 $ 4.54 $ 6.01 $ 4.10
Operating expense............................ 2.79 3.89 2.70 2.96
Utilization(%).................................. 76% 77% 88% 84%
Wholesale fuel sales (millions of gallons)...... 3,363 3,477 13,500 13,758
Wholesale fuel margin (cents per gallon)........ 1.2c 0.5c 2.2c 1.1c
Supply and marketing expenses................... $ 27.5 $ 37.3 $ 94.3 $ 112.5
SELECTED MARKET INDICATORS (DOLLARS PER BARREL)
West Texas Intermediate ("WTI") crude oil....... $20.31 $28.21 $ 25.89 $ 26.09
Crack spreads
Gulf Coast WTI 3:2:1......................... 1.81 3.55 4.11 3.13
Gulf Coast Maya 6:3:2:1...................... 6.89 7.84 10.55 6.71
Chicago WTI 3:2:1............................ 4.41 6.20 7.71 4.96
Chicago LLB 3:2:1............................ 8.00 9.15 11.50 7.25
</Table>

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

(1) Refining data for our Lake Charles, Corpus Christi and Lemont refineries.

For the three months ended December 31, 2002 as compared to the same period
in 2001, net sales increased by $1,768 million while EBITDA increased by $133
million. The increase in EBITDA was primarily due to higher refining margins
partially offset by lower wholesale margins. EBITDA for the three months ended
December 31, 2002, included a revenue component related to property damage
insurance of approximately $24 million as well as revenue from business
interruption coverage.

Net sales were essentially unchanged between 2001 and 2002 while EBITDA
declined by approximately one-third. The decline in EBITDA was due to a sharp
reduction in refining and wholesale margins for 2002 as compared to 2001. EBITDA
for 2002 included a revenue component related to property damage insurance of
approximately $78 million as well as revenue from business interruption
coverage.

SUMMARY OF CONSOLIDATED FINANCIAL DATA

The following summary financial data for the years ended and as of December
31, 1999, 2000 and 2001 are derived from our audited consolidated financial
statements, including the notes thereto, appearing elsewhere in this offering
circular. The summary financial data set forth below for the nine months ended
and as of September 30, 2001 and 2002 are derived from our unaudited condensed
consolidated financial statements, including the notes thereto, appearing
elsewhere in this offering circular. The summary financial data set forth below
for the twelve months ended and as of September 30, 2002 was derived by
combining our unaudited condensed consolidated financial statements for the nine
months ended and as of September 30, 2002 with our unaudited condensed
consolidated financial statements for the three months ended December 31, 2001.
The interim information was prepared on a basis consistent with that used in
preparing our audited financial statements with only such recurring adjustments
as are necessary, in management's opinion, for a fair statement of the results
for the periods presented. The data for the years ended and as of December 31,
1999, 2000 and 2001, the nine months ended and as of September 30, 2001 and the
twelve months ended and as of September 30, 2002 have been restated to give
retroactive effect to the contribution by PDV America of the VPHI, Inc. ("VPHI")
common stock to us. This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our financial statements, including the notes thereto, appearing elsewhere in
this offering circular.

<Table>
<Caption>
TWELVE MONTHS
NINE MONTHS ENDED ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- --------------------- ----------------
1999 2000 2001 2001 2002 2002
--------- --------- --------- --------- --------- ----------------
(AS RESTATED)(1) (AS RESTATED)(1) (AS RESTATED)(1)
--------------------------------- --------------------- ----------------
(IN MILLIONS, EXCEPT AS NOTED)

STATEMENT OF INCOME DATA:
Sales and sales to affiliates.............. $13,334.4 $22,157.2 $19,601.2 $15,885.6 $13,875.4 $17,591.0
Equity in earnings of affiliates........... 22.2 58.7 108.9 97.5 77.4 88.8
Other income (including insurance
recoveries).............................. (29.0) (26.0) (5.2) (18.6) 230.9 244.3
Cost of sales and operating expenses....... 12,804.2 21,370.3 18,734.7 15,028.0 13,694.4 17,401.1
Selling, general and administrative
expenses................................. 239.1 226.6 292.1 211.4 218.5 299.2
Interest expense........................... 94.6 85.6 69.2 53.0 50.4 66.5
Capital lease interest charge.............. 12.7 11.0 9.1 7.0 5.4 7.6
Minority interest.......................... 0.2 1.8 2.0 1.0 -- 0.9
Income taxes............................... 54.2 182.6 206.2 242.1 77.4 41.6
Cumulative effect.......................... -- -- 13.6 13.6 -- --
--------- --------- --------- --------- --------- ---------
Net income................................. $ 122.6 $ 312.0 $ 405.2 $ 435.6 $ 137.6 $ 107.2
--------- --------- --------- --------- --------- ---------
CASH FLOW DATA:
Operating activities....................... $ 196.2 $ 803.3 $ 584.5 $ 456.9 $ 482.4 $ 610.0
Investing activities....................... (249.0) (153.7) (292.8) (162.7) (558.8) (688.9)
Financing activities....................... 116.7 (727.6) (206.3) (284.5) (3.7) 74.5
--------- --------- --------- --------- --------- ---------
Increase (decrease) during the period...... $ 63.9 $ (78.0) $ 85.4 $ 9.7 $ (80.1) $ (4.4)
--------- --------- --------- --------- --------- ---------
SELECTED OPERATING DATA:(2)
Refining capacity (000's of barrels per
day)..................................... 644 644 644 644 644 644
Crude oil throughput (000's of barrels per
day)..................................... 592 619 569 595 560 544
Total throughput (000's of barrels per
day)..................................... 710 750 698 721 678 668

Per barrel of throughput (dollars per
barrel):
Gross margin............................. N/A N/A $ 6.01 $ 6.69 $ 3.97 $ 3.90
Cash operating expense................... $ 2.33 $ 2.45 2.70 2.68 2.69 2.71

Utilization (%)............................ 92% 96% 88% 92% 87% 85%

Wholesale fuel sales (millions of
gallons)................................. N/A N/A 13,500 10,203 10,280 13,577
Wholesale margin (cents per gallon)........ N/A N/A 2.2c 2.5c 1.4c 1.4c
Marketing expenses......................... N/A N/A $ 94.3 $ 67.2 $ 75.2 $ 102.3
</Table>

<Table>
<Caption>
TWELVE MONTHS
NINE MONTHS ENDED ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------- ----------------
1999 2000 2001 2001 2002 2002
-------- -------- -------- -------- -------- ----------------
(AS RESTATED)(1) (AS RESTATED)(1) (AS RESTATED)(1)
------------------------------ ------------------- ----------------
(IN MILLIONS, EXCEPT AS NOTED)

BALANCE SHEET DATA (AT PERIOD END):
Current assets........................................ $2,247.6 $2,597.8 $2,287.0 $2,475.0 $2,276.2 $2,276.2
Current liabilities................................... 1,578.3 2,147.0 1,530.8 1,790.2 2,079.8 2,079.8
-------- -------- -------- -------- -------- --------
Working capital....................................... $669.3 $450.8 $756.2 $684.8 $196.4 $196.4
Net property, plant and equipment..................... 3,417.7 3,287.2 3,292.5 3,240.6 3,576.1 3,576.1
Total assets.......................................... 6,642.0 6,805.7 6,509.1 6,636.1 6,866.9 6,866.9
Total debt............................................ 1,694.0 1,198.6 1,478.9 1,305.8 1,446.5 1,446.5
Total shareholder's equity............................ 2,385.0 2,476.2 2,401.3 2,526.8 2,539.0 2,539.0
OTHER FINANCIAL DATA:
Capital expenditures.................................. $248.0 $122.0 $253.5 $144.2 $478.1 $587.3
Depreciation and amortization......................... 274.0 290.5 288.9 217.4 221.0 292.5
EBITDA(3)............................................. 558.1 881.7 978.6 955.1 491.8 515.4
Ratio of total debt to EBITDA(3)...................... 3.0x 1.4x 1.5x 1.4x 2.9x 2.8x
Ratio of EBITDA to interest expense(3)................ 5.2x 9.1x 12.5x 15.9x 8.8x 7.0x
Total debt to book capitalization..................... 41.5% 32.6% 38.1% 34.1% 36.3% 36.3%
Ratio of earnings to fixed charges(4)................. 3.03x 6.01x 7.78x 10.50x 4.29x 3.11x
</Table>

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

N/A: Information not available.

(1) Amounts shown for the years ended December 31, 1999, 2000 and 2001, the nine
months ended September 30, 2001 and the twelve months ended September 30,
2002 have been restated to give effect to the contribution to our capital of
the common stock of VPHI, which individually owns our Lemont, Illinois
refinery, as if it took place on January 1, 1999. The combination actually
occurred on January 1, 2002.

(2) Refining data for Lake Charles, Corpus Christi and Lemont refineries.

(3) EBITDA is defined as net income plus interest expense, income taxes,
depreciation and amortization. EBITDA is used as a measure of performance by
management and is not a measure of performance under generally accepted
accounting principles, or GAAP. While EBITDA should not be considered as a
substitute for net income, cash flows from operating activities and other
income or cash flow statement data prepared in accordance with GAAP, or as a
measure of profitability or liquidity, we disclose it because management
understands that EBITDA is customarily used by certain investors as one
measure of a company's ability to service debt. Because EBITDA is not
calculated identically by all companies, our presentation may not be
comparable to similarly titled measures presented by other companies.

EBITDA for the nine months ended September 30, 2002 and the twelve months
ended September 30, 2002 include the effect of $187.7 million of business
interruption insurance recoveries and $53.7 million of property damage
insurance recoveries that exceeded associated expenses. These insurance
recoveries were recorded during the nine months ended September 30, 2002 and
were related to a fire occurring at our Lemont refinery in August 2001 and
the resulting shutdown of such refinery until May of 2002 for cleanup and
rebuild.

(4) For the purposes of calculating the ratio of earnings to fixed charges,
"earnings" consist of income before income taxes and cumulative effect of
accounting changes plus fixed charges (excluding capitalized interest),
amortization of previously capitalized interest and certain adjustments to
equity in income of affiliates. "Fixed charges" include interest expense,
capitalized interest, amortization of debt issuance costs and a portion of
operating lease rent expense deemed to be representative of interest.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The following discussion of our financial condition and results of
operations should be read in conjunction with our financial statements attached
as an appendix to this offering circular.

Petroleum refining industry operations and profitability are influenced by
a large number of factors, some of which individual petroleum refining and
marketing companies cannot control. Governmental regulations and policies,
particularly in the areas of taxation, energy and the environment (see
"Business -- Environment and Safety"), have a significant impact on petroleum
activities, regulating how companies conduct their operations and formulate
their products. Demand for crude oil and refined products is largely driven by
the condition of local and worldwide economies, although weather patterns and
taxation relative to other energy sources also play a significant part. Our
consolidated operating results are affected by these industry-specific factors
and by company-specific factors, such as the success of marketing programs and
refinery operations.

The earnings and cash flows of companies engaged in the refining and
marketing business in the United States are primarily dependent upon producing
and selling quantities of refined products at margins sufficient to cover fixed
and variable costs. The refining and marketing business is characterized by high
fixed costs resulting from the significant capital outlays associated with
refineries, terminals and related facilities. This business is also
characterized by substantial fluctuations in variable costs, particularly costs
of crude oil, feedstocks and blending components, and in the prices realized for
refined products. Crude oil and refined products are commodities whose price
levels are determined by market forces beyond the our control.

In general, prices for refined products are significantly influenced by the
price of crude oil, feedstocks and blending components. Although an increase or
decrease in the price for crude oil, feedstocks and blending components
generally results in a corresponding increase or decrease in prices for refined
products, generally there is a lag in the realization of the corresponding
increase or decrease in prices for refined products. The effect of changes in
crude oil prices on our consolidated operating results therefore depends in part
on how quickly refined product prices adjust to reflect these changes. A
substantial or prolonged increase in crude oil prices without a corresponding
increase in refined product prices, or a substantial or prolonged decrease in
refined product prices without a corresponding decrease in crude oil prices, or
a substantial or prolonged decrease in demand for refined products could have a
significant negative effect on our earnings and cash flows.

We purchase a significant amount of our crude oil requirements from PDVSA
under long-term supply agreements (expiring in the years 2006 through 2013).
This supply represented approximately 53% of the crude oil processed in
refineries operated by us in the year ended December 31, 2001. These crude
supply agreements contain force majeure provisions which entitle PDVSA to reduce
the quantity of crude oil and feedstocks delivered under the crude supply
agreements under specified circumstances. For the years 2001 and 2002, PDVSA
deliveries of crude oil to us were slightly less than contractual base volumes
due to PDVSA's declaration of force majeure pursuant to all of the long-term
crude oil supply contracts related to our refineries. Therefore, we were
required to obtain alternative sources of crude oil, which resulted in lower
operating margins.

A nation-wide work stoppage by opponents of President Hugo Chavez began in
Venezuela on December 2, 2002, and has disrupted most activity in that country,
including the operations of PDVSA. We continue to be able to locate and purchase
adequate crude oil, albeit at higher prices than under our supply contracts with
PDVSA, to maintain normal operations at our refineries and to meet our refined
products commitments to our customers. In December 2002, we received
approximately 59 percent of the crude oil volume that we received from PDVSA in
December 2001. In January 2003, we received approximately 94 percent of the
crude oil volume that we received from PDVSA in January 2002. In February 2003,
we expect to receive deliveries of approximately 80 percent of the crude oil
volume that we

received from PDVSA in February 2002. The reduction in supply and purchase of
crude oil from alternative sources has had the effect of increasing our crude
oil cost and decreasing our gross margin and profit margin from what it would
have been if the crude oil were received under our long-term crude oil supply
contracts with PDVSA. If PDVSA continues to reduce its delivery of crude oil
under these crude oil supply agreements due to force majeure events related to
the work stoppage in Venezuela or otherwise, we will be required to obtain
alternative sources of crude oil which may result in reduced operating margins
and increased volatility in our earnings and cash flow. The effect of this
current force majeure declaration on our crude oil supply and the duration of
this situation are not known at this time. See "Business -- Crude Oil and
Refined Product Purchases."

We also purchase significant volumes of refined products to supplement the
production from our refineries to meet marketing demands and to resolve
logistical issues. Our earnings and cash flows are also affected by the cyclical
nature of petrochemical prices. As a result of the factors described above, our
earnings and cash flows may experience substantial fluctuations. Inflation was
not a significant factor in our operations during the three years ended December
31, 2001 or the nine-month periods ended September 30, 2002 and 2001.

The cost and available coverage level of property and business interruption
insurance to us is driven, in part, by company specific and industry factors. It
is also affected by national and international events. The present environment
for us is one characterized by increased cost of coverage, higher deductibles,
and some restrictions in coverage terms. This has the potential effect of
lowering our profitability in the near term.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with Accounting
Principles Generally Accepted in the United States of America requires that
management apply accounting policies and make estimates and assumptions that
affect results of operations and the reported amounts of assets and liabilities.
The following areas are those we believe are important to our financial
statements and which require significant judgment and estimation because of
inherent uncertainty.

Environmental Expenditures. The costs to comply with environmental
regulations are significant. Environmental expenditures incurred currently that
relate to present or future revenues are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past operations and
that do not contribute to current or future revenue generation are expensed. We
constantly monitor our compliance with environmental regulations and respond
promptly to issues raised by regulatory agencies. We record liabilities when
environmental assessments and/or cleanups are probable and the costs can be
reasonably estimated. We do not discount environmental liabilities to their
present value. Subsequent adjustments to estimates, to the extent required, may
be made as more refined information becomes available.

Commodity and Interest Rate Derivatives. We enter into petroleum futures
contracts, options and other over-the-counter commodity derivatives, primarily
to reduce our inventory purchase and product sale exposure to market risk. In
the normal course of business, we also enter into certain petroleum commodity
forward purchase and sale contracts, which qualify as derivatives. We also enter
into various interest rate swap agreements to manage its risk related to
interest rate changes on our debt. Effective January 1, 2001, we record fair
values of derivatives in other current assets or other current liabilities, as
applicable, and changes in the fair value of derivatives not designated in
hedging relationships in income. Effective January 1, 2001, our policy is to
elect hedge accounting only under limited circumstances involving derivatives
with initial terms of 90 days or greater and notional amounts of $25 million or
greater. We will continue to review our accounting treatment of derivatives and
may elect hedge accounting under certain circumstances in the future.

Litigation and Injury Claims. Various lawsuits and claims arising in the
ordinary course of business are pending against us. The status of these lawsuits
and claims are continually reviewed by external and internal legal counsel.
These reviews provide the basis for which we determine whether or not to record

accruals for potential losses. Accruals for losses are recorded when, in
management's opinion, such losses are probable and reasonably estimable. If
known lawsuits and claims were to be determined in a manner adverse to us, and
in amounts greater than our accruals, then such determinations could have a
material adverse effect on our results of operations in a given reporting
period.

Health Care Costs. The cost of providing health care to current employees
and retired employees continues to increase at a significant rate. Historically,
we have absorbed the majority of these cost increases which reduce profitability
and increase our liability. There is no indication that the trend in health care
costs will be reversed in future periods. Our liability for such health care
costs is based on actuarial calculations that could be subject to significant
revision as the underlying assumptions regarding future health care costs and
interest rates change.

Pensions. Our pension cost and liability are based on actuarial
calculations, which are dependent on assumptions concerning discount rates,
expected rates of return on plan assets, employee turnover, estimated retirement
dates, salary levels at retirement and mortality rates. In addition, differences
between actual experience and the assumptions also affect the actuarial
calculations. While management believes that the assumptions used are
appropriate, differences in actual experience or changes in assumptions may
significantly affect our future pension cost and liability.

CHANGE IN REPORTING ENTITY

On January 1, 2002, PDV America, our direct parent company, made a
contribution to our capital of all of the common stock of PDV America's wholly
owned subsidiary, VPHI. Effective January 1, 2002, the accounts of VPHI were
included in our consolidated financial statements at the historical carrying
value of PDV America's investment in VPHI. In the following discussion and
analysis of financial condition and results of operations, amounts shown for the
years ended December 31, 1999, 2000 and 2001, and the three and nine months
ended September 30, 2001, have been restated to give effect to this transaction
as if it took place on January 1, 1999. Further, throughout this offering
circular, figures and percentages pertaining to interim 2001 numbers have been
restated to include the consolidation of VPHI in order to make them comparable
to 2002 interim figures and percentages.

RESULTS OF OPERATIONS

FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002

In the quarter ended September 30, 2002, we generated net income of $56.9
million on total revenue of $5.5 billion compared to net income of $72.2 million
on total revenue of $5.2 billion for the same period last year. In the nine
months ended September 30, 2002, we generated net income of $137.6 million on
total revenue of $14.2 billion compared to net income of $435.6 million on
revenue of $16.0 billion for the same period last year.

The following table summarizes the sources of our sales revenues and sales
volumes for the three-month and nine-month periods ended September 30, 2002 and
2001:

CITGO SALES REVENUES AND VOLUMES

<Table>
<Caption>
THREE MONTHS NINE MONTHS THREE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
--------------- ----------------- ------------- ---------------
2002 2001 2002 2001 2002 2001 2002 2001
------ ------ ------- ------- ----- ----- ------ ------
($ IN MILLIONS) (GALLONS IN MILLIONS)

Gasoline........................... $3,363 $3,069 $ 8,432 $ 9,282 4,056 3,717 11,014 10,239
Jet fuel........................... 359 426 991 1,364 479 556 1,483 1,693
Diesel/#2 fuel..................... 899 999 2,439 3,192 1,232 1,353 3,724 4,074
Asphalt............................ 245 192 468 378 353 365 707 710
Petrochemicals and industrial
products......................... 379 308 1,053 1,173 555 501 1,593 1,641
Lubricants and waxes............... 143 156 422 451 67 74 195 216
------ ------ ------- ------- ----- ----- ------ ------
Total refined product sales...... $5,388 $5,150 $13,805 $15,840 6,742 6,566 18,716 18,573
Other sales........................ 23 18 70 46 -- -- -- --
------ ------ ------- ------- ----- ----- ------ ------
Total sales.................... $5,411 $5,168 $13,875 $15,886 6,742 6,566 18,716 18,573
====== ====== ======= ======= ===== ===== ====== ======
</Table>

The following table summarizes our cost of sales and operating expenses for
the three-month and nine-month periods ended September 30, 2002 and 2001:

CITGO COST OF SALES AND OPERATING EXPENSES

<Table>
<Caption>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------- -----------------
2002 2001 2002 2001
------ ------ ------- -------
($ IN MILLIONS)

Crude oil........................................ $1,641 $1,257 $ 3,827 $ 4,038
Refined products................................. 2,840 2,767 7,303 8,292
Intermediate feedstocks.......................... 352 400 1,104 1,157
Refining and manufacturing costs................. 314 269 900 851
Other operating costs, expenses and inventory
changes........................................ 152 287 560 690
------ ------ ------- -------
Total cost of sales and operating
expenses.................................. $5,299 $4,980 $13,694 $15,028
====== ====== ======= =======
</Table>

Sales revenues and volumes. Sales increased $243 million, or approximately
5%, in the three-month period ended September 30, 2002 as compared to the same
period in 2001. This was due to an increase in average sales price of 2% and an
increase in sales volume of 3%. Sales decreased $2 billion, or approximately
13%, in the nine-month period ended September 30, 2002 as compared to the same
period in 2001. This was due to a decrease in average sales price of 13%. (See
CITGO Sales Revenues and Volumes table above.)

Equity in earnings of affiliates. Equity in earnings of affiliates
decreased by $9 million for the three-month period ended September 30, 2002 and
decreased by $20 million for the nine-month period ended September 30, 2002 as
compared to the same periods in 2001. The decrease for the three-month period
was primarily due to the change in the earnings of LYONDELL-CITGO, our share of
which decreased $12 million, from $30 million in the third quarter of 2001 to
$18 million in the third quarter of 2002. The decrease for the nine-month period
was primarily due to the decrease in the earnings of LYONDELL-CITGO and Nelson
Industrial Steam Company ("NISCO"). Our share of LYONDELL-CITGO's earnings
decreased $14 million, from $70 million in the first nine months of 2001 to $56
million in the first nine months of 2002. Our share of NISCO's earnings
decreased $11 million, from $8 million in the first

nine months of 2001 to $(3) million in the first nine months of 2002. The
decrease in LYONDELL-CITGO's earnings was primarily due to a reduction of
contract crude supply and lower margins on crude purchased in the spot market.
The decrease in NISCO's earnings was primarily related to a decrease in
electricity rates from the prior year.

Insurance recoveries. The insurance recoveries of $46 million included in
the three months ended September 30, 2002 and $257 million included in the nine
months ended September 30, 2002 relate primarily to a fire which occurred on
August 14, 2001 at the Lemont refinery. These recoveries are, in part,
reimbursements for expenses incurred in 2002 to mitigate the effect of the fire
on our earnings. We expect to recover additional amounts related to this event
subject to final settlement negotiations.

Cost of sales and operating expenses. Cost of sales and operating expenses
increased by $319 million or 6%, in the quarter ended September 30, 2002 as
compared to the same period in 2001. Cost of sales and operating expenses
decreased by $1.3 billion or 9%, in the nine months ended September 30, 2002 as
compared to the same period in 2001. (See CITGO Cost of Sales and Operating
Expenses table above.)

We purchase refined products to supplement the production from our
refineries to meet marketing demands and resolve logistical issues. Refined
product purchases represented 54% and 56% of total cost of sales and operating
expenses for the third quarters of 2002 and 2001, respectively and 53% and 55%
for the first nine months of 2002 and 2001, respectively. We estimate that
margins on purchased products, on average, are lower than margins on produced
products due to the fact that we can only receive the marketing portion of the
total margin received on the produced refined products. However, purchased
products are not segregated from CITGO produced products and margins may vary
due to market conditions and other factors beyond our control. As such, it is
difficult to measure the effects on profitability of changes in volumes of
purchased products. In the near term, other than normal refinery turnaround
maintenance, we do not anticipate operational actions or market conditions which
might cause a material change in anticipated purchased product requirements;
however, there could be events beyond our control that impact the volume of
refined products purchased. (See also "Forward Looking Statements.")

Gross margin. The gross margin for the three-month period ended September
30, 2002 was approximately 1.7 cents per gallon, compared to approximately 2.9
cents per gallon for the same period in 2001. The gross margin for the
nine-month period ended September 30, 2002 was less than one cent per gallon,
compared to approximately 4.6 cents per gallon for the same period in 2001. In
the three-month period ended September 30, 2002, the revenue per gallon
component increased approximately 2% while the cost per gallon component
increased approximately 4%. As a result, the gross margin decreased
approximately 1.2 cents on a per gallon basis in the quarter ended September 30,
2002 compared to the same period in 2001. In the nine-month period ended
September 30, 2002, the revenue per gallon component decreased approximately 13%
while the cost per gallon component decreased approximately 10%. As a result,
the gross margin decreased approximately 3.6 cents on a per gallon basis in the
nine months ended September 30, 2002 compared to the same period in 2001. The
gross margin is directly affected by changes in selling prices relative to
changes in costs. An increase or decrease in the price for crude oil, feedstocks
and blending products generally results in a corresponding increase or decrease
in prices for refined products. Generally, the effect of changes in crude oil
and feedstock prices on our consolidated operating results therefore depends in
part on how quickly refined product prices adjust to reflect these changes. In
the first nine months of 2002, there was a substantial decrease in refined
product sales prices without an equivalent decrease in costs resulting in a
significant negative impact on our gross margin and earnings.

Selling, general and administrative expenses. Selling, general and
administrative expenses decreased from $73 million in the third quarter of 2001
to $67 million in the third quarter of 2002, or 8%. Selling, general and
administrative expenses increased from $211 million in the first nine months of
2001 to $219 million in the same period in 2002, or 4%. The increase for the
nine-month period is primarily related to sponsorship fees, media fees and the
start-up expenses related to international operations.

RESULTS OF OPERATIONS

FOR THE THREE YEARS ENDED DECEMBER 31, 2001

The following table summarizes the sources of our sales revenues and
volumes.

CITGO SALES REVENUES AND VOLUMES

<Table>
<Caption>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------- ------------------------
2001 2000 1999 2001 2000 1999
------- ------- ------- ------ ------ ------
($ IN MILLIONS) (GALLONS IN MILLIONS)

Gasoline............................ $11,316 $12,447 $ 7,691 13,585 13,648 13,115
Jet fuel............................ 1,660 2,065 1,129 2,190 2,367 2,198
Diesel/#2 fuel...................... 3,984 4,750 2,501 5,429 5,565 5,057
Asphalt............................. 502 546 338 946 812 753
Petrochemicals and industrial
products.......................... 1,490 1,763 1,041 2,297 2,404 2,306
Lubricants and waxes................ 536 552 482 240 279 285
------- ------- ------- ------ ------ ------
Total refined product sales.... $19,488 $22,123 $13,182 24,687 25,075 23,714
Other sales......................... 113 34 152 -- -- --
------- ------- ------- ------ ------ ------
Total sales.................... $19,601 $22,157 $13,334 24,687 25,075 23,714
======= ======= ======= ====== ====== ======
</Table>

The following table summarizes our cost of sales and operating expenses.

CITGO COST OF SALES AND OPERATING EXPENSES

<Table>
<Caption>
YEAR ENDED DECEMBER 31,
---------------------------
2001 2000 1999
------- ------- -------
($ IN MILLIONS)

Crude oil............................................... $ 4,898 $ 6,784 $ 3,804
Refined products........................................ 10,284 11,308 6,640
Intermediate feedstocks................................. 1,496 1,573 990
Refining and manufacturing costs........................ 1,113 1,058 999
Other operating costs and expenses and inventory
changes............................................... 944 647 371
------- ------- -------
Total cost of sales and operating expenses......... $18,735 $21,370 $12,804
======= ======= =======
</Table>

RESULTS OF OPERATIONS

2001 COMPARED TO 2000

Sales revenues and volumes. Sales decreased $2.6 billion, representing a
12% decrease from 2000 to 2001. This was due to a decrease in average sales
price of 11% and a decrease in sales volume of 2%. (See CITGO Sales Revenues and
Volumes table above.)

Equity in earnings of affiliates. Equity in earnings of affiliates
increased by approximately $50 million, or 85% from $59 million in 2000 to $109
million in 2001. The increase was primarily due to the change in the earnings of
LYONDELL-CITGO, our share of which increased $33 million, from $41 million in
2000 to $74 million in 2001. LYONDELL-CITGO's increased earnings in 2001 are
primarily due to higher refining margins offset by the impact of lower crude
processing rates due to an unplanned production unit outage and a major
turnaround, and higher natural gas costs in the first quarter of 2001. The
earnings for 2000 were impacted by a major planned turnaround which occurred
during the second quarter of 2000.

Cost of sales and operating expenses. Cost of sales and operating expenses
decreased by $2.6 billion, or 12%, from 2000 to 2001. (See CITGO Cost of Sales
and Operating Expenses table above.)

We purchase refined products to supplement the production from our
refineries to meet marketing demands and resolve logistical issues. The refined
product purchases represented 55% and 53% of cost of sales for the years 2001
and 2000. These refined product purchases included purchases from LYONDELL-CITGO
and HOVENSA, L.L.C. ("HOVENSA"). We estimate that margins on purchased products,
on average, are lower than margins on produced products due to the fact that we
can only receive the marketing portion of the total margin received on the
produced refined products. However, purchased products are not segregated from
CITGO produced products and margins may vary due to market conditions and other
factors beyond our control. As such, it is difficult to measure the effects on
profitability of changes in volumes of purchased products. In the near term,
other than normal refinery turnaround maintenance, we do not anticipate
operational actions or market conditions which might cause a material change in
anticipated purchased product requirements; however, there could be events
beyond our control that impact the volume of refined products purchased. (See
also "Forward Looking Statements.")

As a result of purchases of crude oil supplies from alternate sources due
to the supplier's invocation of the force majeure provisions in our crude oil
supply contracts, we estimate that our cost of crude oil purchased in 2001
increased by $6 million from what would have otherwise been the case.

Gross margin. The gross margin for 2001 was $867 million, or 4.4% of net
sales, compared to $787 million, or 3.5% of net sales, for 2000. The gross
margin increased from 3.1 cents per gallon in 2000 to 3.5 cents per gallon in
2001 as a result of general market conditions.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $66 million, or 29% in 2001, primarily as a
result of an increase in incentive compensation, promotion expenses, and the
start-up expenses related to an international operation in 2001.

Interest expense. Interest expense decreased $16 million, or 19% in 2001,
primarily due to lower interest rates and lower average debt outstanding during
2001.

Income taxes. Our provision for income taxes in 2001 was $206 million,
representing an effective tax rate of 35%. In 2000, our provision for income
taxes was $183 million, representing an effective tax rate of 37%.

RESULTS OF OPERATIONS

2000 COMPARED TO 1999

Sales revenues and volumes. Sales increased $8.8 billion, representing a
66% increase from 1999 to 2000. This was due to an increase in average sales
price of 57% and an increase in sales volume of 6%. (See CITGO Sales Revenues
and Volumes table above.)

Equity in earnings of affiliates. Equity in earnings of affiliates
increased by approximately $37 million, or 168% from $22 million in 1999 to $59
million in 2000. The increase was primarily due to the change in earnings of
LYONDELL-CITGO, our share of which increased $40 million, from $1 million in
1999 to $41 million in 2000. The increase in LYONDELL-CITGO earnings was
primarily due to increased deliveries and an improved mix of crude oil, higher
spot margins, reflecting a stronger gasoline market in 2000, and higher margins
for reformulated gasoline due to industry supply shortages. These improvements
were partly offset by higher fuels and utility costs and interest expense.

Cost of sales and operating expenses. Cost of sales and operating expenses
increased by $8.6 billion, or 67%, from 1999 to 2000. (See CITGO Cost of Sales
and Operating Expenses table above.)

LYONDELL-CITGO and HOVENSA. We estimate that margins on purchased products, on
average, are lower than margins on produced products due to the fact that we can
only receive the marketing portion of the total margin received on the produced
refined products. However, purchased products are not segregated from CITGO
produced products and margins may vary due to market conditions and other
factors beyond our control. As such, it is difficult to measure the effects on
profitability of changes in volumes of purchased products. In the near term,
other than normal refinery turnaround maintenance, we do not anticipate
operational actions or market conditions which might cause a material change in
anticipated purchased product requirements; however, there could be events
beyond our control that impact the volume of refined products purchased. See
also "Forward Looking Statements."

As a result of purchases of crude oil supplies from alternate sources due
to the supplier's invocation of the force majeure provisions in our crude oil
supply contracts, we estimate that our cost of crude oil purchased in 2000
increased by $5 million from what would have otherwise been the case.

Gross margin. The gross margin for 2000 was $787 million, or 3.5% of net
sales, compared to $530 million, or 4.0% of net sales, for 1999. The gross
margin increased from 2.2 cents per gallon in 1999 to 3.1 cents per gallon in
2000.

Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $12 million, or 5% in 2000, primarily as a
result of a reduction in bad debt expense due to the sale of our consumer credit
card business in March 2000.

Income taxes. Our provision for income taxes in 2000 was $183 million,
representing an effective tax rate of 37%. In 1999, our provision for income
taxes was $54 million, representing an effective tax rate of 30%. The effective
tax rate for the 1999 tax-year was unusually low due to a favorable resolution
in the second quarter of 1999 of a significant tax issue in the last Internal
Revenue Service audit. During the years under that audit, deferred taxes were
recorded for certain environmental expenses deducted in the tax returns pending
final determination by the Internal Revenue Service. The deductions were allowed
on audit and, accordingly, the deferred tax liability of approximately $11
million was reversed with a corresponding benefit to tax expense.

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity has been adversely affected recently as a result of events
directly and indirectly associated with the disruption in our Venezuelan crude
oil supply from PDVSA. That disruption affected a portion of the crude oil
supplies that we receive from PDVSA, requiring us to replace those supplies from
other sources at higher prices and on payment terms generally less favorable
than the terms under our supply agreement with PDVSA. We received approximately
63% of our contracted crude oil volumes from PDVSA during December and
approximately 86% of our contracted crude oil volumes from PDVSA during January.
We expect to receive approximately 80% of our contractual crude oil volumes from
PDVSA during February. During this supply disruption, we have been successful in
covering any shortfall with spot market purchases, but those purchases generally
require payment fifteen days sooner than would be the case for comparable
deliveries under our supply agreements with PDVSA. This shortening of our
payment cycle has increased our cash needs and reduced our liquidity.

Also, several letter of credit providers for $76 million of our outstanding
letters of credit have indicated that they will not renew such letters of
credit. These letters of credit support approximately $75 million of tax-exempt
bond issues that were issued previously for our benefit. We have an additional
$228 million of letters of credit outstanding that back or support other bond
issues that we have issued through governmental entities, which are subject to
renewal during 2003. We have not received any notice yet from the issuers of
these additional letters of credit indicating an intention not to renew. We are

working on replacing the letters of credit that will not be renewed with letters
of credit issued under our revolving credit facilities. We are also considering
arranging for the redemption of certain tax-exempt bonds and the issuance of new
tax-exempt bonds that would not require letter of credit support. However, we
cannot assure you that any of our letters of credit will be renewed, that we
will be successful in obtaining replacements if they are not renewed, that any
replacement letters of credit will be on terms as advantageous as those we
currently hold or that we will be able to arrange for replacement tax-exempt
bonds that will not require letter of credit support.

- We have reduced our planned discretionary capital expenditures in 2003 by
approximately $200 million.

- We are in advanced discussions with a financial institution to replace
our previous accounts receivable sale facility in the amount of $200
million. We expect the terms of the facility to be similar to the terms
of the previous facility. We anticipate receiving a commitment letter
from the financial institution in the near future.

We believe that we have adequate liquidity from existing sources to support
our operations for the foreseeable future. We are continuing to review our
operations for opportunities to reduce operating and capital expenditures. See
"-- Credit Issues" below.

CASH FLOWS FROM OPERATING ACTIVITIES

Consolidated net cash provided by operating activities totaled
approximately $482 million for the nine months ended September 30, 2002 compared
to $457 million for the nine-month period ended September 30, 2001. Operating
cash flows were derived from net income of $138 million, depreciation and
amortization of $221 million and changes in operating assets and liabilities of
$124 million. The more significant changes in operating assets and liabilities
included the increase in accounts receivable, including receivables from
affiliates, of approximately $163 million, the decrease in prepaid expenses of
$87 million, the increase in income taxes payable of $68 million, and the
increase in accounts payable and other current liabilities, including payables
to affiliates, of approximately $112 million. Additionally, other long-term
assets, which mainly consist of costs of major refinery turnaround maintenance,
increased by $89 million.

CASH FLOWS FROM INVESTING ACTIVITIES

Net cash used in investing activities totaled $559 million for the
nine-month period ended September 30, 2002 compared to $163 million for the
nine-month period ended September 30, 2001. The increase was principally
attributable to a $334 million increase in capital expenditures from $144
million for the nine months ended September 30, 2001 to $478 million for the
same period in 2002. There were also increases in restricted cash of $34 million
and investments in affiliates of $48 million. The increase in capital
expenditures primarily relates to crude unit reconstruction at our Lemont
refinery. On August 14, 2001, a fire occurred at the crude distillation unit of
the Lemont refinery. The crude unit was destroyed and the refinery's other
processing units were temporarily taken out of production. The new crude unit
was operational in May 2002.

Capital expenditure projected amounts for 2003 and 2004 through 2007 are as
follows:

CAPITAL EXPENDITURES -- 2003 THROUGH 2007

<Table>
<Caption>
2003 2004-2007
PROJECTED(1) PROJECTED(1)
------------ ------------
(IN MILLIONS)

Strategic................................................... $ 88 $ 535
Maintenance................................................. 91 502
Regulatory/environmental.................................... 269 1,037
---- ------
Total.................................................. $448 $2,074
==== ======
</Table>

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

(1) Reflects reduction in 2003 projected capital expenditures discussed below.
These estimates may change as future regulatory events unfold. See "Forward
Looking Statements."

Estimated capital expenditures necessary to comply with the Clean Air Act
and other environmental laws and regulations are summarized below. See "Forward
Looking Statements."

<Table>
<Caption>
BEYOND
2003 2004 2005 2006 2006
---- ---- ---- ---- ------
(IN MILLIONS)

Tier 2 gasoline............................................ $231 $125 $ 82 $ -- $ --
Ultra low sulfur diesel(1)................................. 3 33 179 155 244
---- ---- ---- ---- ----
Other environmental(2)..................................... 35 51 81 92 81
---- ---- ---- ---- ----
Total regulatory/environmental............................. $269 $209 $342 $247 $325
</Table>

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

(1) Spending on Ultra Low Sulfur Diesel ("ULSD") assumes the EPA will require
ULSD for on-road diesel in 2006 and ULSD for off-road diesel use in 2008.
These regulations are not final and spending could be reduced if certain
alternative regulatory schemes proposed by EPA are adopted.

(2) Other environmental spending assumes $162.9 million in spending to comply
with New Source Review standards under the Clean Air Act.

Internally generated cash flow, together with borrowings available under
our credit facility, are expected to be sufficient to fund these capital
expenditures. In addition, we have taken steps to reduce our discretionary
capital expenditures in 2003 by approximately $200 million and are continuing to
review the timing and amount of scheduled expenditures under our planned capital
spending programs, including regulatory and environmental projects in the near
term.

We believe that we will have sufficient capital resources to carry out
planned capital spending programs, including regulatory and environmental
projects in the near term, and to meet currently anticipated future obligations
and other planned expenditures as they arise. We periodically evaluate other
sources of capital in the marketplace and anticipate that long-term capital
requirements will be satisfied with current capital resources and future
financing arrangements, including the issuance of debt securities.

Our ability to obtain such financing will depend on numerous factors, including
market conditions and the perceived creditworthiness of the Company at that
time. See also "Forward Looking Statements."

CASH FLOWS FROM FINANCING ACTIVITIES

Net cash used in financing activities totaled $4 million for the nine-month
period ended September 30, 2002, consisting primarily of the payment of $154
million on revolving bank loans, the payment of $25 million on master shelf
agreement notes, the payment of $25 million on taxable bonds, the payment of
capital lease obligations of $10 million and the net repayments of other debt of
$8 million. These payments were offset in part by $119 million in proceeds from
short term borrowings, $63 million in proceeds from tax exempt bonds, and $37
million in proceeds from loans from affiliates.

We have an effective shelf-registration statement with the SEC under which
we can publicly offer up to $400 million principal amount of debt securities.
Notwithstanding that availability, we may not be able to access the public
market. Due, at the time, to the prospect of the Venezuelan work stoppage, we
postponed a planned offering of up to $250 million of our unsecured notes from
our shelf-registration statement.

CREDIT ISSUES

We have historically met our short-term liquidity requirements primarily
through cash from operations, borrowings under our revolving credit facilities
and our accounts receivable sale facility. We presently have two committed
revolving credit facilities with third party financial institutions consisting
of:

- $260 million 364-day credit facility expiring December 10, 2003 (unless
we request, and the lenders consent to, an extension of that facility)
and

- $260 million three-year credit facility expiring December 9, 2005.

The 364-day credit facility includes a provision which allows us at our
option to term-out for one year any amounts outstanding under such facility at
its original maturity date.

Funds are available under these credit facilities for working capital,
capital expenditures and general corporate purposes. As of January 31, 2003,
$210 million was available for borrowing under the 364-day credit facility and
$50 million was available for borrowing under the three-year credit facility.
Borrowings under these credit facilities bear interest at rates based on either
a bank base rate or specified spreads, depending upon our debt to capitalization
ratio, over the euro dollar rate. See "Description of Other Indebtedness" for a
description of the covenants under these credit facilities as well as under
other indebtedness to which we are a party. As noted previously, our accounts
receivable facility was paid on January 31, 2003 following a ratings downgrade.
That facility had a maximum availability of $225 million, although only $125
million was outstanding at the time of its repayment.

Since December 2002, we have experienced a tightening of our payment terms.
Our purchases of crude oil from third parties are made at industry payment terms
that are less favorable than our contractual payment terms to PDVSA. In
addition, a number of our third party crude oil and product suppliers have
shortened the time in which we are required to pay for purchases or require
payment prior to delivery. This tightening of credit terms has negatively
impacted our working capital and liquidity.

In connection with their recent downgrades of our debt ratings, the three
major rating agencies have all noted concerns regarding the continuing
Venezuelan oil supply disruption. Moody's also noted concern that our direct
parent, PDV America, may need substantial assistance from us in order to pay off
$500 million of notes maturing in August 2003. PDV America holds a $500 million
mirror note from PDVSA which is designed to provide sufficient liquidity to PDV
America to make this payment. While PDVSA's obligation remains unchanged, in
light of the current uncertainties, PDV America is exploring alternate funding
options for the principal repayment due in August 2003. These alternatives
involve varying degrees of assistance from us, including a possible dividend
from us to meet some or all of PDV America's obligation.

As a result of these events, we have undertaken, and are undertaking, the
steps described at the outset of this "-- Liquidity and Capital Resources"
discussion.

Our debt instruments do not contain any covenants that trigger increased
costs or burdens as a result of a change in our securities ratings. Our debt
instruments do, however, impose restrictions on our ability to incur additional
debt, place liens on property, sell or acquire fixed assets, and make restricted
payments, including dividends. See "Description of Other Indebtedness" and
"Description of the Notes."

We were in compliance with our obligations under our debt financing
arrangements at December 31, 2002.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following table summarizes future payments for our contractual
obligations at December 31, 2001.

CONTRACTUAL OBLIGATIONS
AT DECEMBER 31, 2001

<Table>
<Caption>
LESS THAN YEAR YEAR AFTER 5
1 YEAR 2-3 4-5 YEARS TOTAL
--------- ---- ---- ------- ------
(IN MILLIONS)

Long-term debt............................... $108 $428 $262 $614 $1,412
Capital lease obligations.................... 20 25 6 16 67
Operating leases............................. 47 65 40 18 170
---- ---- ---- ---- ------
Total contractual cash obligations........... $175 $518 $308 $648 $1,649
==== ==== ==== ==== ======
</Table>

For additional information, see Notes 10 and 14 in our consolidated
financial statements for the year ended December 31, 2001.

The following table summarizes our contingent commitments at December 31,
2001.

OTHER COMMERCIAL COMMITMENTS
AT DECEMBER 31, 2001

<Table>
<Caption>
EXPIRATION
-------------------------------- TOTAL
LESS THAN YEAR YEAR OVER 5 AMOUNTS
1 YEAR 2-3 4-5 YEARS COMMITTED
--------- ---- ---- ------ ---------
(IN MILLIONS)

Letters of credit(1)......................... $ 19 $-- $-- $-- $ 19
Guarantees................................... 63 66 4 1 134
Surety bonds................................. 56 14 3 -- 73
---- --- -- -- ----
Total commercial commitments................. $138 $80 $7 $1 $226
==== === == == ====
</Table>

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

(1) We have outstanding letters of credit totaling approximately $536 million,
which includes $517 million related to our tax-exempt and taxable revenue
bonds included in long-term debt in the table of contractual obligations
above.

For additional information, see Note 13 in our consolidated financial
statements for the year ended December 31, 2001.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Introduction. We and our subsidiaries have exposure to price fluctuations
of crude oil and refined products as well as fluctuations in interest rates. To
manage these exposures, management has defined certain benchmarks consistent
with its preferred risk profile for the environment in which we operate and
finance our assets. We do not attempt to manage the price risk related to all of
our inventories of crude oil and refined products. As a result, at December 31,
2001, we were exposed to the risk of broad market price declines with respect to
a substantial portion of our crude oil and refined product inventories. The
following disclosures do not attempt to quantify the price risk associated with
such commodity inventories.

Commodity Instruments. We balance our crude oil and petroleum product
supply/demand and manage a portion of our price risk by entering into petroleum
commodity derivatives. Generally, our risk management strategies qualified as
hedges through December 31, 2000. Effective January 1, 2001, our policy is to
elect hedge accounting only under limited circumstances involving derivatives
with initial terms of 90 days or greater and notional amounts of $25 million or
greater. At December 31, 2001, none of our commodity derivatives were accounted
for as hedges.

NON TRADING COMMODITY DERIVATIVES
OPEN POSITIONS AT DECEMBER 31, 2001

<Table>
<Caption>
MATURITY NUMBER OF CONTRACT MARKET
COMMODITY DERIVATIVE DATE CONTRACTS VALUE VALUE(4)
- --------- ---------- -------- --------- -------- --------
($ IN MILLIONS)

No lead
gasoline(1)...... Futures Purchased 2002 994 $25.4 $25.0
Futures Sold 2002 332 8.3 8.1
Forward Purchase Contracts 2002 4,095 95.8 94.0
Forward Sale Contracts 2002 3,148 71.2 73.2
Distillates(1)..... Futures Purchased 2002 1,483 43.4 34.6
Futures Purchased 2003 94 2.4 2.3
Futures Sold 2002 943 25.3 21.8
OTC Options Purchased 2002 30 -- --
OTC Options Sold 2002 30 (0.1) (0.1)
Forward Purchase Contracts 2002 1,123 25.2 24.9
Forward Sale Contracts 2002 2,536 56.3 56.4
Crude oil(1)....... Futures Purchased 2002 517 12.6 10.4
Futures Sold 2002 649 12.7 12.9
OTC Swaps (Pay Float/Receive 2002 2 -- 0.3
Fixed)(3)
OTC Swaps (Pay Fixed/Receive 2002 1 -- --
Float)(3)
Forward Purchase Contracts 2002 6,652 130.3 135.2
Forward Sale Contracts 2002 6,268 135.1 137.0
Natural gas(2)..... Futures Sold 2002 55 1.6 1.4
OTC Options Sold 2002 20 -- (0.1)
</Table>

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

(1) 1,000 barrels per contract

(2) Ten-thousands of mmbtu per contract

(3) Floating price based on market index designated in contract; fixed price
agreed upon at date of contract

(4) Based on actively quoted prices

NON TRADING COMMODITY DERIVATIVES
OPEN POSITIONS AT DECEMBER 31, 2000

<Table>
<Caption>
MATURITY NUMBER OF CONTRACT MARKET
COMMODITY DERIVATIVE DATE CONTRACTS VALUE VALUE(3)
- --------- ---------- -------- --------- -------- --------
($ IN MILLIONS)

No lead
gasoline(1)...... Futures Purchased 2001 25 $ 0.8 $ 0.8
Heating oil(1)..... Futures Purchased 2001 1,533 53.9 55.6
Futures Purchased 2002 16 0.5 0.5
Futures Sold 2001 579 21.2 21.7
OTC Swaps (Pay Fixed/Receive 2001 9 -- 0.1
Float)(2)
OTC Swaps (Pay Float/Receive 2001 500 -- (0.5)
Fixed)(2)
Crude oil(1)....... Futures Purchased 2001 579 15.9 15.5
Futures Sold 2001 800 23.4 21.4
</Table>

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

(1) 1,000 barrels per contract

(2) Floating price based on market index designated in contract; fixed price
agreed upon at date of contract

(3) Based on actively quoted prices

Debt Related Instruments. We have fixed and floating U.S. currency
denominated debt. We use interest rate swaps to manage our debt portfolio toward
a benchmark of 40 to 60 percent fixed rate debt to total fixed and floating rate
debt. These instruments have the effect of changing the interest rate with the
objective of minimizing our long-term costs. At December 31, 2001 and 2000, our
primary exposures were to LIBOR and floating rates on tax exempt bonds.

For interest rate swaps, the table below presents notional amounts and
interest rates by expected (contractual) maturity dates. Notional amounts are
used to calculate the contractual payments to be exchanged under the contracts.

NON TRADING INTEREST RATE DERIVATIVES
OPEN POSITIONS AT DECEMBER 31, 2001 AND 2000

<Table>
<Caption>
FIXED RATE NOTIONAL PRINCIPAL
VARIABLE RATE INDEX EXPIRATION DATE PAID AMOUNT
- ------------------- --------------- ---------- ------------------
($ IN MILLIONS)

J. J. Kenny.............................. February 2005 5.30% $12
J. J. Kenny.............................. February 2005 5.27% $15
J. J. Kenny.............................. February 2005 5.49% $15
---
$42
</Table>

The fair value of the interest rate swap agreements in place at December
31, 2001, based on the estimated amount that we would receive or pay to
terminate the agreements as of that date and taking into account current
interest rates, was an unrealized loss of $2.8 million.

For debt obligations, the table below presents principal cash flows and
related weighted average interest rates by expected maturity dates. Weighted
average variable rates are based on implied forward rates in the yield curve at
the reporting date.

DEBT OBLIGATIONS
AT DECEMBER 31, 2001

<Table>
<Caption>
EXPECTED
AVERAGE
FIXED RATE AVERAGE FIXED VARIABLE RATE VARIABLE
EXPECTED MATURITIES DEBT INTEREST RATE DEBT INTEREST RATE
- ------------------- --------------- ------------- --------------- ----------------
($ IN MILLIONS) ($ IN MILLIONS)

2002............................ $ 36 8.78% $ 71 3.45%
2003............................ 61 8.79% 320 4.64%
2004............................ 31 8.02% 16 5.72%
2005............................ 11 9.30% -- --
2006............................ 251 8.06% -- --
Thereafter...................... 130 7.85% 485 8.50%
---- ---- ---- ----
Total........................... $520 8.17% $892 6.66%
==== ====
Fair Value...................... $532 $892
</Table>

DEBT OBLIGATIONS
AT DECEMBER 31, 2000

<Table>
<Caption>
EXPECTED
FIXED RATE AVERAGE FIXED VARIABLE RATE AVERAGE VARIABLE
EXPECTED MATURITIES DEBT INTEREST RATE DEBT INTEREST RATE
- ------------------- --------------- ------------- --------------- ----------------
($ IN MILLIONS) ($ IN MILLIONS)

2001........................... $ 40 9.11% $ 45 6.79%
2002........................... 36 8.78% -- --
2003........................... 61 8.79% -- --
2004........................... 31 8.02% 16 7.36%
2005........................... 12 9.30% -- --
Thereafter..................... 379 7.99% 484 8.86%
---- ---- ---- ----
Total.......................... $559 8.23% $545 8.65%
==== ====
Fair Value..................... $552 $545
</Table>

NEW ACCOUNTING STANDARDS

In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"), which is fully
effective in fiscal years beginning after December 15, 2001, although certain
provisions of SFAS No. 142 are applicable to goodwill and other intangible
assets acquired in transactions completed after June 30, 2001. SFAS No. 142
addresses financial accounting and reporting for acquired goodwill and other
intangible assets and requires that goodwill and intangibles with an indefinite
life no longer be amortized but instead be periodically reviewed for impairment.
The adoption of SFAS No. 142 did not materially impact our financial position or
results of operations.

In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 143, "Accounting for Asset Retirement Obligations" ("SFAS No. 143"), which
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. It applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and (or) the normal operation of a long-lived asset, except for certain
obligations of lessees. This statement is effective for financial statements
issued for fiscal years beginning after June 15, 2002. The adoption of SFAS No.
143 did not materially impact our financial position or results of operations.

In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
No. 144"), which addresses financial accounting and reporting for the impairment
or disposal of long-lived assets by requiring that one accounting model be used
for long-lived assets to be disposed of by sale, whether previously held and
used or newly acquired, and by broadening the presentation of discontinued
operations to include more disposal transactions. SFAS No. 144 is effective for
financial statements issued for fiscal years beginning after December 15, 2001,
and interim periods within those fiscal years. The provisions of this statement
generally are to be applied prospectively; therefore, the adoption of SFAS No.
144 did not impact our financial position or results of operations.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." This interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. It also requires a
guarantor to recognize, at the inception of a guarantee, a liability for the
fair value of the obligations it has undertaken in issuing the guarantee. The
initial recognition and initial measurement provisions of the interpretation are
applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. The disclosure requirements are effective for financial
statements of interim or annual periods ending after December 15, 2002.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46"), which clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements." FIN 46
defines variable interest entities and how an enterprise should assess its
interests in a variable interest entity to decide whether to consolidate that
entity. The interpretation requires certain minimum disclosures with respect to
variable interest entities in which an enterprise holds significant variable
interests but which it does not consolidate. FIN 46 applies immediately to
variable interest entities created after January 31, 2003, and to variable
interest entities in which an enterprise obtains an interest after that date. It
applies in the first fiscal year or interim period beginning after June 15,
2003, to variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. FIN 46 applies to public
enterprises as of the beginning of the applicable interim or annual period, and
it applies to nonpublic enterprises as of the end of the applicable annual
period. FIN 46 may be applied prospectively with a cumulative-effect adjustment
as of the date on which it is first applied or by restating previously issued
financial statements for one or more years with a cumulative-effect adjustment
as of the beginning of the first year restated. We have not determined the
impact on our financial statements that may result from the application of FIN
46.

PROPOSED ACCOUNTING CHANGE

The American Institute of Certified Public Accountants ("AICPA") has issued
a "Statement of Position" exposure draft on cost capitalization that is expected
to require companies to expense the non-capital portion of major maintenance
costs as incurred. The statement is expected to require that any existing
unamortized deferred non-capital major maintenance costs be expensed
immediately. This statement also has provisions which will change the method of
determining depreciable lives. The impact on future depreciation expense is not
determinable at this time. The exposure draft indicates that this change will be
required to be adopted for fiscal years beginning after June 15, 2003, and that
the effect of expensing existing unamortized deferred non-capital major
maintenance costs will be reported as a cumulative effect of an accounting
change in the consolidated statement of income. However, the AICPA is discussing
the future of this exposure draft with the FASB. The final accounting
requirements and timing of required adoption are not known at this time. At
September 30, 2002, we had included turnaround costs of $136 million in other
assets. Our management has not determined the amount, if any, of these costs
that could be capitalized under the provisions of the exposure draft.

BUSINESS

OVERVIEW

We are a direct wholly-owned operating subsidiary of PDV America, a
wholly-owned subsidiary of PDV Holding. Our ultimate parent is Petroleos de
Venezuela, S.A., the national oil company of the Bolivarian Republic of
Venezuela. We are engaged in the refining, marketing and transportation of
petroleum products including gasoline, diesel fuel, jet fuel, petrochemicals,
lubricants, asphalt and refined waxes, mainly within the continental United
States east of the Rocky Mountains.

Our transportation fuel customers include primarily CITGO branded
independent wholesale marketers, convenience stores and airlines located mainly
east of the Rocky Mountains. We generally market asphalt to independent paving
contractors on the East and Gulf Coasts and in the Midwest of the United States.
We sell lubricants principally in the United States to independent marketers,
mass marketers and industrial customers. We have commenced operations to sell
lubricants, gasoline, and distillates in various Latin American markets. We sell
petrochemical feedstocks and industrial products to various manufacturers and
industrial companies throughout the United States. We sell petroleum coke
primarily in international markets.

On January 1, 2002, PDV America made a contribution to our capital of all
of the common stock of VPHI. Effective January 1, 2002, the accounts of VPHI
were included in our consolidated financial statements at the historical
carrying value of PDV America's investment in VPHI. Amounts shown for the years
ended December 31, 1999, 2000 and 2001 have been restated to give effect to this
transaction as if it took place on January 1, 1999.

The principal asset of VPHI is a petroleum refinery owned by its
wholly-owned subsidiary, PDV Midwest Refining L.L.C. ("PDVMR"), located in
Lemont, Illinois. We have operated this refinery and purchased substantially all
of its primary output, consisting of transportation fuels and petrochemicals,
since May 1997. We plan to continue to operate the refinery as a source of
supply for transportation fuels and petrochemicals.

COMPETITIVE NATURE OF THE PETROLEUM REFINING BUSINESS

The petroleum refining industry is cyclical and highly volatile, reflecting
capital intensity with high fixed and low variable costs. Petroleum industry
operations and profitability are influenced by a large number of factors, over
some of which individual petroleum refining and marketing companies have little
control. Governmental regulations and policies, particularly in the areas of
taxation, energy and the environment, have a significant impact on how companies
conduct their operations and formulate their products. Demand for crude oil and
its products is largely driven by the condition of local and worldwide
economies, although weather patterns and taxation relative to other energy
sources also play significant parts. Generally, U.S. refiners compete for sales
on the basis of price, brand image and, in some areas, product quality.

REFINING

Our aggregate net interest in rated crude oil refining capacity is 865
MBPD. The following table shows the capacity of each refinery in which we hold
an interest and our share of such capacity as of December 31, 2002.

CITGO REFINING CAPACITY

<Table>
<Caption>
TOTAL
RATED NET CITGO SOLOMON
CRUDE OWNERSHIP PROCESS
CITGO REFINING IN REFINING COMPLEXITY
OWNER INTEREST CAPACITY CAPACITY RATING
-------------- -------- -------- ----------- ----------
(%) (MBPD) (MBPD)

LOCATION
Lake Charles, LA...... CITGO 100 320 320 17.7
Corpus Christi, TX.... CITGO 100 157 157 16.3
Lemont, IL............ CITGO 100 167 167 11.7
Paulsboro, NJ......... CITGO 100 84 84 --
Savannah, GA.......... CITGO 100 28 28 --
Houston, TX........... LYONDELL-CITGO 41 265 109 15.0
---- ---
Total rated crude oil refining capacity....... 1,021 865
==== ===
</Table>

Our Lake Charles, Corpus Christi and Lemont refineries each have the
capability to process large volumes of heavy crude oil into a flexible slate of
refined products. They have Solomon Process Complexity Ratings of 17.7, 16.3 and
11.7, respectively, as compared to an average of 13.9 for U.S. refineries in the
most recently available Solomon Associates, Inc. survey. The rating is an
industry measure of a refinery's ability to produce higher value products, with
a higher rating indicating a greater capability to produce such products.

The following table shows our aggregate interest in refining capacity,
refinery input, and product yield for the four years ended December 31, 2002.

CITGO REFINERY PRODUCTION(1)

<Table>
<Caption>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
2002 2001 2000 1999
---------- ---------- ---------- ----------
(MBPD, EXCEPT AS OTHERWISE INDICATED)

Rated refining capacity at year end....... 865 865 865 858
Refinery input
Crude oil............................... 674 84% 737 83% 791 82% 753 84%
Other feedstocks........................ 131 16% 150 17% 157 18% 146 16%
--- ---- --- ---- --- ---- --- ----
Total................................. 805 100% 887 100% 948 100% 899 100%
=== ==== === ==== === ==== === ====
Product yield
Light fuels
Gasoline.............................. 379 46% 375 42% 419 42% 401 44%
Jet fuel.............................. 76 9% 76 8% 79 10% 72 8%
Diesel/#2 fuel........................ 153 19% 172 19% 182 18% 173 19%
Asphalt................................... 16 2% 44 6% 47 6% 42 5%
Petrochemicals and industrial products.... 194 24% 228 25% 230 24% 219 24%
--- ---- --- ---- --- ---- --- ----
Total................................. 818 100% 895 100% 957 100% 907 100%
=== ==== === ==== === ==== === ====
Utilization of rated refining capacity.... 78% 85% 91% 88%
</Table>

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

(1) Includes 41.25% of the LYONDELL-CITGO refinery production.

We produce our light fuels and petrochemicals primarily through our Lake
Charles, Corpus Christi and Lemont refineries. Asphalt refining operations are
carried out through our Paulsboro and Savannah refineries. We purchase refined
products from our joint venture refinery in Houston.

Lake Charles, Louisiana Refinery. This refinery has a rated refining
capacity of 320 MBPD. It has the capability to produce significant quantities of
high-octane unleaded gasoline and reformulated gasoline.

The following table shows the rated refining capacity, refinery input and
product yield and selected operating data at the Lake Charles refinery for the
four years in the period ended December 31, 2002.

LAKE CHARLES REFINERY PRODUCTION

<Table>
<Caption>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
2002 2001 2000 1999
------------ ------------- ------------ ------------
(MBPD, EXCEPT AS OTHERWISE INDICATED)

Rated refining capacity at year end... 320 320 320 320
Refinery input
Crude oil........................... 320 92% 317 90% 319 87% 298 89%
Other feedstocks.................... 28 8% 37 10% 48 13% 36 11%
===== === ===== ===== ===== === ===== ===
Total............................ 348 100% 354 100% 367 100% 334 100%
===== === ===== ===== ===== === ===== ===
Product yield
Light fuels
Gasoline......................... 184 52% 175 48% 187 50% 171 50%
Jet fuel......................... 68 19% 67 19% 70 19% 63 18%
Diesel/#2 fuel................... 45 13% 62 17% 58 15% 53 16%
Petrochemicals and industrial
products......................... 60 17% 57 16% 59 16% 54 16%
----- --- ----- ----- ----- --- ----- ---
Total............................ 357 100% 361 100% 374 100% 341 100%
===== === ===== ===== ===== === ===== ===

Utilization of rated refining
capacity............................ 100% 99% 100% 93%

Per barrel of throughput (dollars per
barrel)
Gross margin........................ $4.16 $5.83 N/A N/A
Operating expense................... $2.87 $2.77 $2.66 $2.35
</Table>

N/A: Information not available

The Lake Charles refinery's Gulf Coast location provides it with access to
crude oil deliveries from multiple sources; imported crude oil and feedstock
supplies are delivered by ship directly to the Lake Charles refinery, while
domestic crude oil supplies are delivered by pipeline and barge. In addition,
the refinery is connected by pipelines to the Louisiana Offshore Oil Port and to
terminal facilities in the Houston area through which it can receive crude oil
deliveries. For delivery of refined products, the refinery is connected through
the Lake Charles Pipeline directly to the Colonial and Explorer Pipelines, which
are the major refined product pipelines supplying the Northeast and Midwest
regions of the United States, respectively. The refinery also uses adjacent
terminals and docks, which provide access for ocean tankers and barges to load
refined products for shipment.

The Lake Charles refinery's main petrochemical products are propylene and
benzene. Industrial products include sulphur, residual fuels and petroleum coke.

We own and operate a lubricants refinery located adjacent to the Lake
Charles refinery. Primarily because of its specific design, the refinery
produces high quality oils and waxes and is one of the few in the industry
designed as a stand-alone lubricants refinery.

Corpus Christi, Texas Refinery. The Corpus Christi refinery complex
consists of the East and West Plants, located within five miles of each other.

The following table shows rated refining capacity, refinery input and
product yield and selected operating data at the Corpus Christi refinery for the
four years in the period ended December 31, 2002.

CORPUS CHRISTI REFINERY PRODUCTION

<Table>
<Caption>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
2002 2001 2000 1999
------------ ------------ ------------ ------------
(MBPD, EXCEPT AS OTHERWISE INDICATED)

Rated refining capacity at year end.... 157 157 150 150
Refinery input
Crude oil............................ 154 73% 154 71% 149 70% 148 70%
Other feedstocks..................... 57 27% 63 29% 65 30% 62 30%
----- --- ----- --- ----- --- ----- ---
Total............................. 211 100% 217 100% 214 100% 210 100%
===== === ===== === ===== === ===== ===
Product yield
Light fuels
Gasoline.......................... 93 44% 90 42% 95 46% 96 46%
Diesel/#2 fuel.................... 59 28% 57 26% 58 27% 55 27%
Petrochemicals and industrial
products.......................... 58 28% 69 32% 58 27% 56 27%
----- --- ----- --- ----- --- ----- ---
Total............................. 210 100% 216 100% 211 100% 207 100%
===== === ===== === ===== === ===== ===

Utilization of Rated Refining
Capacity............................. 98% 98% 99% 99%

Per barrel of throughput (dollars per
barrel)
Gross margin......................... $4.37 $5.67 N/A N/A
Operating expense.................... $2.32 $2.33 $2.25 $2.23
</Table>

N/A: Information not available

We operate the West Plant under a sublease agreement from Union Pacific
Corporation. The basic term of the sublease ends on January 1, 2004, but we may
renew the sublease for successive renewal terms through January 31, 2011. We
have the right to purchase the West Plant from Union Pacific at the end of the
basic term, the end of any renewal term, or on January 31, 2011 at a nominal
price.

The Corpus Christi refinery's main petrochemical products include cumene,
cyclohexane, and aromatics (including benzene, toluene and xylene).

Lemont, Illinois Refinery. The Lemont refinery processes primarily heavy
Canadian crude oil into a flexible slate of refined products.

The following table shows rated refining capacity, refinery input and
product yield and selected operating data at the Lemont refinery for the four
years in the period ended December 31, 2002.

LEMONT REFINERY PRODUCTION

Rated refining capacity at year end.... 167 167 167 167
Refinery input
Crude oil............................ 69 74% 98 78% 153 89% 146 90%
Other feedstocks..................... 24 26% 28 22% 18 11% 17 10%
----- --- ----- --- ----- --- ----- ---
Total............................. 93 100% 126 100% 171 100% 163 100%
===== === ===== === ===== === ===== ===
Product yield
Light fuels
Gasoline.......................... 54 59% 68 56% 89 52% 84 51%
Jet fuel.......................... -- 0% -- 0% 1 1% 2 1%
Diesel/#2 fuel.................... 16 17% 24 20% 40 23% 37 23%
Petrochemicals and industrial
products............................. 22 24% 30 25% 41 24% 40 25%
----- --- ----- --- ----- --- ----- ---
Total............................. 92 100% 122 100% 171 100% 163 100%
===== === ===== === ===== === ===== ===

Utilization of rated refining
capacity............................. 41% 59% 92% 87%

Per barrel of throughput (dollars per
barrel)
Gross margin......................... $3.23 $7.12 N/A N/A
Operating expense.................... $4.70 $3.17 $2.26 $2.40
</Table>

Crude oil is supplied to the refinery by pipeline.

N/A: Information not available

Petrochemical products at the Lemont refinery include benzene, toluene and
xylene, plus a range of ten different aliphatic solvents.

On August 14, 2001, a fire occurred at the crude oil distillation unit of
the Lemont refinery. The crude unit was destroyed and the refinery's other
processing units were temporarily taken out of production. A new crude unit was
operational in May 2002. See Consolidated Financial Statements of CITGO for
further information.

LYONDELL-CITGO Refining LP. Subsidiaries of CITGO and Lyondell Chemical
Company ("Lyondell") are partners in LYONDELL-CITGO, which owns and operates a
265 MBPD refinery previously owned by Lyondell and located on the ship channel
in Houston, Texas. At December 31, 2001, our investment in LYONDELL-CITGO was
$508 million. In addition, at December 31, 2001, we held notes receivable from
LYONDELL-CITGO of $35 million. A substantial amount of the crude oil processed
by this refinery is supplied by PDVSA under a long-term crude oil supply
agreement that expires in the year 2017.

PDVSA has invoked its contractual right to declare a force majeure under
the supply agreement with LYONDELL-CITGO at certain points in each of 1999,
2000, 2001 and 2002 for varying periods of time for various reasons. As a result
of these declarations, PDVSA was relieved of its obligation to deliver crude oil
under the supply agreement and LYONDELL-CITGO had to purchase crude oil from
alternate sources, which resulted in increased volatility to operating margins.

CRUDE OIL AND REFINED PRODUCT PURCHASES

We do not own any crude oil reserves or production facilities, and must
therefore rely on purchases of crude oil and feedstocks for our refinery
operations. In addition, because our refinery operations do not produce
sufficient refined products to meet the demands of our marketers, we purchase
refined products, primarily gasoline, from other refiners, including a number of
affiliated companies.

Crude Oil Purchases. The following chart shows our purchases of crude oil
for the four years ended December 31, 2002:

CITGO CRUDE OIL PURCHASES

<Table>
<Caption>
LAKE CHARLES, LA CORPUS CHRISTI, TX LEMONT, IL
------------------------- ------------------------- -------------------------
2002 2001 2000 1999 2002 2001 2000 1999 2002 2001 2000 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(MBPD)

SUPPLIERS
PDVSA................................... 125 136 104 104 126 138 143 118 11 13 12 31
Other sources........................... 190 185 214 196 29 10 8 29 62 78 142 115
--- --- --- --- --- --- --- --- -- --- --- ---
Total............................... 315 321 318 300 155 148 151 147 73 91 154 146
--- --- --- --- --- --- --- --- -- --- --- ---
</Table>

<Table>
<Caption>
PAULSBORO, NJ SAVANNAH, GA
------------------------- -------------------------
2002 2001 2000 1999 2002 2001 2000 1999
---- ---- ---- ---- ---- ---- ---- ----
(MBPD)

SUPPLIERS
PDVSA.......................................... 43 42 47 42 22 22 22 19
Other sources.................................. -- -- -- -- -- -- -- --
Total...................................... 43 42 47 42 22 22 22 19
</Table>

Our largest single supplier of crude oil is PDVSA. We have entered into
crude oil supply agreements with PDVSA with respect to the crude oil
requirements for each of our Lake Charles, Corpus Christi, Paulsboro and
Savannah refineries. Copies of these agreements are filed as exhibits to reports
that we file with the SEC. See "Where You Can Find More Information." The
following table shows the base and incremental volumes of crude oil contracted
for delivery and the volumes of crude oil actually delivered under these
contracts in the four years ended December 31, 2002.

CITGO CRUDE OIL SUPPLY CONTRACTS WITH PDVSA

<Table>
<Caption>
VOLUMES OF
CRUDE OIL PURCHASED
CONTRACT CRUDE FOR THE YEAR ENDED
OIL VOLUME DECEMBER 31, CONTRACT
--------------------- ------------------------- EXPIRATION
BASE INCREMENTAL(1) 2002 2001 2000 1999 DATE
---- -------------- ---- ---- ---- ---- ----------
(MBPD) (MBPD) (YEAR)

LOCATION
Lake Charles, LA(2)........... 120 50 109 117 110 101 2006
Corpus Christi, TX(2)......... 130 -- 114 126 118 108 2012
Paulsboro, NJ(2).............. 30 -- 26 26 28 22 2010
Savannah, GA(2)............... 12 -- 12 12 12 11 2013
</Table>

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

(1) The supply agreement for the Lake Charles refinery gives PDVSA the right to
sell to CITGO incremental volumes up to the maximum amount specified in the
table, subject to certain restrictions relating to the type of crude oil to
be supplied, refining capacity and other operational considerations at the
refinery.

(2) Volumes purchased as shown on this table do not equal purchases from PDVSA
(shown in the previous table) as a result of transfers between refineries of
contract crude purchases included here and spot purchases from PDVSA which
are included in the previous table.

These crude oil supply agreements require PDVSA to supply minimum
quantities of crude oil and other feedstocks to us for a fixed period. The
supply agreements differ somewhat for each entity and each refinery but
generally incorporate formula prices based on the market value of a slate of
refined products deemed to be produced from each particular grade of crude oil
or feedstock, less

- specified deemed refining costs;

- specified actual costs, including transportation charges, or actual cost
of natural gas and electricity, import duties and taxes; and

- a deemed margin, which varies according to the grade of crude oil or
feedstock delivered.

Under each supply agreement, deemed margins and deemed costs are adjusted
periodically by a formula primarily based on the rate of inflation. Because
deemed operating costs and the slate of refined products deemed to be produced
for a given barrel of crude oil or other feedstock do not necessarily reflect
the actual costs and yields in any period, the actual refining margin we earn
under the various supply agreements will vary depending on, among other things,
the efficiency with which we conduct our operations during such period.

These crude supply agreements contain force majeure provisions which excuse
the performance by either party of its obligations under the agreement under
specified circumstances. PDVSA has invoked the force majeure provisions and
reduced the volume of crude oil supplied under the contracts at certain points
during each of 1999, 2000, 2001 and 2002 for varying periods of time for a
variety of reasons. As a result of these declarations of force majeure, we were
required to obtain crude oil from alternative sources, which resulted in
increased volatility in our operating margins.

The supply agreements provide that if the supplier does not supply us with
the volume of crude oil and feedstock required under that agreement and that
failure is not excused by force majeure, then the supplier must pay us the
deemed margin, in the case of the Lake Charles supply agreement, and the deemed
margin and the applicable fixed cost, in the case of the Corpus Christi supply
agreement, for the amount of crude oil and feedstock not supplied. During the
second half of 1999 and throughout 2000, 2001 and 2002, PDVSA did not deliver
naphtha pursuant to certain contracts and has made or will make contractually
specified payments in lieu thereof.

We purchase sweet crude oil under long-standing relationships with numerous
producers.

Refined product purchases. We are required to purchase refined products to
supplement the production of the Lake Charles, Corpus Christi and Lemont
refineries in order to meet demand of our marketing network. The following table
shows our purchases of refined products for the four years ended December 31,
2002.

CITGO REFINED PRODUCT PURCHASES

<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------------------------
2002 2001 2000 1999
----- ---- ---- ----
(MBPD)

LIGHT FUELS
Gasoline................................................. 787 640 616 607
Jet fuel................................................. 62 74 81 75
Diesel/#2 fuel........................................... 281 264 264 241
----- --- --- ---
Total................................................. 1,130 978 961 943
===== === === ===
</Table>

LYONDELL-CITGO is a major supplier of refined petroleum products to CITGO.
We purchase substantially all of the gasoline, diesel/#2 fuel, and jet fuel
produced at the LYONDELL-CITGO refinery under a contract which extends through
the year 2017. See "-- Refining -LYONDELL-CITGO Refining LP."

In October 1998, an affiliate of PDVSA acquired a 50% equity interest in
HOVENSA, a joint venture that owns and operates a refinery in St. Croix, U.S.
Virgin Islands. Under the related product sales agreement, we purchase a
substantial amount of the refined products output of the refinery.

MARKETING

Our major products are light fuels (including gasoline, jet fuel, and
diesel fuel), industrial products and petrochemicals, asphalt, lubricants and
waxes. The following table shows revenues and volumes of each of these product
categories for the four years ended December 31, 2002.

CITGO REFINED PRODUCT SALES REVENUES AND VOLUMES

<Table>
<Caption>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------------------- ---------------------------------
2002 2001 2000 1999 2002 2001 2000 1999
------- ------- ------- -------- ------ ------ ------ ------
(IN MILLIONS) (GALLONS IN MILLIONS)

LIGHT FUELS
Gasoline................ $11,758 $11,316 $12,447 $7,691 15,026 13,585 13,648 13,115
Jet fuel................ 1,402 1,660 2,065 1,129 2,003 2,190 2,367 2,198
Diesel/#2 fuel.......... 3,462 3,984 4,750 2,501 5,031 5,429 5,565 5,057
Asphalt................. 597 502 546 338 902 946 812 753
Petrochemicals and
industrial products... 1,485 1,490 1,763 1,041 2,190 2,297 2,404 2,306
Lubricants and waxes.... 561 536 552 482 261 240 279 285
------- ------- ------- -------- ------ ------ ------ ------
Total refined
product sales.... $19,265 $19,488 $22,123 13,182 25,413 24,687 25,075 23,714
======= ======= ======= ======== ====== ====== ====== ======
</Table>

The following table summarizes CITGO's cost of sales and operating
expenses.

CITGO COST OF SALES AND OPERATING EXPENSES

<Table>
<Caption>
YEAR ENDED DECEMBER 31,
-------------------------------------
2002 2001 2000 1999
------- ------- ------- -------
(IN MILLIONS)

Crude oil...................................... $5,098 $4,898 $6,784 $3,804
Refined products............................... 11,077 10,284 11,308 6,604
Intermediate feedstocks........................ 1,489 1,496 1,573 990
Refining and manufacturing costs............... 1,242 1,113 1,058 959
Other operating costs and expenses and
inventory changes............................ 314 944 647 371
------- ------- ------- -------
Total cost of sales and operating
expenses................................ $19,220 $18,735 $21,370 $12,804
======= ======= ======= =======
</Table>

Light Fuels. Gasoline sales accounted for 61% of our refined product sales
in 2002, 58% in 2001, 56% in 2000 and 58% in 1999. We market CITGO branded
gasoline through approximately 13,000 independently owned and operated CITGO
branded retail outlets (including more than 11,000 branded retail outlets owned
and operated by approximately 800 independent marketers and more than 2,000
7-Eleven(TM) convenience stores) located throughout the United States, primarily
east of the Rocky Mountains. See "-- Crude Oil and Refined Product
Purchases -- Refined Product Purchases."

Our strategy is to enhance the value of the CITGO brand by delivering
quality products and services to the consumer through a large network of
independently owned and operated CITGO branded retail locations. This
enhancement is accomplished through a commitment to quality, dependability and
excellent customer service to our independent marketers, which constitute our
primary distribution channel.

Sales to independent branded marketers typically are made under contracts
that range from three to seven years. Sales to 7-Eleven(TM) convenience stores
are made under a contract that extends through the year 2006. Under this
contract, we arrange all transportation and delivery of motor fuels and handle
all product ordering. We also act as processing agent for the purpose of
facilitating and implementing orders and purchases from third-party suppliers.
We receive a processing fee for such services.

We market jet fuel directly to airline customers at airports, in major hub
cities, including Atlanta, Chicago, Dallas/Fort Worth, New York and Miami.

Our delivery of light fuels to our customers is accomplished in part
through 55 refined product terminals located throughout our primary market
territory. Of these terminals, 44 are wholly-owned by us and 11 are jointly
owned. Twelve of our product terminals have waterborne docking facilities, which
greatly enhance the flexibility of our logistical system. In addition, we
operate and deliver refined products from seven terminals owned by PDVMR in the
Midwest. Refined product terminals owned or operated by us provide a total
storage capacity of approximately 22 million barrels. Also, we have active
exchange relationships with over 300 other refined product terminals, providing
flexibility and timely response capability to meet distribution needs.

Petrochemicals and Industrial Products. We sell petrochemicals in bulk to
a variety of U.S. manufacturers as raw material for finished goods. The majority
of our cumene production is sold to a joint venture phenol production plant in
which we are a limited partner. The phenol plant produces phenol and acetone for
sale primarily to the principal partner in the phenol plant for the production
of plastics. Sulphur is sold to the U.S. and international fertilizer
industries; cycle oils are sold for feedstock processing and blending; natural
gas liquids are sold to the U.S. fuel and petrochemical industry; petroleum coke
is sold primarily in international markets, through a joint venture, for use as
kiln and boiler fuel; and residual fuel blendstocks are sold to a variety of
fuel oil blenders.

Asphalt. Our asphalt is generally marketed to independent paving
contractors on the East and Gulf Coasts and in the Midwest of the United States
for use in the construction and resurfacing of roadways. We deliver asphalt
through three wholly-owned terminals and twenty-three leased terminals. Demand
for asphalt peaks in the summer months.

Lubricants and Waxes. We market many different types, grades and container
sizes of lubricants and wax products, with the bulk of sales consisting of
automotive oil and lubricants and industrial lubricants. Other major lubricant
products include 2-cycle engine oil and automatic transmission fluid.

INTERNATIONAL OPERATIONS

We, through our wholly-owned subsidiary, CILA, are introducing the PDVSA
and CITGO brands into various Latin American markets which will include
wholesale and retail sales of lubricants, gasoline and distillates. Initial
operations are underway in Puerto Rico, Ecuador, Brazil, Chile and Guatemala. We
recently began a light oils marketing joint venture in the Dominican Republic.
We are also seeking to sell lubricants, gasoline and distillates in various
Latin American markets.

PIPELINE OPERATIONS

We own and operate a crude oil pipeline and three products pipeline
systems. We also have equity interests in three crude oil pipeline companies and
five refined product pipeline companies. Our pipeline interests provide us with
access to substantial refinery feedstocks and reliable transportation to refined
product markets, as well as cash flows from dividends. One of the refined
product pipelines in which we have an interest, Colonial Pipeline, is the
largest refined product pipeline in the United States, transporting refined
products from the Gulf Coast to the mid-Atlantic and eastern seaboard states.

EMPLOYEES

We and our subsidiaries have a total of approximately 4,300 employees,
approximately 1,600 of whom are covered by union contracts. Most of the union
employees are employed in refining operations. The remaining union employees are
located primarily at a lubricant plant and various refined product terminals.

ENVIRONMENT AND SAFETY

ENVIRONMENT

The U.S. refining industry is required to comply with increasingly
stringent product specifications under the 1990 Clean Air Act Amendments for
reformulated gasoline and low sulphur gasoline and diesel fuel that have
necessitated additional capital and operating expenditures, and altered
significantly the U.S. refining industry and the return realized on refinery
investments. Also, regulatory interpretations by the U.S. EPA regarding
"modifications" to refinery equipment under the New Source Review ("NSR")
provisions of the Clean Air Act have created uncertainty about the extent to
which additional capital and operating expenditures will be required and
administrative penalties imposed.

In addition, we are subject to various other federal, state and local
environmental laws and regulations that may require us to take additional
compliance actions and also actions to remediate the effects on the environment
of prior disposal or release of petroleum, hazardous substances and other waste
and/or pay for natural resource damages. Maintaining compliance with
environmental laws and regulations could require significant capital
expenditures and additional operating costs. Also, numerous other factors affect
our plans with respect to environmental compliance and related expenditures. See
"Forward Looking Statements."

Our accounting policy establishes environmental reserves as probable site
restoration and remediation obligations become reasonably capable of estimation.
We believe the amounts provided in our consolidated financial statements, as
prescribed by generally accepted accounting principles, are adequate in light of
probable and estimable liabilities and obligations. However, we cannot assure
that the actual amounts required to discharge alleged liabilities and
obligations and to comply with applicable laws and regulations

will not exceed amounts provided for or will not have a material adverse affect
on our consolidated results of operations, financial condition and cash flows.

In 1992, we reached an agreement with the Louisiana Department of
Environmental Quality (the "Louisiana Department"), to cease usage of certain
surface impoundments at our Lake Charles refinery by 1994. A mutually acceptable
closure plan was filed with the state in 1993. We and the former owner of the
refinery are participating in the closure and sharing the related costs based on
estimated contributions of waste and ownership periods. The remediation
commenced in December 1993. In 1997, we presented a proposal to a state agency
revising the 1993 closure plan. In 1998 and 2000, we submitted further revisions
as requested by the Louisiana Department. The Louisiana Department issued an
administrative order in June 2002 that addressed the requirements and schedule
for proceeding to develop and implement the corrective action or closure plan
for these surface impoundments and related waste units. Compliance with the
terms of the administrative order has begun.

The Texas Commission on Environmental Quality conducted a multi-media
investigation of the Corpus Christi refinery during the second quarter of 2002
and has issued a notice of enforcement to us identifying approximately 35 items
of alleged violations of Texas environmental regulations. We anticipate that
penalties will be proposed with respect to these matters, but no amounts have
yet been specified.

In June 1999, we and numerous other industrial companies received notice
from the U.S. EPA that the U.S. EPA believes that we and these other companies
have contributed to contamination in the Calcasieu Estuary, in the proximity of
Lake Charles, Calcasieu Parish, Louisiana and are potentially responsible
parties ("PRPs") under the Comprehensive Environmental Response, Compensation,
and Liability Act ("CERCLA"). The U.S. EPA made a demand for payment of its past
investigation costs from us and other PRPs and is conducting a remedial
investigation/feasibility study, or RI/FS, under its CERCLA authority. We and
other PRPs may be potentially responsible for the costs of the RI/FS, subsequent
remedial actions and natural resource damages. We disagree with the U.S. EPA's
allegations and intend to contest this matter.

In January and July 2001, we received notices of violation ("NOVs") from
the U.S. EPA alleging violations of the Clean Air Act. The NOVs are an outgrowth
of an industry-wide and multi-industry U.S. EPA enforcement initiative alleging
that many refineries and electric utilities modified air emission sources
without obtaining permits or installing new control equipment under the NSR
provisions of the Clean Air Act. The NOVs followed inspections and formal
information requests regarding our Lake Charles, Louisiana, Corpus Christi,
Texas and Lemont, Illinois refineries. Since mid-2002, we have been engaged in
global settlement negotiations with the United States. The settlement
negotiations have focused on different levels of air pollutant emission
reductions and the merits of various types of control equipment to achieve those
reductions. No settlement agreement, or agreement in principle, has been
reached. Based primarily on the costs of control equipment reported by the
United States and other petroleum companies and the types and number of emission
control devices that have been agreed to in previous petroleum companies' NSR
settlement, with the United States, we estimate that the capital costs of a
settlement with the United States could range from $130 to $200 million. Any
such capital costs would be incurred over a period of years, anticipated to be
from 2003 to 2008. Also, this cost estimate range, while based on current
information and judgment, is dependent on a number of subjective factors,
including the types of control devices installed, the emission limitations set
for the units, the year the technology may be installed, and possible future
operational changes. We also may be subject to possible penalties. If settlement
discussions fail, we are prepared to contest the NOVs. If we are found to have
violated the provisions cited in the NOVs, we estimate the capital expenditures
and penalties that might result could range up to $290 million, to be incurred
over a period of years.

In June 1999, a NOV was issued by the U.S. EPA alleging violations of the
National Emission Standards for Hazardous Air Pollutants ("NESHAPS") regulations
covering benzene emissions from wastewater treatment operations at our Lemont,
Illinois refinery. We are in settlement discussions with the U.S. EPA. We
believe this matter will be consolidated with the matters described in the
previous paragraph.

In June 2002, a Consolidated Compliance Order and Notice of Potential
Penalty was issued by the Louisiana Department alleging various violations of
the Louisiana air quality regulations at the Lake Charles, Louisiana refinery.
We are in settlement discussions with the Louisiana Department.

Various regulatory authorities have the right to conduct, and from time to
time do conduct, environmental compliance audits of our and our subsidiaries'
facilities and operations. Those audits have the potential to reveal matters
that those authorities believe represent non-compliance in one or more respects
with regulatory requirements and for which those authorities may seek corrective
actions and/or penalties in an administrative or judicial proceeding. Based upon
current information, we are not aware that any such audits or their findings
have resulted in the filing of such a proceeding or is the subject of a
threatened filing with respect to such a proceeding, nor do we believe that any
such audit or their findings will have a material adverse effect on our future
business and operating results, except for events otherwise described in this
offering circular.

Conditions which require additional expenditures may exist with respect to
our various sites including, but not limited to, our operating refinery
complexes, former refinery sites, service stations and crude oil and petroleum
product storage terminals. Based on currently available information, we cannot
determine the amount of any such future expenditures.

Increasingly stringent environmental regulatory provisions and obligations
periodically require additional capital expenditures. During 2001, we spent
approximately $34 million for environmental and regulatory capital improvements
in our operations. Management currently estimates that we will spend
approximately $1.2 billion for environmental and regulatory capital projects
over the five-year period 2002-2006, which includes capital expenditures
relating to the Lemont refinery of approximately $278 million. These estimates
may vary due to a variety of factors. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Forward Looking Statements."

SAFETY

Due to the nature of petroleum refining and distribution, we are subject to
stringent federal and state occupational health and safety laws and regulations.
We maintain comprehensive safety, training and maintenance programs.

LEGAL PROCEEDINGS

Various lawsuits and claims arising in the ordinary course of business are
pending against us. If known lawsuits and claims were to be determined in a
manner adverse to us, and in amounts greater than our accruals, then such
determinations could have a material adverse effect on our results of
operations. The most significant lawsuits and claims are discussed below.

A class action lawsuit against us brought by four former marketers of the
UNO-VEN Company ("UNO-VEN") in U.S. District Court in Wisconsin against UNO-VEN
alleging improper termination of the UNO-VEN Marketer Sales Agreement under the
Petroleum Marketing Practices Act in connection with PDVMR's 1997 acquisition of
Unocal's interest in UNO-VEN has resulted in the judge granting our motion for
summary judgment. The plaintiffs are appealing the summary judgment. PDVMR and
its parent, VPHI, jointly and severally, have agreed to indemnify UNO-VEN and
certain other related entities against certain liabilities and claims, including
this matter.

A lawsuit is pending against PDVMR and CITGO in Illinois state court which
claims damages as a result of PDVMR invoicing a partnership in which it is a
partner, and an affiliate of the other partner of the partnership, allegedly
excessive charges for electricity utilized by these entities' facilities located
adjacent to the Lemont, Illinois refinery. We believe we will be able to resolve
these claims for a non-material amount. The electricity supplier to the refinery
is seeking recovery from us of alleged underpayments for electricity. We have
denied all allegations and are pursuing our defenses.

In May 1997, a fire occurred at our Corpus Christi refinery. Approximately
seventeen related lawsuits were filed in federal and state courts in Corpus
Christi, Texas against us on behalf of approximately 9,000 individuals alleging
property damages, personal injury and punitive damages. In September 2002, we
reached an agreement to settle substantially all of the claims related to this
incident for an amount that will not have a material financial impact on us.

Litigation is pending in federal court in Lake Charles, Louisiana against
us by a number of current and former refinery employees and applicants asserting
claims of racial discrimination in connection with our employment practices. A
trial involving two plaintiffs resulted in verdicts for us. The court granted us
summary judgment with respect to another group of claims; these rulings have
been affirmed by the Fifth Circuit Court of Appeals. Trials of the remaining
cases are set to begin in December 2003. We do not expect that the ultimate
resolution of these cases will have an adverse material effect on our financial
condition or results of operations.

We are one of several refinery defendants to state and federal lawsuits in
New York and a state action in Illinois alleging contamination of water supplies
by methyl tertiary butyl ether ("MTBE"), a component of gasoline. Plaintiffs
claim that MTBE is a defective product and that refiners failed to adequately
warn customers and the public about risks associated with the use of MTBE in
gasoline. These actions allege that MTBE poses public health risks and seek
testing, damages and remediation of the alleged contamination. The plaintiffs
filed putative class action lawsuits in federal courts in Illinois, California,
Florida and New York. We were named as a defendant in all but the California
case. The federal cases were all consolidated in a Multidistrict Litigation case
in the United States District Court for the Southern District of New York ("MDL
1358"). In July 2002, the court in the MDL case denied plaintiff's motion for
class certification. In August 2002, a New York state court judge handling two
separate but related individual MTBE lawsuits dismissed the plaintiffs' product
liability claims, leaving only traditional nuisance and trespass claims for
leakage from underground storage tanks at gasoline stations near plaintiffs'
water wells. The judge in the Illinois state court action is expected to hear
plaintiffs' motion for class certification in that case sometime within the next
year.

In August 1999, the U.S. Department of Commerce rejected a petition filed
by a group of independent oil producers, including us, to apply antidumping
measures and countervailing duties against imports of crude oil from Venezuela,
Iraq, Mexico and Saudi Arabia. The petitioners appealed this decision before the
U.S. Court of International Trade based in New York, where the matter is still
pending. On September 19, 2000, the Court of International Trade remanded the
case to the Department of Commerce with instructions to reconsider its August
1999 decision. The Department of Commerce was required to make a revised
decision as to whether or not to initiate an investigation within 60 days. The
Department of Commerce appealed to the U.S. Court of Appeals for the Federal
Circuit, which dismissed the appeal as premature on July 31, 2001. The
Department of Commerce issued its revised decision, which again rejected the
petition, in August 2001. The revised decision is awaiting review by the Court
of International Trade.

Approximately 206 lawsuits are currently pending in state and federal
courts, primarily in Louisiana, Texas, and Illinois, in which we are a named
defendant or have potential liability to share in the cost of settlement or
judgment arising from asbestos related illness. The cases were brought by former
employees and contractor employees seeking damages for asbestos related
illnesses allegedly resulting from exposure at refineries owned or operated by
us in Lake Charles, Louisiana, Corpus Christi, Texas and Lemont, Illinois. In
many of these cases, there are multiple defendants. In some cases, we are
indemnified by or have the right to seek indemnification for losses and expenses
that we may incur from prior owners of the refineries or employers of the
claimants. We do not believe that the resolution of the cases will have an
adverse material effect on our financial condition or results of operations.

MANAGEMENT

The following table sets forth the names and titles of our board of
directors and executive officers as of February 2003.

<Table>
<Caption>
NAME POSITION
- ---- --------

Oswaldo Contreras Maza.. President, Chief Executive Officer and Director
W.A. DeVore............. Senior Vice President, Marketing and Lubricants
Eddie Humphrey.......... Senior Vice President, Finance & Administration and Chief
Financial Officer
Adolph Lechtenberger.... Senior Vice President, Refining and Petrochemicals
Jerry Thompson.......... Senior Vice President, Supply and Distribution
Peer L. Anderson........ Vice President and General Counsel
Bob Funk................ Vice President, Corporate Planning & Economics
Bob Kostelnik........... Vice President, Health, Safety, Security of Assets and
Environmental Protection
W. James McCarthy....... Vice President, Government and Public Affairs
Al Prebula.............. Vice President, Lake Charles Manufacturing Complex
Mark Smith.............. Vice President and General Manager, Lemont Refinery
Russ Willmon............ Vice President and General Manager, Corpus Christi
Refinery
Aires Barreto........... Chairman, Board of Directors
Eudomario Carruyo....... Director
Luis Davila............. Director
Ivan Hernandez.......... Director
William Padron.......... Director
Alfredo Riera........... Director
</Table>

OUR EXECUTIVE OFFICERS

OSWALDO CONTRERAS MAZA
PRESIDENT AND CHIEF EXECUTIVE OFFICER OF CITGO PETROLEUM CORPORATION

Oswaldo Contreras joined CITGO in October 2000 as President and CEO. He is
a Brigadier General in the Venezuelan army and graduated from the Venezuelan
Military Academy in 1976 with a bachelors degree in military sciences and arts.
In 1983, he graduated with a nuclear engineering degree from the University of
Michigan. In 1992, he completed the Venezuelan Army's Command and General Staff
Course. He went on to advanced studies in global planning at the Venezuelan
Planning Institute (IVEPLAN), and, in 1998, he attended the United States Army
War College in Pennsylvania.

In his army career, he served as UN Military Observer, commander of an
engineering battalion, Army Budget Director, Defense Budget Director and Army
Information Technology Director. In February 1999, he was appointed Vice
President of PDVSA with responsibility for human resources and shared services
in Caracas. He recently headed the executive committee of the second Summit of
Sovereigns, Heads of State and Government of the OPEC member countries.

Contreras serves on the Board of Directors of INTESA (an information
technology consulting service for Latin American organizations), Venezuelan
American Association of the United States, Tulsa Area United Way and the Indian
Nations Council of Boy Scouts of America. He is a trustee of The Philbrook
Museum of Art and a vice president of the Muscular Dystrophy Association, of
which CITGO is a national sponsor.

W.A. DEVORE
SENIOR VICE PRESIDENT, MARKETING AND LUBRICANTS

W.A. DeVore joined CITGO Petroleum in November 1997 as Senior Vice
President, Marketing. His responsibilities include the domestic and
international marketing and sales of light oils and lubricants, and terminal
operations. He is a graduate of West Texas A&M University with a bachelor of
science in chemistry. DeVore had 30 years experience in the petroleum industry
prior to joining CITGO. Previously, he served as Marketing Vice President of The
UNO-VEN Company from 1995 to 1997. Prior to that, he held positions in marketing
and chemicals general management at Phillips Petroleum Company. He began his
career in the petroleum industry with Phillips Petroleum in 1967.

EDDIE HUMPHREY
SENIOR VICE PRESIDENT FINANCE & ADMINISTRATION AND CHIEF FINANCIAL OFFICER

Eddie Humphrey joined CITGO in 1978. He is responsible for the Corporate
Controllers group, Bank Operations, Treasurers group, Insurance and Risk,
Budgets and Performance Analysis, Tax and Administrative Services. Humphrey
previously served as the Company's Treasurer and Corporate Controller. Prior to
joining CITGO, Humphrey received his bachelors degree in Finance from Oklahoma
State University and holds a masters of business administration from the
University of Tulsa.

ADOLPH LECHTENBERGER
SENIOR VICE PRESIDENT, REFINING AND PETROCHEMICALS

Adolph Lechtenberger joined CITGO in 1991 with the integration of the
Champlin organization. His current responsibilities include the Lake Charles
Manufacturing Complex, the Corpus Christi Refinery, the Lemont Refinery, the
Petrochemicals business unit, as well as CITGO's interest in the Lyondell-CITGO
joint venture in Houston. Lechtenberger is a graduate of the University of
Arkansas with a bachelor of science in chemical engineering and holds a master
of science in chemical engineering from the University of Colorado.

He previously served as Vice President, Lake Charles Manufacturing Complex.
He joined Champlin as Operations Manager in 1990 and was named General Manager
Refining in 1991. Prior to joining Champlin, Lechtenberger was employed by Exxon
Company, USA for 19 years. During his 19-year career with Exxon Company, USA, he
held positions in the Benicia Refinery, Colony Shale Project, Carter Mining
Company, Exxon Refining Headquarters, Billings Refinery and the Baton Rouge
Refinery.

JERRY THOMPSON
SENIOR VICE PRESIDENT, SUPPLY AND DISTRIBUTION

Jerry Thompson joined CITGO in 1971. As Senior Vice President of Supply and
Distribution he is responsible for the supply, trading and distribution of all
crude, intermediate feedstocks and refined products for the Light Oils, Lubes
and Petrochemicals business units. In addition, Thompson is responsible for the
Information Technology and Health, Safety, Security of Assets and Environmental
Protection departments. He also chairs the Short Term Operating Committee. He is
a graduate of Colorado School of Mines with a degree in chemical and petroleum
refining engineering. He began his career at the Lake Charles, Louisiana,
refinery as a process engineer and advanced through several technical and
operations supervisory and management positions.

Thompson became Vice President of Refining for CITGO in 1987, Vice
President of Corporate Planning & Economics in 1994, Vice President Supply and
Logistics in 1995, Vice President, Development & Technological Excellence in
1998, and in 1999 was named a Senior Vice President.

PEER L. ANDERSON
VICE PRESIDENT AND GENERAL COUNSEL

Peer L. Anderson joined CITGO in his present capacity in September 1986.
His current responsibilities include the legal department, and he serves as
Corporate Secretary for CITGO's Board of Directors. He holds a bachelor of arts
degree and a juris doctorate from the University of Oklahoma and a master of
laws degree from George Washington University.

He previously served as Director, Corporate Legal Services for Reading &
Bates Corporation from 1977 to 1986, as an attorney with Cities Service Company
from 1973 to 1977 and with the U.S. Army Judge Advocate General's Corps from
1969 to 1973.

BOB FUNK
VICE PRESIDENT, CORPORATE PLANNING & ECONOMICS

Bob Funk joined CITGO in 1968. He is responsible for all budgeting and
planning activities for the company including preparation of annual operating
and capital budgets, the Long Range Plan and Corporate Performance Measures. He
currently serves as Management Committee Chairman of the Nelson Industrial Steam
Co., an electricity and steam cogeneration plant at Westlake, Louisiana. He
holds a bachelor of science degree in chemical engineering from the University
of Kansas.

Funk has served in various staff and technical positions at the Lake
Charles Manufacturing Complex and the Tulsa headquarters. Since the formation of
CITGO Petroleum Corporation in 1983, he has served as General Manager Lube
Operations, General Manager Facilities Planning and General Manager Business
Planning and Economics.

BOB KOSTELNIK
VICE PRESIDENT, HEALTH, SAFETY, SECURITY OF ASSETS AND ENVIRONMENTAL
PROTECTION

Bob Kostelnik, joined CITGO in 1992. As CITGO's Vice President, Health,
Safety, Security of Assets and Environmental Protection, he is responsible for
overseeing CITGO's health and safety activities as well as asset security and
environmental protection. Prior to being named to his current position,
Kostelnik was Vice President and General Manager of CITGO's Corpus Christi
refinery. He is a graduate of the University of Missouri at Rolla with a
bachelor of science in mechanical engineering.

He has served as General Manager Operations at the Lake Charles
Manufacturing Complex, with operations and maintenance responsibility for the
Lake Charles Refinery and the CITGO lubricants and wax plant. He has ten years
of service at CITGO and a total of 30 years in the refining industry.

W. JAMES MCCARTHY
VICE PRESIDENT, GOVERNMENT & PUBLIC AFFAIRS

Jim McCarthy joined CITGO in 1979 as a member of the Cities Service Legal
Department. As CITGO's Vice President, Government & Public Affairs, his
responsibilities include establishing and communicating CITGO's position on
various state and federal political issues, managing all internal and external
communications, media relations, and community relations as well as CITGO's
shareholder relations. In addition, he is CITGO's spokesperson when dealing with
the media during an emergency.

Prior to his current assignment, he was General Manager of the Safety,
Health and Environmental Department. McCarthy graduated with honors from the
University of Oklahoma with a bachelor of science in chemistry, and he holds a
juris doctorate from the University of Michigan.

AL PREBULA
VICE PRESIDENT, LAKE CHARLES MANUFACTURING COMPLEX

Al Prebula joined CITGO in 1992 as General Manager Technical Services at
the Corpus Christi Refinery. He was named Vice President Corpus Christi Refinery
in March of 1996 and continued in that position until 1999, when he was named
Vice President of the Lake Charles Manufacturing Complex.

He was previously employed with Exxon Company, USA for 24 years where he
held various management positions, including Bayonne, N.J., Plant Manager.
Prebula holds a bachelor of science degree in mechanical engineering from the
University of Maryland and a master's of business administration degree from
Rutgers University.

MARK SMITH
VICE PRESIDENT AND GENERAL MANAGER, LEMONT REFINERY

Mark Smith joined CITGO as an engineer at the Lake Charles Manufacturing
Complex in 1981. He is a graduate of Penn State University, with a bachelor of
science in chemical engineering.

His career with CITGO has included engineering and managerial assignments
at the Tulsa headquarters, the Corpus Christi Refinery and the Lake Charles
Manufacturing Complex. Prior to assuming his current position, he was General
Manager Operations at the Lake Charles Manufacturing Complex.

RUSS WILLMON
VICE PRESIDENT AND GENERAL MANAGER, CORPUS CHRISTI REFINERY

Russ Willmon joined CITGO in January 2001 as General Manager of Engineering
and Technical Services at the Lake Charles Manufacturing Complex. He was named
Vice President and General Manager Corpus Christi Refinery in September 2002. He
is a graduate of Cornell University with a degree in chemical engineering.

Prior to joining CITGO, Willmon worked for Exxon from 1970 through 2000 in
several operations, technical and staff positions. He has extensive experience
in refineries in Baytown, Texas, Billings, Montana, and Linden, New Jersey. He
also worked at Exxon's headquarter in Houston and Exxon-Mobil's headquarters in
Fairfax, Virginia.

OUR BOARD OF DIRECTORS

AIRES BARRETO

Aires Barreto, Chairman of CITGO's Board of Directors, received a masters
degree in hydrocarbons economics and administration from Loughborough
University, England in 1968. Barreto is a chemical engineer who graduated from
the Instituto Quimico Sarria, Spain in 1968 and received a bachelors degree in
chemistry from the University of Bombay, India in 1963. He joined Compania Shell
de Venezuela in 1974, where he held several technical and supervisory positions,
mainly at the Cardon refinery.

Barreto has served in various positions with PDVSA including Refining
Planning Manager at the Maraven refinery, Manufacturing Manager at the Cardon
refinery, Planning Manager of Intevep, General Manager Refining, Petrochemicals,
and Technology of Intevep, Manufacture Planning Manager, Corporate Topics
Manager, Director of Pequiven and PDVSA Vice President.

EUDOMARIO CARRUYO

Eudomario Carruyo received a bachelor's degree in public accounting from
Universidad del Zulia in 1972. Carruyo has 36 years of experience in the
Venezuelan oil industry and is currently serving as PDVSA's Comisario, a
position appointed by the Ministry of Energy and Mines. He also served as
Assistant Comisario in 2000 and 2001.

Previously, Carruyo worked at Palmaven for six years and last served as a
board member. He was also a member of the boards of several Palmaven joint
ventures and held several other positions in the company. Before Palmaven,
Carruyo worked for Corpoven, another PDVSA affiliate, having held several
high-level managerial positions, including Corporate Treasurer, Corporate
Comptroller, Corporate Budget and Economic Evaluations Manager, Corporate
Manager of Accounting, Finance Manager, and Cost Manager.

LUIS DAVILA

Luis Davila is Executive Director of Corporate Finance for PDVSA. In
addition to his service on CITGO's Board of Directors, he is also a member of
the board for several other PDVSA international affiliates. He holds a bachelors
degree in political science and administration from the Central University of
Venezuela and two masters degrees from American University in Washington D.C.,
one in financial sciences and the other in management of state enterprises.

Davila joined Petroleos de Venezuela in 1982 and has held several financial
supervisory and managerial positions. He has also served as Principal Director
and Vice President of PDVSA Finance and Director of Interven, Deltaven,
Propernyn NV, PDV Insurance Company and Proesca.

IVAN HERNANDEZ

Ivan Hernandez started his oil industry career with Creole Petroleum
Corporation in 1957 and held several technical and supervisory positions in the
Amuay refinery. In 1976, Hernandez was assigned to the Benicia refinery in
California. He returned to Amuay a year later to manage the specialties and
crude oil logistics departments. In 1980, he joined the team in charge of
carrying out Amuay's deep conversion upgrade project.

Seven years later, he was assigned to the refining department of Champlin
Petroleum in Texas. Hernandez returned to Venezuela and was appointed Deputy
Manager of the Amuay refinery in 1992 and General Manager in 1994. After the
integration of the Amuay and Cardon refineries in 1997, Hernandez became the
first General Manager of the Paraguana refining center, the largest refining
complex in the world.

WILLIAM PADRON

William Padron is a chemical engineer with a degree from Villanova
University in Pennsylvania. He began his career at PDVSA in 1979 as a Process
Engineer at the Amuay refinery. He held various technical, supervisory and
management positions there, including Terminal Manager and Operations Planning
Coordinator.

After transferring from the Amuay refinery in 1988, Padron held various
positions at PDVSA affiliates, PDVSA's Corporate Center and PDVSA's Office of
the President, including assignments in human resources, supply, finance,
strategic and corporate planning, and corporate topics. Since 2001, Padron has
served as Deputy General Manager of Operadora Cerro Negro, S.A., in charge of
PDVSA and other joint venture participants' assets used for the production and
upgrading of Venezuelan extra heavy crude oil from the Orinoco tar belt.

ALFREDO RIERA

Alfredo Riera graduated from the University of Tulsa with a degree in
mechanical engineering. He also holds a masters in business administration from
Carabobo University in Venezuela and has attended management courses at Harvard
and the University of Georgia. He has more than 30 years of experience in the
oil industry, having started his career at Mobil. Since 1984, he has held a
number of administrative and managerial positions in the petrochemical industry
in strategic planning, new project development, operations management, technical
maintenance, and implementation planning.

From 1990 to 1999 he was Manager of the Fertilizers Business Unit, and in
1987 and 1998 he held leadership positions in several mixed-capital firms
affiliated with Pequiven. In 2000, he was advisor to the PDVSA President. At the
same time, he was assigned to the Production and Trade Ministry as General
Director for Planning and Trade, coordinating PDVSA's projects pertaining to
domestic and international markets. In February 2001, he was appointed Managing
Director of Bitor, a PDVSA affiliate.

OSWALDO CONTRERAS MAZA

In addition to serving as President and CEO of CITGO, Oswaldo Contreras
serves on the CITGO Board of Directors and is responsible for setting CITGO's
course toward achieving our vision: "To be the World's Benchmark Energy
Corporation."

RELATED PARTY TRANSACTIONS

PDVSA LONG-TERM SUPPLY AGREEMENTS

We purchase approximately one-half of the crude oil processed in our
refineries from subsidiaries of PDVSA under long-term supply agreements. Copies
of these agreements are filed as exhibits to reports that we file with the SEC.
See "Where You Can Find More Information." These supply agreements extend
through the year 2006 for the Lake Charles refinery, 2010 for the Paulsboro
refinery, 2012 for the Corpus Christi refinery and 2013 for the Savannah
refinery. We purchased $3.0 billion, $3.2 billion and $1.7 billion of crude oil,
feedstocks and other products from wholly owned subsidiaries of PDVSA in 2001,
2000, and 1999, respectively, under these and other purchase agreements.

Like most sales agreements, each of these four long-term crude oil supply
contracts with PDVSA contains a provision which relieves the adversely affected
party from performing or fully performing under the contract because of a force
majeure event, such as an Act of God, an event reasonably beyond the control of
a party or a governmental order, directive, law, or regulation. During the last
few years, PDVSA has on numerous occasions been obligated to curtail production
following an order of the Venezuelan government, issued in response to an OPEC
decision to reduce production, and has invoked the force majeure provision under
these four long-term crude oil supply contracts and with its other customers. As
a consequence, for extended periods of time we have received reduced deliveries
of crude oil from PDVSA.

PDVSA has invoked the force majeure provisions under the contracts at
certain points during each of 1999, 2000, 2001 and 2002 for varying periods of
time and for a variety of reasons. As a result of these declarations of force
majeure, we were required to obtain crude oil from alternative sources, which
resulted in increased volatility in our operating margins.

In connection with the long-term crude supply agreements for our two Gulf
Coast refineries, both PDVSA and we have typical termination rights for mutual
termination, material default, failure to pay, and bankruptcy. However, both
long-term crude supply agreements can be terminated by either party if PDVSA is
no longer an owner of us. Further, if PDVSA were to fail to deliver to us the
base volumes under these long-term crude supply agreements and such failure to
deliver were not excused by force majeure, PDVSA would be required to pay an
amount to us for such shortfall volume at the Lake Charles refinery equal to the
shortfall volume multiplied by the applicable volume charge (the deemed gross
margin which is adjusted by inflation) and at the Corpus Christi refinery equal
to the shortfall volume multiplied by the applicable volume charge and the
applicable fixed costs. In addition the supply from PDVSA for our two Gulf Coast
refineries under certain circumstances is ensured by supplemental crude supply
agreements. These agreements obligate PDVSA to supply to us the base volumes
from non-Venezuelan sources if PDVSA has failed to supply such base volume,
PDVSA is not excused under the supply agreements, or the failure is the result
of a governmental act, regulation, law, or restraint imposed by the Bolivarian
Republic of Venezuela that is not (1) a general embargo prohibiting exports to
all purchasers in the United States, rather than to us alone or as part of a
limited group, or (2) a health, police, military, judicial, or regulatory
measure of general applicability that temporarily impedes the production or
export of crude oil in Venezuela. The supplemental agreements also contain force
majeure provisions which excuse the performance by either party of obligations
under the supplemental agreement under certain circumstances. The supplemental
crude supply agreements are governed by New York law, and PDVSA has subjected
itself to the jurisdiction of the state and federal courts in Manhattan.

During the second half of 1999 and throughout 2000 and 2001, PDVSA did not
deliver naphtha pursuant to certain contracts and has made or will make
contractually specified payments in lieu thereof.

The crude oil supply contracts incorporate formula prices based on the
market value of a number of refined products deemed to be produced from each
particular crude oil, less

- certain deemed refining costs adjustable for inflation;

- certain actual costs, including transportation charges, natural gas and
electricity and import duties and taxes; and

- a deemed margin, which varies according to the grade of crude oil.

At December 31, 2001 and 2000, $185 million and $251 million, respectively,
were included in payables to affiliates as a result of these transactions.

Most of the crude oil and feedstocks purchased by us from PDVSA are
delivered on tankers owned by PDV Marina, S.A., a wholly-owned subsidiary of
PDVSA. In 2001, 70% of the PDVSA contract crude oil delivered to the Lake
Charles and Corpus Christi refineries was delivered on tankers operated by this
PDVSA subsidiary.

PDVMR CRUDE OIL CONTRACT

Our wholly owned, indirect subsidiary PDVMR is party to a Contract for
Purchase and Sale of Crude Oil date April 23, 1997, with Maraven S.A.
("Maraven"), a corporation organized and existing, at the date of the contract,
under the laws of the Bolivarian Republic of Venezuela and a subsidiary of
PDVSA's at the time. In accordance with the contract, Maraven (or its successor)
is obligated to provide a base volume of up to 100,000 barrels per day of
Venezuelan crude. The Venezuelan crude is priced in accordance with a formula
based upon posted crude prices less a quality differential. Maraven (or its
successor), we and PDVMR can change the amount and type of crude supplied. The
term of the agreement is 60 months with renewal periods of 12 months. PDVMR
purchased approximately 10 MBPD, 13 MBPD and 31 MBPD under this contract in
2001, 2000 and 1999, respectively.

PDVMR sells certain refinery by-products and utilities to The Needle Coker
Company ("Needle"), an affiliate, and buys back hydrogen, naphtha and steam.
Sales to Needle were approximately $10 million, $11 million and $9 million in
2001, 2000 and 1999, respectively. Purchases from Needle were approximately $8
million, $9 million and $6 million in 2001, 2000 and 1999, respectively.

OTHER PURCHASE AND SALE ARRANGEMENTS WITH AFFILIATES

We also purchase refined products from various other affiliates including
LYONDELL-CITGO, HOVENSA and Chalmette, under long-term contracts. These
agreements incorporate various formula prices based on published market prices
and other factors. Such purchases totaled $3.4 billion, $5.3 billion, and $3.1
billion for 2001, 2000, and 1999, respectively. At December 31, 2001 and 2000,
$73 million and $195 million, respectively, were included in payables to
affiliates as a result of these transactions.

LYONDELL-CITGO owns and operates a 265 MBPD refinery in Houston, Texas.
LYONDELL-CITGO was formed in 1993 by subsidiaries of us and Lyondell. The heavy
crude oil processed by the Houston refinery is supplied by PDVSA under a
long-term crude oil supply agreement through the year 2017. Under this
agreement, LYONDELL-CITGO purchased approximately $1.5 billion of crude oil and
feedstocks at market related prices from PDVSA in 2001. We purchase
substantially all of the gasoline, diesel and jet fuel produced at the Houston
refinery under a long-term contract. Various disputes exist between
LYONDELL-CITGO and the partners and their affiliates concerning the
interpretation of these and other agreements between the parties relating to the
operation of the refinery.

Our participation interest in LYONDELL-CITGO was approximately 41% at
December 31, 2001, in accordance with agreements between us and Lyondell
concerning such interest. We held notes receivable from LYONDELL-CITGO of $35
million at December 31, 2001. The notes bear interest at market rates which were
approximately 2.2% at December 31, 2001, and are due July 1, 2003.

On May 1, 1997, PDV America and Unocal closed a transaction relating to The
UNO-VEN Company. The transaction transferred certain assets and liabilities to
PDVMR, a subsidiary of PDV America, in liquidation of PDV America's 50%
ownership interest in UNO-VEN. The assets include a refinery in Lemont,
Illinois, as well as product distribution terminals located in the Midwest. We
operate these facilities and purchase the products produced at the refinery. A
portion of the crude oil processed by PDVMR is supplied by PDVSA under a
long-term crude supply contract. On January 1, 2002, PDV America, our parent
company, made a contribution to our capital of all of the common stock of PDV
America's wholly owned subsidiary, VPHI, the direct parent of PDVMR.

In October 1998 an affiliate of PDVSA acquired a 50% equity interest in
HOVENSA and has the right under a product sales agreement to assign periodically
to us, or other related parties, its option to purchase 50% of the refined
products produced by HOVENSA (less a certain portion of such products that
HOVENSA will market directly in the local and Caribbean markets). In addition,
under the product sales agreement, the PDVSA affiliate has appointed us as its
agent in designating which of its affiliates shall from time to time take
deliveries of the refined products available to it. The product sales agreement
will be in effect for the life of the joint venture, subject to termination
events based on default or mutual agreement. Pursuant to the above arrangement,
we acquired approximately 106 MBPD of refined products from the refinery during
2001, approximately one-half of which was gasoline.

We had refined product, feedstock, and other product sales to affiliates,
primarily at market-related prices, of $248 million, $205 million, and $187
million in 2001, 2000, and 1999, respectively. At December 31, 2001 and 2000,
$64 million and $38 million, respectively, was included in due from affiliates
as a result of these and related transactions.

OTHER INTERCOMPANY AGREEMENTS

Under a separate guarantee of rent agreement, PDVSA has guaranteed payment
of rent, stipulated loss value and terminating value due under the lease of the
Corpus Christi refinery facilities. We have also guaranteed debt of certain
affiliates.

During 1999, PDV America cancelled a note receivable from VPHI in the
amount of $69.4 million. We recorded the cancellation as a noncash capital
contribution.

We and PDV Holding are parties to a tax allocation agreement that is
designed to provide PDV Holding with sufficient cash to pay its consolidated
income tax liabilities. PDV Holding appointed us as its agent to handle the
payment of such liabilities on its behalf. As such, we calculate the taxes due,
allocate the payments among the members according to the agreement and bill each
member accordingly. Each member records its amounts due or payable to us in a
related party payable account. At December 31, 2001, we had net related party
receivables related to federal income taxes of $23 million. At December 31,
2000, we had a net related party payable related to federal income taxes of
$35.3 million.

In August 2002, three affiliates entered into agreements to advance excess
cash to us from time to time under demand notes for amounts of up to a maximum
of $10 million with PDV Texas, Inc., $30 million with PDV America and $10
million with PDV Holding. The notes bear interest at rates equivalent to 30-day
LIBOR plus 0.875% payable quarterly. Amounts outstanding on these notes at
September 30, 2002 were $5 million, $28 million and $4 million from PDV Texas,
PDV America and PDV Holding, respectively, and are included in payables to
affiliates in our consolidated balance sheet.

Prior to the formation of PDV Holding as the common parent in the 1997 tax
year, we and PDV America were parties to a tax allocation agreement. In 1998, $8
million due from us to PDV America under this agreement for the 1997 tax year
was classified as a noncash contribution of capital. In 1999, $11 million due
from PDV America to us under this agreement for the 1998 tax year was classified
as a noncash dividend. Amendment No. 2 to the Tax Allocation Agreement was
executed during 2000. This amendment eliminated the provisions of the agreement
that provided for these noncash contribution and dividend classifications
effective with the 1997 tax year. Consequently, the classifications made in the
prior two years were reversed in 2000. In the event that we should cease to be
part of the consolidated federal income tax group, any amounts included in
shareholder's equity under this agreement are required to be settled between the
parties in cash (net $2 million payable to PDV America at December 31, 2001 and
2000). At December 31, 2001, we had income tax prepayments of $76 million
included in prepaid expenses. At December 31, 2000, we had federal income taxes
payable of $52 million included in other current liabilities.

We also guarantee certain indebtedness of several affiliates. See
"Description of Other Indebtedness -- Guarantees."

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<Table>
<Caption>
PAGE NO.
--------

Unaudited Financial Statements
Condensed Consolidated Balance Sheets as of September 30,
2002 (Unaudited) and December 31, 2001 (as restated)... F-2
Condensed Consolidated Statements of Income and
Comprehensive Income (Unaudited) Three-Month and
Nine-Month Periods Ended September 30, 2002 and 2001
(as restated).......................................... F-3
Condensed Consolidated Statement of Shareholder's Equity
(Unaudited) Nine-Month Period Ended September 30, 2002
(as restated).......................................... F-4
Condensed Consolidated Statements of Cash Flows
(Unaudited) Nine-Month Periods Ended September 30, 2002
and 2001 (as restated)................................. F-5
Notes to the Condensed Consolidated Financial Statements
(Unaudited) Three-Month and Nine-Month Periods Ended
September 30, 2002 and 2001............................ F-6
Audited Financial Statements
Independent Auditors' Report.............................. F-14
Consolidated Balance Sheets as of December 31, 2001 and
2000................................................... F-15
Consolidated Statements of Income and Comprehensive
Income -- Each of the Three Years in the Period Ended
December 31, 2001...................................... F-16
Consolidated Statements of Shareholder's Equity -- Each of
the Three Years in the Period Ended December 31,
2001................................................... F-17
Consolidated Statements of Cash Flows -- Each of the Three
Years in the Period Ended December 31, 2001............ F-18
Notes to Consolidated Financial Statements -- Each of the
Three Years in the Period Ended December 31, 2001......... F-20
</Table>

F-1

UNAUDITED FINANCIAL STATEMENTS

CITGO PETROLEUM CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
SEPTEMBER 30, DECEMBER 31,
2002 2001
(UNAUDITED) (AS RESTATED--SEE NOTE 1)
------------- -------------------------
(DOLLARS IN THOUSANDS)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................... $ 24,273 $ 104,362
Accounts receivable, net................................ 1,054,058 913,068
Due from affiliates..................................... 72,692 64,923
Inventories............................................. 1,080,993 1,109,346
Prepaid expenses and other.............................. 44,221 95,334
---------- ----------
Total current assets................................. 2,276,237 2,287,033
PROPERTY, PLANT AND EQUIPMENT -- Net...................... 3,576,094 3,292,469
RESTRICTED CASH........................................... 33,507 --
INVESTMENTS IN AFFILIATES................................. 714,007 700,701
OTHER ASSETS.............................................. 267,012 228,906
---------- ----------
$6,866,857 $6,509,109
---------- ----------
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Short-term bank loans................................... 119,000 --
Accounts payable........................................ 686,405 616,854
Payables to affiliates.................................. 500,640 265,517
Taxes other than income................................. 204,124 219,699
Other................................................... 249,232 300,484
Current portion of long-term debt....................... 298,864 107,864
Current portion of capital lease obligation............. 21,503 20,358
---------- ----------
Total current liabilities............................ 2,079,768 1,530,776
LONG-TERM DEBT............................................ 971,216 1,303,692
CAPITAL LEASE OBLIGATION.................................. 35,918 46,964
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS............... 240,376 218,706
OTHER NONCURRENT LIABILITIES.............................. 209,065 217,121
DEFERRED INCOME TAXES..................................... 791,477 767,338
MINORITY INTEREST......................................... -- 23,176
COMMITMENTS AND CONTINGENCIES (Note 7) SHAREHOLDER'S
EQUITY:
Common stock -- $1.00 par value, 1,000 shares
authorized, issued and outstanding................... 1 1
Additional capital...................................... 1,659,698 1,659,698
Retained earnings....................................... 882,725 745,102
Accumulated other comprehensive loss.................... (3,387) (3,465)
---------- ----------
Total shareholder's equity........................... 2,539,037 2,401,336
---------- ----------
$6,866,857 $6,509,109
========== ==========
</Table>

See notes to condensed consolidated financial statements.
F-2

CITGO PETROLEUM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS
OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

<Table>
<Caption>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
--------------------------- ----------------------------
2001 2001
(AS RESTATED-- (AS RESTATED--
2002 SEE NOTE 1) 2002 SEE NOTE 1)
---------- -------------- ----------- --------------
(DOLLARS IN THOUSANDS)

REVENUES:
Net sales.............................. $5,342,794 $5,090,755 $13,698,780 $15,676,288
Sales to affiliates.................... 67,777 77,357 176,654 209,346
---------- ---------- ----------- -----------
5,410,571 5,168,112 13,875,434 15,885,634
Equity in earnings of affiliates....... 28,132 36,722 77,405 97,543
Insurance recoveries................... 46,326 -- 256,867 --
Other expense -- net................... (11,492) (17,510) (26,002) (18,648)
---------- ---------- ----------- -----------
5,473,537 5,187,324 14,183,704 15,964,529
---------- ---------- ----------- -----------
COST OF SALES AND EXPENSES:
Cost of sales and operating expenses
(including purchases of $2,103,726,
$1,803,022, $4,989,436 and $5,280,280
from affiliates)..................... 5,298,606 4,979,758 13,694,391 15,027,993
Selling, general and administrative
expenses............................. 67,192 72,876 218,518 211,423
Interest expense, excluding capital
lease................................ 17,188 16,797 50,358 53,014
Capital lease interest charge.......... 1,615 2,157 5,402 6,970
Minority interest...................... -- 957 -- 1,028
---------- ---------- ----------- -----------
5,384,601 5,072,545 13,968,669 15,300,428
---------- ---------- ----------- -----------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE................. 88,936 114,779 215,035 664,101
INCOME TAXES........................... 32,016 42,613 77,412 242,066
---------- ---------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE....... 56,920 72,166 137,623 422,035
CUMULATIVE EFFECT, ACCOUNTING FOR
DERIVATIVES, NET OF RELATED INCOME
TAXES OF $7,977...................... -- -- -- 13,600
---------- ---------- ----------- -----------
NET INCOME............................. 56,920 72,166 137,623 435,635
---------- ---------- ----------- -----------
OTHER COMPREHENSIVE INCOME (LOSS):
Cash flow hedges:
Cumulative effect, accounting for
derivatives, net of related income
taxes of $(850)................... -- -- -- (1,450)
Less: reclassification adjustment for
derivative losses included in net
income, net of related income
taxes of $43, $46, $130, and
$230.............................. 77 78 232 392
---------- ---------- ----------- -----------
77 78 232 (1,058)
Foreign currency translation loss, net
of related income taxes of $(86)..... (154) -- (154) --
---------- ---------- ----------- -----------
OTHER COMPREHENSIVE INCOME (LOSS)...... (77) 78 78 (1,058)
---------- ---------- ----------- -----------
COMPREHENSIVE INCOME................... $ 56,843 $ 72,244 $ 137,701 $ 434,577
========== ========== =========== ===========
</Table>

See notes to condensed consolidated financial statements.

F-3

CITGO PETROLEUM CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY (UNAUDITED)

<Table>
<Caption>
ACCUMULATED
OTHER
COMMON STOCK COMPREHENSIVE
--------------- ADDITIONAL RETAINED (LOSS)
(DOLLARS AND SHARES IN THOUSANDS) SHARES AMOUNT CAPITAL EARNINGS INCOME TOTAL
- --------------------------------- ------ ------ ---------- -------- ------------- ----------
(AS RESTATED)

BALANCE, DECEMBER 31, 2001 (As
Restated -- See Note 1)...... 1 $ 1 $1,659,698 $745,102 $(3,465) $2,401,336
Net income..................... -- -- -- 137,623 -- 137,623
Other comprehensive income..... -- -- -- -- 78 78
---- ----- ---------- -------- ------- ----------
BALANCE, SEPTEMBER 30, 2002.... 1 $ 1 $1,659,698 $882,725 $(3,387) $2,539,037
==== ===== ========== ======== ======= ==========
</Table>

See notes to condensed consolidated financial statements.
F-4

CITGO PETROLEUM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<Table>
<Caption>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
2002 2001
--------- --------------
(AS RESTATED--
SEE NOTE 1)
(DOLLARS IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES (See Note 9)........... $ 482,402 $ 456,930
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (478,053) (144,175)
Proceeds from sales of property, plant and equipment...... 718 1,656
Increase in restricted cash............................... (33,507) --
Investments in LYONDELL-CITGO Refining LP................. (28,700) (19,900)
Investments in and advances to other affiliates........... (19,237) (304)
--------- ---------
Net cash used in investing activities............. (558,779) (162,723)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from short-term bank loans................... 119,000 26,500
Net (repayments of) proceeds from revolving bank loans.... (154,000) 103,350
Proceeds from loans from affiliates....................... 37,000 --
Proceeds from issuance of tax-exempt bonds................ 62,501 25,000
Payments on taxable bonds................................. (25,000) (25,000)
Payments of capital lease obligations..................... (9,901) (17,276)
Payments of master shelf notes............................ (25,000) --
Repayments of other debt.................................. (8,312) (13,196)
Dividends paid............................................ -- (383,900)
--------- ---------
Net cash used in financing activities............. (3,712) (284,522)
--------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS............ (80,089) 9,685
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 104,362 19,038
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 24,273 $ 28,723
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of $1,686 and $1,052 capitalized in 2002 and
2001................................................... $ 48,077 $ 56,608
========= =========
Income taxes, net of refunds of $51,381 in 2002........... $ (45,293) $ 186,141
========= =========
</Table>

See notes to condensed consolidated financial statements.
F-5

CITGO PETROLEUM CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001

1. BASIS OF PRESENTATION

The financial information for CITGO Petroleum Corporation ("CITGO" or "the
Company") subsequent to December 31, 2001 and with respect to the interim
three-month and nine-month periods ended September 30, 2002 and 2001 (as
restated) is unaudited. In the opinion of management, such interim information
contains all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of such periods. The results of
operations for the nine-month periods ended September 30, 2002 and 2001 (as
restated) are not necessarily indicative of the results to be expected for the
full year. Reference is made to CITGO's Annual Report for the fiscal year ended
December 31, 2001 on Form 10-K, dated March 28, 2002, for additional
information.

On January 1, 2002, PDV America, Inc. ("PDV America") the parent company of
CITGO, made a contribution to the capital of CITGO of all of the common stock of
PDV America's wholly owned subsidiary, VPHI Midwest, Inc. ("VPHI"). No
additional shares of the capital stock of CITGO were issued in connection with
the contribution. Effective January 1, 2002, the accounts of VPHI are included
in the consolidated financial statements of CITGO at the historical carrying
value of PDV America's investment in VPHI. CITGO recorded the effects of this
transaction in a manner similar to "pooling-of-interests" accounting. The 2001
financial statements have been restated to reflect the Company's financial
condition at December 31, 2001 and the results of operations for the three-month
and nine-month periods ended September 30, 2001 as if the transaction had
occurred on January 1, 2001. The following unaudited proforma information
presents the separate results of operations for CITGO and VPHI for the three
months and nine months ended September 30, 2001:

<Table>
<Caption>
NINE MONTHS
THREE MONTHS ENDED ENDED
SEPTEMBER 30, 2001 SEPTEMBER 30, 2001
------------------ ------------------
(000'S OMITTED)

Net Income CITGO.................................. $ 87,925 $316,846
Net (Loss) Income VPHI............................ (15,759) 118,789
-------- --------
Net Income Consolidated........................... $ 72,166 $435,635
======== ========
</Table>

The principal asset of VPHI is a petroleum refinery owned by its wholly
owned subsidiary, PDV Midwest Refining, L.L.C. ("PDVMR"), located in Lemont,
Illinois. CITGO has operated this refinery and purchased substantially all of
its primary output, consisting of transportation fuels and petrochemicals, since
1997.

The condensed consolidated financial statements include the accounts of
CITGO and its wholly owned subsidiaries and Cit-Con Oil Corporation, which was
65% owned by CITGO through December 31, 2001 (collectively, "the Company"). On
January 1, 2002, CITGO acquired the outstanding 35 percent interest in Cit-Con
from Conoco, Inc. The principal asset of Cit-Con is a lubricants refinery in
Lake Charles, Louisiana. This transaction did not have a material effect on the
consolidated financial position or results of operations of the Company. The
legal entity, Cit-Con Oil Corporation, was dissolved effective April 1, 2002.

Certain reclassifications have been made to the September 30, 2001
financial statements to conform to the classifications used for the periods
ended September 30, 2002.

2. CHANGE IN ACCOUNTING PRINCIPLE

On January 1, 2001 the Company adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"). The statement, as

F-6

amended, establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives, at fair value, as either assets or liabilities in the statement of
financial position with an offset either to shareholder's equity and
comprehensive income or income depending upon the classification of the
derivative. Under the transition provisions of SFAS No. 133, on January 1, 2001
the Company recorded an after-tax, cumulative-effect-type transition benefit of
$13.6 million (as restated--See Note 1) to net income related to derivatives
that existed on that date and an after-tax, cumulative-effect-type transition
charge of $1.5 million to accumulated other comprehensive income.

3. INVENTORIES

Inventories, primarily at LIFO, consist of the following:

<Table>
<Caption>
SEPTEMBER 30, 2002 DECEMBER 31, 2001
(UNAUDITED) (AS RESTATED)
------------------ -----------------
(000'S OMITTED)

Refined products.................................... $ 836,085 $ 836,683
Crude oil........................................... 160,909 193,319
Materials and supplies.............................. 83,999 79,344
---------- ----------
$1,080,993 $1,109,346
========== ==========
</Table>

4. SHORT-TERM BANK LOANS

As of September 30, 2002, the Company had established $140 million of
uncommitted, unsecured, short-term borrowing facilities with various banks.
Interest rates on these facilities are determined daily based upon the federal
funds' interest rates. Maturity options vary up to 30 days. The Company had $119
million and $0 of borrowings outstanding under these facilities at September 30,
2002 and December 31, 2001, respectively.

5. LONG-TERM DEBT AND FINANCING ARRANGEMENTS

<Table>
<Caption>
SEPTEMBER 30, 2002 DECEMBER 31, 2001
(UNAUDITED) (AS RESTATED)
------------------ -----------------
(000'S OMITTED)

Revolving bank loans................................ $ 237,500 $ 391,500
Senior Notes, $200 million face amount, due 2006
with interest rate of 7.875%...................... 199,890 199,867
Private Placement Senior Notes, due 2002 to 2006
with interest rate of 9.30%....................... 56,819 56,819
Master Shelf Senior Notes, due 2003 to 2009 with
interest rates from 7.17% to 8.94%................ 235,000 260,000
Tax Exempt Bonds, due 2004 to 2032 with variable and
fixed interest rates.............................. 419,871 357,370
Taxable Bonds, due 2026 to 2028 with variable
interest rates.................................... 121,000 146,000
---------- ----------
1,270,080 1,411,556
Current portion of long-term debt................... (298,864) (107,864)
---------- ----------
$ 971,216 $1,303,692
========== ==========
</Table>

The Company's revolving bank loan agreements with various banks mature in
May 2003 and consist of (i) a $400 million, five-year, revolving bank loan; (ii)
a $150 million, 364-day, revolving bank loan; and (iii) a $25 million, 364-day,
revolving bank loan. The Company intends to replace the revolving bank loans
when they mature.

F-7

On March 20, 2002, CITGO issued $25 million of tax exempt revenue bonds due
2032. The proceeds were used to redeem $25 million of taxable Gulf Coast
Environmental facilities revenue bonds due 2032.

On May 3, 2002, CITGO issued $7.7 million of tax exempt environmental
facilities revenue bonds due 2032. On June 28, 2002, CITGO issued $30 million of
tax exempt environmental facilities revenue bonds due 2032. The proceeds from
both of these issuances will be used for capital projects at the Lemont
refinery. Restricted cash of $34 million at September 30, 2002 represents highly
liquid investments held in trust accounts in accordance with these bond
agreements. Funds are released solely for financing the qualified capital
expenditures as defined in the bond agreements.

6. INVESTMENT IN LYONDELL-CITGO REFINING LP

LYONDELL-CITGO Refining LP ("LYONDELL-CITGO") owns and operates a 265 MBPD
refinery in Houston, Texas and is owned by subsidiaries of CITGO (41.25%) and
Lyondell Chemical Company (58.75%) ("the Owners"). This refinery processes heavy
crude oil supplied by PDVSA under a long-term supply contract that expires in
2017. CITGO purchases substantially all of the gasoline, diesel and jet fuel
produced at the refinery under a long-term contract.

On February 9, 2001, PDVSA notified LYONDELL-CITGO that effective February
1, 2001, it had declared force majeure under the contract described above. Under
a force majeure declaration, PDVSA may reduce the amount of crude oil that it
would otherwise be required to supply under the agreement. When PDVSA reduces
its delivery of crude oil under the crude oil supply contract, LYONDELL-CITGO
may obtain alternative sources of crude oil which may result in increased crude
costs. As of December 31, 2001, PDVSA deliveries of crude oil to LYONDELL-CITGO
had not been reduced due to PDVSA's declaration of force majeure. On January 22,
2002, PDVSA notified LYONDELL-CITGO that pursuant to the February 9, 2001
declaration of force majeure, effective March 1, 2002, PDVSA expected to deliver
approximately 20 percent less than the contract volume. Deliveries remained
approximately 20 percent less than contract volume through June 30, 2002.
Beginning in July 2002, contract volumes delivered increased and deliveries are
returning to contractual levels. PDVSA delivered approximately 95 percent of the
contractual crude oil volume during the third quarter of 2002. In the nine
months ended September 30, 2002, PDVSA delivered approximately 89 percent of the
contractual crude oil volume. Crude oil was purchased in the market to replace
the volume not delivered under the contract.

CITGO has notes receivable from LYONDELL-CITGO which total $35 million at
September 30, 2002 and December 31, 2001. The notes bear interest at market
rates. Principal and interest are due July 1, 2003. The Company presently
expects that the term of these notes will be extended as part of the total debt
restructuring described below; accordingly, these notes are included in other
assets in the accompanying consolidated balance sheets.

F-8

CITGO accounts for its investment in LYONDELL-CITGO using the equity method
of accounting and records its share of the net earnings of LYONDELL-CITGO based
on allocations of income agreed to by the Owners which differ from participation
interests. Cash distributions are allocated to the Owners based on participation
interest. Information on CITGO's investment in LYONDELL-CITGO follows:

<Table>
<Caption>
SEPTEMBER 30, 2002 DECEMBER 31,
(UNAUDITED) 2001
------------------ ------------
(000'S OMITTED)

Carrying value of investment............................ $ 512,630 $ 507,940
Notes receivable........................................ 35,278 35,278
Participation interest.................................. 41% 41%
Summary of LYONDELL-CITGO's financial position:
Current assets........................................ $ 258,000 $ 227,000
Non current assets.................................... 1,400,000 1,434,000
Current liabilities:
Debt............................................... 463,000 50,000
Loans from owners.................................. 265,000 --
Other.............................................. 380,000 327,000
Non current liabilities (including debt of $0 and
$450,000 at September 30, 2002 and December 31,
2001, respectively)................................ 69,000 776,000
Members' equity....................................... 482,000 508,000
</Table>

<Table>
<Caption>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
2002 2001
---------- ----------
(UNAUDITED)

Equity in net income........................................ $ 56,127 $ 69,597
Cash distribution received.................................. 80,137 92,683
Summary of LYONDELL-CITGO's operating results:
Revenue................................................... $2,435,792 $2,691,753
Gross profit.............................................. 216,499 273,484
Net income................................................ 153,969 185,822
</Table>

LYONDELL-CITGO's 18-month term loan and working capital revolver will
mature in January 2003. The Owners have engaged an underwriter and expect to
replace these two credit facilities prior to the existing maturity date.

7. COMMITMENTS AND CONTINGENCIES

Litigation and injury claims -- Various lawsuits and claims arising in the
ordinary course of business are pending against the Company. The Company records
accruals for potential losses when, in management's opinion, such losses are
probable and reasonably estimable. If known lawsuits and claims were to be
determined in a manner adverse to the Company, and in amounts greater than the
Company's accruals, then such determinations could have a material adverse
effect on the Company's results of operations in a given reporting period. The
most significant lawsuits and claims are discussed below.

A class action lawsuit brought by four former marketers of the UNO-VEN
Company ("UNO-VEN") in U.S. District Court in Wisconsin against UNO-VEN alleging
improper termination of the UNO-VEN Marketer Sales Agreement under the Petroleum
Marketing Practices Act in connection with PDVMR's 1997 acquisition of Unocal's
interest in UNO-VEN has resulted in the judge granting the Company's motion for
summary judgment. The plaintiffs are appealing the summary judgment. PDVMR and
its parent, VPHI, jointly and severally, have agreed to indemnify UNO-VEN and
certain other related entities against certain liabilities and claims, including
this matter.

F-9

A lawsuit is pending against PDVMR and CITGO in Illinois state court which
claims damages as a result of PDVMR invoicing a partnership in which it is a
partner, and an affiliate of the other partner of the partnership, allegedly
excessive charges for electricity utilized by these entities' facilities located
adjacent to the Lemont, Illinois refinery. The Company believes it will be able
to resolve these claims for a non-material amount. The electricity supplier to
the refinery is seeking recovery from the Company of alleged underpayments for
electricity. The Company has denied all allegations and is pursuing its
defenses.

In May 1997, a fire occurred at CITGO's Corpus Christi refinery.
Approximately seventeen related lawsuits were filed in federal and state courts
in Corpus Christi, Texas against CITGO on behalf of approximately 9,000
individuals alleging property damages, personal injury and punitive damages. In
September 2002, CITGO reached an agreement to settle substantially all of the
claims related to this incident for an amount that will not have a material
financial impact on the Company.

Litigation is pending in federal court in Lake Charles, Louisiana against
CITGO by a number of current and former refinery employees and applicants
asserting claims of racial discrimination in connection with CITGO's employment
practices. A trial involving two plaintiffs resulted in verdicts for the
Company. The Court granted the Company summary judgment with respect to another
group of claims; these rulings have been affirmed by the Fifth Circuit Court of
Appeals. Trials of the remaining cases are set to begin in December 2003. The
Company does not expect that the ultimate resolution of these cases will have an
adverse material effect on its financial condition or results of operations.

CITGO is among refinery defendants to state and federal lawsuits in New
York and a state action in Illinois alleging contamination of water supplies by
methyl tertiary butyl ether ("MTBE"), a component of gasoline. Plaintiffs claim
that MTBE is a defective product and that refiners failed to adequately warn
customers and the public about risks associated with the use of MTBE in
gasoline. These actions allege that MTBE poses public health risks and seek
testing, damages and remediation of the alleged contamination. Plaintiffs filed
putative class action lawsuits in federal courts in Illinois, California,
Florida and New York. CITGO was named as a defendant in all but the California
case. The federal cases were all consolidated in a Multidistrict Litigation case
in the United States District Court for the Southern District of New York ("MDL
1358"). In July 2002, the court in the MDL case denied plaintiffs' motion for
class certification. In August 2002, a New York state court judge handling two
separate but related individual MTBE lawsuits dismissed plaintiffs' product
liability claims, leaving only traditional nuisance and trespass claims for
leakage from underground storage tanks at gasoline stations near plaintiffs'
water wells. The judge in the Illinois state court action is expected to hear
plaintiffs' motion for class certification in that case sometime within the next
year.

In August 1999, the U.S. Department of Commerce rejected a petition filed
by a group of independent oil producers to apply antidumping measures and
countervailing duties against imports of crude oil from Venezuela, Iraq, Mexico
and Saudi Arabia. The petitioners appealed this decision before the U.S. Court
of International Trade based in New York, where the matter is still pending. On
September 19, 2000, the Court of International Trade remanded the case to the
Department of Commerce with instructions to reconsider its August 1999 decision.
The Department of Commerce was required to make a revised decision as to whether
or not to initiate an investigation within 60 days. The Department of Commerce
appealed to the U.S. Court of Appeals for the Federal Circuit, which dismissed
the appeal as premature on July 31, 2001. The Department of Commerce issued its
revised decision, which again rejected the petition, in August 2001. The revised
decision is awaiting review by the Court of International Trade.

Approximately 310 lawsuits are currently pending against the Company in
state and federal courts, primarily in Louisiana, Texas, and Illinois. The cases
were brought by former employees and contractor employees seeking damages for
asbestos related illnesses allegedly resulting from exposure at refineries owned
or operated by the Company in Lake Charles, Louisiana, Corpus Christi, Texas and
Lemont, Illinois. In many of these cases, there are multiple defendants. In some
cases, the Company is indemnified by or has the right to seek indemnification
for losses and expense that it may incur from prior owners of the refineries or
employers of the claimants. The Company does not believe that the resolution of
the cases will have an adverse material effect on its financial condition or
results of operations.

F-10

Environmental compliance and remediation -- CITGO is subject to various
federal, state and local environmental laws and regulations which may require
CITGO to take additional compliance actions and also actions to remediate the
effects on the environment of prior disposal or release of petroleum, hazardous
substances and other waste and/or pay for natural resource damages. Maintaining
compliance with environmental laws and regulations could require significant
capital expenditures and additional operating costs.

CITGO's accounting policy establishes environmental reserves as probable
site restoration and remediation obligations become reasonably capable of
estimation. CITGO believes the amounts provided in its consolidated financial
statements, as prescribed by generally accepted accounting principles, are
adequate in light of probable and estimable liabilities and obligations.
However, there can be no assurance that the actual amounts required to discharge
alleged liabilities and obligations and to comply with applicable laws and
regulations will not exceed amounts provided for or will not have a material
adverse affect on its consolidated results of operations, financial condition
and cash flows.

In 1992, the Company reached an agreement with the Louisiana Department of
Environmental Quality ("LDEQ") to cease usage of certain surface impoundments at
the Lake Charles refinery by 1994. A mutually acceptable closure plan was filed
with the LDEQ in 1993. The Company and its former owner are participating in the
closure and sharing the related costs based on estimated contributions of waste
and ownership periods. The remediation commenced in December 1993. In 1997, the
Company presented a proposal to the LDEQ revising the 1993 closure plan. In 1998
and 2000, the Company submitted further revisions as requested by the LDEQ. The
LDEQ issued an administrative order in June 2002 that addressed the requirements
and schedule for proceeding to develop and implement the corrective action or
closure plan for these surface impoundments and related waste units. Compliance
with the terms of the administrative order has begun.

The Texas Natural Resources Conservation Commission ("TNRCC") conducted a
multi-media investigation of the Corpus Christi Refinery during the second
quarter of 2002 and has issued a Notice of Enforcement to the Company which
identifies approximately 35 items of alleged violations of Texas environmental
regulations. The Company anticipates that penalties will be proposed with
respect to these matters, but no amounts have yet been specified.

In June 1999, CITGO and numerous other industrial companies received notice
from the U.S. Environmental Protection Agency ("U.S. EPA") that the U.S. EPA
believes these companies have contributed to contamination in the Calcasieu
Estuary, in the proximity of Lake Charles, Calcasieu Parish, Louisiana and are
Potentially Responsible Parties ("PRPs") under the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA"). The U.S. EPA made a demand
for payment of its past investigation costs from CITGO and other PRPs and is
conducting a Remedial Investigation/ Feasibility Study ("RI/FS") under its
CERCLA authority. CITGO and other PRPs may be potentially responsible for the
costs of the RI/FS, subsequent remedial actions and natural resource damages.
CITGO disagrees with the U.S. EPA's allegations and intends to contest this
matter.

In January and July 2001, CITGO received Notices of Violation ("NOVs") from
the U.S. EPA alleging violations of the Federal Clean Air Act. The NOVs are an
outgrowth of an industry-wide and multi-industry U.S. EPA enforcement initiative
alleging that many refineries and electric utilities modified air emission
sources without obtaining permits under the New Source Review provisions of the
Clean Air Act. The NOVs to CITGO followed inspections and formal Information
Requests regarding the Company's Lake Charles, Louisiana and Corpus Christi,
Texas refineries and the Lemont, Illinois refinery which at the time was
operated by CITGO but not yet owned by CITGO. At the U.S. EPA's request, the
Company is engaged in settlement discussions, but is prepared to contest the
NOVs if settlement discussions fail. If the Company settles or is found to have
violated the provisions cited in the NOVs, it would be subject to possible
penalties and significant capital expenditures for installation or upgrading of
pollution control equipment or technologies.

In June 1999, a NOV was issued by the U.S. EPA alleging violations of the
National Emission Standards for Hazardous Air Pollutants regulations covering
benzene emissions from wastewater treatment
F-11

operations at the Lemont, Illinois refinery operated by CITGO. CITGO is in
settlement discussions with the U.S. EPA. The Company believes this matter will
be consolidated with the matters described in the previous paragraph.

In June 2002, a Consolidated Compliance Order and Notice of Potential
Penalty was issued by the LDEQ alleging violations of the Louisiana air quality
regulations at the Lake Charles, Louisiana refinery. CITGO is in settlement
discussions with the LDEQ.

Various regulatory authorities have the right to conduct, and from time to
time do conduct, environmental compliance audits of the Company's and its
subsidiaries' facilities and operations. Those audits have the potential to
reveal matters that those authorities believe represent non-compliance in one or
more respects with regulatory requirements and for which those authorities may
seek corrective actions and/or penalties in an administrative or judicial
proceeding. Based upon current information, the Company is not aware that any
such audits or their findings have resulted in the filing of such a proceeding
or is the subject of a threatened filing with respect to such a proceeding, nor
does the Company believe that any such audit or their findings will have a
material adverse effect on its future business and operating results, except for
events otherwise described in its Annual Report on Form 10-K for the year ended
December 31, 2001 or in its Quarterly Report on Form 10-Q for the period ended
September 30, 2002.

Conditions which require additional expenditures may exist with respect to
various Company sites including, but not limited to, CITGO's operating refinery
complexes, former refinery sites, service stations and crude oil and petroleum
product storage terminals. The amount of such future expenditures, if any, is
indeterminable.

Derivative commodity and financial instruments -- As of September 30, 2002
the Company's petroleum commodity derivatives included exchange traded futures
contracts, forward purchase and sale contracts, exchange traded and
over-the-counter options and over-the-counter swaps. At September 30, 2002, the
balance sheet captions prepaid expenses and other current assets and other
current liabilities include $26 million and $13 million, respectively, related
to the fair values of open commodity derivatives.

CITGO has also entered into various interest rate swaps to manage its risk
related to interest rate changes on its debt. The fair value of the interest
rate swap agreements in place at September 30, 2002, based on the estimated
amount that CITGO would receive or pay to terminate the agreements as of that
date and taking into account current interest rates, was a loss of $4 million,
the offset of which is recorded in the balance sheet caption other current
liabilities. In connection with the determination of fair market value, the
Company considers the creditworthiness of the counterparties, but no adjustment
was determined to be necessary as a result.

8. RELATED PARTY TRANSACTIONS

CITGO's largest supplier of crude oil is PDVSA. CITGO has entered into
long-term crude oil supply agreements with PDVSA with respect to the crude oil
requirements for each of CITGO's refineries. These crude oil supply agreements
contain force majeure provisions which entitle PDVSA to reduce the quantity of
crude oil and feedstocks delivered under the crude oil supply agreements under
specified circumstances. On February 9, 2001, PDVSA notified CITGO that it had
declared force majeure, effective February 1, 2001, under each of the long-term
crude oil supply agreements it has with CITGO. Under a force majeure
declaration, PDVSA may reduce the amount of crude oil that it would otherwise be
required to supply under these agreements. When PDVSA reduces its delivery of
crude oil under these crude oil supply agreements, CITGO may obtain alternative
sources of crude oil which may result in increased crude costs or increase its
purchases of refined products. During 2001, PDVSA deliveries of crude oil to
CITGO were slightly less than contractual base volumes due to this declaration
of force majeure. Therefore, the Company was required to obtain alternative
sources of crude oil, which resulted in lower operating margins. On January 22,
2002, PDVSA notified CITGO that pursuant to the February 9, 2001 declaration of
force majeure, effective March 1, 2002, PDVSA expected to deliver approximately
20 percent less than the contract volume. Deliveries remained approximately 20
percent less than contract volume through June 30, 2002. Beginning in July 2002,
contract volumes delivered increased and deliveries are returning to
F-12

contractual levels. PDVSA delivered approximately 98 percent of the contractual
crude oil volume during the third quarter of 2002. In the nine months ended
September 30, 2002, PDVSA delivered approximately 91 percent of the contractual
crude oil volume. As a result, CITGO estimates that crude oil costs during the
quarter ended September 30, 2002 were increased by $1 million and during the
nine months ended September 30, 2002 were increased by $22 million.

In August 2002, three affiliates entered into agreements to advance excess
cash to CITGO from time to time under demand notes for amounts of up to a
maximum of $10 million with PDV Texas, Inc. ("PDV Texas"), $30 million with PDV
America and $10 million with PDV Holding, Inc. ("PDV Holding"). The notes bear
interest at rates equivalent to 30-day LIBOR plus .875% payable quarterly.
Amounts outstanding on these notes at September 30, 2002 were $5 million, $28
million and $4 million from PDV Texas, PDV America and PDV Holding, respectively
and are included in payables to affiliates in the accompanying consolidated
balance sheet.

9. INSURANCE RECOVERIES

The insurance recoveries of $46 million included in the quarter ended
September 30, 2002 and $257 million included in the nine-months ended September
30, 2002 relate primarily to a fire which occurred on August 14, 2001 at the
Lemont refinery. These recoveries are, in part, reimbursements for expenses
incurred in 2002 to mitigate the effect of the fire on the Company's earnings.
The Company received cash proceeds of $49 million during the quarter ended
September 30, 2002 and $292 million during the nine months ended September 30,
2002, a portion of which were applied to receivables recorded during 2001. The
Company expects to recover additional amounts related to this event subject to
final settlement negotiations.

F-13

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholder of
CITGO Petroleum Corporation:

We have audited the accompanying consolidated balance sheets of CITGO
Petroleum Corporation and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of income and comprehensive income,
shareholder's equity and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of CITGO Petroleum Corporation and
subsidiaries at December 31, 2001 and 2000, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2001 in conformity with accounting principles generally accepted in the
United States of America.

As discussed in Note 18, the accompanying consolidated financial statements
have been restated to give retroactive effect to the January 1, 2002 merger of
CITGO Petroleum Corporation and VPHI Midwest, Inc., which has been accounted for
in a manner similar to "pooling-of-interests' accounting.

DELOITTE & TOUCHE LLP

Tulsa, Oklahoma
February 14, 2002
(November 26, 2002 as to Note 18)

F-14

AUDITED FINANCIAL STATEMENTS

CITGO PETROLEUM CORPORATION

CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
DECEMBER 31,
-----------------------
2001 2000
---------- ----------
(DOLLARS IN THOUSANDS)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 104,362 $ 19,038
Accounts receivable, net.................................. 913,068 1,372,712
Due from affiliates....................................... 64,923 39,148
Inventories............................................... 1,109,346 1,156,065
Prepaid expenses and other................................ 95,334 10,825
---------- ----------
Total current assets................................... 2,287,033 2,597,788
PROPERTY, PLANT AND EQUIPMENT -- Net........................ 3,292,469 3,287,174
INVESTMENTS IN AFFILIATES................................... 700,701 712,560
OTHER ASSETS................................................ 228,906 208,222
---------- ----------
$6,509,109 $6,805,744

LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Short-term bank loans..................................... $ -- $ 37,500
Accounts payable.......................................... 616,854 1,039,756
Payables to affiliates.................................... 265,517 452,026
Taxes other than income................................... 219,699 210,986
Other..................................................... 300,484 333,018
Current portion of long-term debt......................... 107,864 47,078
Current portion of capital lease obligation............... 20,358 26,649
---------- ----------
Total current liabilities.............................. 1,530,776 2,147,013
LONG-TERM DEBT.............................................. 1,303,692 1,020,025
CAPITAL LEASE OBLIGATION.................................... 46,964 67,322
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS................. 218,706 206,339
OTHER NONCURRENT LIABILITIES................................ 217,121 213,271
DEFERRED INCOME TAXES....................................... 767,338 644,104
MINORITY INTEREST........................................... 23,176 31,518
COMMITMENTS AND CONTINGENCIES (NOTE 13).....................
SHAREHOLDER'S EQUITY:
Common stock -- $1.00 par value, 1,000 shares authorized,
issued and outstanding................................. 1 1
Additional capital........................................ 1,659,698 1,659,698
Retained earnings......................................... 745,102 818,818
Accumulated other comprehensive loss...................... (3,465) (2,365)
---------- ----------
Total shareholder's equity............................. 2,401,336 2,476,152
---------- ----------
$6,509,109 $6,805,744
========== ==========
</Table>

See notes to consolidated financial statements.
F-15

CITGO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2001

<Table>
<Caption>
2001 2000 1999
----------- ----------- -----------
(DOLLARS IN THOUSANDS)

REVENUES:
Net sales........................................... $19,343,263 $21,941,263 $13,135,695
Sales to affiliates................................. 257,905 215,965 198,672
----------- ----------- -----------
19,601,168 22,157,228 13,334,367
Equity in earnings of affiliates.................... 108,915 58,728 22,161
Other income (expense), net......................... (5,235) (26,011) (28,999)
----------- ----------- -----------
19,704,848 22,189,945 13,327,529
----------- ----------- -----------
COST OF SALES AND EXPENSES:
Cost of sales and operating expenses (including
purchases of $6,558,203, $8,676,970, and
$4,955,162 from affiliates)...................... 18,734,652 21,370,315 12,804,171
Selling, general and administrative expenses........ 292,127 226,601 239,082
Interest expense, excluding capital lease........... 69,164 85,565 94,626
Capital lease interest charge....................... 9,128 11,019 12,715
Minority interest................................... 1,971 1,808 151
----------- ----------- -----------
19,107,042 21,695,308 13,150,745
----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE...................... 597,806 494,637 176,784
INCOME TAXES.......................................... 206,222 182,627 54,231
----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE................................ 391,584 312,010 122,553
CUMULATIVE EFFECT, ACCOUNTING FOR DERIVATIVES, NET OF
RELATED INCOME TAXES OF $7,977...................... 13,600 -- --
----------- ----------- -----------
NET INCOME............................................ 405,184 312,010 122,553
OTHER COMPREHENSIVE INCOME (LOSS):
Cash flow hedges:
Cumulative effect, accounting for derivatives,
net of related income taxes of $(850).......... (1,450) -- --
Less: reclassification adjustment for derivative
losses included in net income, net of related
income taxes of $265........................... 469 -- --
----------- ----------- -----------
(981) -- --
Minimum pension liability adjustment, net of
deferred taxes of $69 in 2001, $(499) in 2000 and
$2,012 in 1999................................... (119) 849 (3,214)
----------- ----------- -----------
Total other comprehensive (loss) income.......... (1,100) 849 (3,214)
----------- ----------- -----------
COMPREHENSIVE INCOME.................................. $ 404,084 $ 312,859 $ 119,339
=========== =========== ===========
</Table>

See notes to consolidated financial statements.
F-16

CITGO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2001

<Table>
<Caption>
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)
--------------------------------
COMMON STOCK MINIMUM CASH TOTAL
--------------- ADDITIONAL RETAINED PENSION FLOW SHAREHOLDER'S
SHARES AMOUNT CAPITAL EARNINGS LIABILITY HEDGES TOTAL EQUITY
------ ------ ---------- --------- --------- -------- --------- -------------
(DOLLARS AND SHARES IN THOUSANDS)

BALANCE, JANUARY 1,
1999.................. 1 $1 $1,597,929 $ 624,255 $ -- $ -- $ -- $2,222,185
Net income.............. -- -- -- 122,553 -- -- -- 122,553
Other comprehensive
loss.................. -- -- -- -- (3,214) -- (3,214) (3,214)
Noncash capital
contribution.......... -- -- 69,376 -- -- -- -- 69,376
Noncash dividend paid... -- -- -- (10,788) -- -- -- (10,788)
Dividend paid........... -- -- -- (15,000) -- -- -- (15,000)
-- -- ---------- --------- ------- ----- ------- ----------
BALANCE, DECEMBER 31,
1999.................. 1 1 1,667,305 721,020 (3,214) -- (3,214) 2,385,112
Net income.............. -- -- -- 312,010 -- -- -- 312,010
Other comprehensive
income................ -- -- -- -- 849 -- 849 849
Tax allocation agreement
amendment............. -- -- (7,607) 10,788 -- -- -- 3,181
Dividend paid........... -- -- -- (225,000) -- -- -- (225,000)
-- -- ---------- --------- ------- ----- ------- ----------
BALANCE, DECEMBER 31,
2000.................. 1 1 1,659,698 818,818 (2,365) -- (2,365) 2,476,152
Net income.............. -- -- -- 405,184 -- -- -- 405,184
Other comprehensive
loss.................. -- -- -- -- (119) (981) (1,100) (1,100)
Dividends paid.......... -- -- -- (478,900) -- -- -- (478,900)
-- -- ---------- --------- ------- ----- ------- ----------
BALANCE, DECEMBER 31,
2001.................. 1 $1 $1,659,698 $ 745,102 $(2,484) $(981) (3,465) $2,401,336
== == ========== ========= ======= ===== ======= ==========
</Table>

See notes to condensed consolidated financial statements.
F-17

CITGO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2001

<Table>
<Caption>
2001 2000 1999
--------- --------- ---------
(DOLLARS IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................. $ 405,184 $ 312,010 $ 122,553
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................ 288,882 290,450 274,024
Provision for losses on accounts receivable.......... 6,239 1,651 15,110
Loss on sale of investments.......................... -- 1 1,616
Deferred income taxes................................ 115,025 52,945 79,188
Distributions in excess of equity in earnings of
affiliates......................................... 44,521 68,196 82,847
Other adjustments.................................... 24,680 26,260 18,162
Changes in operating assets and liabilities:
Accounts receivable and due from affiliates........ 427,771 (348,229) (459,287)
Inventories........................................ 42,960 (58,142) (262,795)
Prepaid expenses and other current assets.......... (84,280) 550 10,183
Accounts payable and other current liabilities..... (625,313) 512,753 396,180
Other assets....................................... (90,984) (52,550) (66,332)
Other liabilities.................................. 29,802 (2,609) (15,268)
--------- --------- ---------
Total adjustments............................... 179,303 491,276 73,628
--------- --------- ---------
Net cash provided by operating activities....... 584,487 803,286 196,181
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................... (253,465) (122,049) (248,042)
Proceeds from sales of property, plant and equipment.... 3,866 4,491 16,495
Decrease in restricted cash............................. -- 3,015 6,421
Investments in LYONDELL-CITGO Refining LP............... (31,800) (17,600) --
Loans to LYONDELL-CITGO Refining LP..................... -- (7,024) (24,600)
Proceeds from sale of investments....................... -- -- 4,980
Investments in and advances to other affiliates......... (11,435) (14,500) (4,212)
--------- --------- ---------
Net cash used in investing activities........... (292,834) (153,667) (248,958)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments of) proceeds from short-term bank
loans................................................ (37,500) 21,500 (21,000)
Net proceeds (repayments of) from revolving bank
loans................................................ 391,500 (462,000) 252,000
Payments on private placement senior notes.............. (39,935) (39,935) (39,935)
Payments on taxable bonds............................... (28,000) -- (25,000)
Proceeds from issuance of tax-exempt bonds.............. 28,000 -- 25,000
Payments of capital lease obligations................... (26,649) (7,954) (14,660)
Repayments of other debt................................ (14,845) (14,179) (44,695)
Dividends paid.......................................... (478,900) (225,000) (15,000)
--------- --------- ---------
Net cash (used in) provided by financing
activities.................................... (206,329) (727,568) 116,710
--------- --------- ---------
(continued)
</Table>

F-18

CITGO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2001

<Table>
<Caption>
2001 2000 1999
--------- --------- ---------
(DOLLARS IN THOUSANDS)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......... $ 85,324 $ (77,949) $ 63,933
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............ 19,038 96,987 33,054
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................. $ 104,362 $ 19,038 $ 96,987
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of amounts capitalized.................. $ 83,972 $ 92,080 $ 101,476
========= ========= =========
Income taxes, net of refunds of $30,488 in 1999....... $ 296,979 $ 60,501 $ (16,428)
========= ========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Investment in LYONDELL-CITGO Refining LP (Note 3)....... $ -- $ -- $ (32,654)
========= ========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Noncash dividend........................................ $ -- $ -- $ (10,788)
========= ========= =========
Noncash capital contribution............................ $ -- $ -- $ 69,376
========= ========= =========
Tax allocation agreement amendment...................... $ -- $ 3,181 $ --
========= ========= =========
(concluded)
</Table>

See notes to consolidated financial statements.
F-19

CITGO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2001

1. SIGNIFICANT ACCOUNTING POLICIES

Description of business. CITGO Petroleum Corporation ("CITGO" or the
"Company") is a subsidiary of PDV America, Inc. ("PDV America"), an indirect
wholly owned subsidiary of Petroleos de Venezuela, S.A. ("PDVSA"), the national
oil company of the Bolivarian Republic of Venezuela.

CITGO manufactures or refines and markets quality transportation fuels as
well as lubricants, refined waxes, petrochemicals, asphalt and other industrial
products. CITGO owns and operates three modern, highly complex crude oil
refineries (Lake Charles, Louisiana, Corpus Christi, Texas, and Lemont,
Illinois) and two asphalt refineries (Paulsboro, New Jersey, and Savannah,
Georgia) with a combined aggregate rated crude oil refining capacity of 756
thousand barrels per day ("MBPD"). CITGO also owns a minority interest in
LYONDELL-CITGO Refining LP, a limited partnership (formerly a limited liability
company) that owns and operates a refinery in Houston, Texas, with a rated crude
oil refining capacity of 265 MBPD. CITGO's consolidated financial statements
also include accounts relating to a 65 percent owned lubricant and wax plant,
pipelines, and equity interests in pipeline companies and petroleum storage
terminals (see Note 17, "Subsequent Event").

CITGO's transportation fuel customers include primarily CITGO branded
wholesale marketers, convenience stores and airlines located mainly east of the
Rocky Mountains. Asphalt is generally marketed to independent paving contractors
on the East and Gulf Coasts and the Midwest of the United States. Lubricants are
sold principally in the United States to independent marketers, mass marketers
and industrial customers. CITGO and PDVSA are engaged in a joint effort to sell
lubricants, gasoline and distillates in various Latin American markets.
Petrochemical feedstocks and industrial products are sold to various
manufacturers and industrial companies throughout the United States. Petroleum
coke is sold primarily in international markets.

Principles of consolidation. The consolidated financial statements include
the accounts of CITGO and its subsidiaries including VPHI Midwest, Inc. ("VPHI")
and its wholly owned subsidiary, PDV Midwest Refining, L.L.C. ("PDVMR"), and
Cit-Con Oil Corporation ("Cit-Con"), (collectively referred to as the
"Company"). All subsidiaries are wholly owned except for Cit-Con, which is 65
percent owned (see Note 17, "Subsequent Event"). All material intercompany
transactions and accounts have been eliminated.

The Company's investments in less than majority-owned affiliates are
accounted for by the equity method. The excess of the carrying value of the
investments over the equity in the underlying net assets of the affiliates is
amortized on a straight-line basis over 40 years, which is based upon the
estimated useful lives of the affiliates' assets.

Estimates, risks and uncertainties. The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

CITGO's operations can be influenced by domestic and international
political, legislative, regulatory and legal environments. In addition,
significant changes in the prices or availability of crude oil and refined
products could have a significant impact on CITGO's results of operations for
any particular year.

Impairment of long-lived assets. The Company periodically evaluates the
carrying value of long-lived assets to be held and used when events and
circumstances warrant such a review. The carrying value of a long-lived asset is
considered impaired when the separately identifiable anticipated undiscounted
net cash flow from such asset is less than its carrying value. In that event, a
loss is recognized based on the amount
F-20

by which the carrying value exceeds the fair value of the long-lived asset. Fair
value is determined primarily using the anticipated net cash flows discounted at
a rate commensurate with the risk involved. Losses on long-lived assets to be
disposed of are determined in a similar manner, except that fair values are
reduced for disposal costs.

Revenue recognition. Revenue from sales of products is recognized upon
transfer of title, based upon the terms of delivery.

Supply and marketing activities. The Company engages in the buying and
selling of crude oil to supply its refineries. The net results of this activity
are recorded in cost of sales. The Company also engages in the buying and
selling of refined products to facilitate the marketing of its refined products.
The results of this activity are recorded in cost of sales and sales.

Refined product exchange transactions that do not involve the payment or
receipt of cash are not accounted for as purchases or sales. Any resulting
volumetric exchange balances are accounted for as inventory in accordance with
the Company's last-in, first-out ("LIFO") inventory method. Exchanges that are
settled through payment or receipt of cash are accounted for as purchases or
sales.

Excise taxes. The Company collects excise taxes on sales of gasoline and
other motor fuels. Excise taxes of approximately $3.3 billion, $3.2 billion, and
$3.1 billion were collected from customers and paid to various governmental
entities in 2001, 2000, and 1999, respectively. Excise taxes are not included in
sales.

Cash and cash equivalents. Cash and cash equivalents consist of highly
liquid short-term investments and bank deposits with initial maturities of three
months or less.

Inventories. Crude oil and refined product inventories are stated at the
lower of cost or market and cost is determined using the LIFO method. Materials
and supplies are valued using the average cost method.

Property, plant and equipment. Property, plant and equipment is reported
at cost, less accumulated depreciation. Depreciation is based upon the estimated
useful lives of the related assets using the straight-line method. Depreciable
lives are generally as follows: buildings and leaseholds -- 10 to 24 years;
machinery and equipment -- 5 to 24 years; and vehicles -- 3 to 10 years.

Upon disposal or retirement of property, plant and equipment, the cost and
related accumulated depreciation are removed from the accounts and any resulting
gain or loss is recognized in income.

The Company capitalizes interest on projects when construction entails
major expenditures over extended time periods. Such interest is allocated to
property, plant and equipment and amortized over the estimated useful lives of
the related assets. Interest capitalized totaled $2 million, $4 million, and $7
million, during 2001, 2000, and 1999, respectively.

Commodity and interest rate derivatives. The Company enters into petroleum
futures contracts, options and other over-the-counter commodity derivatives,
primarily to reduce its inventory purchase and product sale exposure to market
risk. In the normal course of business, the Company also enters into certain
petroleum commodity forward purchase and sale contracts, which qualify as
derivatives. The Company also enters into various interest rate swap agreements
to manage its risk related to interest rate change on its debt.

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). In June 2000, Statement of
Financial Accounting Standards No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities, an amendment of SFAS No. 133," was
issued. The statement, as amended, establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives, at fair value, as either assets or
liabilities in the statement of financial position with an offset either to
shareholder's equity and comprehensive income or income depending upon the
classification of the derivative. The Company adopted SFAS No. 133 on January 1,
2001. Certain of the derivative instruments identified at January 1,

F-21

2001 under the provisions of SFAS No. 133 had been previously designated in
hedging relationships that addressed the variable cash flow exposure of
forecasted transactions; under the transition provisions of SFAS No. 133, on
January 1, 2001 the Company recorded an after-tax, cumulative-effect-type
transition charge of $1.5 million to accumulated other comprehensive income
related to these derivatives. Certain of the derivative instruments identified
at January 1, 2001, under the provisions of SFAS No. 133 had been previously
designated in hedging relationships that addressed the fair value of certain
forward purchase and sale commitments; under the transition provisions of SFAS
No. 133, on January 1, 2001 the Company recorded fair value adjustments to the
subject derivatives and related commitments resulting in the recording of a net
after-tax, cumulative-effect-type transition charge of $0.2 million to net
income. The remaining derivatives identified at January 1, 2001 under the
provisions of SFAS No. 133, consisting of certain forward purchases and sales,
had not previously been considered derivatives under accounting principles
generally accepted in the United States of America; under the transition
provisions of SFAS No. 133, on January 1, 2001 the Company recorded an
after-tax, cumulative-effect-type benefit of $13.8 million to net income related
to these derivatives. The Company did not elect prospective hedge accounting for
derivatives existing at the date of adoption of SFAS No. 133.

Effective January 1, 2001, fair values of derivatives are recorded in other
current assets or other current liabilities, as applicable, and changes in the
fair value of derivatives not designated in hedging relationships are recorded
in income. Effective January 1, 2001, the Company's policy is to elect hedge
accounting only under limited circumstances involving derivatives with initial
terms of 90 days or greater and notional amounts of $25 million or greater.

Prior to January 1, 2001, gains or losses on contracts which qualified as
hedges were recognized when the related inventory was sold or the hedged
transaction was consummated. Changes in the market value of commodity
derivatives which were not hedges were recorded as gains or losses in the period
in which they occurred. Additionally, prior to January 1, 2001, premiums paid
for purchased interest rate swap agreements were amortized to interest expense
over the terms of the agreements. Unamortized premiums were included in other
assets. The interest rate differentials received or paid by the Company related
to these agreements were recognized as adjustments to interest expense over the
term of the agreements.

Refinery maintenance. Costs of major refinery turnaround maintenance are
charged to operations over the estimated period between turnarounds. Turnaround
periods range approximately from one to seven years. Unamortized costs are
included in other assets. Amortization of refinery turnaround costs is included
in depreciation and amortization expense. Amortization was $69 million, $68
million, and $58 million for 2001, 2000, and 1999, respectively. Ordinary
maintenance is expensed as incurred.

The American Institute of Certified Public Accountants has issued a
"Statement of Position" exposure draft on cost capitalization that is expected
to require companies to expense the non-capital portion of major maintenance
costs as incurred. The statement is expected to require that any existing
unamortized deferred non-capital major maintenance costs be expensed
immediately. The exposure draft indicates that this change will be required to
be adopted for fiscal years beginning after June 15, 2002, and that the effect
of expensing existing unamortized deferred non-capital major maintenance costs
will be reported as a cumulative effect of an accounting change in the
consolidated statement of income. At December 31, 2001, the Company had included
turnaround costs of $107 million in other assets. Company management has not
determined the amount, if any, of these costs that could be capitalized under
the provisions of the exposure draft.

Environmental expenditures. Environmental expenditures that relate to
current or future revenues are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past operations and
that do not contribute to current or future revenue generation are expensed.
Liabilities are recorded when environmental assessments and/or cleanups are
probable and the costs can be reasonably estimated. Environmental liabilities
are not discounted to their present value. Subsequent adjustments to estimates,
to the extent required, may be made as more refined information becomes
available.

F-22

Income taxes. The Company is included in the consolidated U.S. federal
income tax return filed by PDV Holding, Inc., the direct parent of PDV America.
The Company's current and deferred income tax expense has been computed on a
stand-alone basis using an asset and liability approach.

New accounting standards. In July 2001, the FASB issued Statement of
Financial Accounting Standards No. 141, "Business Combinations" ("SFAS No. 141")
which addresses financial accounting and reporting for business combinations and
requires that all business combinations initiated after June 30, 2001 be
accounted for under the purchase method. Use of the pooling of interests method
is no longer permitted. The adoption of SFAS No. 141 did not impact the
Company's financial position or results of operations.

In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142") which is fully
effective in fiscal years beginning after December 15, 2001, although certain
provisions of SFAS No. 142 are applicable to goodwill and other intangible
assets acquired in transactions completed after June 30, 2001. SFAS No. 142
addresses financial accounting and reporting for acquired goodwill and other
intangible assets and requires that goodwill and intangibles with an indefinite
life no longer be amortized but instead be periodically reviewed for impairment.
The adoption of SFAS No. 142 will not materially impact the Company's financial
position or results of operations.

In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 143, "Accounting for Asset Retirement Obligations" ("SFAS No. 143") which
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. It applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and/or the normal operation of a long-lived asset, except for certain
obligations of lessees. This statement is effective for financial statements
issued for fiscal years beginning after June 15, 2002. The Company has not
determined the impact on its financial statements that may result from the
adoption of SFAS No. 143.

In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
No. 144") which addresses financial accounting and reporting for the impairment
or disposal of long-lived assets by requiring that one accounting model be used
for long-lived assets to be disposed of by sale, whether previously held and
used or newly acquired, and by broadening the presentation of discontinued
operations to include more disposal transactions. SFAS No. 144 is effective for
financial statements issued for fiscal years beginning after December 15, 2001,
and interim periods within those fiscal years. The provisions of this statement
generally are to be applied prospectively; therefore, the adoption of SFAS No.
144 will not impact the Company's financial position or results of operations.

2. REFINERY AGREEMENTS

An affiliate of PDVSA acquired a 50 percent equity interest in a refinery
in Chalmette, Louisiana ("Chalmette") in October 1997, and assigned to CITGO its
option to purchase up to 50 percent of the refined products produced at the
refinery through December 31, 2000 (Note 4). CITGO exercised this option during
2000 and 1999, and acquired approximately 67 MBPD and 66 MBPD of refined
products from the refinery during those years, respectively, approximately
one-half of which was gasoline. The affiliate did not assign this option to
CITGO for 2001.

In October 1998, an affiliate of PDVSA acquired a 50 percent equity
interest in a joint venture that owns and operates a refinery in St. Croix, U.S.
Virgin Islands ("HOVENSA") and has the right under a product sales agreement to
assign periodically to CITGO, or other related parties, its option to purchase
50 percent of the refined products produced by HOVENSA (less a certain portion
of such products that HOVENSA will market directly in the local and Caribbean
markets). In addition, under the product sales agreement, the PDVSA affiliate
has appointed CITGO as its agent in designating which of its affiliates shall
from time to time take deliveries of the refined products available to it. The
product sales agreement will be in effect for the life of the joint venture,
subject to termination events based on default or mutual
F-23

agreement (Note 4). Pursuant to the above arrangement, CITGO acquired
approximately 106 MBPD, 125 MBPD, and 118 MBPD of refined products from HOVENSA
during 2001, 2000, and 1999, respectively, approximately one-half of which was
gasoline.

3. INVESTMENT IN LYONDELL-CITGO REFINING LP

In April 1998, PDVSA, pursuant to its contractual rights, declared force
majeure and reduced deliveries of crude oil to LYONDELL-CITGO; this required
LYONDELL-CITGO to obtain alternative sources of crude oil supply in replacement,
which resulted in lower operating margins. On October 1, 2000, the force majeure
condition was terminated and PDVSA deliveries of crude oil returned to contract
levels. On February 9, 2001, PDVSA notified LYONDELL-CITGO that effective
February 1, 2001, it had again declared force majeure under the contract
described above. As of December 31, 2001, PDVSA deliveries of crude oil to
LYONDELL-CITGO have not been reduced due to PDVSA's declaration of force
majeure. On January 22, 2002, PDVSA notified LYONDELL-CITGO that pursuant to the
February 9, 2001 declaration of force majeure, effective March 1, 2002, PDVSA
expects to deliver approximately 20 percent less than the contract volume and
that force majeure will be in effect until at least June 2002. If PDVSA reduces
its delivery of crude oil under these crude oil supply agreements, LYONDELL-
CITGO will be required to use alternative sources of crude oil which may result
in reduced operating margins. The effect of this declaration on LYONDELL-CITGO's
crude oil supply and the duration of this situation are not known at this time.

As of December 31, 2001, CITGO has outstanding loans to LYONDELL-CITGO of
$35 million. On December 31, 1999, CITGO converted $32.7 million of outstanding
loans to investments in LYONDELL-CITGO. The notes bear interest at market rates,
which were approximately 2.2 percent, 6.9 percent, and 6.7 percent at December
31, 2001, 2000 and 1999, and are due July 1, 2003. These notes are included in
other assets in the accompanying consolidated balance sheets.

CITGO accounts for its investment in LYONDELL-CITGO using the equity method
of accounting and records its share of the net earnings of LYONDELL-CITGO based
on allocations of income agreed

F-24

to by the Owners. Cash distributions are allocated to the Owners based on
participation interest. Information on CITGO's investment in LYONDELL-CITGO
follows:

<Table>
<Caption>
DECEMBER 31,
------------------------------------
2001 2000 1999
---------- ---------- ----------
(000'S OMITTED)

Carrying value of investment............................. $ 507,940 $ 518,333 $ 560,227
Notes receivable......................................... 35,278 35,278 28,255
Participation interest................................... 41% 41% 41%
Equity in net income..................................... $ 73,983 $ 41,478 $ 924
Cash distributions received.............................. 116,177 100,972 70,724
Summary of financial position:
Current assets......................................... $ 227,000 $ 310,000 $ 219,000
Noncurrent assets...................................... 1,434,000 1,386,000 1,406,000
Current liabilities (including debt of $50,000,
$470,000 and $450,000 at December 31, 2001, 2000,
and 1999, respectively)............................. 377,000 867,000 697,000
Noncurrent liabilities (including debt of $450,000 at
December 31, 2001 and $0 at December 31, 2000 and
1999)............................................... 776,000 321,000 316,000
Member's equity........................................ 508,000 508,000 612,000
Summary of operating results:
Revenue................................................ $3,284,000 $4,075,000 $2,571,000
Gross profit........................................... 317,000 250,000 133,000
Net income............................................. 203,000 128,000 24,000
</Table>

On July 20, 2001, LYONDELL-CITGO completed a refinancing of its working
capital revolver and its $450 million term bank loan. The new 18-month term loan
and working capital revolver will mature in January 2003.

4. RELATED PARTY TRANSACTIONS

The Company purchases approximately one-half of the crude oil processed in
its refineries from subsidiaries of PDVSA under long-term supply agreements.
These supply agreements extend through the year 2006 for the Lake Charles
refinery, 2010 for the Paulsboro refinery, 2012 for the Corpus Christi refinery
and 2013 for the Savannah refinery. The Company purchased $3.0 billion, $3.2
billion, and $1.7 billion of crude oil, feedstocks and other products from
wholly owned subsidiaries of PDVSA in 2001, 2000, and 1999, respectively, under
these and other purchase agreements.

During 2000 and 1999, PDVSA deliveries of crude oil to CITGO were less than
contractual base volumes due to the PDVSA declaration of force majeure pursuant
to all four long-term crude oil supply contracts described above. As a result,
the Company was required to obtain alternative sources of crude oil, which
resulted in lower operating margins. On October 1, 2000 the force majeure
condition was terminated and PDVSA deliveries of crude oil returned to contract
levels.

On February 9, 2001 PDVSA notified CITGO that, effective February 1, 2001,
it had declared force majeure under the four contracts described above. During
2001, PDVSA deliveries of crude oil to CITGO were slightly less than contractual
base volumes due to this declaration of force majeure. Therefore, the Company
was required to use alternative sources of crude oil, which resulted in lower
operating margins. On January 22, 2002, PDVSA notified CITGO that pursuant to
the February 9, 2001 declaration of force majeure, effective March 1, 2002,
PDVSA expects to deliver approximately 20 percent less than the contract volume
and PDVSA indicated that force majeure will be in effect until at least June
2002. If PDVSA reduces its delivery of crude oil under these crude oil supply
agreements, CITGO will be required

F-25

to use alternative sources of crude oil which may result in reduced operating
margins. The effect of this declaration on CITGO's crude oil supply and the
duration of this situation are not known at this time.

During the second half of 1999 and throughout 2000 and 2001, PDVSA did not
deliver naphtha pursuant to certain contracts and has made or will make
contractually specified payments in lieu thereof.

The crude oil supply contracts incorporate formula prices based on the
market value of a number of refined products deemed to be produced from each
particular crude oil, less (i) certain deemed refining costs adjustable for
inflation; (ii) certain actual costs, including transportation charges, import
duties and taxes; and (iii) a deemed margin, which varies according to the grade
of crude oil. At December 31, 2001 and 2000, $185 million and $251 million,
respectively, were included in payables to affiliates as a result of these
transactions.

The Company also purchases refined products from various other affiliates
including LYONDELL-CITGO, HOVENSA and Chalmette, under long-term contracts.
These agreements incorporate various formula prices based on published market
prices and other factors. Such purchases totaled $3.4 billion, $5.3 billion, and
$3.1 billion for 2001, 2000, and 1999, respectively. At December 31, 2001 and
2000, $73 million and $195 million, respectively, were included in payables to
affiliates as a result of these transactions.

The Company had refined product, feedstock, and other product sales to
affiliates, primarily at market-related prices, of $248 million, $205 million,
and $187 million in 2001, 2000, and 1999, respectively. At December 31, 2001 and
2000, $64 million and $38 million, respectively, was included in due from
affiliates as a result of these and related transactions.

PDVMR is party to a Contract for Purchase and Sale of Crude Oil date April
23, 1997, with Maraven S.A. ("Maraven"), a corporation organized and existing,
at the date of the contract, under the laws of the Bolivarian Republic of
Venezuela. In accordance with the contract, Maraven (or its successor) is
obligated to provide a base volume of up to 100,000 barrels per day of
Venezuelan crude. The Venezuelan crude is priced in accordance with a formula
based upon posted crude prices less a quality differential. Maraven (or its
successor), CITGO and PDVMR can change the amount and type of crude supplied.
The term of the agreement is 60 months with renewal periods of 12 months. PDVMR
purchased approximately 10 MBPD, 13 MBPD and 31 MBPD under this contract in
2001, 2000 and 1999, respectively.

PDVMR sells certain refinery by-products and utilities to The Needle Coker
Company ("Needle") (Note 8) and buys back hydrogen, naphtha and steam. Sales to
Needle were approximately $10 million, $11 million and $9 million in 2001, 2000
and 1999, respectively. Purchases from Needle were approximately $8 million, $9
million and $6 million in 2001, 2000 and 1999, respectively.

Under a separate guarantee of rent agreement, PDVSA has guaranteed payment
of rent, stipulated loss value and terminating value due under the lease of the
Corpus Christi refinery facilities described in Note 14. The Company has also
guaranteed debt of certain affiliates (Note 13).

During 1999, PDV America cancelled a note receivable from VPHI in the
amount of $69.4 million. The Company recorded the cancellation as a noncash
capital contribution.

The Company and PDV Holding are parties to a tax allocation agreement that
is designed to provide PDV Holding with sufficient cash to pay its consolidated
income tax liabilities. PDV Holding appointed CITGO as its agent to handle the
payment of such liabilities on its behalf. As such, CITGO calculates the taxes
due, allocates the payments among the members according to the agreement and
bills each member accordingly. Each member records its amounts due or payable to
CITGO in a related party payable account. At December 31, 2001, CITGO had net
related party receivables related to federal income taxes of $23 million. At
December 31, 2000, CITGO had a net related party payable related to federal
income taxes of $35.3 million.

Prior to the formation of PDV Holding as the common parent in the 1997 tax
year, the Company and PDV America were parties to a tax allocation agreement. In
1998, $8 million due from CITGO to PDV
F-26

America under this agreement for the 1997 tax year was classified as a noncash
contribution of capital. In 1999, $11 million due from PDV America to CITGO
under this agreement for the 1998 tax year was classified as a noncash dividend.
Amendment No. 2 to the Tax Allocation Agreement was executed during 2000; this
amendment eliminated the provisions of the agreement that provided for these
noncash contribution and dividend classifications effective with the 1997 tax
year. Consequently, the classifications made in the prior two years were
reversed in 2000. In the event that CITGO should cease to be part of the
consolidated federal income tax group, any amounts included in shareholder's
equity under this agreement are required to be settled between the parties in
cash (net $2 million payable to PDV America at December 31, 2001 and 2000).

At December 31, 2001, CITGO had income tax prepayments of $76 million
included in prepaid expenses. At December 31, 2000, CITGO had federal income
taxes payable of $52 million included in other current liabilities.

5. ACCOUNTS RECEIVABLE

<Table>
<Caption>
2001 2000
-------- ----------
(000'S OMITTED)

Trade....................................................... $718,319 $1,229,040
Credit card................................................. 121,334 126,822
Other....................................................... 87,195 32,996
-------- ----------
926,848 1,388,858
Allowance for uncollectible accounts........................ (13,780) (16,146)
-------- ----------
$913,068 $1,372,712
======== ==========
</Table>

Sales are made on account, based on pre-approved unsecured credit terms
established by CITGO management. The Company also has a proprietary credit card
program which allows commercial customers to purchase fuel at CITGO branded
outlets. Allowances for uncollectible accounts are established based on several
factors that include, but are not limited to, analysis of specific customers,
historical trends, current economic conditions and other information.

The Company has two limited purpose consolidated subsidiaries, CITGO
Funding Corporation and CITGO Funding Corporation II, which established
non-recourse agreements to sell trade accounts and credit card receivables to
independent third parties. Under the terms of the agreements, new receivables
are added to the pool as collections (administered by CITGO) reduce previously
sold receivables. The amounts sold at any one time is limited to a maximum of
$225 million (increased from $125 million through an amendment in April 2000).
The agreement to sell trade accounts receivable was extended in April 2001 for
one year, and is renewable for successive one-year terms by mutual agreement. In
October 2001, the agreement to sell up to $150 million of credit card
receivables expired and CITGO chose not to renew it. Fees and expenses of $7.6
million, $16 million, and $15.2 million related to the agreements were recorded
as other expense during the years ended December 31, 2001, 2000 and 1999,
respectively. In 2000, the Company realized a gain of $5 million resulting from
the reversal of the allowance for uncollectible accounts related to certain
receivables sold.

6. INVENTORIES

<Table>
<Caption>
2001 2000
---------- ----------
(000'S OMITTED)

Refined product............................................. $ 836,683 $ 809,953
Crude oil................................................... 193,319 269,831
Materials and supplies...................................... 79,344 76,281
---------- ----------
$1,109,346 $1,156,065
========== ==========
</Table>

F-27

At December 31, 2001 and 2000, estimated net market values exceeded
historical cost by approximately $174 million and $762 million, respectively.

7. PROPERTY, PLANT AND EQUIPMENT

<Table>
<Caption>
2001 2000
----------- -----------
(000'S OMITTED)

Land....................................................... $ 137,927 $ 138,825
Buildings and leaseholds................................... 470,465 464,542
Machinery and equipment.................................... 3,951,191 3,873,640
Vehicles................................................... 23,866 23,764
Construction in process.................................... 219,938 82,155
----------- -----------
4,803,387 4,582,926
Accumulated depreciation and amortization.................. (1,510,918) (1,295,752)
----------- -----------
$ 3,292,469 $ 3,287,174
=========== ===========
</Table>

Depreciation expense for 2001, 2000, and 1999 was $220 million, $222
million, and $214 million, respectively.

Other income (expense) includes gains and losses on disposals and
retirements of property, plant and equipment. Such net losses were approximately
$24 million, $11 million, and $18 million in 2001, 2000, and 1999, respectively.

8. INVESTMENTS IN AFFILIATES

In addition to LYONDELL-CITGO, the Company's investments in affiliates
consist of equity interests of 6.8 percent to 50 percent in joint interest
pipelines and terminals, including a 15.79 percent interest in Colonial Pipeline
Company; a 49.5 percent partnership interest in Nelson Industrial Steam Company
("NISCO"), which is a qualified cogeneration facility; a 49 percent partnership
interest in Mount Vernon Phenol Plant; and a 25 percent interest in Needle. The
carrying value of these investments exceeded the Company's equity in the
underlying net assets by approximately $139 million and $143 million at December
31, 2001 and 2000, respectively.

At December 31, 2001 and 2000, NISCO had a partnership deficit. CITGO's
share of this deficit, as a general partner, was $39.5 million and $50.1 million
at December 31, 2001 and 2000, respectively, which is included in other
noncurrent liabilities in the accompanying consolidated balance sheets.

Information on the Company's investments, including LYONDELL-CITGO,
follows:

<Table>
<Caption>
DECEMBER 31,
------------------------------
2001 2000 1999
-------- -------- --------
(000'S OMITTED)

Company's investments in affiliates (excluding
NISCO)............................................. $700,701 $712,560 $758,812
Company's equity in net income of affiliates......... 108,915 58,728 22,161
Dividends and distributions received from
affiliates......................................... 153,435 126,600 105,339
</Table>

F-28

Selected financial information provided by the affiliates is summarized as
follows:

<Table>
<Caption>
DECEMBER 31,
------------------------------------
2001 2000 1999
---------- ---------- ----------
(000'S OMITTED)

Summary of financial position:
Current assets................................. $ 566,204 $ 638,297 $ 485,824
Noncurrent assets.............................. 3,288,950 3,005,582 2,915,245
Current liabilities (including debt of
$685,089, $729,806 and $625,006 at December
31, 2001, 2000, and 1999, respectively)..... 1,240,391 1,336,989 1,039,409
Noncurrent liabilities (including debt of
$1,460,196, $1,274,069 and $1,046,317 at
December 31, 2001, 2000, and 1999,
respectively)............................... 2,082,573 1,874,465 1,681,558
Summary of operating results:
Revenues....................................... $4,603,136 $5,221,382 $3,621,296
Gross profit................................... 781,630 700,317 577,258
Net income..................................... 397,501 325,489 244,635
</Table>

9. SHORT-TERM BANK LOANS

As of December 31, 2001, the Company has established $190 million of
uncommitted, unsecured, short-term borrowing facilities with various banks.
Interest rates on these facilities are determined daily based upon the federal
funds' interest rates, and maturity options vary up to 30 days. The weighted
average interest rates actually incurred in 2001, 2000, and 1999 were 2.3
percent, 6.4 percent, and 5.5 percent, respectively. The Company had $0 and $38
million of borrowings outstanding under these facilities at December 31, 2001
and 2000, respectively.

10. LONG-TERM DEBT AND FINANCING ARRANGEMENTS

<Table>
<Caption>
2001 2000
---------- ----------
(000'S OMITTED)

Revolving bank loans........................................ $ 391,500 $ --
Senior Notes $200 million face amount, due 2006 with
interest rate of 7.875%................................... 199,867 199,837
Private Placement Senior Notes, due 2006 with an interest
rate of 9.30%............................................. 56,819 96,753
Master Shelf Senior Notes, due 2002 to 2009 with interest
rates from 7.17% to 8.94%................................. 260,000 260,000
Tax-Exempt Bonds, due 2004 to 2031 with variable and fixed
interest rates............................................ 357,370 329,370
Taxable Bonds, due 2026 to 2028 with variable interest
rates..................................................... 146,000 174,000
Cit-Con bank credit agreement............................... -- 7,143
---------- ----------
1,411,556 1,067,103
Current portion of long-term debt........................... (107,864) (47,078)
---------- ----------
$1,303,692 $1,020,025
========== ==========
</Table>

Revolving bank loans. CITGO's credit agreements with various banks consist
of (i) a $400 million, five-year, revolving bank loan maturing in May 2003; (ii)
a $150 million, 364-day, revolving bank loan; and (iii) a $25 million 364-day
revolving bank loan established May 28, 2001, all of which are unsecured and
have various borrowing maturities and interest rate options. Interest rates on
the revolving bank loans

F-29

ranged from 2.5 percent -- 2.9 percent at December 31, 2001; $360 million was
outstanding under these credit agreements at December 31, 2001.

On May 11, 2001 CITGO renewed its $150 million 364-day revolving bank loan
facility for another term.

PDVMR had a revolving credit facility with a consortium of banks which was
committed through April 28, 2002, and allowed for borrowings up to $75 million
at various interest rates. Inventories and accounts receivable of PDVMR were
pledged as collateral. The weighted average interest rate at December 31, 2001
was 2.5 percent. At December 31, 2001, $32 million was outstanding under this
facility. PDVMR canceled this facility effective January 23, 2002.

Shelf registration. In April 1996, the Company filed a registration
statement with the Securities and Exchange Commission relating to the shelf
registration of $600 million of debt securities that may be offered and sold
from time to time. In May 1996, the registration became effective and CITGO sold
a tranche of debt securities with an aggregate offering price of $200 million.
On October 28, 1997, the Company entered into a Selling Agency Agreement with
Salomon Brothers Inc. and Chase Securities Inc. providing for the sale of up to
an additional $235 million in aggregate principal amount of notes in tranches
from time to time by the Company under the shelf registration. No amounts were
sold under this agreement as of December 31, 2001.

Private placement. At December 31, 2001, the Company has outstanding
approximately $57 million of privately placed, unsecured Senior Notes. Principal
amounts are payable in annual installments in November and interest is payable
semiannually in May and November.

Master shelf agreement. At December 31, 2001, the Company has outstanding
$260 million of privately-placed senior notes under an unsecured Master Shelf
Agreement with an insurance company. The notes have various fixed interest rates
and maturities.

Covenants. The various debt agreements above contain certain covenants
that, depending upon the level of the Company's capitalization and earnings,
could impose limitations on the Company's ability to pay dividends, incur
additional debt, place liens on property, and sell fixed assets. The Company was
in compliance with the debt covenants at December 31, 2001.

Tax-exempt bonds. At December 31, 2001, through state entities, CITGO has
outstanding $74.8 million of industrial development bonds for certain Lake
Charles port facilities and pollution control equipment and $262.7 million of
environmental revenue bonds to finance a portion of the Company's environmental
facilities at its Lake Charles and Corpus Christi refineries and at the
LYONDELL-CITGO refinery. Additional credit support for these bonds is provided
through letters of credit. The bonds bear interest at various floating rates,
which ranged from 2.5 percent to 6.0 percent at December 31, 2001 and ranged
from 4.7 percent to 6.0 percent at December 31, 2000.

PDVMR has issued $19.9 million of variable rate pollution control bonds,
with interest currently paid monthly. The bonds have one payment at maturity in
the year 2008 to retire the principal, and principal and interest payments are
guaranteed by a $20.3 million letter of credit.

Taxable bonds. At December 31, 2001, through state entities, the Company
has outstanding $146 million of taxable environmental revenue bonds to finance a
portion of the Company's environmental facilities at its Lake Charles refinery
and at the LYONDELL-CITGO refinery. Such bonds are secured by letters of credit
and have floating interest rates (3.1 percent at December 31, 2001 and 6.6
percent at December 31, 2000). At the option of the Company and upon the
occurrence of certain specified conditions, all or any portion of such taxable
bonds may be converted to tax-exempt bonds. As of December 31, 2001, $49 million
of originally issued taxable bonds had been converted to tax-exempt bonds.

Cit-Con bank credit agreement. The Cit-Con bank credit agreement consisted
of a term loan collateralized by throughput agreements of the owner companies.
The loan contained various interest rate

F-30

options (weighted average effective rate of 7.6 percent at December 31, 2000),
and required quarterly principal payments through December 2001.

Debt maturities. Future maturities of long-term debt as of December 31,
2001, are: 2002 -- $107.9 million, 2003 -- $381.4 million, 2004 -- $47.2
million, 2005 -- $11.4 million, 2006 -- $251.2 million and $612.5 million
thereafter.

Interest rate swap agreements. The Company has entered into the following
interest rate swap agreements to reduce the impact of interest rate changes on
its variable interest rate debt:

<Table>
<Caption>
NOTIONAL PRINCIPAL
AMOUNT
FIXED -------------------
VARIABLE RATE INDEX EXPIRATION DATE RATE PAID 2001 2000
------------------- --------------- --------- -------- --------
(000'S OMITTED)

J.J. Kenny............................... February 2005 5.30% $12,000 $12,000
J.J. Kenny............................... February 2005 5.27% 15,000 15,000
J.J. Kenny............................... February 2005 5.49% 15,000 15,000
------- -------
$42,000 $42,000
======= =======
</Table>

Interest expense includes $0.6 million and $1.5 million in 2000 and 1999,
respectively, related to the net settlements on these agreements. Effective
January 1, 2001, changes in the fair value of these agreements is recorded in
other income (expense). The fair value of these agreements at December 31, 2001,
based on the estimated amount that CITGO would receive or pay to terminate the
agreements as of that date and taking into account current interest rates, was a
loss of $2.8 million, the offset of which is recorded in the balance sheet
caption other current liabilities.

11. EMPLOYEE BENEFIT PLANS

Employee savings. CITGO sponsors three qualified defined contribution
retirement and savings plans covering substantially all eligible salaried and
hourly employees. Participants make voluntary contributions to the plans and
CITGO makes contributions, including matching of employee contributions, based
on plan provisions. CITGO expensed $20 million, $17 million and $18 million
related to its contributions to these plans in 2001, 2000 and 1999,
respectively.

Pension benefits. CITGO sponsors three qualified noncontributory defined
benefit pension plans, two covering eligible hourly employees and one covering
eligible salaried employees. CITGO also sponsors three nonqualified defined
benefit plans for certain eligible employees. The qualified plans' assets
include corporate securities, shares in a fixed income mutual fund, two
collective funds and a short-term investment fund. The nonqualified plans are
not funded.

CITGO's policy is to fund the qualified pension plans in accordance with
applicable laws and regulations and not to exceed the tax deductible limits. The
nonqualified plans are funded as necessary to pay retiree benefits. The plan
benefits for each of the qualified pension plans are primarily based on an
employee's years of plan service and compensation as defined by each plan.

Postretirement benefits other than pensions. In addition to pension
benefits, CITGO also provides certain health care and life insurance benefits
for eligible salaried and hourly employees at retirement. These benefits are
subject to deductibles, copayment provisions and other limitations and are
primarily funded on a pay-as-you-go basis. CITGO reserves the right to change or
to terminate the benefits at any time.

F-31

The following sets forth the changes in benefit obligations and plan assets
for the CITGO pension and postretirement plans for the years ended December 31,
2001 and 2000, and the funded status of such plans reconciled with amounts
reported in the Company's consolidated balance sheets:

<Table>
<Caption>
PENSION BENEFITS OTHER BENEFITS
------------------- ---------------------
2001 2000 2001 2000
-------- -------- --------- ---------
(000'S OMITTED)

CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of
year................................... $288,188 $258,703 $ 206,276 $ 189,032
Service cost............................. 15,680 15,533 5,754 5,769
Interest cost............................ 21,798 19,680 15,708 14,392
Plan vesting changes..................... -- 5,556 -- --
Actuarial loss........................... 23,130 737 40,556 4,463
Benefits paid............................ (11,879) (12,021) (7,598) (7,380)
-------- -------- --------- ---------
Benefit obligation at end of year........ 336,917 288,188 260,696 206,276
-------- -------- --------- ---------
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of
year................................... 272,889 275,382 1,053 991
Actual return on plan assets............. (10,185) 6,844 62 62
Employer contribution.................... 13,128 2,684 7,598 7,380
Benefits paid............................ (11,879) (12,021) (7,598) (7,380)
-------- -------- --------- ---------
Fair value of plan assets at end of
year................................... 263,953 272,889 1,115 1,053
-------- -------- --------- ---------
Funded status............................ (72,965) (15,299) (259,581) (205,223)
Unrecognized net actuarial (gain) loss... (1,991) (62,492) 30,840 (9,717)
Unrecognized prior service cost.......... 2,293 2,644 -- --
Net gain at date of adoption............. (475) (744) -- --
-------- -------- --------- ---------
Net amount recognized.................... $(73,138) $(75,891) $(228,741) $(214,940)
======== ======== ========= =========
AMOUNTS RECOGNIZED IN THE COMPANY'S
CONSOLIDATED BALANCE SHEETS CONSIST OF:
Accrued benefit liability.............. $(80,238) $(83,353) $(228,741) $(214,940)
Intangible asset....................... 3,035 3,584 -- --
Accumulated other comprehensive
income.............................. 4,065 3,878 -- --
-------- -------- --------- ---------
Net amount recognized.................... $(73,138) $(75,891) $(228,741) $(214,940)
======== ======== ========= =========
</Table>

<Table>
<Caption>
PENSION
BENEFITS OTHER BENEFITS
----------- ---------------
2001 2000 2001 2000
---- ---- ------ ------

WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31,:
Discount rate............................................ 7.25% 7.75% 7.25% 7.75%
Expected return on plan assets........................... 9.00% 9.00% 6.00% 6.00%
Rate of compensation increase............................ 5.00% 5.00% -- --
</Table>

For measurement purposes, a 10 percent pre-65 and an 11 percent post-65
annual rate of increase in the per capita cost of covered health care benefits
was assumed for 2002. These rates are assumed to decrease 1 percent per year to
an ultimate level of 5 percent by 2007 for pre-65 and 2008 for post-65
participants, and to remain at that level thereafter.

F-32

<Table>
<Caption>
PENSION BENEFITS OTHER BENEFITS
------------------------------ ----------------------------
2001 2000 1999 2001 2000 1999
-------- -------- -------- ------- -------- -------
(000'S OMITTED)

Components of net
periodic benefit cost:
Service cost.......... $ 15,680 $ 15,533 $ 19,554 $ 5,754 $ 5,769 $ 6,922
Interest cost......... 21,798 19,680 17,899 15,708 14,392 13,040
Expected return on
plan assets........ (24,165) (24,397) (22,531) (63) (59) (57)
Amortization of prior
service cost....... 351 143 40 -- -- --
Amortization of net
gain at date of
adoption........... (268) (268) (268) -- -- --
Recognized net
actuarial gain..... (3,021) (4,824) (1,649) -- (17,254) --
-------- -------- -------- ------- -------- -------
Net periodic benefit
cost.................. $ 10,375 $ 5,867 $ 13,045 $21,399 $ 2,848 $19,905
======== ======== ======== ======= ======== =======
One-time adjustment..... $ -- $ 2,875 $ -- $ -- $ -- $ --
======== ======== ======== ======= ======== =======
</Table>

Actuarial gains (or losses) related to the postretirement benefit
obligation are recognized as a component of net postretirement benefit cost by
the amount the beginning of year unrecognized net gain (or loss) exceeds 7.5
percent of the accumulated postretirement benefit obligation.

The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plan with accumulated benefit obligations
in excess of plan assets were $33.4 million, $29.3 million and $0, respectively,
as of December 31, 2001, and $31.7 million, $28 million and $0, respectively, as
of December 31, 2000.

Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in
assumed health care cost trend rates would have the following effects:

<Table>
<Caption>
1-PERCENTAGE- 1-PERCENTAGE-
POINT INCREASE POINT DECREASE
-------------- --------------
(000'S OMITTED)

Increase (decrease) in total of service and interest cost
components.............................................. $ 3,580 $ (2,850)
Increase (decrease) in postretirement benefit
obligation.............................................. 39,683 (32,151)
</Table>

Employee separation programs. During 1997, CITGO's senior management
implemented a Transformation Program that resulted in certain personnel
reductions (the "Separation Programs"). CITGO expensed approximately $0.3
million, $1 million and $7 million for the years ended December 31, 2001, 2000
and 1999, respectively, relating to the Separation Programs.

PDVMR pension plans. In connection with the creation of PDVMR, on May 1,
1997, PDVMR assumed the responsibility for a former partnership's pension plans,
which include both a qualified and a nonqualified plan which were frozen at
their current levels on April 30, 1997. The plans cover former employees of the
partnership who were participants in the plans as of April 30, 1997. At December
31, 2001 and 2000, plan assets consisted of equity securities, bonds and cash.

F-33

The following sets forth the changes in benefit obligations and plan assets
for the PDVMR pension plans for the years ended December 31, 2001 and 2000, and
the funded status of such plans reconciled with amounts reported in the
Company's consolidated balance sheets:

<Table>
<Caption>
2001 2000
------- -------
(000S OMITTED)

Change in benefit obligation:
Benefit obligation at beginning of year................... $51,446 $50,387
Interest cost............................................. 3,934 3,823
Actuarial (gain) loss..................................... (2) 2,097
Benefits paid............................................. (1,788) (4,861)
------- -------
Benefit obligation at end of year........................... 53,590 51,446
------- -------
Change in plan assets:
Fair value of plan assets at beginning of year............ 66,737 69,782
Actual return on plan assets.............................. (4,661) 1,813
Employer contribution..................................... -- 3
Benefits paid............................................. (1,788) (4,861)
------- -------
Fair value of plan assets at end of year.................. 60,288 66,737
------- -------
Funded status............................................. 6,698 15,291
Unrecognized net actuarial loss (gain).................... 6,091 (4,986)
------- -------
Prepaid benefit cost...................................... $12,789 $10,305
======= =======
</Table>

<Table>
<Caption>
2001 2000
---- ----

WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31:
Discount rate............................................. 7.25% 7.75%
Expected return on plan assets............................ 9.50% 9.50%
</Table>

<Table>
<Caption>
2001 2000
------- -------
(000S OMITTED)

COMPONENTS OF NET PERIODIC BENEFIT CREDIT:
Interest cost............................................. $ 3,934 $ 3,823
Expected return on plan assets............................ (6,421) (6,123)
Recognized net actuarial loss (gain)...................... 3 (55)
------- -------
Net periodic benefit credit................................. $(2,484) $(2,355)
======= =======
</Table>

The projected benefit obligation of the nonqualified plan (which equals the
accumulated benefit obligation for this plan) was $487,000 as of December 31,
2001 and $437,000 as of December 31, 2000. The plan is unfunded.

F-34

12. INCOME TAXES

The provisions for income taxes are comprised of the following:

<Table>
<Caption>
2001 2000 1999
-------- -------- --------
(000'S OMITTED)

Current:
Federal............................................ $ 84,960 $125,068 $(25,517)
State.............................................. 5,686 4,614 559
-------- -------- --------
90,646 129,682 (24,958)
Deferred............................................. 115,576 52,945 79,189
-------- -------- --------
$206,222 $182,627 $ 54,231
======== ======== ========
</Table>

The federal statutory tax rate differs from the effective tax rate due to
the following:

<Table>
<Caption>
2001 2000 1999
---- ---- ----

Federal statutory tax rate.................................. 35.0% 35.0% 35.0%
State taxes, net of federal benefit......................... 0.9% 1.6% 3.9%
Dividend exclusions......................................... (1.2)% (1.3)% (4.4)%
Tax settlement.............................................. --% --% (6.4)%
Other....................................................... (0.2)% 1.6% 2.6%
---- ---- ----
Effective tax rate.......................................... 34.5% 36.9% 30.7%
==== ==== ====
</Table>

The effective tax rate for 1999 was unusually low due primarily to the
favorable resolution in this year with the Internal Revenue Service of
significant tax issues related to environmental expenditures.

Deferred income taxes reflect the net tax effects of (i) temporary
differences between the financial and tax bases of assets and liabilities, and
(ii) loss and tax credit carryforwards. The tax effects of significant items
comprising the Company's net deferred tax liability as of December 31, 2001 and
2000 are as follows:

<Table>
<Caption>
2001 2000
---------- ----------
(000'S OMITTED)

Deferred tax liabilities:
Property, plant and equipment............................. $ 710,131 $ 678,416
Inventories............................................... 93,459 121,606
Investments in affiliates................................. 173,724 163,050
Other..................................................... 58,170 59,556
---------- ----------
1,035,484 1,022,628
---------- ----------
Deferred tax assets:
Postretirement benefit obligations........................ 88,049 76,396
Employee benefit accruals................................. 57,243 43,682
Alternative minimum tax credit carryforwards.............. 59,929 109,403
Net operating loss carryforwards.......................... 1,602 729
Marketing and promotional accruals........................ 4,989 12,594
Other..................................................... 51,970 89,172
---------- ----------
263,782 331,976
---------- ----------
Net deferred tax liability (of which $4,365 and $46,545 is
included in current liabilities at December 31, 2001 and
2000, respectively)....................................... $ 771,702 $ 690,652
========== ==========
</Table>

F-35

The Company's alternative minimum tax credit carryforwards are available to
offset regular federal income taxes in future years without expiration, subject
to certain alternative minimum tax limitations.

13. COMMITMENTS AND CONTINGENCIES

Litigation and injury claims. Various lawsuits and claims arising in the
ordinary course of business are pending against the Company. The Company records
accruals for potential losses when, in management's opinion, such losses are
probable and reasonably estimable. If known lawsuits and claims were to be
determined in a manner adverse to the Company, and in amounts greater than the
Company's accruals, then such determinations could have a material adverse
effect on the Company's results of operations in a given reporting period. The
most significant lawsuits and claims are discussed below.

Four former marketers of the UNO-VEN Company ("UNO-VEN") have filed a class
action complaint against UNO-VEN alleging improper termination of the UNO-VEN
Marketer Sales Agreement under the Petroleum Marketing Practices Act in
connection with PDVMR's 1997 acquisition of Unocal's interest in UNO-VEN. This
class action has been certified for liability purposes. The lawsuit is pending
in U.S. District Court in Wisconsin. PDVMR has filed a motion for summary
judgment. The Company, including PDVMR, jointly and severally, has agreed to
indemnify UNO-VEN and certain other related entities against certain liabilities
and claims, including this matter.

A lawsuit is pending against PDVMR and CITGO in Illinois State court which
claims damages as a result of PDVMR's invoicing a partnership, in which it is a
partner, and an affiliate of the other partner of the partnership, alleging
excessive charges for electricity utilized by these entities' facilities located
adjacent to the Lemont, Illinois refinery. PDVMR has denied all allegations and
is pursuing its defenses.

In May 1997, a fire occurred at CITGO's Corpus Christi refinery. No serious
personal injuries were reported. There are seventeen related lawsuits pending in
Corpus Christi, Texas state court against CITGO on behalf of approximately 9,000
individuals alleging property damages, personal injury and punitive damages. A
trial of the claims of approximately 20 plaintiffs is scheduled for April 2002.
Approximately 1,300 claims have been resolved for immaterial amounts.

A class action lawsuit is pending in Corpus Christi, Texas state court
against CITGO which claims damages for reduced value of residential properties
as a result of alleged air, soil and groundwater contamination. CITGO has
purchased 275 adjacent properties included in the lawsuit and settled those
related property damage claims. Over CITGO's objections, the trial court has
recently ruled that an agreement by CITGO that purported to provide for
settlement of the remaining property damage claims for $5 million payable by it,
is enforceable. CITGO will appeal this decision.

A lawsuit alleging wrongful death and personal injury filed in 1996 against
CITGO and other industrial facilities in Corpus Christi, Texas state court was
brought by persons who claim that exposure to refinery hydrocarbon emissions
have caused various forms of illness. The lawsuit is scheduled for trial in
September 2002.

CITGO is among defendants to class action and individual lawsuits in North
Carolina, New York and Illinois alleging contamination of water supplies by
methyl tertiary butyl ether ("MTBE"), a component of gasoline. These actions
allege that MTBE poses public health risks and seek testing, damages and
remediation of the alleged contamination. These matters are in early stages of
discovery. One of the Illinois cases has been transferred to New York and
consolidated with the case pending in New York. CITGO has denied all of the
allegations and is pursuing its defenses.

F-36

In 1999, a group of U.S. independent oil producers filed petitions under
the U.S. antidumping and countervailing duty laws against imports of crude oil
from Venezuela, Iraq, Mexico and Saudi Arabia. These laws provide for the
imposition of additional duties on imports of merchandise if (1) the U.S.
Department of Commerce ("DOC"), after investigation, determines that the
merchandise has been sold to the United States at dumped prices or has benefited
from countervailing subsidies, and (2) the U.S. International Trade Commission
determines that the imported merchandise has caused or threatened material
injury to the U.S. industry producing like product. The amount of the additional
duties imposed is generally equal to the amount of the dumping margin and
subsidies found on the imports on which the duties are assessed. No duties are
owed on imports made prior to the formal initiation of an investigation by the
DOC. In 1999, prior to initiation of a formal investigation, the DOC dismissed
the petitions. In 2000, the U.S. Court of International Trade ("CIT") reversed
this decision and remanded the case to the DOC for reconsideration. In August
2001, the DOC again dismissed the petitions. This matter is now pending before
the CIT for a decision to affirm or remand for further consideration.

Environmental compliance and remediation. The Company is subject to
various federal, state and local environmental laws and regulations which may
require the Company to take action to correct or improve the effects on the
environment of prior disposal or release of petroleum substances by the Company
or other parties. Maintaining compliance with environmental laws and regulations
in the future could require significant capital expenditures and additional
operating costs.

The Company accounting policy establishes environmental reserves as
probable site restoration and remediation obligations become reasonably capable
of estimation. The Company believes the amounts provided in its consolidated
financial statements, as prescribed by generally accepted accounting principles,
are adequate in light of probable and estimable liabilities and obligations.
However, there can be no assurance that the actual amounts required to discharge
alleged liabilities and obligations and to comply with applicable laws and
regulations will not exceed amounts provided for or will not have a material
adverse effect on its consolidated results of operations, financial condition
and cash flows.

In 1992, the Company reached an agreement with the Louisiana Department of
Environmental Quality to cease usage of certain surface impoundments at the
Company's Lake Charles refinery by 1994. A mutually acceptable closure plan was
filed with the state in 1993. The Company and its former owner are participating
in the closure and sharing the related costs based on estimated contributions of
waste and ownership periods. The remediation commenced in December 1993. In
1997, the Company presented a proposal to a state agency revising the 1993
closure plan. In 1998 and 2000, the Company submitted further revisions as
requested by the Louisiana Department. A ruling on the proposal, as amended, is
expected in 2002 with final closure to begin later in 2002.

The Texas Natural Resources Conservation Commission conducted environmental
compliance reviews at the Corpus Christi refinery in 1998 and 1999. The Texas
Commission issued Notices of Violation ("NOV") related to each of the reviews
and proposed fines of approximately $970,000 based on the 1998 review and
$700,000 based on the 1999 review. The first NOV was issued in January 1999 and
the second NOV was issued in December 1999. Most of the alleged violations refer
to recordkeeping and reporting issues, failure to meet required emission levels,
and failure to properly monitor emissions. The Company is currently engaged in
settlement discussions, but is prepared to contest the alleged violations and
proposed fines if a reasonable settlement cannot be reached.

In June 1999, CITGO and numerous other industrial companies received notice
from the U.S. EPA that the U.S. EPA believes these companies have contributed to
contamination in the Calcasieu Estuary, in the proximity of Lake Charles,
Calcasieu Parish, Louisiana and are Potentially Responsible Parties ("PRPs")
under the Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"). The U.S. EPA made a demand for payment of its past investigation
costs from CITGO and other PRPs and is conducting a Remedial
Investigation/Feasibility Study ("RI/FS") under its CERCLA authority. CITGO and
other PRPs may be potentially responsible for the costs of the RI/FS. CITGO
disagrees with the U.S. EPA's allegations and intends to contest this matter.

F-37

In October 1999, the Louisiana Department of Environmental Quality issued
the Company a NOV and Potential Penalty alleging violation of the National
Emission Standards for Hazardous Air Pollutants ("NESHAPS") regulations covering
benzene emissions from wastewater treatment operations at CITGO's Lake Charles,
Louisiana refinery and requested additional information. The Company is in
settlement discussions and anticipates resolving this matter in the near future.

In January and July 2001, CITGO received NOVs from the U.S. EPA alleging
violations of the Clean Air Act. The NOVs are an outgrowth of an industry-wide
and multi-industry U.S. EPA enforcement initiative alleging that many refineries
and electric utilities modified air emission sources without obtaining permits
under the New Source Review provisions of the Clean Air Act. The NOVs to CITGO
followed inspections and formal Information Requests regarding the Company's
Lake Charles, Louisiana and Corpus Christi, Texas refineries and the Lemont,
Illinois refinery operated by CITGO. At U.S. EPA's request, the Company is
engaged in settlement discussions, but is prepared to contest the NOVs if
settlement discussions fail. If the Company settles or is found to have violated
the provisions cited in the NOVs, it would be subject to possible penalties and
significant capital expenditures for installation or upgrading of pollution
control equipment or technologies.

In June 1999, a NOV was issued by the U.S. EPA alleging violations of the
NESHAPS regulations covering benzene emissions from wastewater treatment
operations at the Lemont, Illinois refinery operated by CITGO. CITGO is in
settlement discussions with the U.S. EPA. The Company believes this matter will
be consolidated with the matters described in the previous paragraph.

In 1992, an agreement was reached between the Company and a former owner
concerning a number of environmental issues which provides, in part, that the
former owner will continue to share the costs of certain specific environmental
remediation and certain tort liability actions based on ownership periods and
specific terms of the agreement.

Conditions which require additional expenditures may exist with respect to
various Company sites including, but not limited to, CITGO's operating refinery
complexes, closed refineries, service stations and crude oil and petroleum
product storage terminals. The amount of such future expenditures, if any, is
indeterminable.

Supply agreements. The Company purchases the crude oil processed at its
refineries and also purchases refined products to supplement the production from
its refineries to meet marketing demands and resolve logistical issues. In
addition to supply agreements with various affiliates (Notes 2 and 4), the
Company has various other crude oil, refined product and feedstock purchase
agreements with unaffiliated entities with terms ranging from monthly to annual
renewal. The Company believes these sources of supply are reliable and adequate
for its current requirements.

Throughput agreements. The Company has throughput agreements with certain
pipeline affiliates (Note 8). These throughput agreements may be used to secure
obligations of the pipeline affiliates. Under these agreements, the Company may
be required to provide its pipeline affiliates with additional funds through
advances against future charges for the shipping of petroleum products. The
Company currently ships on these pipelines and has not been required to advance
funds in the past. At December 31, 2001, the Company has no fixed and
determinable, unconditional purchase obligations under these agreements.

Commodity derivative activity. As of December 31, 2001 the Company's
petroleum commodity derivatives included exchange traded futures contracts,
forward purchase and sale contracts, exchange traded and over-the-counter
options, and over-the-counter swaps. At December 31, 2001, the balance sheet
captions other current assets and other current liabilities include $14.6
million and $23.6 million, respectively, related to the fair values of open
commodity derivatives.

Other credit and off-balance sheet risk information as of December 31,
2001. The Company has guaranteed approximately $12 million of debt of certain
CITGO marketers. Such debt is substantially collateralized by assets of these
entities. The Company has also guaranteed approximately $122 million of debt of
certain affiliates, including $50 million related to HOVENSA (Note 2). The
Company has outstanding letters of credit totaling approximately $536 million,
which includes $497 million related to
F-38

CITGO's tax-exempt and taxable revenue bonds and $20.3 million related to
PDVMR's pollution control bonds (Note 10).

The Company has also acquired surety bonds totaling $73 million primarily
due to requirements of various government entities. The Company does not expect
liabilities to be incurred related to such guarantees, letters of credit or
surety bonds.

Neither the Company nor the counterparties are required to collateralize
their obligations under interest rate swaps or over-the-counter derivative
commodity agreements. The Company is exposed to credit loss in the event of
nonperformance by the counterparties to these agreements. The Company does not
anticipate nonperformance by the counterparties, which consist primarily of
major financial institutions.

Management considers the credit risk to the Company related to its
commodity and interest rate derivatives to be insignificant during the periods
presented.

14. LEASES

The Company leases certain of its Corpus Christi refinery facilities under
a capital lease. The basic term of the lease expires on January 1, 2004;
however, the Company may renew the lease until January 31, 2011, the date of its
option to purchase the facilities for a nominal amount. Capitalized costs
included in property, plant and equipment related to the leased assets were
approximately $209 million at December 31, 2001 and 2000. Accumulated
amortization related to the leased assets was approximately $126 million and
$118 million at December 31, 2001 and 2000, respectively. Amortization is
included in depreciation expense.

The Company also has various noncancelable operating leases, primarily for
product storage facilities, office space, computer equipment and vehicles. Rent
expense on all operating leases totaled $44 million in 2001, $35 million in
2000, and $35 million in 1999. Future minimum lease payments for the capital
lease and noncancelable operating leases are as follows:

<Table>
<Caption>
CAPITAL OPERATING
YEAR LEASE LEASES TOTAL
- ---- -------- --------- --------
(000'S OMITTED)

2002................................................. $ 27,375 $ 47,030 $ 74,405
2003................................................. 27,375 38,844 66,219
2004................................................. 5,000 26,601 31,601
2005................................................. 5,000 21,877 26,877
2006................................................. 5,000 17,599 22,599
Thereafter........................................... 21,000 18,073 39,073
-------- -------- --------
Total minimum lease payments......................... 90,750 $170,024 $260,774
======== ========
Amount representing interest......................... 23,428
--------
Present value of minimum lease payments.............. 67,322
Current portion...................................... (20,358)
--------
$ 46,964
========
</Table>

15. FAIR VALUE INFORMATION

The following estimated fair value amounts have been determined by the
Company, using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.

F-39

The carrying amounts of cash equivalents approximate fair values. The
carrying amounts and estimated fair values of the Company's other financial
instruments are as follows:

<Table>
<Caption>
2001 2000
----------------------- -----------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ---------- ---------- ----------
(000'S OMITTED)

LIABILITIES:
Short-term bank loans.............. $ -- $ -- $ 37,500 $ 37,500
Long-term debt..................... 1,411,556 1,423,388 1,067,103 1,059,602
DERIVATIVE AND OFF-BALANCE SHEET
FINANCIAL INSTRUMENTS -- UNREALIZED
LOSSES:
Interest rate swap agreements...... (2,816) (2,816) -- (2,049)
Guarantees of debt................. -- (1,470) -- (1,069)
Letters of credit.................. -- (5,903) -- (4,217)
Surety bonds....................... -- (292) -- (219)
</Table>

Short-term bank loans and long-term debt. The fair value of short-term
bank loans and long-term debt is based on interest rates that are currently
available to the Company for issuance of debt with similar terms and remaining
maturities, except for the year 2000 fair value of the Company's $200 million
principal amount senior notes due 2006, which was based upon quoted market
prices.

Interest rate swap agreements. The fair value of these agreements is based
on the estimated amount that the Company would receive or pay to terminate the
agreements at the reporting dates, taking into account current interest rates
and the current creditworthiness of the counterparties.

Guarantees, letters of credit and surety bonds. The estimated fair value
of contingent guarantees of third-party debt, letters of credit and surety bonds
is based on fees currently charged for similar one-year agreements or on the
estimated cost to terminate them or otherwise settle the obligations with the
counterparties at the reporting dates.

The fair value estimates presented herein are based on pertinent
information available to management as of the reporting dates. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date, and current
estimates of fair value may differ significantly from the amounts presented
herein.

16. OTHER INFORMATION

On August 14, 2001, a fire occurred at the crude oil distillation unit of
the Lemont refinery. The crude unit was destroyed and the refinery's other
processing units were temporarily taken out of production. A new crude unit is
expected to be operational in March or April 2002. Operations have resumed by
using purchased feedstocks for processing units downstream from the crude unit.
PDVMR has insurance coverage for this type of an event and has submitted a
notice of loss to its insurance carriers related to the fire, including a claim
under its business interruption coverage.

As a result of this fire, during 2001 PDVMR recorded property losses and
related expenses totaling $40.9 million in other income (expense) -- net. The
Company records estimated property damage insurance recoveries, up to the amount
of recorded losses and related expenses, when the collection of such amounts is
probable. Property damage insurance recoveries in excess of the amount of
recorded losses and related expenses, and business interruption insurance
recoveries are not recognized until such amounts are realized. For 2001, other
income (expense) -- net includes $34.3 million of insurance recoveries (net of
deductibles) related to this event; $31.7 million of this amount is included in
accounts receivable at December 31, 2001.

F-40

On September 21, 2001, a fire occurred at the hydrocracker unit of the Lake
Charles refinery. The hydrocracker unit was damaged and operations at other
processing units were temporarily affected. Operation of the other refinery
units returned to normal on October 16, 2001. Operations at the hydrocracker
resumed on November 22, 2001. The Company has insurance coverage for this type
of an event and has submitted a notice of loss to its insurance carriers related
to the fire, including a claim under its business interruption coverage. As a
result of this fire, during the year ended December 31, 2001, the Company
recorded property losses and related expenses totaling $13.4 million in other
income (expense), net. Additionally, during 2001 the Company recorded $18.1
million of insurance proceeds received related to this event in other income
(expense), net.

17. SUBSEQUENT EVENT

On January 1, 2002, CITGO acquired the outstanding 35 percent interest in
Cit-Con from Conoco, Inc. The principal asset of Cit-Con is a lubricants
refinery in Lake Charles, Louisiana. CITGO plans to continue to operate this
facility as a source of lubricants. This transaction will not have a material
effect on the consolidated financial position or results of operations of the
Company.

18. CHANGE IN REPORTING ENTITY

On January 1, 2002, PDV America, the parent company of CITGO, made a
contribution to the capital of CITGO of all of the common stock of PDV America's
wholly owned subsidiary, VPHI. No additional shares of the capital stock of
CITGO were issued in connection with the contribution. The principal asset of
VPHI is a petroleum refinery owned by its wholly owned subsidiary, PDVMR,
located in Lemont, Illinois. CITGO has operated this refinery and purchased
substantially all of its primary output, consisting of transportation fuels and
petrochemicals, since 1997.

Effective January 1, 2002, the accounts of VPHI were included in the
consolidated financial statements of CITGO at the historical carrying value of
PDV America's investment in VPHI. CITGO recorded the effects of this transaction
in a manner similar to pooling-of-interests accounting; accordingly the
accompanying financial statements and notes thereto have been restated to
present the Company's consolidated financial position as of December 31, 2001
and 2000 and results of operations for the three years in the period ended
December 31, 2001 as if the transaction had occurred on January 1, 1999. All
significant intercompany transactions, balances and profits were eliminated; no
other adjustments to previously reported results of operations of either entity
were necessary in preparation of the restated financial statements.

The following presents the separate results of operations for CITGO and
VPHI for the three years ended December 31, 2001:

<Table>
<Caption>
YEAR ENDED DECEMBER 31,
------------------------------
2001 2000 1999
-------- -------- --------
(000'S OMITTED)

CITGO net income as previously reported.............. $317,024 $231,984 $146,484
Effect of VPHI....................................... 88,160 80,026 (23,931)
-------- -------- --------
Net income restated.................................. $405,184 $312,010 $122,553
======== ======== ========
</Table>

The restated results of operations do not purport to be indicative of the
results of operations that actually would have resulted had the combination
occurred on January 1, 1999, or of future results of operations of the combined
entities.

* * * * * *

F-41