On Dec. 31, 2005, if all goes according to plan, Valero Energy Corporation will acquire Premcor. This transaction will make Valero the largest refiner in North America with a throughput capacity of 3.3 million barrels a day and revenues of $70 billion. Premcor is one of the largest independent petroleum refiners and suppliers of unbranded transportation fuels, heating oil, petrochemical feedstocks, petroleum coke and other petroleum products in the U. S. with a throughput capacity of 790,000 barrels per day.
In an April 25, 2005, announcement of the merger, Jefferson F. Allen, Premcor's CEO, notes, "This transaction provides Premcor's shareholders with a meaningful increase in the value of their investment, as the terms of the agreement represent a 24.6% increase over the closing price of our stock on April 22, 2005. In addition, our shareholders will retain the option to continue participating in the industry through common stock ownership in Valero, which, with this transaction, will become the largest refiner in the U.S."
In this acquisition, both the senior management and board of directors will remain in place.
In an April 28, 2005, press release announcing second-quarter results, Allen commented, "Refining margins remained strong during the first quarter while the benchmark crude oil price differentials were at record highs. Demand for light low-sulfur crude oil, ample supply of heavy high- sulfur crude oil, limited complex refining capacity and increasingly strict sulfur specifications around the world continue to drive margins and differentials. The growth in our earnings per share of over 100% from the first quarter of last year reflects these strong margins, the wide crude oil price differentials and of course our growth strategy.
"Our results for the quarter were, however, significantly limited by scheduled plant-wide turnaround maintenance at the Port Arthur refinery. The turnaround, which was completed on schedule, included maintenance activity on all of the major units at the refinery. All of the units have since been restarted in a safe and environmentally sound manner and are running reliably. Our employees accomplished a very difficult task and I complement them for it."
Looking toward the second quarter 2005, Allen said, "Industry conditions in the second quarter to date have been robust with refining margins even stronger than during the first quarter and crude oil price differentials only slightly weaker. Premcor's results will continue to be positively impacted by these wide discounts as our Port Arthur, Texas refinery processes primarily Mexican Maya crude oil and our Delaware City refinery processes primarily Arab medium-heavy blends. We continue to see strong demand for refined products with worldwide and U.S. petroleum demand approximately 2.6% and 1.7%, respectively, greater than the 2004 levels year to date."
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