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, 2005

¨ 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 26, 2005:

Premcor Inc.

89,303,559 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, 2005

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, 2005 and December 31, 2004	3
		Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2005 and 2004	4
		Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2004	5

	The Premcor Refining Group Inc.:
		Report of Independent Registered Public Accounting Firm	6
		Condensed Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004	7
		Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2005 and 2004	8
		Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2004	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		42

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		57

Item 4.	Controls and Procedures		58

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		59

Item 4.	Submission of Matters to a Vote of Security Holders		59

Item 6.	Exhibits		60

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 the condensed 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 condensed consolidated footnotes is 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, 2005, and the related condensed consolidated statements of operations for the three-month and six-month periods ended June 30, 2005 and 2004, and of cash flows for the six-month periods ended June 30, 2005 and 2004. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the 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 the 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 the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Premcor Inc. and subsidiaries (the “Company”) as of December 31, 2004, 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 March 1, 2005, 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, 2004 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

July 28, 2005

Premcor Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(unaudited, in millions, except share data)


	June 30, 2005		December 31, 2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	664.0	$	233.3
Short-term investments		678.9		520.0
Restricted cash and cash equivalents		75.4		69.1
Accounts receivable, net of allowance of $3.3 and $3.3		732.9		708.7
Inventories		805.4		772.6
Prepaid expenses and other		151.4		155.8
Deferred income taxes		20.8		74.9

Total current assets		3,128.8		2,534.4

Property, plant and equipment, net		3,138.7		2,908.1
Goodwill		100.0		27.6
Other assets		288.6		219.5

	$	6,656.1	$	5,689.6

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	1,294.8	$	993.4
Accrued expenses and other		417.0		207.5
Accrued taxes other than income		63.0		70.4
Current portion of long-term debt		46.7		38.8

Total current liabilities		1,821.5		1,310.1

Long-term debt		1,766.2		1,788.7
Deferred income taxes		297.4		275.8
Other long-term liabilities		174.2		180.6
Commitments and contingencies

COMMON STOCKHOLDERS’ EQUITY:
Common, $0.01 par value per share, 300,000,000 authorized, 89,302,759 issued and outstanding as of June 30, 2005; 89,213,510 issued and outstanding as of December 31, 2004		0.9		0.9
Additional paid-in capital		1,711.1		1,699.7
Retained earnings		884.8		433.8

Total common stockholders’ equity		2,596.8		2,134.4

	$	6,656.1	$	5,689.6

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,
	2005			2004			2005			2004
NET SALES AND OPERATING REVENUES	$	5,308.5		$	3,573.7		$	9,472.8		$	6,125.4

EXPENSES:
Cost of sales		4,402.2			3,034.7			8,018.0			5,269.2
Operating expenses		265.4			197.5			502.7			344.5
General and administrative expenses		65.2			43.2			107.0			65.7
Depreciation		22.7			23.9			49.1			41.8
Amortization		20.3			12.9			40.2			29.1
Refinery restructuring and other charges		0.6			4.7			4.7			9.3

		4,776.4			3,316.9			8,721.7			5,759.6

OPERATING INCOME		532.1			256.8			751.1			365.8

Interest and finance expense		(28.4	)		(35.3	)		(58.7	)		(66.6	)
Loss on extinguishment of debt		—			(3.6	)		—			(3.6	)
Interest income		6.9			1.6			10.3			3.3

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		510.6			219.5			702.7			298.9

Income tax provision		(178.1	)		(84.5	)		(243.5	)		(113.9	)

INCOME FROM CONTINUING OPERATIONS		332.5			135.0			459.2			185.0

Loss from discontinued operations, net of income tax benefit of $1.9 and $2.8 for 2005; $1.0 and $1.1 for 2004		(3.1	)		(1.5	)		(4.6	)		(1.8	)

NET INCOME	$	329.4		$	133.5		$	454.6		$	183.2

NET INCOME PER COMMON SHARE:
Basic:
Income from continuing operations	$	3.72		$	1.58		$	5.15		$	2.32
Discontinued operations		(0.03	)		(0.02	)		(0.05	)		(0.02	)

Net income	$	3.69		$	1.56		$	5.10		$	2.30

Weighted average common shares outstanding		89.2			85.4			89.2			79.8
Diluted:
Income from continuing operations	$	3.60		$	1.55		$	4.99		$	2.27
Discontinued operations		(0.03	)		(0.02	)		(0.05	)		(0.02	)

Net income	$	3.57		$	1.53		$	4.94		$	2.25

Weighted average common shares outstanding		92.3			87.3			92.1			81.5

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,
	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	454.6		$	183.2

Adjustments:
Loss from discontinued operations		4.6			1.8
Depreciation		49.1			41.8
Amortization		44.4			33.4
Deferred income taxes		75.7			101.7
Stock-based compensation		8.3			9.8
Refinery restructuring and other charges		—			(3.8	)
Write-off of deferred financing costs		—			3.6
Other, net		(3.9	)		6.5
Cash provided by (reinvested in):
Accounts receivable, prepaid expenses and other		(19.8	)		102.5
Inventories		(32.8	)		(54.4	)
Accounts payable, accrued expenses, taxes other than income, and other		461.9			(125.6	)
Restricted cash and cash equivalents		—			0.7

Net cash provided by operating activities of continuing operations		1,042.1			301.2
Net cash used in operating activities of discontinued operations		(3.2	)		(2.4	)

Net cash provided by operating activities		1,038.9			298.8

CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment		(313.3	)		(133.9	)
Expenditures for turnaround		(114.6	)		(73.9	)
Expenditures for refinery acquisition, net		—			(874.8	)
Net (purchases) sales of short-term investments		(159.4	)		45.4
Restricted cash and cash equivalents		(5.8	)		—

Net cash used in investing activities		(593.1	)		(1,037.2	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock		3.1			493.0
Proceeds from issuance of long-term debt		—			400.0
Long-term debt and capital lease payments		(14.6	)		(10.0	)
Dividends paid to shareholders		(3.6	)		—
Cash and cash equivalents restricted for debt repayment		—			(3.9	)
Deferred financing costs		—			(16.1	)

Net cash (used in) provided by financing activities		(15.1	)		863.0

NET INCREASE IN CASH AND CASH EQUIVALENTS		430.7			124.6
CASH AND CASH EQUIVALENTS, beginning of period		233.3			120.7

CASH AND CASH EQUIVALENTS, end of period	$	664.0		$	245.3

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, 2005, and the related condensed consolidated statements of operations for the three-month and six-month periods ended June 30, 2005 and 2004, and of cash flows for the six-month periods ended June 30, 2005 and 2004. These interim financial statements are the responsibility of the Company’s management.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of The Premcor Refining Group Inc. and subsidiaries (the “Company”) as of December 31, 2004, and the related consolidated statements of income, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated March 1, 2005, 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, 2004 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

July 28, 2005

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(unaudited, in millions, except share data)


	June 30, 2005		December 31, 2004
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	630.5	$	230.5
Short-term investments		364.3		378.7
Restricted cash and cash equivalents		75.4		69.1
Accounts receivable, net of allowance of $3.3 and $3.3		732.7		708.3
Receivables from affiliates		189.0		119.7
Inventories		805.4		772.6
Prepaid expenses and other		150.9		155.6
Deferred income taxes		20.9		69.5

Total current assets		2,969.1		2,504.0

Property, plant and equipment, net		3,079.3		2,846.5
Goodwill		100.0		27.6
Other assets		288.6		219.5

	$	6,437.0	$	5,597.6

LIABILITIES AND STOCKHOLDER’S EQUITY

CURRENT LIABILITIES:
Accounts payable	$	1,294.5	$	992.8
Payables to affiliates		62.3		124.4
Accrued expenses and other		363.2		231.7
Accrued taxes other than income		62.5		70.5
Current portion of long-term debt		46.4		38.5

Total current liabilities		1,828.9		1,457.9

Long-term debt		1,756.8		1,779.1
Deferred income taxes		298.6		277.5
Other long-term liabilities		174.0		180.6
Commitments and contingencies

COMMON STOCKHOLDER’S EQUITY:
Common, $0.01 par value per share, 1,000 authorized, 100 issued and outstanding		—		—
Additional paid-in capital		1,247.1		1,237.4
Retained earnings		1,131.6		665.1

Total common stockholder’s equity		2,378.7		1,902.5

	$	6,437.0	$	5,597.6

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

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(unaudited, in millions)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2005			2004			2005			2004
NET SALES AND OPERATING REVENUES	$	5,310.5		$	3,573.0		$	9,471.8		$	6,124.1

EXPENSES:
Cost of sales		4,413.0			3,036.5			8,034.5			5,272.9
Operating expenses		257.4			196.4			489.3			342.6
General and administrative expenses		64.7			43.3			106.1			65.4
Depreciation		22.2			23.7			48.0			41.2
Amortization		20.3			12.9			40.2			29.1
Refinery restructuring and other charges		0.6			4.7			4.7			9.3

		4,778.2			3,317.5			8,722.8			5,760.5

OPERATING INCOME		532.3			255.5			749.0			363.6
Interest and finance expense		(27.4	)		(34.8	)		(57.4	)		(65.9	)
Loss on extinguishment of debt		—			(3.6	)		—			(3.6	)
Interest income		5.3			1.3			8.1			3.0

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		510.2			218.4			699.7			297.1

Income tax provision		(176.6	)		(84.1	)		(241.6	)		(113.2	)

INCOME FROM CONTINUING OPERATIONS		333.6			134.3			458.1			183.9

Loss from discontinued operations, net of income tax benefit of $1.9 and $2.8 for 2005; $1.0 and $1.1 for 2004		(3.1	)		(1.5	)		(4.6	)		(1.8	)

NET INCOME	$	330.5		$	132.8		$	453.5		$	182.1

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,
	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	453.5		$	182.1

Adjustments:
Loss from discontinued operations		4.6			1.8
Depreciation		48.0			41.2
Amortization		44.4			33.1
Deferred income taxes		69.8			93.4
Stock-based compensation		8.3			9.8
Refinery restructuring and other charges		—			(3.8	)
Write-off of deferred financing costs		—			3.6
Other, net		(3.7	)		5.5
Cash provided by (reinvested in):
Accounts receivable, prepaid expenses and other		(19.7	)		103.0
Inventories		(32.8	)		(54.4	)
Accounts payable, accrued expenses, taxes other than income, and other		383.3			(131.1	)
Affiliate receivables and payables		(118.3	)		22.9
Restricted cash and cash equivalents		—			0.7

Net cash provided by operating activities of continuing operations		837.4			307.8
Net cash used in operating activities of discontinued operations		(3.2	)		(2.4	)

Net cash provided by operating activities		834.2			305.4

CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment		(313.3	)		(133.8	)
Expenditures for turnaround		(114.6	)		(73.9	)
Expenditures for refinery acquisition, net		—			(874.8	)
Net sales of short-term investments		13.9			121.5
Restricted cash and cash equivalents		(5.8	)		—

Net cash used in investing activities		(419.8	)		(961.0	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions, net		—			394.8
Proceeds from issuance of long-term debt		—			400.0
Long-term debt and capital lease payments		(14.4	)		(10.0	)
Cash and cash equivalents restricted for debt repayment		—			(3.9	)
Deferred financing costs		—			(16.1	)

Net cash (used in) provided by financing activities		(14.4	)		764.8

NET INCREASE IN CASH AND CASH EQUIVALENTS		400.0			109.2
CASH AND CASH EQUIVALENTS, beginning of period		230.5			118.9

CASH AND CASH EQUIVALENTS, end of period	$	630.5		$	228.1

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, 2005

(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 approximately 800,000 barrels per day (“bpd”). The refineries are located in Port Arthur, Texas; Lima, Ohio; Memphis, Tennessee; 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 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., 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 the 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, 2005 are not necessarily indicative of the results that may be expected for the year ended December 31, 2005. These unaudited condensed 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, 2004.

The statement of cash flows for the six months ended June 30, 2004 has been reclassified to conform to current period presentation for auction rate securities. This reclassification has no effect on the current or previously reported statements of operations or balance sheets. Refer to Footnote 13 for further information.

On April 25, 2005, Valero Energy Corporation (“Valero”) and Premcor announced that the companies had entered into an Agreement and Plan of Merger, whereby Premcor will be merged with and into Valero, with Valero as the surviving corporation. The boards of directors of both companies unanimously approved Valero’s acquisition of Premcor, which is subject to the approval of Premcor’s shareholders and customary regulatory approvals. On June 27, 2005, the Federal Trade Commission issued a request for additional information and documentary material pursuant to the Hart-Scott-Rodino Antitrust Improvement Act (“Hart-Scott-Rodino”). Premcor expects to comply with the request. A special meeting will be held on August 30, 2005 for Premcor stockholders of record as of July 8, 2005, to vote to adopt the Agreement and Plan of Merger.

Under the terms of the merger agreement, Premcor shareholders will have the right to receive either 0.99 shares of Valero common stock, or $72.76 in cash for each share of Premcor stock they own, or a combination of the two, subject to pro-ration so that 50 percent of the total Premcor shares are acquired for cash.

Valero and Premcor have made customary representations, warranties and covenants in the Merger Agreement, including, among others, covenants (i) that both Valero and Premcor will conduct their respective businesses in the ordinary course consistent with past practice during the interim period between the execution of the Merger Agreement and the Effective Time and (ii) not to engage in certain kinds of transactions during such period. In addition, Premcor has agreed to cause a meeting of holders of Premcor common stock to be held by Premcor to consider adoption of the Merger Agreement. Premcor has also made certain additional customary covenants, including, among others, covenants not to: (i) solicit proposals relating to alternative business combination transactions or (ii) subject to certain exceptions, enter into discussions concerning, or provide confidential information in connection with, any proposals for alternative business combination transactions.

Consummation of the Merger is subject to customary conditions, including (i) approval of the holders of Premcor Common Stock, (ii) absence of any law or order prohibiting the consummation of the Merger, and (iii) expiration or termination of the Hart-Scott-Rodino waiting period and certain other regulatory approvals. In addition, each party’s obligation to consummate the Merger is subject to certain other conditions, including (i) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (ii) material compliance of the other party with its covenants, and (iii) the delivery of customary opinions from counsel to Valero and counsel to Premcor that the Merger will qualify as a reorganization under Section 368(a) of the Internal Revenue Code.

The Merger Agreement contains certain termination rights for both Valero and Premcor, and further provides that, upon termination of the Merger Agreement under specified circumstances, Premcor may be required to pay Valero a termination fee of $150 million.

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 approximately 190,000 bpd. Also included in the purchase was 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 was $800 million ($780 million cash and $20 million assumed liabilities), plus additional petroleum inventories valued at $90 million and approximately $3 million in transaction fees. 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 level of 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 and will be subject to an annual impairment measurement test. In July 2005, the Company made a payment of $25 million to Motiva that was recorded as goodwill.

The Delaware City refinery is a high-conversion medium and heavy high-sulfur crude oil refinery. Major process units include a crude unit, a reformer unit, a fluid catalytic cracking unit, a fluid coking unit, a high pressure hydrocracking unit and a coke gasification unit. 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 6³/4% per annum; and from available cash.

The acquisition of the Delaware City refinery assets was accounted for using the purchase method, and the results of operations of these assets have been included in our results from the date of acquisition. The final adjusted purchase price allocation is as follows:


Current assets	$	128.0
Property, plant & equipment		756.9
Other assets		5.3
Accrued expenses and other		(1.6	)
Other long-term liabilities		(15.8	)

Total purchase price allocation	$	872.8

In conjunction with the acquisition of the Delaware City refinery, the Company entered into an agreement, effective May 1, 2004, with the Saudi Arabian Oil Company for the supply of 105,000 bpd of crude oil; however, due to certain quota restrictions the current supply is 85,000 bpd. The agreement had a one year term with automatic one-year extensions thereafter unless terminated at the option of either party. The contract had been renewed effective May 1, 2005. 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 36,700 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 had terms extending for six months with automatic renewals until canceled by either party. Both Premcor and Motiva have decided not to renew the contract and as of April 30, 2005, the contract had expired.

3.	Inventories

The carrying value of inventories consisted of the following:


	June 30, 2005		December 31, 2004
Crude oil	$	392.9	$	324.1
Refined products and blendstocks		374.0		411.3
Warehouse stock and other		38.5		37.2

	$	805.4	$	772.6

The market value of crude oil, refined products and blendstock inventories as of June 30, 2005 was approximately $705.0 million (December 31, 2004 - $379.8 million) above carrying value.

4.	Other Assets

Other assets consisted of the following:


	June 30, 2005		December 31, 2004
Deferred turnaround costs	$	230.6	$	160.2
Deferred financing costs		35.3		39.4
Intangible assets		7.1		10.4
Pension assets and other		15.6		9.5

	$	288.6	$	219.5

Amortization of deferred financing costs for the three months ended June 30, 2005 and 2004 was $2.0 million and $2.2 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, 2005 and 2004 was $4.1 million and $4.3 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 $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 for both the three and six months ended June 30, 2004. The loss represented a write-off of unamortized deferred financing costs.

5.	Goodwill and Intangible Assets

During the six months ended June 30, 2005, the Company recorded $72.4 million to goodwill, of which $47.4 million was related to the earn-out agreement entered into with The Williams Companies, Inc. in conjunction with the Memphis acquisition and $25.0 million was related to the earn-out agreement entered into with Motiva Enterprises LLC in conjunction with the Delaware City acquisition. Such goodwill will not be amortized, but will be subject to an annual impairment evaluation.

Goodwill and intangible assets were comprised of the following as of June 30, 2005:


	Gross carrying amount		Accumulated amortization			Net amount
Goodwill	$	100.0	$	—		$	100.0

Customer contract	$	5.4	$	(0.6	)	$	4.8
Environmental credits		3.1		(3.1	)		—
Environmental permits		2.4		(0.1	)		2.3

Total intangible assets	$	10.9	$	(3.8	)	$	7.1

Amortization expense for the three months ended June 30, 2005 and 2004 was $0.8 million and $0.1 million, respectively. Amortization expense for the six months ended June 30, 2005 and 2004 was $3.3 million and $0.2 million, respectively.

6.	Employee Benefit Plans

The following table provides the components of net periodic benefit cost for the three and six months 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,
	2005			2004			2005			2004			2005			2004			2005			2004
Components of Net Periodic Benefit Costs:
Service cost	$	4.8		$	3.2		$	9.6		$	5.1		$	1.2		$	0.8		$	2.4		$	1.6
Interest cost		0.5			0.2			1.0			0.4			1.9			1.6			3.8			3.3
Recognized actuarial loss		0.2			—			0.4			—			0.7			0.5			1.4			1.1
Expected return on plan assets		(0.4	)		(0.1	)		(0.8	)		(0.2	)		—			—			—			—
Amortization of prior service costs		—			0.1			—			0.2			(0.1	)		(0.1	)		(0.2	)		(0.2	)

Net periodic benefit cost	$	5.1		$	3.4		$	10.2		$	5.5		$	3.7		$	2.8		$	7.4		$	5.8
Special termination benefits		—			—			1.8			—			—			—			—			—

Total net periodic benefit cost	$	5.1		$	3.4		$	12.0		$	5.5		$	3.7		$	2.8		$	7.4		$	5.8

As of December 31, 2004, the Company expected to contribute a total of $20 million to its pension plans in 2005 and this estimate has not changed as of June 30, 2005. The Company has made contributions of $16.0 million to its pension plans in the quarter ended June 30, 2005.

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 2004 and a reduction of $0.7 million 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, 2005.

7.	Refinery Restructuring and Other Charges

During the three and six months ended June 30, 2005, the Company recorded refinery restructuring and other charges of $0.6 million and $4.7 million, respectively. The charges relate to litigation and environmental matters at closed refineries.

During the three months ended June 30, 2004, the Company recorded refinery restructuring and other charges of $4.7 million, which included a $3.3 million charge related to the St. Louis administrative office closure and $1.4 million related to litigation 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. Below is further discussion of the administrative function restructuring.

Administrative Restructuring. In 2002, the Company began a restructuring of its administrative functions. 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 office move, which was completed in 2004, cost $14.8 million, which included $4.3 million of severance related benefits and $10.5 million of other costs such as training, relocation and the movement of physical assets. The severance related costs were amortized over the future service period of the affected employees and the other costs were expensed as incurred.

8.	Interest and Finance Expense

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


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2005			2004			2005			2004
Interest expense	$	38.9		$	38.3		$	77.2		$	71.2
Financing costs		2.0			2.2			4.1			4.3
Capitalized interest		(12.5	)		(5.2	)		(22.6	)		(8.9	)

	$	28.4		$	35.3		$	58.7		$	66.6

The Company paid cash for interest for the three months ended June 30, 2005 and 2004 of $25.1 million and $13.2 million, respectively. The Company paid cash for interest for the six months ended June 30, 2005 and 2004 of $77.2 million and $59.2 million, respectively. PRG paid cash for interest for the three months ended June 30, 2005 and 2004 of $24.8 million and $12.8 million, respectively. PRG paid cash for interest for the six months ended June 30, 2005 and 2004 of $76.5 million and $58.6 million, respectively.

9.	Long-term Debt and Credit Facilities

Long-term debt consisted of the following:


	June 30, 2005			December 31, 2004
12¹/2% Senior Notes due January 15, 2009 (“12¹/2% Senior Notes”) (1)	$	183.2		$	197.6
9¹/4% Senior Notes due February 1, 2010 (“9¹/4% Senior Notes”) (2)		175.0			175.0
6³/4% Senior Notes due February 1, 2011 (“6³/4% 2011 Senior Notes”) (2)		210.0			210.0
6¹/8% Senior Notes due February 1, 2011 (“6¹/8% Senior Notes”) (2)		200.0			200.0
7³/4% Senior Subordinated Notes due February 1, 2012 (“7³/4% Senior Subordinated Notes”) (2)		175.0			175.0
9¹/2% Senior Notes due February 1, 2013 (“9¹/2% Senior Notes”) (2)		350.0			350.0
6³/4% Senior Notes due February 1, 2014 (“6³/4% 2014 Senior Notes”) (2)		200.0			200.0
7¹/2% Senior Notes due June 15, 2015 (“7¹/2% 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)		9.7			9.9

		1,812.9			1,827.5
Less current portion		(46.7	)		(38.8	)

Total long-term debt	$	1,766.2		$	1,788.7

(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.

PRG’s long-term debt, including current maturities, as of June 30, 2005 was $1,803.2 million and is the same as Premcor Inc.’s long-term debt as noted in the table above except that it excludes the $9.7 million of capital lease obligations. PRG’s long-term debt, including current maturities, as of December 31, 2004 was $1,817.6 million and is the same as Premcor Inc.’s long-term debt as noted in the table above except that it excludes the $9.9 million of capital lease obligations. The Premcor Pipeline Co. assumed these lease obligations as part of the Memphis acquisition.

As of June 30, 2005, the borrowing base for the $1 billion credit facility was $2,396.5 million, with $479.9 million of the facility utilized for letters of credit. As of December 31, 2004, the borrowing base for the $1 billion credit facility was $1,853.1 million with $484.1 million of the facility utilized for letters of credit. There were no direct borrowings under the $1 billion credit facility as of June 30, 2005 or December 31, 2004.

The Company entered into a $260 million cash-collateralized credit facility in June 2005. The $260 million credit facility has a one year term and was arranged primarily to enable the Company to secure the purchase of crude oil under an existing crude purchasing agreement with the Morgan Stanley Capital Group Inc. (“MSCG”) with letters of credit rather than paying for crude purchases one week in advance of delivery. As of June 30, 2005, $260 million of the facility was utilized for letters of credit.

PRG entered into a $100 million cash-collateralized credit facility in February 2005. The $100 million credit facility has a three year term and was arranged primarily for the issuance of letters of credit for crude oil purchases. As of June 30, 2005, $87.9 million of the facility was utilized for letters of credit.

PRG also has a $40 million cash-collateralized credit facility which was renewed effective June 1, 2005 for an additional year. This facility was initially arranged in support of lower interest rates on the Series 2001 Ohio Bonds. In addition, this facility can be utilized for other non-hydrocarbon purposes. As of June 30, 2005 and December 31, 2004, $39.7 million of the facility was utilized for letters of credit.

10.

Income Taxes

The Company’s effective tax rate was 34.7% for the six months ended June 30, 2005 as compared to 38.1% in the corresponding period in 2004. The Company’s 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 the Company’s consolidated effective tax rate. The decrease in the Company’s 2005 consolidated effective tax rate as compared to 2004 resulted from a higher percentage of the Company’s 2005 consolidated income being recognized by Sabine River Holding Corp. (“Sabine”), which has a lower effective tax rate than other subsidiaries and the change in the Ohio tax law as discussed further below.

The Company made net cash income tax payments of $82.9 million and $84.8 million for the three and six months ended June 30, 2005, respectively. The Company made net cash income tax payments of $2.3 million for both the three and six months ended June 30, 2004. PRG made net cash income tax payments of $1.2 million and $3.1 million for the three and six months ended June 30, 2005, respectively. PRG made net cash income tax payments of $0.1 million for both the three and six months ended June 30, 2004.

On June 30, 2005, the State of Ohio passed a law to phase-out its income-based tax over a period of five years beginning in 2006 and replaced it with a new gross receipts tax. The impact of reducing previously recorded deferred tax assets and liabilities due to the change in Ohio tax law is reflected in the income tax provision for the three and six months ended June 30, 2005. The Company also expects a lower state effective tax rate due to this change.

11.

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 remains 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 July 2004, the CRE bankruptcy estate was liquidated and the case dismissed. As of June 30, 2005, PRG was subleasing 36 operating stores, the leases on 30 stores had either been terminated or expired, the leases on 82 operating stores were held by third parties, PRG had completed the buy out of one lease and is in the process of buying out the leases on the remaining two stores. For the three and six months ended June 30, 2005, PRG recorded an after-tax charge of $3.1 million and $4.6 million, respectively. These charges represent the estimated net present value of its remaining liability under the current operating stores that were subleased, net of estimated sublease income, and other direct costs. 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, representing the estimated net present value of its remaining liability under the leases that had been rejected as of June 30, 2004, 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
Balance, December 31, 2003	$	7.4		$	21.2		$	28.6
Accretion and other expenses		9.1			—			9.1
Net cash outlays		(4.1	)		0.4			(3.7	)

Ending balance, December 31, 2004	$	12.4		$	21.6		$	34.0
Accretion and other expenses		7.4			—			7.4
Net cash outlays		(2.6	)		(0.6	)		(3.2	)

Ending balance, June 30, 2005	$	17.2		$	21.0		$	38.2

12.

Earnings per Share

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


	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2005	2004	2005	2004
Weighted average common shares outstanding	89.2	85.4	89.2	79.8
Dilutive effect of stock options	3.1	1.9	2.9	1.7

Weighted average common shares outstanding, assuming dilution	92.3	87.3	92.1	81.5

Outstanding stock options totaling 4.0 million (2004 – 3.8 million) and 3.9 million (2004 – 3.8 million) common shares for the three and six months ended June 30, 2005, respectively, were excluded from the diluted earnings per share calculation because they did not have a dilutive effect under the treasury stock method.

13.

Financial Instruments

Short-term Investments

As of June 30, 2005, the Company maintained short-term investments totaling $678.9 million (December 31, 2004—$520 million), of which $1.7 million was pledged as collateral for self-insured workers’ compensation programs at PRG and $421.4 million was used as collateral for the Company’s $260 million, and PRG’s $100 million and $40 million credit facilities. As of June 30, 2005, a wholly owned subsidiary of Premcor Inc. held $6.0 million in investments to provide additional directors and officers liability coverage for claims made against them in their respective capacities as directors and officers of the Company. The subsidiary’s assets are restricted to payment of directors’ and officers’ liability defense costs and claims. The cost of short-term investments approximates fair value. Accordingly, unrealized gains and losses are not material.

In December 2004, the Company began to classify its investments in auction rate securities as short-term investments. For all periods presented herein, investments in auction rate securities have been reclassed from cash and cash equivalents to short-term investments on the condensed consolidated balance sheets. The amount of the investments in auction rate securities as of June 30, 2005 and December 31, 2004, was $672 million and $513 million, respectively. The reclassification was made because the certificates had stated maturities beyond three months. The reclassification resulted in changes in the condensed consolidated statements of cash flows within the cash and cash equivalent balances and investing activities. This change had no impact on total assets, current assets, cash flow from operations or net income of the Company.

Derivative Financial Instruments

The Company enters into derivative financial instruments, such as fixed purchase and sale commitments and futures contracts, which are treated as derivative financial instruments and are marked-to-market. The fixed purchase and sale commitments generally are entered into at a fixed price one to several weeks in advance of receiving and processing the crude oil or producing and delivering the product. The Company uses futures contracts to manage the price risk on its fixed commitments and to manage the price risk on a portion of refinery feedstock and refined product inventories. All gains and losses from fixed commitments and futures contracts are recorded to cost of sales.

During the three and six months ended June 30, 2005, the Company recognized a net gain of $38 million and $40 million, respectively, related to its price risk management activities. During the three and six months ended June 30, 2004, the Company recognized a net loss of $20 million and $26 million, respectively, related to its price risk management activities. The net gains in 2005 are comprised of the following:


	Unrealized and realized (gains) / losses
	Three Months Ended June 30, 2005			Six Months Ended June 30, 2005
Net Fixed Commitments:
Crude	$	(40	)	$	(119	)
Product		(7	)		(9	)

Net Futures Contracts:
Crude		2			77
Product		7			11

	$	(38	)	$	(40	)

At June 30, 2005, the Company had recorded its unrealized gains and losses on outstanding fixed commitments and futures contracts of $63.8 million in prepaid expenses and other and $88.4 million in accrued expenses and other. All of the outstanding fixed commitments and futures contracts at quarter end are expected to mature within the next few months. At June 30, 2005, the Company had outstanding fixed commitments of $61.8 million recorded in prepaid and other and $54.2 million recorded in accrued expenses and other. At June 30, 2005, the Company also had $0.4 million recorded to accounts receivable related to swap agreements which had expired but settlement had not yet occurred.

As of June 30, 2005, the Company had the following derivative positions outstanding:


	Purchases /(sales) in barrels
Net Fixed Commitments:
Crude	11.5
Product	(1.7	)

Net Futures Contracts:
Crude	(12.7	)
Product	2.5

	(0.4	)

At December 31, 2004, the Company recorded $33 million in current assets and $51 million in current liabilities, related to its price risk management activities. The majority of the balance in both current assets and current liabilities related to the unrealized gains and losses on the Company’s fixed commitments.

14.

Condensed 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 statements of 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”) 12¹/2% 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 statements of 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, 2005

(unaudited, in millions)


	PRG			PAFC		Other Guarantor Subsidiaries			Eliminations			Consolidated PRG
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	630.5		$	—	$	—		$	—		$	630.5
Short-term investments		364.3			—		—			—			364.3
Restricted cash and cash equivalents		0.5			—		74.9			—			75.4
Accounts receivable, net		732.7			—		0.7			(0.7	)		732.7
Receivable from affiliates		187.8			57.6		—			(56.4	)		189.0
Inventories		770.5			—		34.9			—			805.4
Prepaid expenses and other		143.5			—		7.4			—			150.9
Deferred income taxes		20.9			—		—			—			20.9

Total current assets		2,850.7			57.6		117.9			(57.1	)		2,969.1

Property, plant and equipment, net		2,481.7			—		597.6			—			3,079.3
Deferred income taxes		15.6			—		—			(15.6	)		—
Investments in affiliates		173.9			—		—			(173.9	)		—
Goodwill		100.0			—		—			—			100.0
Other assets		263.5			—		25.1			—			288.6
Notes receivable from affiliate		—			148.4		—			(148.4	)		—

	$	5,885.4		$	206.0	$	740.6		$	(395.0	)	$	6,437.0

LIABILITIES AND STOCKHOLDER’S EQUITY

CURRENT LIABILITIES:
Accounts payable	$	1,140.8		$	—	$	153.7		$	—		$	1,294.5
Payables to affiliates		(27.7	)		—		100.0			(10.0	)		62.3
Accrued expenses and other		350.3			11.2		2.5			(0.8	)		363.2
Accrued taxes other than income		59.1			—		3.4			—			62.5
Current portion of long-term debt		—			46.4		—			—			46.4
Current portion of notes payable to affiliate		—			—		46.4			(46.4	)		—

Total current liabilities		1,522.5			57.6		306.0			(57.2	)		1,828.9

Long-term debt		1,620.0			148.4		—			(11.6	)		1,756.8
Deferred income taxes		191.5			—		122.7			(15.6	)		298.6
Other long-term liabilities		172.7			—		1.3			—			174.0
Notes payable to affiliate		—			—		148.4			(148.4	)		—
Commitments and contingencies

COMMON STOCKHOLDER’S EQUITY:
Common stock		—			—		0.1			(0.1	)		—
Additional paid-in capital		1,247.1			—		395.9			(395.9	)		1,247.1
Retained earnings		1,131.6			—		(233.8	)		233.8			1,131.6

Total common stockholder’s equity		2,378.7			—		162.2			(162.2	)		2,378.7

	$	5,885.4		$	206.0	$	740.6		$	(395.0	)	$	6,437.0

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Three Months Ended June 30, 2005

(unaudited, in millions)


	PRG			PAFC			Other Guarantor Subsidiaries			Eliminations			Consolidated PRG
Net sales and operating revenues	$	5,346.4		$	—		$	1,343.2		$	(1,379.1	)	$	5,310.5
Equity in earnings of affiliates		188.0			—			—			(188.0	)		—

Expenses:
Cost of sales		4,802.4			—			980.4			(1,369.8	)		4,413.0
Operating expenses		203.9			—			62.9			(9.4	)		257.4
General and administrative expenses		63.6			—			1.1			—			64.7
Depreciation		16.4			—			5.8			—			22.2
Amortization		18.8			—			1.5			—			20.3
Refinery restructuring and other charges		0.6			—			—			—			0.6

		5,105.7			—			1,051.7			(1,379.2	)		4,778.2

Operating income		428.7			—			291.5			(187.9	)		532.3

Interest and finance expense		(21.0	)		(6.1	)		(6.7	)		6.4			(27.4	)
Interest income		5.4			6.1			0.3			(6.5	)		5.3

Income from continuing operations before income taxes		413.1			—			285.1			(188.0	)		510.2

Income tax provision		(79.5	)		—			(97.1	)		—			(176.6	)

Income from continuing operations		333.6			—			188.0			(188.0	)		333.6

Loss from discontinued operations, net of tax		(3.1	)		—			—			—			(3.1	)

Net income	$	330.5		$	—		$	188.0		$	(188.0	)	$	330.5

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Six Months Ended June 30, 2005

(unaudited, in millions)


	PRG			PAFC			Other Guarantor Subsidiaries			Eliminations			Consolidated PRG
Net sales and operating revenues	$	9,529.9		$	—		$	2,066.4		$	(2,124.5	)	$	9,471.8
Equity in earnings of affiliates		308.2			—			—			(308.2	)		—

Expenses:
Cost of sales		8,682.8			—			1,457.6			(2,105.9	)		8,034.5
Operating expenses		394.8			—			113.1			(18.6	)		489.3
General and administrative expenses		104.2			—			1.9			—			106.1
Depreciation		36.7			—			11.3			—			48.0
Amortization		38.1			—			2.1			—			40.2
Refinery restructuring and other charges		4.7			—			—			—			4.7

		9,261.3			—			1,586.0			(2,124.5	)		8,722.8

Operating income		576.8			—			480.4			(308.2	)		749.0

Interest and finance expense		(44.5	)		(12.3	)		(13.6	)		13.0			(57.4	)
Interest income		8.3			12.3			0.5			(13.0	)		8.1

Income from continuing operations before income taxes		540.6			—			467.3			(308.2	)		699.7

Income tax provision		(82.5	)		—			(159.1	)		—			(241.6	)

Income from continuing operations		458.1			—			308.2			(308.2	)		458.1

Loss from discontinued operations, net of tax		(4.6	)		—			—			—			(4.6	)

Net income	$	453.5		$	—		$	308.2		$	(308.2	)	$	453.5

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

For the Six Months Ended June 30, 2005

(unaudited, in millions)


	PRG			PAFC			Other Guarantor Subsidiaries			Eliminations			Consolidated PRG
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	453.5		$	—		$	308.2		$	(308.2	)	$	453.5
Adjustments:
Loss from discontinued operations		4.6			—			—			—			4.6
Depreciation		36.7			—			11.3			—			48.0
Amortization		40.9			—			3.5			—			44.4
Deferred income taxes		46.7			—			23.1			—			69.8
Stock-based compensation		8.3			—			—			—			8.3
Refinery restructuring and other charges		—			—			—			—			—
Equity in earnings of affiliates		(308.2	)		—			—			308.2			—
Other, net		(3.9	)		—			0.2			—			(3.7	)
CASH PROVIDED BY (REINVESTED IN):
Accounts receivable, prepaid expenses and other		(13.7	)		—			(6.0	)		—			(19.7	)
Inventories		(22.9	)		—			(9.9	)		—			(32.8	)
Accounts payable, accrued expenses, taxes other than income, and other		351.5			(0.9	)		32.7			—			383.3
Affiliate receivables and payables		182.0			16.2			(315.6	)		(0.9	)		(118.3	)

Net cash used in operating activities of continuing operations		775.5			15.3			47.5			(0.9	)		837.4
Net cash used in operating activities of discontinued operations		(3.2	)		—			—			—			(3.2	)

Net cash used in operating activities		772.3			15.3			47.5			(0.9	)		834.2

CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment		(285.7	)		—			(27.6	)		—			(313.3	)
Expenditures for turnaround		(100.5	)		—			(14.1	)		—			(114.6	)
Restricted cash and cash equivalents		—			—			(5.8	)		—			(5.8	)
Net sales of short-term investments		13.9			—			—			—			13.9

Net cash used in investing activities		(372.3	)		—			(47.5	)		—			(419.8	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt and capital lease payments		—			(15.3	)		—			0.9			(14.4	)

Net cash used in financing activities		—			(15.3	)		—			0.9			(14.4	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		400.0			—			—			—			400.0
CASH AND CASH EQUIVALENTS, beginning of period		230.5			—			—			—			230.5

CASH AND CASH EQUIVALENTS, end of period	$	630.5		$	—		$	—		$	—		$	630.5

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

As of December 31, 2004

(in millions)


	PRG		PAFC		Other Guarantor Subsidiaries			Eliminations			Consolidated PRG
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	230.5	$	—	$	—		$	—		$	230.5
Short-term investments		378.7		—		—			—			378.7
Restricted cash and cash equivalents		—		—		69.1			—			69.1
Accounts receivable, net		708.0		—		0.9			(0.6	)		708.3
Receivable from affiliates		191.4		50.6		0.3			(122.6	)		119.7
Inventories		747.6		—		25.0			—			772.6
Prepaid expenses and other		154.4		—		1.2			—			155.6
Deferred income taxes		69.5		—		—			—			69.5

Total current assets		2,480.1		50.6		96.5			(123.2	)		2,504.0

Property, plant and equipment, net		2,265.2		—		581.3			—			2,846.5
Deferred income taxes		15.6		—		—			(15.6	)		—
Investments in affiliates		65.1		—		—			(65.1	)		—
Goodwill		27.6		—		—			—			27.6
Other assets		205.0		—		14.5			—			219.5
Note receivable from affiliate		—		171.6		—			(171.6	)		—

	$	5,058.6	$	222.2	$	692.3		$	(375.5	)	$	5,597.6

LIABILITIES AND STOCKHOLDER’S EQUITY

CURRENT LIABILITIES:
Accounts payable	$	873.9	$	—	$	118.9		$	—		$	992.8
Payable to affiliates		6.2		—		202.3			(84.1	)		124.4
Accrued expenses and other		218.3		12.1		2.0			(0.7	)		231.7
Accrued taxes other than income		64.8		—		5.7			—			70.5
Current portion of long-term debt		—		38.5		—			—			38.5
Current portion of notes payable to affiliate		—		—		38.5			(38.5	)		—

Total current liabilities		1,163.2		50.6		367.4			(123.3	)		1,457.9

Long-term debt		1,619.9		171.6		—			(12.4	)		1,779.1
Deferred income taxes		193.6		—		99.5			(15.6	)		277.5
Other long-term liabilities		179.4		—		1.2			—			180.6
Note payable to affiliate		—		—		171.6			(171.6	)		—
Commitments and contingencies

COMMON STOCKHOLDER’S EQUITY:
Common stock		—		—		0.1			(0.1	)		—
Additional paid-in capital		1,237.4		—		206.0			(206.0	)		1,237.4
Retained earnings		665.1		—		(153.5	)		153.5			665.1

Total common stockholder’s equity		1,902.5		—		52.6			(52.6	)		1,902.5

	$	5,058.6	$	222.2	$	692.3		$	(375.5	)	$	5,597.6

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		42.4			—			0.9			—			43.3
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

Discontinued operations		(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		63.5			—			1.9			—			65.4
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

Discontinued operations		(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

Adjustments:
Loss from discontinued operations		1.8			—			—						1.8
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):
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	)
Net sales of short-term investments		122.1			—			—			(0.6	)		121.5

Net cash used in investing activities		(958.5	)		—			(1.9	)		(0.6	)		(961.0	)

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 (used in) financing activities		885.5			(10.5	)		(110.7	)		0.5			764.8

NET INCREASE IN CASH AND CASH EQUIVALENTS		109.2			—			—			—			109.2
CASH AND CASH EQUIVALENTS, beginning of period		118.9			—			—			—			118.9

CASH AND CASH EQUIVALENTS, end of period	$	228.1		$	—		$	—		$	—		$	228.1

15.

Condensed 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 statements of 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 6³/4% 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 statements of 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, 2005

(unaudited, in millions)


	Premcor		Consolidated PRG		Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Premcor
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	31.0	$	630.5	$	2.5		$	—		$	664.0
Short-term investments		309.1		364.3		5.5			—			678.9
Restricted cash and cash equivalents		—		75.4		—			—			75.4
Accounts receivable, net		0.4		732.7		(0.2	)		—			732.9
Receivable from affiliates		105.0		189.0		42.2			(336.2	)		—
Inventories		—		805.4		—			—			805.4
Prepaid expenses and other		—		150.9		6.4			(5.9	)		151.4
Deferred income taxes		—		20.9		—			(0.1	)		20.8

Total current assets		445.5		2,969.1		56.4			(342.2	)		3,128.8

Property, plant and equipment, net		—		3,079.3		59.4			—			3,138.7
Investments in affiliates		2,423.8		—		2,495.5			(4,919.3	)		—
Goodwill		—		100.0		—			—			100.0
Other assets		—		288.6		—			—			288.6

	$	2,869.3	$	6,437.0	$	2,611.3		$	(5,261.5	)	$	6,656.1

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	—	$	1,294.5	$	0.3		$	—		$	1,294.8
Payable to affiliates		216.4		62.3		57.5			(336.2	)		—
Accrued expenses and other		54.1		363.2		5.6			(5.9	)		417.0
Accrued taxes other than income		—		62.5		0.5			—			63.0
Current portion of long-term debt		—		46.4		0.3			—			46.7

Total current liabilities		270.5		1,828.9		64.2			(342.1	)		1,821.5

Long-term debt		—		1,756.8		9.4			—			1,766.2
Deferred income taxes		2.0		298.6		(3.2	)		—			297.4
Other long-term liabilities		—		174.0		0.2			—			174.2
Commitments and contingencies

COMMON STOCKHOLDERS’ EQUITY:
Common stock		0.9		—		0.1			(0.1	)		0.9
Additional paid-in capital		1,711.1		1,247.1		1,639.1			(2,886.2	)		1,711.1
Retained earnings		884.8		1,131.6		901.5			(2,033.1	)		884.8

Total common stockholders’ equity		2,596.8		2,378.7		2,540.7			(4,919.4	)		2,596.8

	$	2,869.3	$	6,437.0	$	2,611.3		$	(5,261.5	)	$	6,656.1

Premcor Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Three Months Ended June 30, 2005

(unaudited, in millions)


	Premcor			Consolidated PRG			Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Premcor
Net sales and operating revenues	$	—		$	5,310.5		$	10.6		$	(12.6	)	$	5,308.5
Equity in earnings of affiliates		330.5			—			330.3			(660.8	)		—

Expenses:
Cost of sales		—			4,413.0			—			(10.8	)		4,402.2
Operating expenses		—			257.4			9.8			(1.8	)		265.4
General and administrative expenses		0.1			64.7			0.4			—			65.2
Depreciation		—			22.2			0.5			—			22.7
Amortization		—			20.3			—			—			20.3
Refinery restructuring and other charges		—			0.6			—			—			0.6

		0.1			4,778.2			10.7			(12.6	)		4,776.4

Operating income		330.4			532.3			330.2			(660.8	)		532.1

Interest and finance expense		(0.7	)		(27.4	)		(0.3	)		—			(28.4	)
Interest income		1.3			5.3			0.3			—			6.9

Income from continuing operations before income taxes		331.0			510.2			330.2			(660.8	)		510.6

Income tax provision		(1.6	)		(176.6	)		0.1			—			(178.1	)

Income from continuing operations		329.4			333.6			330.3			(660.8	)		332.5

Loss from discontinued operations, net of tax		—			(3.1	)		—			—			(3.1	)

Net income	$	329.4		$	330.5		$	330.3		$	(660.8	)	$	329.4

Premcor Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Six Months Ended June 30, 2005

(unaudited, in millions)


	Premcor			Consolidated PRG			Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Premcor
Net sales and operating revenues	$	—		$	9,471.8		$	21.1		$	(20.1	)	$	9,472.8
Equity in earnings of affiliates		455.3			—			454.5			(909.8	)		—

Expenses:
Cost of sales		—			8,034.5			—			(16.5	)		8,018.0
Operating expenses		—			489.3			17.0			(3.6	)		502.7
General and administrative expenses		0.1			106.1			0.8			—			107.0
Depreciation		—			48.0			1.1			—			49.1
Amortization		—			40.2			—			—			40.2
Refinery restructuring and other charges		—			4.7			—			—			4.7

		0.1			8,722.8			18.9			(20.1	)		8,721.7

Operating income		455.2			749.0			456.7			(909.8	)		751.1

Interest and finance expense		(0.7	)		(57.4	)		(0.6	)		—			(58.7	)
Interest income		1.9			8.1			0.3			—			10.3

Income from continuing operations before income taxes		456.4			699.7			456.4			(909.8	)		702.7

Income tax provision		(1.8	)		(241.6	)		(0.1	)		—			(243.5	)

Income from continuing operations		454.6			458.1			456.3			(909.8	)		459.2

Loss from discontinued operations, net of tax		—			(4.6	)		—			—			(4.6	)

Net income	$	454.6		$	453.5		$	456.3		$	(909.8	)	$	454.6

Premcor Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

For the Six Months Ended June 30, 2005

(unaudited, in millions)


	Premcor			Consolidated PRG			Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Premcor
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	454.6		$	453.5		$	456.3		$	(909.8	)	$	454.6

Adjustments:
Loss from discontinued operations		—			4.6			—			—			4.6
Depreciation		—			48.0			1.1			—			49.1
Amortization		—			44.4			—			—			44.4
Deferred income taxes		3.4			69.8			2.5			—			75.7
Stock-based compensation		—			8.3			—			—			8.3
Refinery restructuring and other charges		—			—			—			—			—
Equity in earnings of affiliates		(455.3	)		—			(454.5	)		909.8			—
Other, net		(1.4	)		(3.7	)		1.2			—			(3.9	)

Cash provided by (reinvested in):
Accounts receivable, prepaid expenses and other		(0.2	)		(19.7	)		(3.4	)		3.5			(19.8	)
Inventories		—			(32.8	)		—			—			(32.8	)
Accounts payable, accrued expenses, taxes other than income and other		78.8			383.3			3.3			(3.5	)		461.9
Affiliate receivables and payables		123.8			(118.3	)		(5.5	)		—			—

Net cash provided by operating activities of continuing operations		203.7			837.4			1.0			—			1,042.1
Net cash used in operating activities of discontinued operations		—			(3.2	)		—			—			(3.2	)

Net cash provided by operating activities		203.7			834.2			1.0			—			1,038.9

CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment		—			(313.3	)		—			—			(313.3	)
Expenditures for turnaround		—			(114.6	)		—			—			(114.6	)
Restricted cash and cash equivalents		—			(5.8	)		—			—			(5.8	)
Net (purchases) sales of short-term investments		(173.1	)		13.9			(0.2	)		—			(159.4	)

Net cash used in investing activities		(173.1	)		(419.8	)		(0.2	)		—			(593.1	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock		3.1			—			—			—			3.1
Long-term debt and capital lease payments		—			(14.4	)		(0.2	)		—			(14.6	)
Dividends paid to shareholders		(3.6	)		—			—			—			(3.6	)

Net cash used in financing activities		(0.5	)		(14.4	)		(0.2	)		—			(15.1	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		30.1			400.0			0.6			—			430.7
CASH AND CASH EQUIVALENTS, beginning of year		0.9			230.5			1.9			—			233.3

CASH AND CASH EQUIVALENTS, end of year	$	31.0		$	630.5		$	2.5		$	—		$	664.0

Premcor Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

As of December 31, 2004

(in millions)


	Premcor			Consolidated PRG		Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Premcor
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	0.9		$	230.5	$	1.9		$	—		$	233.3
Short-term investments		136.0			378.7		5.3			—			520.0
Restricted cash and cash equivalents		—			69.1		—			—			69.1
Accounts receivable		0.2			708.3		0.2			—			708.7
Receivable from affiliates		268.3			119.7		65.6			(453.6	)		—
Inventories		—			772.6		—			—			772.6
Prepaid expenses and other		—			155.6		2.6			(2.4	)		155.8
Deferred income taxes		—			69.5		5.4			—			74.9

Total current assets		405.4			2,504.0		81.0			(456.0	)		2,534.4

Property, plant and equipment, net		—			2,846.5		61.6			—			2,908.1
Investments in affiliates		1,986.8			—		1,875.5			(3,862.3	)		—
Goodwill		—			27.6		—			—			27.6
Other assets		—			219.5		—			—			219.5

	$	2,392.2		$	5,597.6	$	2,018.1		$	(4,318.3	)	$	5,689.6

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	—		$	992.8	$	0.6		$	—		$	993.4
Payable to affiliates		283.9			124.4		45.2			(453.5	)		—
Accrued expenses and other		(24.7	)		231.7		2.9			(2.4	)		207.5
Accrued taxes other than income		—			70.5		(0.1	)		—			70.4
Current portion of long-term debt		—			38.5		0.3			—			38.8

Total current liabilities		259.2			1,457.9		48.9			(455.9	)		1,310.1

Long-term debt		—			1,779.1		9.6			—			1,788.7
Deferred income taxes		(1.4	)		277.5		(0.3	)		—			275.8
Other long-term liabilities		—			180.6		—			—			180.6
Commitments and contingencies		—			—		—			—			—

COMMON STOCKHOLDERS’ EQUITY:
Common stock		0.9			—		0.1			(0.1	)		0.9
Additional paid-in capital		1,699.7			1,237.4		1,516.8			(2,754.2	)		1,699.7
Retained earnings		433.8			665.1		443.0			(1,108.1	)		433.8

Total common stockholders’ equity		2,134.4			1,902.5		1,959.9			(3,862.4	)		2,134.4

	$	2,392.2		$	5,597.6	$	2,018.1		$	(4,318.3	)	$	5,689.6

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 Premcor
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		—			43.3			0.2			(0.3	)		43.2
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

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 Premcor
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			65.4			0.2						65.7
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 Premcor
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	183.2		$	182.1		$	183.9		$	(366.0	)	$	183.2

Adjustments:
Loss from discontinued operations		—			1.8			—			—			1.8
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):
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 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 operating activities

PREMCOR REFINING GROUP INC 10-Q