Exhibit 99.1
[Premcor Logo Appears Here]
Premier People,
Products and Services
NEWS RELEASE ---------------------------------------
Premcor Inc.
1700 East Putnam
Suite 500
Old Greenwich, CT 06870
203-698-7500
203-698-7925 fax
PREMCOR ANNOUNCES SECOND QUARTER 2002 RESULTS
OLD GREENWICH, Connecticut, August 6, 2002---Premcor Inc. (NYSE: PCO) today
reported a net loss of $40.1 million, or $.82 per share, in the second quarter
of 2002 compared to net earnings of $174.5 million, or $5.06 per share, in the
second quarter of 2001. Excluding the effect of the special items discussed
below, the second quarter 2002 net loss was $17.3 million, or $.35 per share.
For the six months ended June 30, 2002, Premcor reported a net loss of
$139.8 million, or $3.47 per share, as compared to net earnings of $142.8
million, or $4.14 per share, in the first six months of 2001. Excluding the
effect of the special items discussed below, the first six months of 2002
resulted in a net loss of $29.7 million, or $.74 per share, compared to net
earnings of $218.4 million, or $6.33 per share, in the first six months of 2001.
Thomas D. O'Malley, Premcor's Chairman, Chief Executive Officer, and
President, said, "Results for the second quarter were disappointing. The basic
West Texas Intermediate 3-2-1 crack spread (manufacturing margin) was
reasonable, but the price spreads between WTI and medium sulfur crude oil and
most importantly Mexican Maya crude oil were well below historical averages and
had a significant negative impact on our quarterly results. The company's
refineries operated well during the quarter."
O'Malley continued, "Despite the poor market conditions, we made tremendous
progress toward reshaping Premcor's balance sheet and cost structure during the
quarter. Most significantly, in April we completed the successful initial public
offering of our common stock, raising net proceeds of $482 million. We promptly
repurchased $346 million of debt using a portion of the IPO proceeds. These
repurchases were followed in early June by the restructuring of our Sabine River
Holdings and Premcor Refining Group subsidiaries in a transaction that allowed
us to simplify our corporate structure and retire an additional $221 million of
debt using available cash and IPO proceeds. These steps have reduced our annual
interest burden by $52 million. In the back office, to date we have reduced cash
G&A expenditures by more than $8 million on an annual basis, and we will achieve
additional savings by year-end. These steps have dramatically reduced the
breakeven economics for our ongoing operations, and they began to have an impact
during June."
Looking ahead, O'Malley said, "The third quarter got off to a reasonable
start, but we have witnessed a deterioration during the second half of July,
which, if it continues, will make it difficult to
achieve a profit during the third quarter. The main problem is the continuing
narrow price differential between WTI and the very heavy crude oil run by our
Port Arthur Refinery. This light/heavy crude oil spread is one of the important
economic effects of the continuing OPEC cutbacks, which have been concentrated
in heavy crude oil. Results for the company may not improve significantly until
we see a widening of the light/heavy spread."
Commenting on recent events concerning corporate accountability, O'Malley
said, "Investors must have confidence in the management of their companies. To
that end, our board of directors, audit committee, and management team are
reviewing Premcor's corporate governance policy and will make adjustments as
needed to ensure that it is fully compliant with new legal and regulatory
initiatives. The CEO and CFO will attest to the correctness of Premcor's
financial statements in accordance with the SEC request."
On the subject of stock option accounting, O'Malley said, "Options have
become a controversial topic for public companies in the U.S. Premcor believes
it is appropriate to expense stock options in order to provide clarity and
present the most conservative picture to our investors. Accordingly, Premcor's
board has authorized management to expense options in compliance with SFAS No.
123, `Accounting for Stock-Based Compensation.' As shown on the accompanying
income statements, Premcor has recorded a $5.7 million expense for the first six
months to cover all 2002 options issued to date. These options represent
approximately 73 percent of options currently outstanding. Premcor expects to
charge approximately $4.2 million per quarter for the approximately ten quarters
remaining in the 2002 option issuance vesting period. Future option issues will
be treated in the same manner."
For the second quarter of 2002, pre-tax special items of $35.9 million
included $6.5 million relating to the restructuring of the company's St. Louis
general and administrative operations, $2.5 million related to the restructuring
of the company's Premcor Refining Group and Sabine River Holding Corp.
subsidiaries, $6.2 million for the planned closure of the Hartford, Illinois
refinery, $1.4 million for idled equipment, and $19.3 million related to the
early retirement of long-term debt. The total after-tax effect of these special
items on the quarter was a net loss of $22.8 million, equal to $.47 per share.
There were no special items in the second quarter of 2001.
For the first six months of 2002, pre-tax special items of $177.9 million
included $137.4 million related to the planned closure of the Hartford refinery,
$17.3 million primarily for severance and other charges related to the
restructuring of the company's St. Louis general and administrative operations,
$2.5 million related to the PRG and Sabine restructuring, $1.4 million for idled
equipment, and $19.3 million related to the early retirement of long-term debt.
The after-tax effect of these special items for the six months of 2002 was
$110.1 million, or $2.73 per share. Special items for the first six months of
2001 included charges related to the closure of the Blue Island, Illinois
refinery and discontinued retail operations. The net after-tax effect of these
charges, partially offset by a $30 million income tax benefit, was $75.6
million, or $2.19 per share.
The company's regular quarterly conference call concerning the quarter's
results will be webcast live today at 11:00 am EDT on the Investor Relations
section of the Premcor Inc. website at www.premcor.com. A 24-hour replay of the
call will be available until August 13, 2002 at (800) 396-1242, and the call
will be archived on the company's website.
Premcor Inc. is one of the largest independent petroleum refiners and
marketers of unbranded transportation fuels and heating oil in the United
States.
This press release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, including the company's
current expectations with respect to future market conditions, future operating
results, the future performance of its refinery operations, and future debt
reductions. Words such as "expects," "intends," "plans," "projects," "believes,"
"estimates," "may," "will," "should," "shall," and similar expressions typically
identify such forward-looking statements. Even though Premcor believes the
expectations reflected in such forward-looking statements are based on
reasonable assumptions, it can give no assurance that its expectations will be
attained. Factors that could cause actual results to differ materially from
expectations include, but are not limited to, operational difficulties, varying
market conditions, potential changes in gasoline, crude oil, distillate, and
other commodity prices, government regulations, and other factors contained from
time to time in the reports filed with the Securities and Exchange Commission by
the company and its subsidiaries, Premcor USA Inc. and The Premcor Refining
Group Inc., including the company's Form S-1 and the company's and its
subsidiaries' quarterly reports on Form 10-Q, reports on Form 8-K, and annual
reports on Form 10-K.
###
Contacts:
Premcor Inc.
Joe Watson, (203) 698-7510 (Media/Investors)
Karen Davis, (314) 854-1424 (Investors)
Michael Taylor, (314) 719-2304 (Investors)
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
(dollars in millions except per share amounts, unaudited) 2002 2001 2002 2001
-------- -------- -------- --------
Operating revenues $ 1,679.0 $ 1,818.3 $ 2,907.3 $ 3,504.7
Cost of sales 1,523.4 1,337.3 2,585.0 2,742.9
--------- --------- --------- ---------
Gross margin 155.6 481.0 322.3 761.8
Operating expenses 114.1 118.1 228.6 250.9
General and administrative expenses 14.4 16.6 28.9 29.2
Stock option compensation expense 3.8 - 5.7 -
--------- --------- --------- ---------
Adjusted EBITDA (1) 23.3 346.3 59.1 481.7
Depreciation and amortization 21.9 22.9 44.1 44.5
Restructuring and other charges 16.6 - 158.6 150.0
--------- --------- --------- ---------
Operating income (loss) (15.2) 323.4 (143.6) 287.2
Interest expense and finance income, net (30.0) (35.3) (61.0) (72.5)
Loss on extinguishment of long-term debt (19.3) - (19.3) -
Income tax benefit (provision) 23.5 (103.3) 84.9 (47.3)
Minority interest 0.9 (7.6) 1.7 (10.9)
--------- --------- --------- ---------
Net income from continuing operations before
preferred stock dividends (40.1) 177.2 (137.3) 156.5
Discontinued operations, net of tax - - - (8.5)
Preferred stock dividends - (2.7) (2.5) (5.2)
--------- --------- --------- ---------
Net income (loss) available to common
shareholders $ (40.1) $ 174.5 $ (139.8) $ 142.8
========= ========= ========= =========
Net income (loss) per common share (fully-diluted):
Income (loss) from continuing operations $ (0.82) $ 5.06 $ (3.47) $ 4.39
Discontinued operations - - - (0.25)
--------- --------- --------- ---------
Net income (loss) $ (0.82) $ 5.06 $ (3.47) $ 4.14
========= ========= ========= =========
Weighted average common shares outstanding (in millions) 48.7 34.5 40.3 34.5
(1) Earnings before interest, income taxes, depreciation, amortization and
restructuring and other charges.
June 30, December 31,
Summarized Balance Sheet Information 2002 2001
------------ ------------
Cash and short-term investments:
Premcor Inc. $ 44.9 $ 2.1
Premcor USA Inc. 17.1 25.5
The Premcor Refining Group Inc. 120.2 482.5
--------- --------
Consolidated cash and short-term investments 182.2 510.1
Cash restricted for debt service 65.4 30.8
Other working capital 87.9 (58.3)
Total assets 2,365.2 2,509.8
Long-term debt and exchangeable preferred stock:
Premcor USA Inc. 43.5 239.2
The Premcor Refining Group Inc. 880.0 1,247.0
--------- --------
Consolidated long-term debt 923.5 1,486.2
Total common stockholders' equity 678.9 294.7
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended Six months ended
June 30, June 30,
------------------ -----------------
(unaudited) 2002 2001 2002 2001
-------- -------- -------- -------
Selected Volumetric and Per Barrel Data
Production (Mbbls per day) 465.5 460.2 454.6 463.5
Crude oil throughput (Mbbls per day) 447.9 444.0 441.1 443.7
Per barrel of throughput:
Gross margin $ 3.82 $ 11.90 $ 4.04 $ 9.49
Operating expenses 2.80 2.92 2.86 3.12
Market Indicators (dollars per barrel)
West Texas Intermediate, or "WTI" (sweet) $ 26.28 $ 27.89 $ 23.94 $ 28.35
Crack Spreads:*
Gulf Coast 3/2/1 3.36 6.52 3.08 5.76
Chicago 3/2/1 5.29 11.97 4.48 8.95
Crude Oil Differentials:
WTI less WTS (sour) 1.15 3.23 1.24 3.66
WTI less Maya (heavy sour) 4.34 10.46 4.89 10.54
WTI less Dated Brent (foreign) 1.23 0.72 0.82 1.81
Natural Gas (per mmbtu) 3.38 4.68 2.79 5.84
* Per barrel margin achieved by converting three
barrels of West Texas Intermediate crude oil,
priced at Cushing, Oklahoma, into two barrels of
conventional gasoline and one barrel of high
sulfur diesel fuel, priced in their respective
regional market.
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended June 30, 2002 Three months ended June 30, 2001
--------------------------------------- ---------------------------------------
Port Port
Selected Refinery Data (unaudited) Arthur Lima Hartford Total Arthur Lima Hartford Total
--------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Operating results (dollars in millions):
Gross margin:
Gulf Coast 3/2/1 $ 73.4 $ 43.7 $ 19.9 $ 137.0 $ 137.0 $ 86.6 $ 40.0 $ 263.6
Chicago 3/2/1 vs. Gulf Coast 3/2/1 - 25.0 11.4 36.4 - 72.4 33.4 105.8
Crude oil differentials to benchmark 79.4 (10.4) 6.1 75.1 188.5 (28.3) 18.5 178.7
Product differentials to benchmark (53.3) (22.3) (17.3) (92.9) (41.8) (11.1) (14.2) (67.1)
------ ------ ------ ------- ------- ------ ------ -------
Realized gross margin 99.5 36.0 20.1 155.6 283.7 119.6 77.7 481.0
Operating expenses 66.7 28.5 18.9 114.1 73.0 27.6 17.5 118.1
------ ------ ------ ------- ------- ------- ------ -------
Net refining margin 32.8 7.5 1.2 41.5 210.7 92.0 60.2 362.9
Depreciation and amortization 13.9 5.7 - 19.6 12.6 5.9 3.9 22.4
Per barrel of throughput (in dollars):
Gross margin:
Gulf Coast 3/2/1 $ 3.36 $ 3.36 $ 3.36 $ 3.36 $ 6.52 $ 6.52 $ 6.52 $ 6.52
Chicago 3/2/1 vs. Gulf Coast 3/2/1 - 1.92 1.92 0.89 - 5.45 5.45 2.62
Crude oil differentials to benchmark 3.64 (0.80) 1.03 1.84 8.98 (2.13) 3.02 4.42
Product differentials to benchmark (2.44) (1.71) (2.92) (2.28) (1.99) (0.83) (2.32) (1.66)
------ ------ ------ ------- ------- ------ ------ -------
Realized gross margin 4.56 2.77 3.38 3.82 13.51 9.01 12.67 11.90
Operating expenses 3.06 2.19 3.18 2.80 3.48 2.08 2.85 2.92
------ ------ ------ ------- ------- ------ ------ -------
Net refining margin 1.50 0.58 0.20 1.02 10.04 6.93 9.82 8.98
Depreciation and amortization 0.64 0.44 - 0.48 0.60 0.44 0.64 0.55
Calculation methodology:
Although the Company manages its refinery business, including feedstock
acquisition and product marketing, on an integrated basis, for analytical
purposes, the business results shown here have been allocated to the individual
refineries. The foundation for determining realized gross margin by refinery is
a daily valuation of actual refinery feedstocks at market and a daily valuation
of actual refinery production at market. The result of this calculation is a
standard refinery gross margin. Since it is not possible to ratably deliver
daily priced feedstocks to our refineries and since it is not possible to
realize the value of refinery production on the day it is produced, the actual
refinery gross margin differs from the standard. These differences arise from
the fact that crude oil is often purchased and priced well in advance of the
time that it is consumed and the value of refinery production can be fixed
before or after it is produced and is further determined by the channel of trade
through which it is marketed. Inventory fluctuations and hedging activities with
their attendant product grade, location and time basis risks lead to further
deviations from the standard daily feedstock and product valuations. These
variations from the standard are allocated to each refinery on a reasonable
basis, usually driven by volume of crude input. As a result of these
allocations, the individual refinery realized gross margins presented here do
not reflect the results that would be reported if separately accounted for in
accordance with generally accepted accounting principles.
Premcor Inc. and Subsidiaries
Earnings Release
Three months ended June 30, 2002 Three months ended June 30, 2001
--------------------------------------- ---------------------------------------
Selected Volumetric Data
------------------------ Port Port
(in thousands of barrels per day) Arthur Lima Hartford Total Arthur Lima Hartford Total
--------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Feedstocks:
Crude oil throughput:
Sweet - 142.6 - 142.6 - 142.1 1.4 143.5
Light/Medium sour 33.3 0.2 63.2 96.7 39.7 3.8 58.0 101.5
Heavy sour 206.6 - 2.0 208.6 191.0 - 8.0 199.0
------- ------ ------- ------- ------- ------- ------- -------
Total crude oil 239.9 142.8 65.2 447.9 230.7 145.9 67.4 444.0
Unfinished and blendstocks 10.3 (12.4) 4.4 2.3 9.5 (6.2) (0.4) 2.9
------- ------ ------- ------- ------- ------- ------- -------
Total feedstocks 250.2 130.4 69.6 450.2 240.2 139.7 67.0 446.9
======= ====== ======= ======= ======= ======= ======= =======
Production:
Light products:
Conventional gasoline 85.3 70.7 29.4 185.4 85.3 71.8 26.3 183.4
Premium and reformulated gasoline 29.7 9.5 7.9 47.1 28.4 12.5 10.0 50.9
Diesel fuel 66.8 18.8 22.2 107.8 69.0 20.3 22.5 111.8
Jet fuel 30.2 20.7 - 50.9 23.5 24.8 - 48.3
Petrochemical products 18.4 7.4 3.1 28.9 18.4 7.4 3.3 29.1
------- ------ ------- ------- ------- ------- ------- -------
Total light products 230.4 127.1 62.6 420.1 224.6 136.8 62.1 423.5
Petroleum coke and sulfur 29.4 2.8 3.8 36.0 25.3 3.0 4.4 32.7
Residual oil 5.6 2.1 1.7 9.4 2.9 1.5 (0.4) 4.0
------- ------ ------- ------- ------- ------- ------- -------
Total production 265.4 132.0 68.1 465.5 252.8 141.3 66.1 460.2
======= ====== ======= ======= ======= ======= ======= =======
Premcor Inc. and Subsidiaries
Earnings Release
Six months ended June 30, 2002 Six months ended June 30, 2001
--------------------------------------- -----------------------------------------------
Port Port Blue
Selected Refinery Data (unaudited) Arthur Lima Hartford Total Arthur Lima Hartford Island* Total
---------------------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Operating results (dollars in
millions):
Gross margin:
Gulf Coast 3/2/1 $ 131.4 $ 78.7 $ 35.7 $ 245.8 $ 240.0 $ 145.5 $ 68.8 $ 8.3 $ 462.6
Chicago 3/2/1 vs. Gulf Coast
3/2/1 - 35.8 16.2 52.0 - 80.5 38.1 4.6 123.2
Crude oil differentials to
benchmark 183.1 (12.2) 18.3 189.3 341.3 (41.4) 45.0 0.1 344.9
Product differentials to
benchmark (114.4) (22.6) (27.8) (164.8) (114.0) (17.7) (31.7) (5.6) (169.0)
------- ------ ------ ------- ------- ------ ------ ------ -------
Realized gross margin 200.1 79.7 42.4 322.3 467.2 166.9 120.2 7.4 761.8
Operating expenses 133.9 57.2 37.5 228.6 149.5 59.3 36.7 5.4 250.9
------- ------ ------ ------- ------- ------ ------ ------ -------
Net refining margin 66.2 22.5 4.9 93.7 317.7 107.6 83.6 2.0 510.9
Depreciation and amortization 26.4 11.6 2.9 40.9 22.9 10.6 7.8 1.1 42.4
Per barrel of throughput
(in dollars):
Gross margin:
Gulf Coast 3/2/1 $ 3.08 $ 3.08 $ 3.08 $ 3.08 $ 5.76 $ 5.76 $ 5.76 $ 5.76 $ 5.76
Chicago 3/2/1 vs. Gulf Coast
3/2/1 - 1.40 1.40 0.65 - 3.19 3.19 3.19 1.53
Crude oil differentials to
benchmark 4.29 (0.48) 1.58 2.37 8.19 (1.64) 3.77 0.04 4.29
Product differentials to
benchmark (2.68) (0.88) (2.40) (2.06) (2.74) (0.70) (2.65) (3.86) (2.10)
------- ------ ------ ------ ------- ------ ------ ------ -------
Realized gross margin 4.69 3.12 3.66 4.04 11.21 6.61 10.06 5.13 9.49
Operating expenses 3.14 2.24 3.24 2.86 3.59 2.35 3.07 3.75 3.12
------- ------ ------ ------ ------- ------ ------ ------ -------
Net refining margin 1.55 0.88 0.42 1.17 7.62 4.26 6.99 1.38 6.36
Depreciation and amortization 0.62 0.45 0.25 0.51 0.55 0.42 0.65 0.76 0.53
Calculation methodology:
Although the Company manages its refinery business, including feedstock
acquisition and product marketing, on an integrated basis, for analytical
purposes, the business results shown here have been allocated to the individual
refineries. The foundation for determining realized gross margin by refinery is
a daily valuation of actual refinery feedstocks at market and a daily valuation
of actual refinery production at market. The result of this calculation is a
standard refinery gross margin. Since it is not possible to ratably deliver
daily priced feedstocks to our refineries and since it is not possible to
realize the value of refinery production on the day it is produced, the actual
refinery gross margin differs from the standard. These differences arise from
the fact that crude oil is often purchased and priced well in advance of the
time that it is consumed and the value of refinery production can be fixed
before or after it is produced and is further determined by the channel of trade
through which it is marketed. Inventory fluctuations and hedging activities with
their attendant product grade, location and time basis risks lead to further
deviations from the standard daily feedstock and product valuations. These
variations from the standard are allocated to each refinery on a reasonable
basis, usually driven by volume of crude input. As a result of these
allocations, the individual refinery realized gross margins presented here do
not reflect the results that would be reported if separately accounted for in
accordance with generally accepted accounting principles.
* Closed January 2001
Premcor Inc. and Subsidiaries
Earnings Release
Six months ended June 30, 2002 Six months ended June 30, 2001
--------------------------------------- -----------------------------------------------
Selected Volumetric Data
------------------------ Port Port Blue
(in thousands of barrels per day) Arthur Lima Hartford Total Arthur Lima Hartford Island* Total
--------------------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Feedstocks:
Crude oil throughput:
Sweet - 138.5 - 138.5 - 132.7 2.6 6.4 141.7
Light/Medium sour 41.1 2.7 59.1 102.9 52.7 6.8 57.9 1.6 119.0
Heavy sour 194.8 - 4.9 199.7 177.5 - 5.5 - 183.0
------- ------- ------- ------- ------- ------ ------- ------ -------
Total crude oil 235.9 141.2 64.0 441.1 230.2 139.5 66.0 8.0 443.7
Unfinished and blendstocks (3.2) (5.7) 3.5 (5.4) 7.2 (4.0) 0.5 0.8 4.5
------- ------- ------- ------- ------- ------ ------- ------ -------
Total feedstocks 232.7 135.5 67.5 435.7 237.4 135.5 66.5 8.8 448.2
======= ======= ======= ======= ======= ====== ======= ====== =======
Production:
Light products:
Conventional gasoline 79.0 74.6 30.8 184.4 81.8 69.9 29.1 0.3 181.1
Premium and reformulated gasoline 21.9 10.3 5.8 38.0 24.9 11.4 7.1 5.1 48.5
Diesel fuel 65.6 18.0 21.0 104.6 73.6 21.7 22.2 2.3 119.8
Jet fuel 28.6 21.7 - 50.3 18.9 21.8 - - 40.7
Petrochemical products 17.2 7.7 3.2 28.1 19.9 6.8 3.4 0.2 30.3
------- ------- ------- ------- ------- ------ ------- ------ -------
Total light products 212.3 132.3 60.8 405.4 219.1 131.6 61.8 7.9 420.4
Petroleum coke and sulfur 31.3 2.8 4.4 38.5 28.6 2.9 4.1 0.7 36.3
Residual oil 7.4 1.8 1.5 10.7 4.6 2.1 0.1 - 6.8
------- ------- ------- ------- ------- ------ ------- ------ -------
Total production 251.0 136.9 66.7 454.6 252.3 136.6 66.0 8.6 463.5
======= ======= ======= ======= ======= ====== ======= ====== =======
*Closed January 2001