Premcor to Acquire Motiva Delaware City Refining Complex

Jan 14, 2004, 00:00 ET from Premcor Inc.

    OLD GREENWICH, Conn., Jan. 14 /PRNewswire-FirstCall/ -- Premcor Inc.
 (NYSE:   PCO) today announced that its wholly owned subsidiary The Premcor
 Refining Group Inc. will purchase Motiva Enterprises LLC's Delaware City
 Refining Complex located in Delaware City, Delaware.  The assets to be
 purchased include a heavy crude oil refinery capable of processing in excess
 of 180,000 barrels per day (bpd), a 2,400 tons-per-day (tpd) petroleum coke
 gasification unit, a 160 megawatt (MW) cogeneration facility, and related
 assets.  The asset purchase price will be $435 million, plus the assumption by
 Premcor of Motiva's obligations associated with $365 million of tax-exempt
 bonds issued by the Delaware Economic Development Authority (DEDA) in
 connection with the gasification and cogeneration facilities, plus the value
 of petroleum inventories at closing.  At current petroleum prices, the
 inventory value would be approximately $100 million.  The assumption of the
 tax-exempt bonds by Premcor is subject to the consent of the DEDA and other
 parties involved in the financing.  There is also a contingent purchase
 provision that may result in an additional $25 million payment per year up to
 a total of $75 million over a three-year period depending on the level of
 industry refining margins during that period, and a gasifier performance
 provision that may result in an additional $25 million payment per year up to
 a total of $50 million over a two-year period depending on the achievement of
 certain performance criteria at the gasification facility.
     The Delaware City refinery is a high-conversion heavy crude oil refinery
 with a Nelson complexity rating of 11.7.  Major process units include a fluid
 coking unit, a fluid catalytic cracking unit, a hydrocracking unit with a
 hydrogen plant, a continuous catalytic reformer, an alkylation unit, and
 several hydrotreating units.  Primary products include regular and premium
 conventional and reformulated gasoline, low-sulfur diesel, home heating oil,
 and jet fuel.  The refinery's production is sold in the U.S. Northeast via
 pipeline, barge, and truck distribution.  The refinery's petroleum coke
 production is gasified to fuel the cogeneration facility, which supplies
 electricity and steam to the refinery as well as outside sales to third
     Thomas D. O'Malley, Premcor's Chairman and Chief Executive Officer, said,
 "This transaction, which will increase our crude oil processing capability by
 approximately 30 percent, represents a major step forward for Premcor.  We are
 extremely pleased to have the opportunity to acquire the most technologically
 complex refinery on the East Coast.  This will give us meaningful entry into
 the attractive, product-short Northeast market.  The refinery is capable of
 processing heavy-sour and high-acid crude oils, which typically sell at a
 substantial discount to the benchmark WTI crude oil.  The refinery has a clean
 product yield of approximately 95 percent.  Refining margins in the Northeast
 have historically seen premiums over Gulf Coast margins in the $2.00 per
 barrel range for reformulated gasoline.  The facility is in excellent
 condition, having benefited from significant upgrades under Motiva and its
 predecessors.  It is capable of meeting the new E.P.A. low-sulfur fuel
 specifications with only a modest investment. With all of these advantages, we
 are confident in stating that this refinery acquisition will be immediately
 and significantly accretive to Premcor's after-tax earnings per share and cash
     O'Malley continued, "In addition to the refinery, this transaction
 includes a coke gasification plant and cogeneration facility located on the
 refinery site.  These assets have a significant value above and beyond the
 refinery proper, converting low-value petroleum coke into electricity, steam,
 and commercial gases available to the refinery and outside third parties.
 Depending on market and operating conditions, they can generate tens of
 millions of dollars in annual cash operating earnings.  As we move forward
 toward completing this acquisition, we will determine the best means for
 maximizing the value of this related but separate complex, whether that be to
 own and operate it alongside the refinery or to monetize it via sale of all or
 part of it to a third party."
     Commenting on the acquisition financing, O'Malley said, "In line with our
 long-stated goal of continuing to improve Premcor's balance sheet, we intend
 to finance this purchase with an approximately 50 percent mix of equity and
 debt, including the assumption of the DEDA obligations."
     A letter of interest has been approved and executed by both companies.
 Completion of the sale is subject to the satisfaction of certain conditions,
 including execution of a definitive agreement and obtaining regulatory
 approvals.  The acquisition is expected to close during the second quarter of
     Premcor will hold an analyst meeting at the Plaza Hotel in New York City
 tomorrow, January 15, 2004 at 12:00 p.m. EST to review the Delaware City
 acquisition in more detail.  The analyst meeting will be webcast live on the
 Investor Relations section of the Premcor Inc. web site at ,
 and will be archived on the web site thereafter.
     Premcor Inc. is one of the largest independent petroleum refiners and
 marketers of unbranded transportation fuels and heating oil in the United
     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 acquisitions and related financing transactions.  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 subsidiary, The Premcor Refining Group Inc., including
 quarterly reports on Form 10-Q, current reports on Form 8-K, and annual
 reports on Form 10-K.

SOURCE Premcor Inc.