UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Commission File Number	Exact Name of Registrant as Specified in its Charter, Principal Office Address and Telephone Number	State of Incorporation	I.R.S. Employer Identification No.
1-16827	Premcor Inc. 1700 East Putnam Avenue, Suite 400 Old Greenwich, Connecticut 06870 (203) 698-7500	Delaware	43-1851087

1-11392	The Premcor Refining Group Inc. 1700 East Putnam Avenue, Suite 400 Old Greenwich, Connecticut 06870 (203) 698-7500	Delaware	43-1491230

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Premcor Inc.	Yes	þ	No ¨
The Premcor Refining Group Inc.	Yes	þ	No ¨

Indicate by check mark if the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes þ No ¨

Number of shares of the registrant’s common stock (only one class for each registrant) outstanding as of July 31, 2004:


Premcor Inc.		89,183,177 shares
The Premcor Refining Group Inc.		100 shares (100% owned by Premcor USA Inc., a direct wholly owned subsidiary of Premcor Inc.)

Form 10-Q

June 30, 2004

Table of Contents

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements (unaudited)
	Premcor Inc.:
	Report of Independent Registered Public Accounting Firm	2
	Condensed Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003	3
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2004 and 2003	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003	5

	The Premcor Refining Group Inc.:
	Report of Independent Registered Public Accounting Firm	6
	Condensed Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003	7
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2004 and 2003	8
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003	9
	Notes to Condensed Consolidated Financial Statements (Premcor Inc. and The Premcor Refining Group Inc.)	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	53

Item 4.	Controls and Procedures	54

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	55

Item 4.	Submission of Matters to a Vote of Security Holders	55

Item 6.	Exhibits and Reports on Form 8-K	56

FORM 10-Q - PART I. FINANCIAL INFORMATION

This Quarterly Report on Form 10-Q represents information for two registrants, Premcor Inc. and its indirect, wholly owned subsidiary, The Premcor Refining Group Inc. Premcor Inc. owns all of the outstanding common stock of Premcor USA Inc. (“Premcor USA”), and Premcor USA owns all of the outstanding common stock of The Premcor Refining Group Inc. (together with its consolidated subsidiaries, “PRG”). The Premcor Refining Group Inc. and its indirect subsidiary, Port Arthur Coker Company L.P. (“PACC”), are Premcor Inc.’s principal operating subsidiaries. PRG owns and operates four refineries. The results of operations for Premcor Inc. principally reflect the results of operations of PRG, except for certain pipeline operations, general and administrative costs, interest income and interest expense at stand-alone Premcor Inc. and/or its other subsidiaries. Included in this Quarterly Report on Form 10-Q are consolidated balance sheets, statements of operations, and statements of cash flows for the applicable periods for Premcor Inc. and The Premcor Refining Group Inc. The information reflected in the consolidated footnotes are equally applicable to both companies except where indicated otherwise.

ITEM 1.

FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of Premcor Inc.:

We have reviewed the accompanying condensed consolidated balance sheet of Premcor Inc. and subsidiaries (the “Company”) as of June 30, 2004, and the related condensed consolidated statements of operations for the three-month and six-month periods ended June 30, 2004 and 2003, and of cash flows for the six-month periods ended June 30, 2004 and 2003. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

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

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2003, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 20, 2004 (which report includes an explanatory paragraph relating to the Company’s change in 2002 in its method of accounting for stock based compensation issued to employees as discussed in Note 2 to those 2003 consolidated financial statements), we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2003 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Deloitte & Touche LLP

Stamford, Connecticut

August 3, 2004

Premcor Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(unaudited, in millions, except per share data)


	June 30, 2004		December 31, 2003
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	504.8	$	426.7
Short-term investments		7.0		5.9
Cash and cash equivalents restricted for debt service		69.8		66.6
Accounts receivable, net of allowance of $1.9 and $1.9		496.9		623.5
Inventories		801.0		630.3
Prepaid expenses and other		129.0		92.7
Deferred income taxes		19.8		—

Total current assets		2,028.3		1,845.7

PROPERTY, PLANT AND EQUIPMENT, NET		2,597.9		1,739.8
GOODWILL		27.6		14.2
OTHER ASSETS		168.0		115.6

	$	4,821.8	$	3,715.3

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	603.9	$	779.9
Accrued expenses and other		173.4		125.8
Accrued taxes other than income		67.2		53.8
Current portion of long-term debt		30.9		26.1

Total current liabilities		875.4		985.6

LONG-TERM DEBT		1,811.2		1,426.0
DEFERRED INCOME TAXES		122.1		0.6
OTHER LONG-TERM LIABILITIES		181.9		157.9
COMMITMENTS AND CONTINGENCIES		—		—

COMMON STOCKHOLDERS’ EQUITY:
Common, $0.01 par value per share, 150,000,000 authorized, 89,180,511 issued and outstanding as of June 30, 2004; 74,119,694 issued and outstanding as of December 31, 2003		0.9		0.7
Paid-in capital		1,689.4		1,186.8
Retained earnings (accumulated deficit)		140.9		(42.3	)

Total common stockholders’ equity		1,831.2		1,145.2

	$	4,821.8	$	3,715.3

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

Premcor Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(unaudited, in millions, except per share data)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2004			2003			2004			2003
NET SALES AND OPERATING REVENUES	$	3,573.7		$	2,147.4		$	6,125.4		$	4,116.3
EXPENSES:
Cost of sales		3,034.7			1,882.1			5,269.2			3,583.6
Operating expenses		197.5			134.4			344.5			251.6
General and administrative expenses		38.3			15.7			55.9			27.4
Stock-based compensation		4.9			4.4			9.8			8.7
Depreciation		23.9			16.0			41.8			30.6
Amortization		12.9			9.1			29.1			18.6
Refinery restructuring and other charges		4.7			0.7			9.3			15.7

		3,316.9			2,062.4			5,759.6			3,936.2
OPERATING INCOME		256.8			85.0			365.8			180.1
Interest and finance expense		(35.3	)		(30.4	)		(66.6	)		(57.3	)
Loss on extinguishment of debt		(3.6	)		(3.4	)		(3.6	)		(10.4	)
Interest income		1.6			1.3			3.3			2.9

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		219.5			52.5			298.9			115.3
Income tax provision		(84.5	)		(18.0	)		(113.9	)		(39.0	)

INCOME FROM CONTINUING OPERATIONS		135.0			34.5			185.0			76.3
Loss from discontinued operations, net of income tax benefit of $1.0 and $1.1 for 2004; $1.3 and $4.0 for 2003		(1.5	)		(2.2	)		(1.8	)		(6.5	)

NET INCOME	$	133.5		$	32.3		$	183.2		$	69.8

NET INCOME PER COMMON SHARE:
Basic:
Income from continuing operations	$	1.58		$	0.47		$	2.32		$	1.07
Discontinued operations		(0.02	)		(0.03	)		(0.02	)		(0.09	)

Net income	$	1.56		$	0.44		$	2.30		$	0.98

Weighted average common shares outstanding		85.4			74.1			79.8			71.5
Diluted:
Income from continuing operations	$	1.55		$	0.46		$	2.27		$	1.06
Discontinued operations		(0.02	)		(0.03	)		(0.02	)		(0.09	)

Net income	$	1.53		$	0.43		$	2.25		$	0.97

Weighted average common shares outstanding		87.3			74.8			81.5			72.2

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

Premcor Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited, in millions)


	For the Six Months Ended June 30,
	2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	183.2		$	69.8
Adjustments:
Loss from discontinued operations		1.8			6.5
Depreciation		41.8			30.6
Amortization		33.4			23.3
Deferred income taxes		101.7			37.7
Stock-based compensation		9.8			8.7
Refinery restructuring and other charges		(3.8	)		13.6
Write-off of deferred financing costs		3.6			5.4
Other, net		6.5			6.7
Cash provided by (reinvested in) working capital:
Accounts receivable, prepaid expenses and other		102.5			(170.1	)
Inventories		(54.4	)		(129.9	)
Accounts payable, accrued expenses, taxes other than income, and other		(125.6	)		123.8
Cash and cash equivalents restricted for debt service		0.7			(0.3	)

Net cash provided by operating activities of continuing operations		301.2			25.8
Net cash used in operating activities of discontinued operations		(2.4	)		(3.1	)

Net cash provided by operating activities		298.8			22.7

CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment		(133.9	)		(60.7	)
Expenditures for turnaround		(73.9	)		(9.5	)
Expenditures for refinery acquisition, net		(874.8	)		(474.8	)
Purchase of short-term investments		(1.1	)		(1.0	)
Cash and cash equivalents restricted for investment in capital additions		—			0.2

Net cash used in investing activities		(1,083.7	)		(545.8	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net		493.0			306.5
Proceeds from issuance of long-term debt		400.0			825.0
Long-term debt and capital lease payments		(10.0	)		(299.6	)
Cash and cash equivalents restricted for debt repayment		(3.9	)		(4.9	)
Deferred financing costs		(16.1	)		(25.3	)

Net cash provided by financing activities		863.0			801.7

NET INCREASE IN CASH AND CASH EQUIVALENTS		78.1			278.6
CASH AND CASH EQUIVALENTS, beginning of period		426.7			167.4

CASH AND CASH EQUIVALENTS, end of period	$	504.8		$	446.0

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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of The Premcor Refining Group Inc.:

We have reviewed the accompanying condensed consolidated balance sheet of The Premcor Refining Group Inc. and subsidiaries (the “Company”) as of June 30, 2004, and the related condensed consolidated statements of operations for the three-month and six-month periods ended June 30, 2004 and 2003, and of cash flows for the six-month periods ended June 30, 2004 and 2003. These interim financial statements are the responsibility of the Company’s management.

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2003, and the related consolidated statements of operations, stockholder’s equity, and cash flows for the year then ended (not presented herein); and in our report dated February 20, 2004 (which report includes an explanatory paragraph relating to the Company’s change in 2002 in its method of accounting for stock based compensation issued to employees as discussed in Note 2 to those 2003 consolidated financial statements and the restatement in 2002 of the consolidated financial statements to give effect to the contribution of Sabine River Holding Corp. common stock owned by Premcor Inc. to the Company, which was accounted for in a manner similar to a pooling of interests as described in Note 4 to those 2003 consolidated financial statements), we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2003 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Deloitte & Touche LLP

Stamford, Connecticut

August 3, 2004

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(unaudited, in millions, except per share data)


	June 30, 2004		December 31, 2003
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	364.6	$	376.9
Short-term investments		1.7		1.7
Cash and cash equivalents restricted for debt service		69.8		66.6
Accounts receivable, net of allowance of $1.9 and $1.9		496.2		623.4
Receivables from affiliates		22.2		22.5
Inventories		801.0		630.3
Prepaid expenses and other		129.2		93.1
Deferred income taxes		13.8		—

Total current assets		1,898.5		1,814.5

PROPERTY, PLANT AND EQUIPMENT, NET		2,574.1		1,715.5
GOODWILL		27.6		14.2
OTHER ASSETS		167.9		115.6

	$	4,668.1	$	3,659.8

LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES:
Accounts payable	$	603.9	$	779.9
Payables to affiliates		71.9		49.0
Accrued expenses and other		168.1		127.9
Accrued taxes other than income		67.2		53.8
Current portion of long-term debt		30.6		25.8

Total current liabilities		941.7		1,036.4

LONG-TERM DEBT		1,801.3		1,416.0
DEFERRED INCOME TAXES		130.0		22.9
OTHER LONG-TERM LIABILITIES		181.9		157.9
COMMITMENTS AND CONTINGENCIES		—		—

COMMON STOCKHOLDER’S EQUITY:
Common, $0.01 par value per share, 1,000 authorized, 100 issued and outstanding		—		—
Paid-in capital		1,227.3		822.7
Retained earnings		385.9		203.9

Total common stockholder’s equity		1,613.2		1,026.6

	$	4,668.1	$	3,659.8

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

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidated Statements of Operation

(unaudited, in millions)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2004			2003			2004			2003
NET SALES AND OPERATING REVENUES	$	3,573.0		$	2,146.8		$	6,124.1		$	4,115.2
EXPENSES:
Cost of sales		3,036.5			1,884.2			5,272.9			3,586.4
Operating expenses		196.4			133.2			342.6			249.9
General and administrative expenses		38.4			15.6			55.6			27.3
Stock-based compensation		4.9			4.4			9.8			8.7
Depreciation		23.7			15.7			41.2			30.2
Amortization		12.9			9.1			29.1			18.6
Refinery restructuring and other charges		4.7			0.7			9.3			15.7

		3,317.5			2,062.9			5,760.5			3,936.8
OPERATING INCOME		255.5			83.9			363.6			178.4
Interest and finance expense		(34.8	)		(29.9	)		(65.9	)		(56.1	)
Loss on extinguishment of debt		(3.6	)		(3.4	)		(3.6	)		(8.1	)
Interest income		1.3			1.5			3.0			2.6

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		218.4			52.1			297.1			116.8
Income tax provision		(84.1	)		(17.8	)		(113.2	)		(39.4	)

INCOME FROM CONTINUING OPERATIONS		134.3			34.3			183.9			77.4
Loss from discontinued operations, net of income tax benefit of $1.0 and $1.1 for 2004; $1.3 and $4.0 for 2003		(1.5	)		(2.2	)		(1.8	)		(6.5	)

NET INCOME	$	132.8		$	32.1		$	182.1		$	70.9

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

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited, in millions)


	For the Six Months Ended June 30,
	2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	182.1		$	70.9
Adjustments:
Loss from discontinued operations		1.8			6.5
Depreciation		41.2			30.2
Amortization		33.1			23.3
Deferred income taxes		93.4			33.0
Stock-based compensation		9.8			8.7
Refinery restructuring and other charges		(3.8	)		13.6
Write-off of deferred financing costs		3.6			5.4
Other, net		5.5			6.9
Cash provided by (reinvested in) working capital:
Accounts receivable, prepaid expenses and other		103.0			(169.9	)
Inventories		(54.4	)		(129.9	)
Accounts payable, accrued expenses, taxes other than income, and other		(131.1	)		125.9
Affiliate receivables and payables		22.9			3.2
Cash and cash equivalents restricted for debt service		0.7			(0.3	)

Net cash provided by operating activities of continuing operations		307.8			27.5
Net cash used in operating activities of discontinued operations		(2.4	)		(3.1	)

Net cash provided by operating activities		305.4			24.4

CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment		(133.8	)		(60.7	)
Expenditures for turnaround		(73.9	)		(9.5	)
Expenditures for refinery acquisition, net		(874.8	)		(474.8	)
Cash and cash equivalents restricted for investment in capital additions		—			0.2

Net cash used in investing activities		(1,082.5	)		(544.8	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt		400.0			825.0
Long-term debt and capital lease payments		(10.0	)		(259.4	)
Capital contributions, net		394.8			263.3
Cash and cash equivalents restricted for debt repayment		(3.9	)		(4.9	)
Deferred financing costs		(16.1	)		(25.3	)

Net cash provided by financing activities		764.8			798.7

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(12.3	)		278.3
CASH AND CASH EQUIVALENTS, beginning of period		376.9			119.7

CASH AND CASH EQUIVALENTS, end of period	$	364.6		$	398.0

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

FORM 10-Q – PART I

ITEM 1.

FINANCIAL STATEMENTS (continued)

PREMCOR INC. AND SUBSIDIARIES

THE PREMCOR REFINING GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2004

(Tabular amounts in millions, except per share data)

1.	Nature of Business and Basis of Preparation

Premcor Inc., together with its consolidated subsidiaries (the “Company”), is an independent petroleum refiner and supplier of unbranded transportation fuels, heating oil, petrochemical feedstocks, petroleum coke and other petroleum products. Premcor Inc. owns all of the outstanding common stock of Premcor USA Inc. (“Premcor USA”), and Premcor USA owns all of the outstanding common stock of The Premcor Refining Group Inc. (together with its consolidated subsidiaries, “PRG”). The Premcor Refining Group Inc. and its indirect subsidiary, Port Arthur Coker Company L.P. (“PACC”), are Premcor Inc.’s principal operating subsidiaries. PRG owns and operates four refineries with a combined total throughput capacity of 790,000 barrels per day (“bpd”). The refineries are located in Port Arthur, Texas; Memphis, Tennessee; Lima, Ohio; and Delaware City, Delaware.

All of the operations of the Company are in the United States. These operations are related to the refining of crude oil and other petroleum feedstocks into petroleum products and are all considered part of one business segment. The Company’s earnings and cash flows from operations are primarily dependent upon processing crude oil and selling quantities of refined petroleum products at margins sufficient to cover operating expenses. Crude oil and refined petroleum products are commodities, and factors largely out of the Company’s control can cause these commodity prices to vary, in a wide range, over a short period of time. This potential margin volatility can have a material effect on the Company’s financial position, earnings, and cash flows.

The accompanying unaudited condensed consolidated financial statements of Premcor Inc. and The Premcor Refining Group Inc., and their respective subsidiaries, are presented pursuant to the rules and regulations of the United States Securities and Exchange Commission in accordance with the disclosure requirements for the quarterly report on Form 10-Q. In the opinion of management of the Company, the unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary to fairly state the results for the interim periods presented. Operating results for the three and six months ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ended December 31, 2004. These consolidated notes apply equally to the Company and PRG unless otherwise noted. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes included in Premcor Inc.’s and PRG’s Annual Report on Form 10-K for the year ended December 31, 2003.

Certain reclassifications have been made to the prior year’s financial statements to conform to classifications used in the current year. In particular, net sales and operating revenues and cost of sales for 2003 have been reclassified to conform to the fourth quarter 2003 application of Emerging Issues Task Force, or EITF, Issue No. 03-11, Reporting Gains and Losses on Derivative Instruments That Are Subject to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and Not Held for Trading Purposes. In accordance with EITF 03-11, cost of sales includes the net effect of the buying and selling of crude oil to supply the Company’s refineries. The reclassification had no effect on previously reported operating income or net income.

2.	Acquisitions

Effective May 1, 2004, the Company completed an agreement with Motiva Enterprises LLC (“Motiva”) to purchase its Delaware City refining complex located in Delaware City, Delaware. The Delaware City refinery has a rated crude unit throughput capacity of 180,000 bpd. Also included in the purchase is a 2,400 tons per day petroleum coke gasification unit, a 180 megawatt cogeneration facility, 8.5 million barrels of crude oil, intermediates, blendstock, and product tankage, and a 50,000 bpd truck-loading rack. The purchase price is $800 million ($780 million cash and $20 million assumed liabilities), plus additional petroleum inventories valued at $90 million and approximately $5 million in transaction fees.

The Delaware City refinery is a high-conversion medium and heavy sour crude oil refinery. Major process units include a crude unit, 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, and home heating oil. The refinery’s production is sold in the U.S. Northeast via pipeline, barge, and truck distribution. The refinery’s petroleum coke production is sold to third parties or gasified to fuel the cogeneration facility, which is designed to supply electricity and steam to the refinery as well as outside electrical sales to third parties.

The Company financed the acquisition from a portion of the proceeds from its April 2004 public common stock offering of 14.9 million shares which provided net proceeds of $490 million; from PRG’s $400 million senior notes offering completed April 2004 of which $200 million, due in 2011, bear interest at 6¹/8% per annum and $200 million, due in 2014, bear interest at 6¾% per annum; and from available cash. In addition, Motiva will be entitled to receive contingent purchase payments of $25 million per year up to a total of $75 million over a three-year period depending on the amount of crude oil processed at the refinery and the refining margins during that period, and a $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. Any amount the Company pays to Motiva for the contingent consideration will be recorded as goodwill.

In conjunction with the acquisition of the Delaware City refinery, the Company entered into an agreement, effective May 1, 2004, with Saudi Arabian Oil Company for the supply of approximately 105,000 bpd of crude oil, subject to certain restrictions. The agreement has terms extending to April 30, 2005, with automatic one-year extensions thereafter unless terminated at the option of either party. The crude oil is priced by a market-based formula as defined in the agreement. The Company also entered into a product offtake agreement with Motiva that provides for the delivery by Premcor to Motiva of approximately 95,000 bpd of finished light petroleum products, such as gasoline and heating oil. The agreement was effective May 1, 2004, and the main portion of the offtake agreement has terms extending for six months with automatic renewals until canceled by either party.

The purchase of the Delaware City refinery complex and results of operations of these assets have been included in the Company’s year-to-date results from the date of purchase. The preliminary purchase price allocation, which is subject to change pending completion of independent appraisals and other evaluations, is as follows:


Current assets	$	12
Inventory		116
Property, plant and equipment		767
Other liabilities (primarily post retirement obligations)		(20	)

	$	875

Effective March 3, 2003, the Company acquired its Memphis, Tennessee refinery from The Williams Companies, Inc. and certain of its subsidiaries (“Williams”), for approximately $475 million, including inventory. The purchase of the Memphis refinery assets and the results of operations of those assets have been included in the Company’s results from the date of acquisition. In addition, Williams or its assignee will be entitled to receive contingent purchase payments up to a maximum aggregate of $75 million over the next seven years, depending on the refining margins during that period. Any amount the Company pays to Williams or its assignee for the contingent consideration will be recorded as goodwill. As of June 30, 2004, $27.6 million had been

recorded to goodwill related to the contingent purchase payment consideration. The Company made a $27.6 million contingent purchase payment during the third quarter of 2004.

The Company financed the Memphis refinery acquisition from a portion of the proceeds from a public offering of 13.1 million shares of common stock and a private placement of 2.9 million shares of common stock resulting in net proceeds of approximately $306 million and from an offering of $525 million in senior notes. A portion of these proceeds was also used to retire certain outstanding long-term debt.

3.	Inventories

The carrying value of inventories consisted of the following:


	June 30, 2004		December 31, 2003
Crude oil	$	302.9	$	268.4
Refined products and blendstocks		462.9		334.7
Warehouse stock and other		35.2		27.2

	$	801.0	$	630.3

The market value of crude oil, refined products and blendstock inventories as of June 30, 2004 was approximately $280 million (December 31, 2003 - $174 million) above carrying value.

4.	Other Assets

Other assets consisted of the following:


	June 30, 2004		December 31, 2003
Deferred turnaround costs	$	120.8	$	76.0
Deferred financing costs		43.8		35.6
Other		3.4		4.0

	$	168.0	$	115.6

Amortization of deferred financing costs for the three months ended June 30, 2004 and 2003 was $2.2 million and $2.3 million, respectively, for both the Company and PRG and is included in “Interest and finance expense”. Amortization of deferred financing costs for the six months ended June 30, 2004 and 2003 was $4.3 million and $4.7 million, respectively, for both the Company and PRG.

For the three and six months ended June 30, 2004, the Company incurred deferred financing costs of $16.1 million related to the new $1 billion credit facility and the issuance of $400 million of senior notes. As a result of the early extinguishment of the $785 million credit facility, the Company recorded a loss of $3.6 million (PRG $3.6 million) for both the three and six months ended June 30, 2004. The loss represented a write-off of unamortized deferred financing costs.

For the three and six months ended June 30, 2003, the Company incurred deferred financing costs of $5.7 million and $25.3 million, respectively, related to the amendment of its credit agreement and the issuance of $825 million in senior notes under two separate offerings.

As a result of the early extinguishment of long-term debt and credit agreement restructuring in 2003, the Company recorded a loss of $3.4 million (PRG $3.4 million) and $10.4 million (PRG $8.1 million) for the three

and six months ended June 30, 2003, respectively. The loss included cash premiums of $2.7 million and a write-off of unamortized deferred financing costs of $0.7 million for the three months ended June 30, 2003. The loss included a cash premium of $5.0 million (PRG $2.7 million) and a write-off of unamortized deferred financing costs of $5.4 million for the six months ended June 30, 2003.

5.	Employee Benefit Plans

The following table provides the components of net periodic benefit cost for the three and six month periods ended June 30:


	Pension Benefits										Other Postretirement Benefits
	For the Three Months Ended June 30,					For the Six Months Ended June 30,					For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2004			2003		2004			2003		2004			2003			2004			2003
Components of Net Periodic Benefit Costs:
Service cost	$	3.2		$	2.0	$	5.1		$	3.1	$	0.8		$	0.7		$	1.6		$	1.3
Interest cost		0.2			—		0.4			0.1		1.6			1.4			3.3			2.7
Recognized actuarial loss		—			—		—			—		0.5			0.5			1.1			1.0
Expected return on plan assets		(0.1	)		—		(0.2	)		—		—			—			—			—
Amortization of prior service costs		0.1			0.1		0.2			0.1		(0.1	)		(0.1	)		(0.2	)		(0.2	)

Net periodic benefit cost	$	3.4		$	2.1	$	5.5		$	3.3	$	2.8		$	2.5		$	5.8		$	4.8

As of December 31, 2003, the Company expected to contribute a total of $9 million to its pension plans in 2004. As of June 30, 2004 the Company had contributed $0.5 million to its pension plans and expects to contribute $8.5 million during the remainder of 2004. In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (“Act”) was signed into law. The Act will provide prescription drug coverage to retirees beginning in 2006 and will provide subsidies to sponsors of post-retirement medical plans that provide prescription drug coverage.

In May 2004 the FASB issued FSP 106-2 “Accounting and Disclosure Requirements related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (“FSP 106-2”). The Company has applied FSP 106-2 retroactively to the date of enactment. The impact of adopting FSP 106-2 resulted in a reduction in the Company’s accumulated projected benefit obligation (“APBO”) of $15.5 million for the full year 2004 and a reduction of $0.7 million for net periodic pension cost for both the three and six months ended June 30, 2004. The Company’s actuaries have determined the plan is actuarially equivalent. The Company is currently evaluating the expected gross receipts to be received from the subsidy; no subsidies have been received as of June 30, 2004.

6.	Refinery Restructuring and Other Charges

During the three months ended June 30, 2004, the Company recorded refinery restructuring and other charges of $4.7 million. The charges include $3.3 million related to the St. Louis administrative office closure and $1.4 million related to expenses associated with safety and environmental matters at closed refineries. During the six months ended June 30, 2004, the Company recorded refinery restructuring and other charges of $9.3 million. The charges include $7.3 million related to the St. Louis administrative office closure and $2.0 million related to expenses associated with safety and environmental matters at closed refineries.

During the three months ended June 30, 2003, the Company recorded refinery restructuring and other charges of $0.7 million related to the Company’s plans to close the St. Louis administrative office. During the six months ended June 30, 2003, the Company recorded refinery restructuring and other charges of $15.7 million. The six month charge also included a $1.6 million reversal in restructuring charges related to the administrative restructuring which began in 2002 and a $16.6 million charge related to the then potential sale of certain Hartford refinery assets.

Below are further discussions of the Hartford refinery asset sale and the administrative function restructuring.

Hartford Asset Sale. In September 2002, the Company ceased refining operations at its Hartford, Illinois refinery, but the Company continues to operate a storage and distribution facility at the refinery site. In the first quarter of 2003, the Company signed a memorandum of understanding with ConocoPhillips for the sale of refining assets and certain storage and distribution assets for $40 million. Accordingly, the Company recorded a charge of $16.6 million related to the transaction, which included the write-down of the refining assets held for sale and the write-down of certain storage and distribution assets included in property, plant and equipment. The sale was completed in the third quarter of 2003.

Administrative Restructuring. In 2002, the Company began a restructuring of its administrative functions, and at that time the elimination of certain positions in the St. Louis office was scheduled for early 2003. As a result of the Memphis refinery acquisition in early 2003, the number of positions to be eliminated at the St. Louis office was reduced by 25 and the Company recorded a reduction in the restructuring liability of $1.6 million in the first quarter of 2003. In May 2003, the Company announced that it would be closing the St. Louis office and moving the administrative functions to the Connecticut office over the next twelve months. The severance related costs were amortized over the remaining service period of the affected employees and the other costs, such as training, relocation, and the movement of physical assets, are expensed as incurred.

The following table summarizes the expected expenses associated with the administrative restructuring and provides a reconciliation of the administrative restructuring liability as of June 30, 2004


	Severance			Other Costs			Total Costs
Summary of Restructuring Expenses:
Expected total restructuring expenses	$	5.9		$	10.5		$	16.4
Expenses recorded for the six months ended June 30, 2004		0.9			6.4			7.3
Cumulative expenses recorded to date		5.9			10.5			16.4
Liability Activity:
Beginning balance, December 31, 2003		5.2			—			5.2
Expenses recorded for the six months ended June 30, 2004		0.9			6.4			7.3
Cash outflows		(4.7	)		(6.4	)		(11.1	)

Ending balance, June 30, 2004	$	1.4		$	—		$	1.4

7.	Interest and Finance Expense

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


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2004			2003			2004			2003
Interest expense	$	38.3		$	31.4		$	71.2		$	58.2
Financing costs		2.2			2.3			4.3			4.7
Capitalized interest		(5.2	)		(3.3	)		(8.9	)		(5.6	)

	$	35.3		$	30.4		$	66.6		$	57.3

PRG’s interest and finance expense included in the statements of operations was $34.8 million and $65.9 million for the three and six months ended June 30, 2004, respectively and is the same as Premcor Inc.’s interest expense, except that it excludes interest expense on the $10.2 million of capital lease obligations (see Note 9). PRG’s interest and finance expense included in the statements of operations was $29.9 million and $56.1 million for the three and six months ended June 30, 2003, respectively and is the same as Premcor Inc.’s interest expense, except that it excludes interest expense on the $10.3 million of capital lease obligations (see Note 9).

The Company paid cash for interest for the three months ended June 30, 2004 and 2003 of $13.2 million and $13.1 million, respectively. The Company paid cash for interest for the six months ended June 30, 2004 and 2003 of $59.2 million and $38.2 million, respectively. PRG paid cash for interest for the three months ended June 30, 2004 and 2003 of $12.8 million and $12.7 million, respectively. PRG paid cash for interest for the six months ended June 30, 2004 and 2003 of $58.6 million and $35.8 million, respectively.

8.	Credit Facility

On April 13, 2004, PRG completed a new $1 billion senior secured revolving credit facility, maturing in April 2009, to replace its existing $785 million credit facility. The facility is used primarily to secure crude oil purchase obligations for the Company’s refinery operations and to provide for other working capital needs. The revolving credit facility allows for the issuance of letters of credit and direct borrowings, individually or collectively, up to the lesser of $1 billion or the amount available under a defined borrowing base. The borrowing base includes, among other items, eligible cash and cash equivalents, eligible investments, eligible receivables, and eligible petroleum inventories. The revolving credit facility also allows for an overall increase in the principal amount of the facility of up to $250 million under certain circumstances. The revolving credit facility is secured by a lien on substantially all of PRG’s cash and cash equivalents, receivables, crude oil and refined product inventories and intellectual property and is guaranteed by Premcor Inc. The collateral also includes the capital stock of Sabine River Holding Corp. (“Sabine”) and certain other subsidiaries and certain PACC inventory. PRG’s borrowings under this facility bear interest at a rate based on the highest of three U.S. based rate formulas, or the Eurodollar rate plus a defined margin.

The covenants and conditions under this new credit agreement are generally less restrictive than the covenants contained in the agreement governing PRG’s terminated $785 million facility. The new credit agreement contains covenants and conditions that, among other things, limit dividends, indebtedness, liens, investments, restricted payments as defined, and the sale of assets. The covenants also provide that in the event PRG does not maintain certain availability within the facility, additional restrictions and a cumulative cash flow test will apply. PRG was in compliance with these covenants as of June 30, 2004.

As of June 30, 2004, the borrowing base for the new credit facility was $1,534.5 million, with $404.0 million of the facility utilized for letters of credit. As of December 31, 2003, the borrowing base for the old credit facility was $1,348.9 million with $602.1 million of the facility utilized for letters of credit. There were no direct borrowings under the applicable credit facilities as of June 30, 2004 or December 31, 2003.

9.	Long-term Debt

Long-term debt consisted of the following:


	June 30, 2004			December 31, 2003
12½% Senior Notes due January 15, 2009 (“12 ½% Senior Notes”) ⁽¹⁾	$	211.9		$	221.8
9¼% Senior Notes due February 1, 2010 (“9¼% Senior Notes”) ⁽²⁾		175.0			175.0
6¾% Senior Notes due February 1, 2011 (“6¾% 2011 Senior Notes”) ⁽²⁾		210.0			210.0
6¹/8% Senior Notes due February 1, 2011 (“6¹/8% Senior Notes”) ⁽²⁾		200.0			—
7 ¾% Senior Subordinated Notes due February 1, 2012 (“7 ¾% Senior Subordinated Notes”) ⁽²⁾		175.0			175.0
9½% Senior Notes due February 1, 2013 (“9½% Senior Notes”) ⁽²⁾		350.0			350.0
6³/4% Senior Notes due February 1, 2014 (“6³/4% 2014 Senior Notes”) ⁽²⁾		200.0			—
7½% Senior Notes due June 15, 2015 (“7½% Senior Notes”) ⁽²⁾		300.0			300.0
Ohio Water Development Authority Environmental Facilities Revenue Bonds due December 1, 2031 (“Series 2001 Ohio Bonds”) ⁽²⁾		10.0			10.0
Obligation under capital leases ⁽³⁾		10.2			10.3

		1,842.1			1,452.1
Less current portion		(30.9	)		(26.1	)

Total long-term debt at Premcor Inc.	$	1,811.2		$	1,426.0

⁽¹⁾	Issued or borrowed by Port Arthur Finance Corp., a subsidiary of PACC

⁽²⁾	Issued or borrowed by stand-alone PRG

⁽³⁾	Assumed by The Premcor Pipeline Co., a subsidiary of Premcor USA Inc.

On April 23, 2004, PRG completed an offering of $400 million in senior notes, of which $200 million, due in 2011, bear interest at 6¹/8% per annum and $200 million, due in 2014, bear interest at 6¾% per annum. A portion of the proceeds was used to purchase the Delaware City refining complex. The senior notes are unsecured. Premcor Inc. has fully and unconditionally guaranteed the principal payments on these senior notes and any applicable premiums and interest.

PRG’s long-term debt, including current maturities, as of June 30, 2004 was $1,831.9 million and is the same as Premcor Inc.’s long-term debt as noted in the table above except that it excludes the $10.2 million of capital lease obligations. The Premcor Pipeline Co. assumed these lease obligations as part of the Memphis acquisition. PRG’s long-term debt, including current maturities, as of December 31, 2003 was $1,441.8 million and is the same as Premcor Inc.’s long-term debt as noted in the table above except that it excludes the $10.3 million of capital lease obligations.

10.

Stockholders’ Equity

On April 23, 2004, Premcor Inc. completed a public offering of 14,950,000 shares of common stock, which included 1,950,000 shares related to the overallotment option, which was exercised by the underwriter. The shares were issued at a price of $34.00 per share and the company received proceeds, net of underwriter’s discount and commissions, of $490 million. A portion of the proceeds was used to purchase the Delaware City refinery complex, which is discussed in Note 2. Stockholders’ equity also reflected the receipt of proceeds from the exercise of stock options.

11.

Income Taxes

Our effective tax rate was 38.1% for the six months ended June 30, 2004 as compared to 33.8% in 2003. Our subsidiaries are subject to different statutory tax rates. These differing tax rates and the differing amount of

taxable income or loss recognized by each subsidiary impact our consolidated effective tax rate. The increase in our 2004 consolidated effective tax rate as compared to 2003 resulted from a lower percentage of our 2004 consolidated income being recognized by Sabine, which has a lower effective tax rate than other subsidiaries.

The Company made net cash income tax payments of $2.3 million for both the three and six months ended June 30, 2004. The Company made net cash income tax payments of $2.3 million for both the three and six months ended June 30, 2003. PRG made net cash income tax payments of $0.1 million for both the three and six months ended June 30, 2004. PRG made net cash income tax payments of $0.2 million for both the three and six months ended June 30, 2003.

For federal income tax purposes, the Company has incurred, as a result of the April 2004 equity offering, a stock ownership change of more than 50%, determined over the preceding three-year period. Under federal tax law, the more than 50% stock ownership change has resulted in an annual limitation being placed on the amount of regular and alternative minimum tax net operating losses, and certain other losses and tax credits (collectively “tax attributes”) that may be utilized in any given year. Accordingly, the Company’s ability to utilize tax attributes could be affected in both timing and amount. However, management believes such annual limitation will not restrict the Company’s ability to significantly utilize its tax attributes over the applicable carryforward periods. Therefore, at this time, the Company does not anticipate the need for an additional valuation allowance as a result of this more than 50% stock ownership change.

12.

Discontinued Operations

In connection with the 1999 sale of PRG’s retail assets to Clark Retail Enterprises, Inc. (“CRE”), PRG assigned certain leases and subleases of retail stores to CRE. Subject to certain defenses, PRG remained jointly and severally liable for CRE’s obligations under approximately 150 of these leases, including payment of rent and taxes. PRG may also be contingently liable for environmental obligations at these sites. In 2002, CRE and its parent company, Clark Retail Group, Inc., filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. In 2003, through the bankruptcy hearings, PRG, subject to certain defenses, became primarily obligated for approximately 36 of the previously assigned leases. For the three and six months ended June 30, 2004, PRG recorded an after-tax charge of $1.5 million and $1.8 million, respectively. These charges represent the estimated net present value of its remaining liability under additional leases that had been rejected as of June 30, 2004, net of estimated sublease income, and other direct costs. For the three and six months ended June 30, 2003, PRG recorded an after-tax charge of $2.2 million and $6.5 million, respectively representing the estimated net present value of its remaining liability under the leases that had been rejected as of June 30, 2003, net of estimated sublease income, and other direct costs. The following table reconciles the activity and balance of the liability for the lease obligations as well as the Company’s environmental liability for previously owned and leased retail sites:


	Lease Obligations			Environmental Obligations of Previously Owned and Leased Sites		Total Discontinued Operations
Beginning balance, December 31, 2003	$	7.4		$	21.2	$	28.6
Accretion and other expenses		2.9			—		2.9
Net cash outlays		(3.3	)		0.9		(2.4	)

Ending balance, June 30, 2004	$	7.0		$	22.1	$	29.1

The primary obligation under a majority of the non-rejected leases and subleases was transferred in a CRE bankruptcy sale process to various unrelated third parties; however, the Company may remain jointly and severally liable on the assigned leases. In July 2004, the CRE bankruptcy estate was liquidated and the case dismissed.

13.

Earnings per Share

The common stock shares used to compute the Company’s basic and diluted earnings per share was as follows:


	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2004	2003	2004	2003
Weighted average common shares outstanding	85.4	74.1	79.8	71.5
Dilutive effect of stock options	1.9	0.7	1.7	0.7

Weighted average common shares outstanding, assuming dilution	87.3	74.8	81.5	72.2

Outstanding stock options totaling 3.8 million (2003 – 3.9 million) and 3.8 million (2003 – 3.7 million) common shares for the three and six month periods ended June 30, 2004, respectively, were excluded from the diluted earnings per share calculation because they did not have a dilutive effect under the treasury stock method. In addition, outstanding stock options totaling 0.1 million (2003 – 0.6 million) and 0.1 million (2003 – 0.5 million) common shares for the three and six month periods ended June 30, 2004, respectively, were excluded from the diluted earnings per share calculation because they were anti-dilutive.

14.

Consolidating Financial Statements of PRG as Co-guarantor of PAFC’s Senior Notes

Presented below are the PRG condensed consolidating balance sheets, statements of operations, and cash flows as required by Rule 3-10 of the Securities Exchange Act of 1934, as amended. PRG along with PACC, Sabine, and various other subsidiaries of Sabine are full and unconditional guarantors of Port Arthur Finance Corp’s (“PAFC”) 12½% Senior Notes. Sabine indirectly owns PACC through its 100% ownership of PACC’s general and limited partners. PAFC is a wholly owned subsidiary of PACC. Under Rule 3-10, the condensed consolidating balance sheets, statements of operations, and cash flows presented below meet the requirements for financial statements of the issuer and each guarantor of the notes since the issuer and guarantors are all direct or indirect wholly owned subsidiaries of PRG, and all guarantees are full and unconditional on a joint and several basis.

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

As of June 30, 2004

(unaudited, in millions)


	PRG		PAFC		Other Guarantor Subsidiaries		Eliminations			Consolidated PRG
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	364.6	$	—	$	—	$	—		$	364.6
Cash restricted for debt service		—		—		69.8		—			69.8
Short-term investments		1.7		—		—		—			1.7
Accounts receivable		495.8		—		1.2		(0.8	)		496.2
Receivable from affiliates		103.9		43.6		—		(125.3	)		22.2
Inventories		772.9		—		28.1		—			801.0
Prepaid expenses and other		125.4		—		3.8		—			129.2
Deferred income taxes		13.7		—		0.1		—			13.8

Total current assets		1,878.0		43.6		103.0		(126.1	)		1,898.5

PROPERTY, PLANT AND EQUIPMENT, NET		1,981.6		—		592.5		—			2,574.1
DEFERRED INCOME TAXES		15.4		—		—		(15.4	)		—
INVESTMENT IN AFFILIATES		242.1		—		—		(242.1	)		—
GOODWILL		27.6		—		—		—			27.6
OTHER ASSETS		154.7		—		13.2		—			167.9
NOTE RECEIVABLE FROM AFFILIATE		—		194.8		—		(194.8	)		—

	$	4,299.4	$	238.4	$	708.7	$	(578.4	)	$	4,668.1

LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES:
Accounts payable	$	559.0	$	—	$	44.9	$	—		$	603.9
Payable to affiliates		30.5		—		136.2		(94.8	)		71.9
Accrued expenses and other		154.5		13.0		1.5		(0.9	)		168.1
Accrued taxes other than income		63.9		—		3.3		—			67.2
Current portion of long-term debt		—		30.6		—		—			30.6
Current portion of notes payable to affiliate		—		—		30.6		(30.6	)		—

Total current liabilities		807.9		43.6		216.5		(126.3	)		941.7

LONG-TERM DEBT		1,620.0		194.8				(13.5	)		1,801.3
DEFERRED INCOME TAXES		77.4		—		68.1		(15.5	)		130.0
OTHER LONG-TERM LIABILITIES		180.9		—		1.0		—			181.9
NOTE PAYABLE TO AFFILIATE		—		—		194.8		(194.8	)		—
COMMITMENTS AND CONTINGENCIES		—		—		—		—			—

COMMON STOCKHOLDER’S EQUITY:
Common stock		—		—		—		—			—
Paid-in capital		1,227.3		—		206.0		(206.0	)		1,227.3
Retained earnings		385.9		—		22.3		(22.3	)		385.9

Total common stockholder’s equity		1,613.2		—		228.3		(228.3	)		1,613.2

	$	4,299.4	$	238.4	$	708.7	$	(578.4	)	$	4,668.1

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Three Months Ended June 30, 2004

(unaudited, in millions)


	PRG			PAFC			Other Guarantor Subsidiaries			Eliminations			Consolidated PRG
Net sales and operating revenues	$	3,599.8		$	—		$	639.9		$	(666.7	)	$	3,573.0
Equity in earnings of affiliates		23.1			—			—			(23.1	)		—

Expenses
Cost of sales		3,163.2			—			531.1			(657.8	)		3,036.5
Operating expenses		146.3			—			59.0			(8.9	)		196.4
General and administrative expenses		37.5			—			0.9			—			38.4
Stock-based compensation		4.9			—			—			—			4.9
Depreciation		18.2			—			5.5			—			23.7
Amortization		12.7			—			0.2			—			12.9
Refinery restructuring and other charges		4.7			—			—			—			4.7

		3,387.5			—			596.7			(666.7	)		3,317.5
Operating income		235.4			—			43.2			(23.1	)		255.5
Interest and finance expense		(27.4	)		(7.0	)		(7.8	)		7.4			(34.8	)
Loss on extinguishment of debt		(3.6	)		—			—			—			(3.6	)
Interest income		1.6			7.0			0.1			(7.4	)		1.3

Income from continuing operations before income taxes		206.0			—			35.5			(23.1	)		218.4
Income tax provision		(71.7	)		—			(12.4	)		—			(84.1	)

Income from continuing operations		134.3			—			23.1			(23.1	)		134.3
Loss from discontinued operations, net of tax		(1.5	)		—			—			—			(1.5	)

Net income	$	132.8		$	—		$	23.1		$	(23.1	)	$	132.8

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Six Months Ended June 30, 2004

(unaudited, in millions)


	PRG			PAFC			Other Guarantor Subsidiaries			Eliminations			Consolidated PRG
Net sales and operating revenues	$	6,172.2		$	—		$	1,273.3		$	(1,321.4	)	$	6,124.1
Equity in earnings of affiliates		49.4			—			—			(49.4	)		—

Expenses
Cost of sales		5,506.8			—			1,070.3			(1,304.2	)		5,272.9
Operating expenses		261.5			—			98.3			(17.2	)		342.6
General and administrative expenses		53.7			—			1.9			—			55.6
Stock-based compensation		9.8			—			—			—			9.8
Depreciation		30.2			—			11.0			—			41.2
Amortization		28.7			—			0.4			—			29.1
Refinery restructuring and other charges		9.3			—			—			—			9.3

		5,900.0			—			1,181.9			(1,321.4	)		5,760.5
Operating income		321.6			—			91.4			(49.4	)		363.6
Interest and finance expense		(51.1	)		(14.1	)		(15.6	)		14.9			(65.9	)
Loss on extinguishment of debt		(3.6	)		—			—			—			(3.6	)
Interest income		3.6			14.1			0.2			(14.9	)		3.0

Income from continuing operations before income taxes		270.5			—			76.0			(49.4	)		297.1
Income tax provision		(86.6	)		—			(26.6	)		—			(113.2	)

Income from continuing operations		183.9			—			49.4			(49.4	)		183.9
Loss from discontinued operations, net of tax		(1.8	)		—			—			—			(1.8	)

Net income	$	182.1		$	—		$	49.4		$	(49.4	)	$	182.1

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

For the Six Months Ended June 30, 2004

(unaudited, in millions)


	PRG			PAFC			Other Guarantor Subsidiaries			Eliminations			Consolidated PRG
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	182.1		$	—		$	49.4		$	(49.4	)	$	182.1
Discontinued operations		1.8			—			—						1.8
Adjustments:
Depreciation		30.2			—			11.0			—			41.2
Amortization		31.6			—			1.5			—			33.1
Deferred income taxes		84.9			—			8.6			(0.1	)		93.4
Stock-based compensation		9.8			—			—			—			9.8
Refinery restructuring and other charges		(3.8	)		—			—			—			(3.8	)
Write-off of deferred financing costs		3.6			—			—			—			3.6
Equity earnings in affiliates		(49.4	)		—			—			49.4			—
Other, net		5.1			—			0.2			0.2			5.5
CASH PROVIDED BY (REINVESTED IN) WORKING CAPITAL:
Accounts receivable, prepaid expenses and other		102.2			—			0.8			—			103.0
Inventories		(51.1	)		—			(3.3	)					(54.4	)
Accounts payable, accrued expenses, taxes other than income, and other		(101.9	)		(0.5	)		(28.8	)		0.1			(131.1	)
Affiliate receivables and payables		(60.5	)		11.0			72.5			(0.1	)		22.9
Cash and cash equivalents restricted for debt service		—			—			0.7			—			0.7

Net cash provided by operating activities of continuing operations		184.6			10.5			112.6			0.1			307.8
Net cash used in operating activities of discontinued operations		(2.4	)		—			—			—			(2.4	)

Net cash provided by operating activities		182.2			10.5			112.6			0.1			305.4

CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment		(132.2	)		—			(1.6	)		—			(133.8	)
Expenditures for turnaround		(73.6	)		—			(0.3	)		—			(73.9	)
Refinery acquisition expenditures		(874.8	)		—			—			—			(874.8	)
Maturities of investments		0.6			—			—			(0.6	)		—

Net cash used in investing activities		(1,080.0	)		—			(1.9	)		(0.6	)		(1,082.5	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt		400.0			—			—			—			400.0
Long-term debt and capital lease payments		—			(10.5	)		—			0.5			(10.0	)
Cash and cash equivalent restricted for debt repayment		—			—			(3.9	)		—			(3.9	)
Capital contributions, net		501.6			—			(106.8	)		—			394.8
Deferred financing costs		(16.1	)		—			—			—			(16.1	)

Net cash provided by financing activities		885.5			(10.5	)		(110.7	)		0.5			764.8

NET DECREASE IN CASH AND CASH EQUIVALENTS		(12.3	)		—			—			—			(12.3	)
CASH AND CASH EQUIVALENTS, beginning of period		376.9			—			—			—			376.9

CASH AND CASH EQUIVALENTS, end of period	$	364.6		$	—		$	—		$	—		$	364.6

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

As of December 31, 2003

(unaudited, in millions)


	PRG		PAFC		Other Guarantor Subsidiaries		Eliminations			Consolidated PRG
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	376.9	$	—	$	—	$	—		$	376.9
Cash restricted for debt service		—		—		66.6		—			66.6
Short-term investments		1.7		—		—		—			1.7
Accounts receivable		623.4		—		0.8		(0.8	)		623.4
Receivable from affiliates		77.7		39.3		38.2		(132.7	)		22.5
Inventories		605.5		—		24.8		—			630.3
Prepaid expenses and other		88.6		—		4.5		—			93.1

Total current assets		1,773.8		39.3		134.9		(133.5	)		1,814.5

PROPERTY, PLANT AND EQUIPMENT, NET		1,113.5		—		602.0		—			1,715.5
DEFERRED INCOME TAXES		36.6		—		—		(36.6	)		—
INVESTMENT IN AFFILIATES		300.0		—		—		(300.0	)		—
GOODWILL		14.2		—		—		—			14.2
OTHER ASSETS		100.5		—		15.1		—			115.6
NOTE RECEIVABLE FROM AFFILIATE		—		210.1		—		(210.1	)		—

	$	3,338.6	$	249.4	$	752.0	$	(680.2	)	$	3,659.8

LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES:
Accounts payable	$	707.1	$	—		$72.8	$	—		$	779.9
Payable to affiliates		64.5		—		91.4		(106.9	)		49.0
Accrued expenses and other		114.1		13.5		1.1		(0.8	)		127.9
Accrued taxes other than income		49.2		—		4.6		—			53.8
Current portion of long-term debt		—		25.8		—		—			25.8
Current portion of notes payable to affiliate		—		—		25.8		(25.8	)		—

Total current liabilities		934.9		39.3		195.7		(133.5	)		1,036.4

LONG-TERM DEBT		1,220.0		210.1		—		(14.1	)		1,416.0
DEFERRED INCOME TAXES		—		—		59.5		(36.6	)		22.9
OTHER LONG-TERM LIABILITIES		157.1		—		0.8		—			157.9
NOTE PAYABLE TO AFFILIATE		—		—		210.1		(210.1	)		—
COMMITMENTS AND CONTINGENCIES		—		—		—		—			—

COMMON STOCKHOLDER’S EQUITY:
Common stock		—		—		0.1		(0.1	)		—
Paid-in capital		822.7		—		206.0		(206.0	)		822.7
Retained earnings		203.9		—		79.8		(79.8	)		203.9

Total common stockholder’s equity		1,026.6		—		285.9		(285.9	)		1,026.6

	$	3,338.6	$	249.4	$	752.0	$	(680.2	)	$	3,659.8

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Three Months Ended June 30, 2003

(unaudited, in millions)


	PRG			PAFC			Other Guarantor Subsidiaries			Eliminations			Consolidated PRG
Net sales and operating revenues	$	2,257.6		$	—		$	580.0		$	(690.8	)	$	2,146.8
Equity in earnings of affiliates		43.2			—			—			(43.2	)		—

Expenses
Cost of sales		2,109.6			—			456.8			(682.2	)		1,884.2
Operating expenses		100.5			—			41.3			(8.6	)		133.2
General and administrative expenses		14.7			—			0.9			—			15.6
Stock-based compensation		4.4			—			—			—			4.4
Depreciation		10.2			—			5.5			—			15.7
Amortization		9.1			—			—			—			9.1
Refinery restructuring and other charges		0.7			—			—			—			0.7

		2,249.2			—			504.5			(690.8	)		2,062.9
Operating income		51.6			—			75.5			(43.2	)		83.9
Interest and finance expense		(21.6	)		(7.7	)		(8.6	)		8.0			(29.9	)
Loss on extinguishment of debt		(2.7	)		—			(0.7	)		—			(3.4	)
Interest income		1.5			7.7			0.3			(8.0	)		1.5

Income from continuing operations before income taxes		28.8			—			66.5			(43.2	)		52.1
Income tax provision		5.5			—			(23.3	)		—			(17.8	)

Income from continuing operations		34.3			—			43.2			(43.2	)		34.3
Loss from discontinued operations, net of tax		(2.2	)		—			—			—			(2.2	)

Net income	$	32.1		$	—		$	43.2		$	(43.2	)	$	32.1

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Six Months Ended June 30, 2003

(unaudited, in millions)


	PRG			PAFC			Other Guarantor Subsidiaries			Eliminations			Consolidated PRG
Net sales and operating revenues	$	4,364.0		$	—		$	1,284.3		$	(1,533.1	)	$	4,115.2
Equity in earnings of affiliates		105.5			—			—			(105.5	)		—

Expenses
Cost of sales		4,094.9			—			1,007.7			(1,516.2	)		3,586.4
Operating expenses		182.9			—			83.9			(16.9	)		249.9
General and administrative expenses		25.4			—			1.9			—			27.3
Stock-based compensation		8.7			—			—			—			8.7
Depreciation		19.3			—			10.9			—			30.2
Amortization		18.6			—			—			—			18.6
Refinery restructuring and other charges		15.7			—			—			—			15.7

		4,365.5			—			1,104.4			(1,533.1	)		3,936.8
Operating income		104.0			—			179.9			(105.5	)		178.4
Interest and finance expense		(39.1	)		(15.4	)		(17.3	)		15.7			(56.1	)
Loss on extinguishment of debt		(7.4	)		—			(0.7	)		—			(8.1	)
Interest income		2.5			15.4			0.4			(15.7	)		2.6

Income from continuing operations before income taxes		60.0			—			162.3			(105.5	)		116.8
Income tax provision		17.4			—			(56.8	)		—			(39.4	)

Income from continuing operations		77.4			—			105.5			(105.5	)		77.4
Loss from discontinued operations, net of tax		(6.5	)		—			—			—			(6.5	)

Net income	$	70.9		$	—		$	105.5		$	(105.5	)	$	70.9

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

For the Six Months Ended June 30, 2003

(unaudited, in millions)


	PRG			PAFC			Other Guarantor Subsidiaries			Eliminations			Consolidated PRG
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	70.9		$	—		$	105.5		$	(105.5	)	$	70.9
Discontinued operations		6.5			—			—			—			6.5
Adjustments:
Depreciation		19.3			—			10.9			—			30.2
Amortization		21.4			—			1.9			—			23.3
Deferred income taxes		22.5			—			10.5			—			33.0
Stock-based compensation		8.7			—						—			8.7
Refinery restructuring and other charges		13.6			—			—			—			13.6
Write-off of deferred financing costs		4.7			—			0.7			—			5.4
Equity earnings in affiliates		(105.5	)		—			—			105.5			—
Other, net		6.5			0.1			0.3			—			6.9
CASH PROVIDED BY (REINVESTED IN) WORKING CAPITAL:
Accounts receivable, prepaid expenses and other		(167.3	)		—			(3.4	)		0.8			(169.9	)
Inventories		(113.5	)		—			(16.4	)		—			(129.9	)
Accounts payable, accrued expenses, taxes
other than income, and other		129.2			(0.2	)		(2.3	)		(0.8	)		125.9
Affiliate receivables and payables		(80.2	)		4.5			78.9			—			3.2
Cash and cash equivalents restricted for debt service		—			—			(0.3	)		—			(0.3	)

Net cash provided by (used in) operating activities of continuing operations		(163.2	)		4.4			186.3			—			27.5
Net cash used in operating activities of discontinued operations		(3.1	)		—			—			—			(3.1	)

Net cash provided by (used in) operating activities		(166.3	)		4.4			186.3			—			24.4

CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment		(56.8	)		—			(3.9	)		—			(60.7	)
Expenditures for turnaround		(9.1	)		—			(0.4	)		—			(9.5	)
Refinery acquisition expenditures		(474.8	)		—			—						(474.8	)
Purchase of investments		(14.7	)		—			—			14.7			—
Cash and cash equivalents restricted for investment in capital additions		2.6			—			(2.4	)		—			0.2

Net cash used in investing activities		(552.8	)		—			(6.7	)		14.7			(544.8	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt		825.0			—									825.0
Long-term debt and capital lease payments		(240.3	)		(4.4	)		—			(14.7	)		(259.4	)
Cash and cash equivalent restricted for debt repayment		—			—			(4.9	)		—			(4.9	)
Capital contributions, net		438.0						(174.7	)					263.3
Deferred financing costs		(25.3	)		—			—			—			(25.3	)

Net cash provided by financing activities		997.4			(4.4	)		(179.6	)		(14.7	)		798.7

NET INCREASE IN CASH AND CASH EQUIVALENTS		278.3			—			—			—			278.3
CASH AND CASH EQUIVALENTS, beginning of period		119.7			—			—			—			119.7

CASH AND CASH EQUIVALENTS, end of period	$	398.0		$	—		$	—		$	—		$	398.0

15.

Consolidating Financial Statements of Premcor Inc. as Guarantor of PRG’s Senior Notes

Presented below are the Premcor Inc. condensed consolidating balance sheets, statements of operations, and cash flows as required by Rule 3-10 of the Securities Exchange Act of 1934, as amended. Premcor Inc. is a full and unconditional guarantor of PRG’s 6¹/8% 2011 Senior Notes and 6¾% 2014 Senior Notes. Premcor Inc. indirectly owns PRG through its 100% ownership of Premcor USA. PRG is a wholly owned subsidiary of Premcor USA. Under Rule 3-10, the condensed consolidating balance sheets, statements of operations, and cash flows presented below meet the requirements for financial statements of the issuer and the guarantor of the notes, and all guarantees are full and unconditional on a joint and several basis.

Premcor Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

As of June 30, 2004

(unaudited, in millions)


	Premcor		Consolidated PRG		Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Statement
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	137.9	$	364.6	$	2.3		$	—		$	504.8
Cash restricted for debt service		—		69.8		—			—			69.8
Short-term investments		—		1.7		5.3			—			7.0
Accounts receivable		0.1		496.2		0.6			—			496.9
Receivable from affiliates		120.4		22.2		47.4			(190.0	)		—
Inventories		—		801.0		—			—			801.0
Prepaid expenses and other		—		129.2		4.5			(4.7	)		129.0
Deferred income taxes		—		13.8		6.2			(0.2	)		19.8

Total current assets		258.4		1,898.5		66.3			(194.9	)		2,028.3

PROPERTY, PLANT AND EQUIPMENT, NET		—		2,574.1		23.8			—			2,597.9
INVESTMENT IN AFFILIATES		1,684.6		—		1,572.0			(3,256.6	)		—
GOODWILL		—		27.6		—			—			27.6
OTHER ASSETS		—		167.9		0.1			—			168.0

	$	1,943.0	$	4,668.1	$	1,662.2		$	(3,451.5	)	$	4,821.8

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	—	$	603.9	$	—		$	—		$	603.9
Payable to affiliates		106.0		71.9		12.1			(190.0	)		—
Accrued expenses and other		5.8		168.1		4.5			(5.0	)		173.4
Accrued taxes other than income		—		67.2		—			—			67.2
Current portion of long-term debt		—		30.6		0.3			—			30.9

Total current liabilities		111.8		941.7		16.9			(195.0	)		875.4

LONG-TERM DEBT		—		1,801.3		9.9			—			1,811.2
DEFERRED INCOME TAXES		—		130.0		(7.7	)		(0.2	)		122.1
OTHER LONG-TERM LIABILITIES		—		181.9		—			—			181.9
COMMITMENTS AND CONTINGENCIES		—		—		—			—			—

COMMON STOCKHOLDERS’ EQUITY:
Common stock		0.9		—		0.1			(0.1	)		0.9
Paid-in capital		1,689.4		1,227.3		1,487.4			(2,714.7	)		1,689.4
Retained earnings		140.9		385.9		155.6			(541.5	)		140.9

Total common stockholders’ equity		1,831.2		1,613.2		1,643.1			(3,256.3	)		1,831.2

	$	1,943.0	$	4,668.1	$	1,662.2		$	(3,451.5	)	$	4,821.8

Premcor Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Three Months Ended June 30, 2004

(unaudited, in millions)


	Premcor			Consolidated PRG			Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Statement
Net sales and operating revenues	$	—		$	3,573.0		$	3.9		$	(3.2	)	$	3,573.7
Equity in earnings of affiliates		133.2			—			133.2			(266.4	)		—

Expenses
Cost of sales		—			3,036.5			—			(1.8	)		3,034.7
Operating expenses		—			196.4			2.4			(1.3	)		197.5
General and administrative expenses		—			38.4			0.2			(0.3	)		38.3
Stock-based compensation		—			4.9			—			—			4.9
Depreciation		—			23.7			0.2			—			23.9
Amortization		—			12.9			—			—			12.9
Refinery restructuring and other charges		—			4.7			—			—			4.7

		—			3,317.5			2.8			(3.4	)		3,316.9
Operating income		133.2			255.5			134.3			(266.2	)		256.8
Interest and finance expense		(0.1	)		(34.8	)		(0.4	)		—			(35.3	)
Loss on extinguishment of debt		—			(3.6	)		—			—			(3.6	)
Interest income		0.5			1.3			—			(0.2	)		1.6

Income from continuing operations before income taxes		133.6			218.4			133.9			(266.4	)		219.5
Income tax provision		(0.1	)		(84.1	)		(0.3	)		—			(84.5	)

Income from continuing operations		133.5			134.3			133.6			(266.4	)		135.0
Loss from discontinued operations, net of tax		—			(1.5	)		—			—			(1.5	)

Net income	$	133.5		$	132.8		$	133.6		$	(266.4	)	$	133.5

Premcor Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Six Months Ended June 30, 2004

(unaudited, in millions)


	Premcor			Consolidated PRG			Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Statement
Net sales and operating revenues	$	—		$	6,124.1		$	7.7		$	(6.4	)	$	6,125.4
Equity in earnings of affiliates		183.0			—			183.0			(366.0	)		—

Expenses
Cost of sales		—			5,272.9			—			(3.7	)		5,269.2
Operating expenses		—			342.6			4.7			(2.8	)		344.5
General and administrative expenses		0.1			55.6			0.2						55.9
Stock-based compensation		—			9.8			—			—			9.8
Depreciation		—			41.2			0.6			—			41.8
Amortization		—			29.1			—			—			29.1
Refinery restructuring and other charges		—			9.3			—			—			9.3

		0.1			5,760.5			5.5			(6.5	)		5,759.6
Operating income		182.9			363.6			185.2			(365.9	)		365.8
Interest and finance expense		(0.3	)		(65.9	)		(0.7	)		0.3			(66.6	)
Loss on extinguishment of debt		—			(3.6	)		—			—			(3.6	)
Interest income		0.7			3.0			—			(0.4	)		3.3

Income from continuing operations before income taxes		183.3			297.1			184.5			(366.0	)		298.9
Income tax provision		(0.1	)		(113.2	)		(0.6	)		—			(113.9	)

Income from continuing operations		183.2			183.9			183.9			(366.0	)		185.0
Loss from discontinued operations, net of tax		—			(1.8	)		—			—			(1.8	)

Net income	$	183.2		$	182.1		$	183.9		$	(366.0	)	$	183.2

Premcor Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

For the Six Months Ended June 30, 2004

(unaudited, in millions)


	Premcor			Consolidated PRG			Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Statement
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	183.2		$	182.1		$	183.9		$	(366.0	)	$	183.2
Discontinued operations		—			1.8			—			—			1.8
Adjustments:
Depreciation		—			41.2			0.6			—			41.8
Amortization		—			33.1			0.3			—			33.4
Deferred income taxes		0.1			93.4			8.3			(0.1	)		101.7
Stock-based compensation		—			9.8			—			—			9.8
Refinery restructuring and other charges		—			(3.8	)		—			—			(3.8	)
Write-off of deferred financing costs		—			3.6			—			—			3.6
Equity earnings in affiliates		(183.0	)		—			(183.0	)		366.0			—
Other, net		(0.4	)		5.5			1.1			0.3			6.5
CASH PROVIDED BY (REINVESTED IN) WORKING CAPITAL :
Accounts receivable, prepaid expenses and other		2.2			103.0			(1.3	)		(1.4	)		102.5
Inventories		—			(54.4	)		—			—			(54.4	)
Accounts payable, accrued expenses, taxes
other than income, and other		5.8			(131.1	)		(1.5	)		1.2			(125.6	)
Affiliate receivables and payables		(16.4	)		22.9			(6.5	)		—			—
Cash and cash equivalents restricted for debt service		—			0.7			—			—			0.7

Net cash provided by (used in) operating activities of continuing operations		(8.5	)		307.8			1.9			—			301.2
Net cash used in operating activities of discontinued operations		—			(2.4	)		—			—			(2.4	)

Net cash provided by (used in) operating activities		(8.5	)		305.4			1.9			—			298.9

CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment		—			(133.8	)		(0.1	)		—			(133.9	)
Expenditures for turnaround		—			(73.9	)		—			—			(73.9	)
Refinery acquisition expenditures		—			(874.8	)		—			—			(874.8	)
Purchases of short-term investments		—			—			(1.1	)		—			(1.1	)

Net cash used in investing activities		—			(1,082.5	)		(1.2	)		—			(1,083.7	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt		—			400.0			—			—			400.0
Proceeds from issuance of common stock		493.0			—			—			—			493.0
Long-term debt and capital lease payments		—			(10.0	)		—			—			(10.0	)
Cash and cash equivalent restricted for debt repayment		—			(3.9	)		—			—			(3.9	)
Capital contributions, net		(394.6	)		394.8			(0.2	)		—			—
Deferred financing costs		—			(16.1	)		—			—			(16.1	)

Net cash provided by financing activities		98.4			764.8			(0.2	)		—			863.0

NET INCREASE IN CASH AND CASH EQUIVALENTS		89.9			(12.3	)		0.5			—			78.1
CASH AND CASH EQUIVALENTS, beginning of period		48.0			376.9			1.8			—			426.7

CASH AND CASH EQUIVALENTS, end of period	$	137.9		$	364.6		$	2.3		$	—		$	504.8

Premcor Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

As of December 31, 2003

(unaudited, in millions)


	Premcor			Consolidated PRG		Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Statement
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	48.0		$	376.9	$	1.8		$	—		$	426.7
Cash restricted for debt service		—			66.6		—			—			66.6
Short-term investments		—			1.7		4.2			—			5.9
Accounts receivable		—			623.4		0.1			—			623.5
Receivable from affiliates		99.0			22.5		43.8			(165.3	)		—
Inventories		—			630.3		—			—			630.3
Prepaid expenses and other		—			93.1		3.5			(3.9	)		92.7
Income tax receivable		2.3			—		—			(2.3	)		—

Total current assets		149.3			1,814.5		53.4			(171.5	)		1,845.7

PROPERTY, PLANT AND EQUIPMENT, NET		—			1,715.5		24.3			—			1,739.8
INVESTMENT IN AFFILIATES		1,096.8			—		994.6			(2,091.4	)		—
GOODWILL		—			14.2		—			—			14.2
OTHER ASSETS		—			115.6		—			—			115.6

	$	1,246.1		$	3,659.8	$	1,072.3		$	(2,262.9	)	$	3,715.3

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	—		$	779.9	$	—		$	—		$	779.9
Payable to affiliates		92.1			49.0		15.3			(156.4	)		—
Accrued expenses and other		—			127.9		4.1			(6.2	)		125.8
Accrued taxes other than income		—			53.8		—			—			53.8
Current portion of long-term debt		—			25.8		0.3			—			26.1
Current portion of notes payable to affiliate		8.9			—		—			(8.9	)		—

Total current liabilities		101.0			1,036.4		19.7			(171.5	)		985.6

LONG-TERM DEBT		—			1,416.0		10.0			—			1,426.0
DEFERRED INCOME TAXES		(0.1	)		22.9		(22.2	)		—			0.6
OTHER LONG-TERM LIABILITIES		—			157.9		—			—			157.9
COMMITMENTS AND CONTINGENCIES		—			—		—			—			—

COMMON STOCKHOLDERS’ EQUITY:
Common stock		0.7			—		0.1			(0.1	)		0.7
Paid-in capital		1,186.8			822.7		1,093.1			(1,915.8	)		1,186.8
Retained earnings		(42.3	)		203.9		(28.4	)		(175.5	)		(42.3	)

Total common stockholders’ equity		1,145.2			1,026.6		1,064.8			(2,091.4	)		1,145.2

	$	1,246.1		$	3,659.8	$	1,072.3		$	(2,262.9	)	$	3,715.3

Premcor Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Three Months Ended June 30, 2003

(unaudited, in millions)


	Premcor			Consolidated PRG			Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Statement
Net sales and operating revenues	$	—		$	2,146.8		$	3.7		$	(3.1	)	$	2,147.4
Equity in earnings of affiliates		32.4			—			32.5			(64.9	)		—

Expenses
Cost of sales		—			1,884.2			—			(2.1	)		1,882.1
Operating expenses		—			133.2			2.3			(1.1	)		134.4
General and administrative expenses		0.1			15.6			—			—			15.7
Stock-based compensation		—			4.4			—			—			4.4
Depreciation		—			15.7			0.3			—			16.0
Amortization		—			9.1			—			—			9.1
Refinery restructuring and other charges		—			0.7			—			—			0.7

		0.1			2,062.9			2.6			(3.2	)		2,062.4
Operating income		32.3			83.9			33.6			(64.8	)		85.0
Interest and finance expense		(0.2	)		(29.9	)		(0.5	)		0.2			(30.4	)
Loss on extinguishment of debt		—			(3.4	)		—			—			(3.4	)
Interest income		0.1			1.5			—			(0.3	)		1.3

Income from continuing operations before income taxes		32.2			52.1			33.1			(64.9	)		52.5
Income tax provision		0.1			(17.8	)		(0.3	)		—			(18.0	)

Income from continuing operations		32.3			34.3			32.8			(64.9	)		34.5
Loss from discontinued operations, net of tax		—			(2.2	)		—			—			(2.2	)

Net income	$	32.3		$	32.1		$	32.8		$	(64.9	)	$	32.3

Premcor Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Six Months Ended June 30, 2003

(unaudited, in millions)


	Premcor			Consolidated PRG			Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Statement
Net sales and operating revenues	$	—		$	4,115.2		$	5.7		$	(4.6	)	$	4,116.3
Equity in earnings of affiliates		69.7			—			71.7			(141.4	)		—

Expenses
Cost of sales		—			3,586.4			—			(2.8	)		3,583.6
Operating expenses		—			249.9			3.6			(1.9	)		251.6
General and administrative expenses		0.1			27.3			—			—			27.4
Stock-based compensation		—			8.7			—			—			8.7
Depreciation		—			30.2			0.4			—			30.6
Amortization		—			18.6			—			—			18.6
Refinery restructuring and other charges		—			15.7			—			—			15.7

		0.1			3,936.8			4.0			(4.7	)		3,936.2
Operating income		69.6			178.4			73.4			(141.3	)		180.1
Interest and finance expense		(0.4	)		(56.1	)		(1.2	)		0.4			(57.3	)
Loss on extinguishment of debt		—			(8.1	)		(2.3	)		—			(10.4	)
Interest income		0.7			2.6			0.1			(0.5	)		2.9

Income from continuing operations before income taxes		69.9			116.8			70.0			(141.4	)		115.3
Income tax provision		(0.1	)		(39.4	)		0.5			—			(39.0	)

Income from continuing operations		69.8			77.4			70.5			(141.4	)		76.3
Loss from discontinued operations, net of tax		—			(6.5	)		—			—			(6.5	)

Net income	$	69.8		$	70.9		$	70.5		$	(141.4	)	$	69.8

Premcor Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

For the Six Months Ended June 30, 2003

(unaudited, in millions)


	Premcor		Consolidated PRG		Other Non-Guarantor Subsidiaries		Eliminations			Consolidated Statement
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	69.8	$	70.9	$	70.5	$	(141.4	)	$	69.8
Discontinued operations		—		6.5		—		—			6.5
Adjustments:
Depreciation		—		30.2		0.4		—			30.6
Amortization		—		23.3		—		—			23.3
Deferred income taxes		—		33.0		4.7		—			37.7
Stock-based compensation		—		8.7		—		—			8.7
Refinery restructuring and other charges		—

PREMCOR REFINING GROUP INC 10-Q