<PAGE> 1
FORM 10/A
AMENDMENT NO. 3
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
CITGO PETROLEUM CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 73-1173881
- --------------------------------------------- ---------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE WARREN PLACE
6100 SOUTH YALE AVENUE
TULSA, OKLAHOMA 74136
- --------------------------------------------- ---------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (918) 495-4000
Securities to be registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
- --------------------------------------------- ---------------------------------------------
<S> <C>
7 7/8% Senior Notes Due 2006 New York Stock Exchange
- --------------------------------------------- ---------------------------------------------
- --------------------------------------------- ---------------------------------------------
</TABLE>
Securities to be registered pursuant to Section 12(g) of the Act:
- --------------------------------------------------------------------------------
(Title of class)
- --------------------------------------------------------------------------------
(Title of class)
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Item 1, Item 3 and Item 11 are hereby amended in their entireties as
follows:
ITEM 1 AND ITEM 3. BUSINESS AND PROPERTIES.
OVERVIEW
CITGO Petroleum Corporation ("CITGO" or the "Company") is a privately-held
company engaged in the refining, marketing and transportation of petroleum
products including gasoline, diesel fuel, jet fuel, petrochemicals, lubricants,
asphalt and refined waxes. CITGO is a direct wholly-owned subsidiary of PDV
America, Inc., a Delaware corporation ("PDV America"), and an indirect
wholly-owned subsidiary of Petroleos de Venezuela, S.A. ("PDVSA").
PDVSA, the national oil company of the Republic of Venezuela, is the
world's second largest oil company, behind only Saudi Aramco, according to
rankings published by Petroleum Intelligence Weekly, based on a combination of
factors, including reserves, production capacity and refined product sales. At
December 31, 1995, PDVSA's proved crude oil reserves of approximately 64.8
billion barrels were the largest of any company or country in the Western
hemisphere (larger, for example, than the 22.4 billion barrels of proved crude
oil reserves located in the United States).
CITGO owns and operates two modern, highly complex crude oil refineries
(Lake Charles, Louisiana, and Corpus Christi, Texas) and two asphalt refineries
(Paulsboro, New Jersey, and Savannah, Georgia) with a combined aggregate rated
crude oil refining capacity of 572 thousand barrels per day ("MBPD"). The Lake
Charles refinery is the sixth largest in the United States. The Lake Charles
refinery and the Corpus Christi refinery have Solomon Process Complexity Ratings
of 15.2 and 15.8, respectively (as compared to an average of 12.6 for U.S.
refineries in the most recently available Solomon Associates, Inc. survey). The
Solomon Process Complexity Rating is an industry measure of a refinery's ability
to produce higher value-added products. CITGO also owns a minority interest in
LYONDELL-CITGO Refining Company, Ltd. ("LYONDELL-CITGO"), a limited liability
company that owns and operates a refinery in Houston, Texas, with a rated crude
oil refining capacity of 265 MBPD.
CITGO's largest supplier of crude oil is PDVSA, and CITGO has entered into
long-term crude oil supply agreements with PDVSA, expiring between 2006 and
2013, which allow CITGO to purchase crude oil and other feedstocks at each of
its refineries. The long-term crude oil supply agreements incorporate formula
prices based on the market value of a slate of refined products deemed to be
produced from each particular grade of crude oil or feedstock less (i) certain
deemed refining costs adjustable for inflation, (ii) certain actual costs,
including transportation charges, import duties and taxes and (iii) a deemed
margin which varies according to the grade of crude oil or feedstock delivered.
Deemed margins under certain of the supply agreements are adjusted periodically
by a formula based in part upon the rate of inflation. These crude oil supply
agreements are designed to provide a relatively stable level of gross margin on
crude oil supplied by PDVSA in order to reduce the volatility of earnings and
cash flows from the refining operations of CITGO. This supply represented
approximately two-thirds of the crude oil processed in refineries operated by
CITGO in 1995.
CITGO markets branded gasoline through over 14,000 independently owned and
operated CITGO branded retail outlets (including 12,286 retail outlets owned or
operated by approximately 750 independent branded distributors and 1,752
7-Eleven convenience stores) located throughout the United States, primarily
east of the Rocky Mountains. In 1995, the National Petroleum News ranked CITGO
second in the number of branded outlets and third in domestic gasoline market
share with 8.2%, up from approximately 4.5% in 1989. The number of independent
distributor-owned or operated CITGO branded retail outlets increased
approximately 7%, 6% and 13% in 1995, 1994, and 1993, respectively. Gasoline
sales accounted for 61%, 57% and 58% of CITGO's total sales revenues in 1995,
1994, and 1993, respectively. To supply its marketing network, CITGO not only
uses the gasoline production from its refineries but also purchases gasoline
from others. In 1995, CITGO sold approximately 11.1 billion gallons of gasoline.
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CITGO sells jet fuel directly to airline customers at 22 airports,
including such major hub cities as Chicago, Dallas/Fort Worth, New York and
Miami. CITGO also sells diesel/#2 fuel through wholesale rack sales to
distributors as well as in bulk through contract sales or on a spot basis.
CITGO's delivery of light products is accomplished in part through 52
refined product terminals located throughout CITGO's primary market territory.
Of these terminals, 40 were wholly owned by CITGO and 12 were jointly owned as
of December 31, 1995. Active exchange relationships give CITGO access to over
370 other refined product terminals.
CITGO sells petrochemicals and industrial products in bulk to a variety of
U.S. manufacturers as raw materials for finished goods. Sulfur is sold to the
U.S. and international fertilizer industry; cycle oils are sold for feedstocks
processing and blending; natural gas liquids are sold to the U.S. fuel and
petrochemical industry; petroleum coke is sold primarily in international
markets for use as kiln and boiler fuel; and residual fuel blendstocks are sold
to a variety of fuel oil blenders and customers. The majority of CITGO's cumene
production is sold to a phenol production plant owned by a partnership in which
CITGO is a limited partner. The phenol plant produces phenol and acetone for
sale primarily to the principal partner in the phenol plant for the production
of plastics.
CITGO sells a variety of lubricants, including automotive lubricants and
industrial lubricants and waxes, to independent distributors, mass marketers and
industrial customers. CITGO markets many different types, grades and container
sizes of lubricant and wax products, with the bulk of these sales consisting of
automotive oil and lubricants and industrial lubricants. CITGO markets the
largest portion of its wax production as coating material for the corrugated
container industry. In 1995, CITGO acquired Cato Oil & Grease ("Cato"), a lubes
blending, manufacturing and packaging operation. Cato's extensive lines of
lubricating fluids and grease continue to be marketed under the Mystik and Cato
brands.
CITGO markets asphalt through 10 terminals located along the East Coast,
from Savannah, Georgia to Albany, New York. Asphalt is sold primarily to
independent contractors for use in the construction and resurfacing of roadways.
CITGO owns and operates a 959 mile crude oil pipeline system and three
product pipelines with a combined total of approximately 1,100 miles. CITGO also
owns minority equity interests in three crude oil pipeline companies and six
refined product pipeline companies. CITGO's pipeline interests provide it with
access to substantial refinery feedstocks and reliable transportation to refined
products markets, as well as dividend income. One of these pipelines, Colonial
Pipeline, is owned 13.98% by CITGO and is the largest refined product pipeline
in the United States. It transports gasoline, jet fuel and diesel/#2 fuel from
the Gulf Coast to the mid-Atlantic states, a major market area for CITGO.
STRATEGY
The Company intends to seek growth in the refining and marketing segment of
the petroleum industry by focusing on the costs it can control, mitigating the
costs it cannot control and focusing on the gasoline and lubricant distributor
class of trade. The Company's principal business strategies, which have remained
generally unchanged since 1985, allow it to compete in a very volatile and
mature industry.
- Enhance and grow the CITGO brand
Enhancing and growing the CITGO brand has been the primary focus for
CITGO since 1985. While competitors were busy building company-owned
stores, CITGO was focusing on building a solid distributor base for the
sale of light fuels. Today, over 750 CITGO distributors service more
than 14,000 branded retail outlets, and it is by this particular focus
that CITGO has gained prominence in the light fuels market. CITGO
intends to enhance and grow the CITGO brand in the future by relying on
the branded distributor segment of business. This growth is expected to
be mostly from existing distributors with the objective of becoming
their primary supplier.
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- Retain competitiveness of CITGO refineries by producing higher valued
products from lower valued heavy crude oil
In the refining industry, it is essential to achieve lower costs and
improve product quality and yields. CITGO has made significant refinery
investments in its wholly-owned refineries, as well as in the joint
venture LYONDELL-CITGO refinery, so that heavy Venezuelan crudes can be
processed into high quality valued-added products.
- Reduce imbalance resulting from growing product demand by increasing
supply through refinery conversion enhancement
In order to satisfy demand for petroleum products as well as to increase
CITGO's market share, CITGO's objective is to process increasing amounts
of crude oil into higher value-added products in the most cost efficient
manner. Significant capital expenditures are planned for CITGO's
refineries in order to enhance their conversion capabilities.
- Seek growth through continued petrochemical upgrading
The petrochemicals business segment has been a significant contributor
to CITGO's income during the last two years; however, CITGO expects that
profit margins in the petrochemical business segment will decrease from
1995 levels in the near term. In order to counteract this, CITGO plans
to reduce petrochemical costs and promote growth in higher value-added
products such as mixed xylenes, cumene and propylene. In addition,
capital improvement projects to improve processing efficiency at both
Corpus Christi and Lake Charles are scheduled for completion by 1998.
- Optimize profitability in the lubricants business
The Lubricants and Specialty Products business division has been a
stable contributor to CITGO's profitability for at least the past five
years. Furthermore, the acquisition of Cato during 1995 enhanced CITGO's
strength in the lubricants market. In order to further strengthen
CITGO's market presence, however, it will be necessary to increase both
finished lubricants and wax sales. CITGO is reviewing the feasibility of
improving manufacturing efficiency through technological improvements
and cost reductions while continuing to evaluate various possible
responses to the expanded supply of base oils which are expected to be
available on the Gulf Coast in the near future.
REFINING
CITGO and its subsidiaries own and operate two modern, highly complex crude
oil refineries and two asphalt refineries that have an aggregate rated crude oil
refining capacity of 572 MBPD. The two crude oil refineries, located in Lake
Charles, Louisiana and Corpus Christi, Texas, produce light fuels (gasoline, jet
fuel and diesel/#2 fuel oil), industrial products and petrochemicals. The two
asphalt refineries, located in Paulsboro, New Jersey and Savannah, Georgia,
produce asphalt for use primarily in the construction and resurfacing of
roadways. All of the Company's refineries are located in areas that qualify as
foreign trade zones for purposes of certain import duties and state taxes. CITGO
also owns a minority interest in LYONDELL-CITGO, which owns and operates a
refinery located in Houston, Texas that has a rated crude oil refining capacity
of 265 MBPD.
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The following table shows the rated capacity of each refinery in which
CITGO holds an interest and CITGO's share of such capacity.
<TABLE>
<CAPTION>
RATED REFINING CAPACITY
----------------------------------
NET
CITGO CITGO
REFINERY OWNER GROSS PERCENTAGE INTEREST
-------- ----- ------ ---------- ----------
(MBPD) (%) (MBPD)
<S> <C> <C> <C> <C>
Lake Charles, LA................... CITGO 320(1) 100 320
Corpus Christi, TX................. CITGO 140(1) 100 140
Paulsboro, NJ...................... CITGO 84 100 84
Savannah, GA....................... CITGO 28 100 28
Houston, TX........................ LYONDELL-CITGO 265 12(2) 32
--- ---
Total Rated Refining Capacity............. 837 604
=== ===
</TABLE>
- ---------------
(1) CITGO estimates that the actual capacity of the Lake Charles and Corpus
Christi refineries to refine heavy crude of the type currently being
refined, on an economical basis, is approximately 290 MBPD and 130 MBPD,
respectively.
(2) Represents CITGO's participation interest in LYONDELL-CITGO. At December
31, 1995, CITGO's equity interest in LYONDELL-CITGO entitled CITGO to
participate in approximately 12% of the profits of LYONDELL-CITGO. This
participation percentage is expected to increase to approximately 40% as a
result of additional planned investments and reinvested earnings by CITGO
through the in-service date, currently scheduled for the first quarter of
1997, of a refinery enhancement project. The Company has an option to
increase the participation percentage up to 50% that may be exercised
within 18 months of the in-service date. In connection with CITGO's
investment in LYONDELL-CITGO, CITGO and LYONDELL-CITGO entered into an
agreement pursuant to which CITGO purchases substantially all of the
refined products produced at the LYONDELL-CITGO refinery. See
"-- LYONDELL-CITGO."
The following table shows CITGO's aggregate interest in refining capacity,
refinery input and product yield for the three years in the period ended
December 31, 1995, which aggregate interest includes CITGO's proportionate share
of refining capacity, refinery input and product yield of LYONDELL-CITGO based
on CITGO's relative participation interests for each of these years. See
"-- LYONDELL-CITGO."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995(1) 1994(1) 1993(1)(2)
------------- ------------- -------------
(MBPD, EXCEPT AS OTHERWISE INDICATED)
<S> <C> <C> <C> <C> <C> <C>
Rated Refining Capacity(3).................. 604 601 599
Refinery Input:
Crude oil................................. 473 79.9% 474 78.7% 454 78.5%
Other feedstocks.......................... 119 20.1% 128 21.3% 124 21.5%
--- ------ --- ------ --- ------
Total............................. 592 100.0% 602 100.0% 578 100.0%
=== ====== === ====== === ======
Product Yield(4):
Light fuels
Gasoline............................... 267 44.6% 279 45.8% 267 45.7%
Jet Fuel............................... 61 10.2% 55 9.0% 48 8.2%
Diesel/#2 fuel oil..................... 101 16.9% 110 18.0% 114 19.5%
Asphalt................................... 32 5.4% 30 4.9% 29 5.0%
Petrochemicals and industrial products.... 137 22.9% 136 22.3% 126 21.6%
--- ------ --- ------ --- ------
Total............................. 598 100.0% 610 100.0% 584 100.0%
=== ====== === ====== === ======
</TABLE>
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- ---------------
(1) Includes a weighted average of 11.45% and 10.48% of the refining capacity,
refining input and product yield of the LYONDELL-CITGO refinery for 1995
and 1994, respectively, and a weighted average of 5% of such items related
to the LYONDELL-CITGO refinery for the last six months of 1993.
(2) Includes the Savannah refinery from its date of purchase on April 30, 1993.
(3) Rated capacity at year end. Due to the specific gravity of the crude oil
generally processed at the Lake Charles and Corpus Christi refineries,
CITGO estimates that the actual capacity of these refineries to refine
heavy crude of the type currently being refined, on an economical basis, is
approximately 290 MBPD and 130 MBPD, respectively.
(4) Does not include Paulsboro refinery Unit 1. See "-- Paulsboro Refinery."
Lake Charles Refinery. The Lake Charles refinery, located in Lake Charles,
Louisiana, was originally built in 1944 and since then has been continuously
upgraded. As a result of these upgrades, the refinery is a modern, complex, high
conversion refinery. The refinery is the sixth largest in the United States,
with a rated refining capacity of 320 MBPD, and is capable of processing large
volumes of crude oil into a flexible slate of refined products, including
significant quantities of high-octane unleaded gasoline and, due to recent
modifications, the new reformulated gasoline. The Lake Charles refinery has a
Solomon Process Complexity Factor of 15.2 (as compared to an average of 12.6 for
U.S. refineries in the most recently available Solomon Associates, Inc. survey).
The Solomon Process Complexity Rating is an industry measure of a refinery's
ability to produce higher value-added products. A higher rating indicates a
greater capability to produce such products. The Lake Charles refinery's major
process units and their respective capacities are as follows:
<TABLE>
<CAPTION>
NUMBER
OF AGGREGATE
UNIT TYPE UNITS CAPACITY
--------- ------ ---------
(MBPD)
<S> <C> <C>
Atmospheric crude distillation.................................. 3 320
Vacuum distillation............................................. 2 81
Catalytic cracking.............................................. 3 130
Catalytic reforming............................................. 3 102
Hydrocracking................................................... 1 40
Hydrotreating (distillates)..................................... 3 53
Hydrotreating (naphtha)......................................... 3 102
Alkylation (sulfuric)........................................... 1 23
Delayed coking.................................................. 2 94
MTBE............................................................ 1 3
TAME............................................................ 1 3
Petrochemical units:
Sulfolane (benzene)........................................... 1 5
Propylene fractionation....................................... 1 6
</TABLE>
The Lake Charles refinery has more than one unit in a number of different
process areas. This "multiple stream capacity" allows it to continue to operate
even while one unit or group of units is shut down. The Lake Charles refinery
has significant flexibility to take advantage of market opportunities through
the ability to shift production between low and high sulfur diesel, diesel and
jet fuel, and jet fuel and naphtha, depending on market prices and demand.
Flexibility in gasoline blending and logistics allows the refinery to make a
variety of gasoline grades, from conventional to reformulated, depending on
market pricing.
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The following table shows the refining capacity, refinery input and product
yield at the Lake Charles refinery for the three years in the period ended
December 31, 1995.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995 1994 1993
------------- ------------- -------------
(MBPD, EXCEPT AS OTHERWISE INDICATED)
<S> <C> <C> <C> <C> <C> <C>
Rated Refining Capacity(1).................. 320 320 320
Refinery Input:
Crude oil................................. 275 85.4% 274 83.0% 271 83.1%
Other feedstocks.......................... 47 14.6% 56 17.0% 55 16.9%
--- ------ --- ------ --- ------
Total............................. 322 100.0% 330 100.0% 326 100.0%
=== ====== === ====== === ======
Product Yield:
Light fuels
Gasoline............................... 164 50.0% 169 50.0% 163 49.3%
Jet Fuel............................... 58 17.7% 52 15.4% 47 14.2%
Diesel/#2 fuel......................... 42 12.8% 50 14.8% 54 16.3%
Petrochemicals and industrial products.... 64 19.5% 67 19.8% 67 20.2%
--- ------ --- ------ --- ------
Total(2).......................... 328 100.0% 338 100.0% 331 100.0%
=== ====== === ====== === ======
Utilization................................. 86% 86% 85%
</TABLE>
- ---------------
(1) Rated refining capacity at year end.
(2) Total product yields exceed crude oil refining capacity due to the use of
other feedstocks, in addition to crude oil, in the refining process and the
volumetric increases which can result from the refining process.
Approximately 64%, 68% and 64% of the total crude runs at the Lake Charles
refinery in the years 1995, 1994 and 1993, respectively, consisted of crude oil
with an average API gravity of 24(degree) or less. Due to the complex processing
required to refine such heavy crude oil, the Lake Charles refinery's economic
crude oil throughput capacity is approximately 290 MBPD, which is approximately
90% of its rated capacity of 320 MBPD.
The Lake Charles refinery's Gulf Coast location provides it with access to
crude oil deliveries from multiple sources. Imported crude oil and feedstocks
supplies are delivered by ship directly to the Lake Charles refinery, and
domestic crude oil supplies are delivered by pipeline and barge. In addition,
the refinery is connected by pipelines to the Louisiana Offshore Oil Port
("LOOP") and to terminal facilities in the Houston area through which it can
receive crude oil deliveries if the Lake Charles docks are temporarily
inaccessible. For delivery of refined products, the refinery is connected
through the Lake Charles Pipeline directly to the Colonial Pipeline and the
Explorer Pipeline, which are the major refined product pipelines supplying the
Northeast and Midwest regions of the United States, respectively. The refinery
also uses adjacent terminals and docks, which provide access for ocean tankers
and barges.
The Lake Charles refinery's main petrochemical products are propylene and
benzene. Propylene production was 5.7, 5.2 and 4.7 MBPD, and benzene production
was 4.1, 3.8 and 3.8 MBPD, in each case for the years 1995, 1994 and 1993,
respectively. Industrial products include sulfur, residual fuels and petroleum
coke.
Located adjacent to the Lake Charles refinery is a lubricants refinery
operated by CITGO and owned by Cit-Con Oil Corporation, which is owned 65% by
CITGO and 35% by Conoco, Inc. ("Conoco"). Primarily because of its specific
design, the Cit-Con refinery produces high quality oils and waxes, and is one of
the few in the industry designed as a stand-alone lubricants refinery. It
currently has a rated capacity of 9.6 MBPD of base oils and 1.4 MBPD of wax, and
is the sixth largest rated capacity paraffinic lubricants refinery in the United
States. For the years 1995, 1994 and 1993, the refinery capacity utilization of
the Cit-Con refinery was 101%, 110%, and 107%, respectively. Feedstocks are
supplied 65% from CITGO's Lake Charles refinery and 35% from Conoco's nearby
refinery. Finished refined
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<PAGE> 8
products are shared on the same pro rata basis by CITGO and Conoco. Conoco is a
participant in a project to build a new refinery that will produce base oils.
CITGO anticipates that such refinery will be more efficient than the Cit-Con
refinery and, as a result, such new refinery may be able to produce base oils at
a lower cost than those produced at the Cit-Con refinery. CITGO is reviewing the
feasibility of improving the manufacturing efficiency of the Cit-Con refinery
through technological improvements and cost reductions while continuing to
evaluate various other responses to the expanded supply of base oils which are
expected to be available in the Gulf Coast area when such new refinery is placed
in service.
Corpus Christi Refinery. The Corpus Christi refinery complex consists of
the East and West Plants, located within five miles of each other in Corpus
Christi, Texas. Construction began on the East Plant in 1937, and it was
extensively reconstructed and modernized during the 1970's and 1980's. The West
plant was completed in 1983. The Corpus Christi refinery is an efficient and
highly complex facility, capable of processing high volumes of crude oil into a
flexible slate of refined products, with a Solomon Process Complexity Factor of
15.8 (as compared to an average 12.6 for U.S. refineries in the most recently
available Solomon Associates, Inc. survey). The Corpus Christi refinery has a
rated capacity of 140 MBPD, and its major process units and their respective
capacities are as follows:
<TABLE>
<CAPTION>
NUMBER
OF AGGREGATE
UNIT TYPE UNITS CAPACITY
---------------------------------------------------------------- ------ ---------
(MBPD)
<S> <C> <C>
Atmospheric crude distillation.................................. 1 140
Vacuum distillation............................................. 1 67
Fluidized catalytic cracking.................................... 2 78
Platforming..................................................... 2 54
Hydrotreating (distillates)..................................... 1 42
Hydrotreating (naphtha)......................................... 2 60
Hydrotreating (gasoils)......................................... 1 65
Alkylation (hydrofluoric)....................................... 1 19
Delayed coking.................................................. 1 34
MTBE............................................................ 1 2
Petrochemical units:
UDEX extraction (benzene, toluene, xylene).................... 1 7
Cumene........................................................ 1 8
Cyclohexane................................................... 1 3
Aromatics disproportionation.................................. 1 3
</TABLE>
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<PAGE> 9
The following table shows refining capacity, refinery input and product
yield at the Corpus Christi refinery for the three years in the period ended
December 31, 1995.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995 1994 1993
------------- ------------- -------------
(MBPD, EXCEPT AS OTHERWISE INDICATED)
<S> <C> <C> <C> <C> <C> <C>
Rated Refining Capacity(1).................. 140 140 140
Refinery Input:
Crude oil................................. 121 64.7% 128 66.3% 127 65.8%
Other feedstocks.......................... 66 35.3% 65 33.7% 66 34.2%
--- ------ --- ------ --- ------
Total............................. 187 100.0% 193 100.0% 193 100.0%
=== ====== === ====== === ======
Product Yield:
Light fuels
Gasoline............................... 90 48.4% 99 51.0% 99 51.6%
Diesel/#2 fuel......................... 53 28.5% 55 28.4% 57 29.7%
Petrochemicals and industrial products.... 43 23.1% 40 20.6% 36 18.7%
--- ------ --- ------ --- ------
Total(2).......................... 186 100.0% 194 100.0% 192 100.0%
=== ====== === ====== === ======
Utilization................................. 86% 91% 91%
</TABLE>
- ---------------
(1) Rated capacity at year end.
(2) Total product yields exceed crude oil refining capacity in 1994 due to the
use of other feedstocks, in addition to crude oil, in the refining process
and the volumetric increases which can result from the refining process.
All of the crude oil processed at the Corpus Christi refinery is heavy
Venezuelan crude oil having a high sulfur content. Due to the complex processing
required to refine such heavy sour crude oil, the Corpus Christi refinery's
economic crude oil throughput capacity is approximately 130 MBPD, which is
approximately 93% of its rated capacity of 140 MBPD. Crude oil supplies are
delivered directly to the Corpus Christi refinery through the Port of Corpus
Christi.
CITGO operates the West Plant under a sublease agreement (the "Sublease")
from Union Pacific Corporation ("Union Pacific"). The basic term of the Sublease
ends on January 1, 2004, but CITGO may renew the Sublease for successive renewal
terms through January 31, 2011. CITGO has the right to purchase the West Plant
from Union Pacific at the end of the basic term, the end of any renewal term, or
on January 31, 2011, at a nominal price.
During the last several years, CITGO has increased the capacity of the
Corpus Christi refinery to produce petrochemical products. The Corpus Christi
refinery's main petrochemical products include cumene, cyclohexane, MTBE and
aromatics (including benzene, toluene, and xylene). The Company produces a
significant quantity of cumene, an important petrochemical product used in the
engineered plastics market. The production of xylene, a basic building block
used in the manufacture of consumer plastics, allows the refinery to take
advantage of its reforming capacity while staying within the new, more stringent
gasoline specifications of the Clean Air Act Amendments of 1990.
Paulsboro Refinery. This asphalt refinery, purchased in 1991, is located in
Paulsboro, New Jersey. The refinery consists of Unit I, with a rated capacity of
44 MBPD, and Unit II, with a rated capacity of 40 MBPD.
Unit II, originally constructed in 1980 to produce asphalt from higher
sulfur, heavy crude oil high in naphthenic acid, is a combination atmospheric
and vacuum distillation facility. The crude oil purchased by CITGO from PDVSA to
supply Unit II's crude oil requirements is particularly well suited for the
production of asphalt. Unit II produced an average of 19.1, 19.4 and 16.4 MBPD
of asphalt in the years 1995, 1994, and 1993, respectively, which accounted for
58%, 57% and 57% of Unit II's total production in such years. The remaining Unit
II production in 1995, 1994 and 1993 consisted of distillate products such as
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<PAGE> 10
naphthas, marine diesel oil and vacuum gas oils, which in the aggregate averaged
approximately 13.7, 14.9 and 12.5 MBPD, respectively in such years. Unit II
crude oil runs averaged 33, 34 and 29 MBPD resulting in a utilization rate of
83%, 85% and 73% of rated capacity in 1995, 1994, and 1993, respectively.
Unit I was constructed in 1979 to process low sulfur, light crude oil. The
unit produces naphthas and diesel/#2 and #6 fuels. Unit I is run primarily when
there is demand for toll processing of sweet crudes at attractive economics.
Crude oil runs for third party processing in 1995, 1994 and 1993 averaged 2.1,
0.0 and 0.8 MBPD, respectively. In 1995, 2.6 MBPD of crude oil was run on Unit I
for CITGO's own account, producing 1.9 MBPD of asphalt and 0.8 MBPD of other
products.
Savannah Refinery. On April 30, 1993, CITGO purchased an asphalt refinery
located near Savannah, Georgia, one asphalt distribution terminal and throughput
rights at two additional distribution terminals. The Savannah refinery and the
related distribution terminals have been integrated with CITGO's existing
asphalt operations. The 100 acre facility is located on the Savannah River. The
facility includes two crude distillation units, with a combined rated capacity
of 28 MBPD. The primary crude oil run by the refinery is Boscan, a heavy
Venezuelan crude oil that is rich in asphalt.
The units produced an average of 10.5 MBPD of asphalt in the year ended
December 31, 1995, which accounted for 77% of total production. An additional
3.4 MBPD of production included naphthas and light, medium and heavy gas oils.
Total crude runs for the period averaged 13.7 MBPD, for a utilization rate of
49% of rated capacity.
LYONDELL-CITGO. In July 1993, CITGO and Lyondell Petrochemical Company
("Lyondell") executed agreements pursuant to which Lyondell contributed a 265
MBPD refinery and related assets to LYONDELL-CITGO, a newly formed limited
liability company, and CITGO and Lyondell agreed to provide certain amounts
necessary to fund a refinery enhancement project to increase the refinery's
heavy crude oil conversion capacity from approximately 130 MBPD of 22(degrees)
average API gravity crude oil to approximately 200 MBPD of 17(degrees) average
API gravity crude oil. The refinery enhancement project is expected to be
completed at the end of 1996, with an in-service date occurring in the first
quarter of 1997.
In connection with this project, PDVSA entered into a long-term contract
with LYONDELL-CITGO to supply 135 MBPD of heavy Venezuelan crude oil to the
refinery until the completion date of the refinery enhancement project, at which
time PDVSA will be required to supply 200 MBPD of such crude oil. The supply
agreement, which extends through 2017, incorporates formula prices based on the
market value of a slate of refined products deemed to be produced from each
particular grade of crude oil, less (i) certain deemed refining costs adjustable
for inflation, (ii) certain actual costs, including transportation charges,
import duties and taxes, and (iii) a deemed margin, which varies according to
the grade of crude oil delivered. See "-- Crude Oil Supply." LYONDELL-CITGO also
purchases crude oil from third parties to supplement the PDVSA supplies. In
addition, CITGO entered into a long-term contract with LYONDELL-CITGO to
purchase substantially all of the refined products produced at the refinery
through the year 2017 at market related prices, thereby significantly reducing
CITGO's need to purchase refined products from third party sources to supply its
distribution network. See "-- Marketing -- Refined Product Purchases."
The Company anticipates that the total cost of the refinery enhancement
project will be approximately $1 billion, of which approximately $600 million
had been expended as of December 31, 1995. At such date, CITGO had invested an
aggregate of $461 million (including reinvested earnings), of which $258 million
was funded through equity contributions from PDV America. As of December 31,
1995, CITGO was committed to make additional investments in LYONDELL-CITGO
consisting of (i) $30 million at the in-service date of the refinery enhancement
project and (ii) up to an additional approximately $150 million through the
in-service date provided that the total refinery enhancement project costs do
not exceed 110% of the current estimate. In addition, CITGO is required to fund
certain fees, expenses and interest on LYONDELL-CITGO's initial $200 million
construction loan, and is committed to fund up to $22 million for certain
maintenance and environmental costs to the extent that such costs exceed certain
estimates. CITGO does not currently expect that its aggregate investments in
LYONDELL-CITGO will
9
<PAGE> 11
exceed $630 million (exclusive of reinvested earnings) through the in-service
date. At December 31, 1995, CITGO had an approximate 12% participation interest
in the profits and losses of LYONDELL-CITGO. CITGO's expected aggregate
investment in LYONDELL-CITGO, plus its share of LYONDELL-CITGO's earnings (which
must be reinvested through the completion date of such project), will give CITGO
an approximate 40% participation interest in the profits and losses of
LYONDELL-CITGO. CITGO also has the option, exercisable on one occasion within 18
months after the in-service date, to increase its participation in the profits
and losses of LYONDELL-CITGO up to a maximum of 50% which, if exercised, would
require CITGO to make an additional investment in LYONDELL-CITGO.
CRUDE OIL SUPPLY
CITGO owns no crude oil reserves or production facilities, and must
therefore rely on purchases of crude oil and feedstocks for its refinery
operations. The following chart shows CITGO's purchases of crude oil (for
refining) for the three years in the period ended December 31, 1995.
<TABLE>
<CAPTION>
LAKE CHARLES, LA CORPUS CHRISTI, TX PAULSBORO, NJ SAVANNAH, GA(1)
------------------ ------------------ ------------------ ------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(MBPD) (MBPD) (MBPD) (MBPD)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PDVSA......... 150 129 125 122 128 127 35 36 31 14 12 14
PEMEX......... 33 63 65 0 0 0 0 0 0 0 0 0
Occidental.... 43 42 41 0 0 0 0 0 0 0 0 0
Other
Sources..... 52 40 40 0 0 0 0 0 0 0 0 0
--- --- --- --- --- --- -- -- -- -- -- --
Total.. 278 274 271 122 128 127 35 36 31 14 12 14
=== === === === === === == == == == == ==
</TABLE>
- ---------------
(1) CITGO acquired the Savannah refinery on April 30, 1993.
CITGO's largest supplier of crude oil is PDVSA, and CITGO has entered into
long-term crude oil supply agreements with PDVSA with respect to each of CITGO's
refineries. In addition, LYONDELL-CITGO has entered into a long-term crude oil
supply agreement with PDVSA with respect to its refinery. The following table
shows the base and incremental volumes of crude oil contracted for delivery and
the volumes of crude oil purchased from PDVSA under these agreements in the
three years in the period ended December 31, 1995.
<TABLE>
<CAPTION>
VOLUMES OF CRUDE
OIL PURCHASED UNDER
PDVSA PDVSA AGREEMENTS
SUPPLY AGREEMENT FOR THE YEAR ENDED
OIL VOLUME DECEMBER 31, YEAR OF
---------------------- ---------------------- AGREEMENT
REFINERY BASE INCREMENTAL(1) 1995 1994 1993 EXPIRATION
-------- ---- -------------- ---- ---- ---- ----------
(MBPD) (MBPD)
<S> <C> <C> <C> <C> <C> <C>
Lake Charles, LA..................... 120 50 126(2) 125(2) 125 2006
Corpus Christi, TX................... 130 N/A 122 126 127 2012
Paulsboro, NJ........................ 30 N/A 35 36 31 2010
Savannah, GA (3)..................... 12 N/A 13 12 14 2013
Houston, TX (4)...................... 135 N/A 136 135 131 2017
</TABLE>
- ---------------
(1) The supply agreement for the Lake Charles refinery gives PDVSA the right to
sell to CITGO incremental volumes up to the maximum amount specified in the
table, subject to certain restrictions relating to the type of crude oil to
be supplied, refining capacity and other operational considerations at the
refinery.
(2) Volumes purchased under the supply agreements do not equal the purchases
from PDVSA shown in the previous table as a result of spot purchases.
(3) CITGO acquired the Savannah refinery on April 30, 1993.
(4) CITGO acquired an equity interest in LYONDELL-CITGO, the owner of the
Houston refinery, on July 1, 1993. In connection with such transaction,
LYONDELL-CITGO entered into a long-term crude
10
<PAGE> 12
oil supply agreement with PDVSA that provides for delivery volumes of 135
MBPD until the completion of a planned refinery enhancement project at which
time the delivery volumes will increase to 200 MBPD.
These crude oil supply agreements require PDVSA to supply minimum
quantities of crude oil and other feedstocks to CITGO for a fixed period,
usually 20 to 25 years from the inception of the agreement. These supply
agreements are designed to reduce the inherent earnings volatility of the
refining operations of CITGO. The supply agreements incorporate formula prices
based on the market value of a slate of refined products deemed to be produced
from each particular grade of crude oil or feedstock, less (i) certain deemed
refining costs, (ii) certain actual costs, including transportation charges,
import duties and taxes and (iii) a deemed margin, which varies according to the
grade of crude oil or feedstock delivered. Under each supply agreement, deemed
costs are adjusted periodically by a formula primarily based on the rate of
inflation. In addition, deemed margins under certain of the supply agreements
are adjusted periodically by a formula based in part on the rate of inflation.
Because deemed operating costs and the slate of refined products deemed to be
produced for a given barrel of crude oil or other feedstock do not necessarily
reflect the actual costs and yields in any period, the actual refining margin
earned by CITGO under the various supply agreements will vary depending on,
among other things, the efficiency with which CITGO conducts its operations
during such period.
Effective January 1, 1992, the supply agreements between PDVSA and CITGO
with respect to the Lake Charles, Corpus Christi and Paulsboro refineries were
modified to reduce the price levels to be paid by CITGO by a fixed amount per
barrel of crude oil purchased from PDVSA. Such reductions were intended to
defray CITGO's costs of certain environmental compliance expenditures. This
modification resulted in a decrease in the cost of crude oil purchased under
these agreements of approximately $70 million per year for the years 1992
through 1994 as compared to the amount that would otherwise have been payable
thereunder. This modification was to expire at December 31, 1996; however, in
1995, PDVSA and CITGO agreed to adjust this modification so that the 1992 fixed
amount per barrel would be reduced and the adjusted modification would not
expire until December 31, 1999. The effect of this adjustment to the original
modification was to increase the cost of crude oil purchased under these
agreements by approximately $22 million in 1995 as compared to the amount that
would otherwise have been payable thereunder based on the original modification
(resulting in a net decrease of approximately $48 million from the amount
otherwise payable under the agreement prior to the 1992 original modification).
The Company anticipates that the effect of the adjustments to the original
modifications will be to increase the price of crude oil purchased from PDVSA
under these agreements by approximately $45 million in 1996 (resulting in a net
decrease of approximately $25 million from the amount otherwise payable under
the agreement prior to the 1992 original modification) and to reduce the price
of crude oil purchased from PDVSA under these agreements by approximately $25
million per year in 1997 through 1999, in each case as compared to the original
modification and without giving effect to any other factors that may affect the
price payable for crude oil under these agreements. Due to the pricing formula
under the supply agreements, the aggregate price actually paid for crude oil
purchased from PDVSA under these agreements in each of these years will depend
primarily upon the then current prices for refined products and certain actual
costs of CITGO. These estimates are also based on the assumption that CITGO will
purchase the base volumes of crude oil under the agreements.
Under certain of these agreements, if supplies from PDVSA are interrupted,
PDVSA is required to compensate CITGO for any additional costs incurred in
securing crude oil or other feedstocks. These crude oil supply agreements may be
terminated (i) by mutual agreement, (ii) by either party in the event of a
material default, bankruptcy or similar financial hardship on the part of the
other party or (iii) in the case of contracts with CITGO, if PDVSA no longer
holds specified ownership interests in CITGO. See "Item 11. Description of
Registrant's Securities to be Registered -- Covenants -- Specified Agreements."
Most of the crude oil and feedstocks purchased by CITGO from PDVSA are
delivered on tankers owned by PDVSA subsidiaries. In 1995, 71% of the PDVSA
contract crude oil delivered to the Lake Charles and Corpus Christi refineries
was delivered on tankers operated by PDVSA subsidiaries.
11
<PAGE> 13
CITGO purchases additional crude oil under a 90-day evergreen agreement
with an affiliate of Petroleos Mexicanos ("PEMEX"). CITGO's refineries are
particularly well suited to refine PEMEX's Maya heavy, sour crude oil, which is
similar in many respect to several types of Venezuelan crude oil. Effective
January 1995, the PEMEX crude agreement provided for the purchase of 23 MBPD for
the first six months of 1995 and 17 MBPD for the last six months of 1995. The
PEMEX agreement provides for the purchase of 37 MBPD of crude for the first six
months of 1996 and 45 MBPD for the last six months of 1996.
CITGO is a party to a contract with an affiliate of Occidental Petroleum
Corporation ("Occidental") for the purchase of crude oil at contract reference
prices. Purchases under this contract, which expires on August 31, 1998,
averaged 54.5 MBPD in 1995. CITGO also purchases crude oil under long-standing
relationships with numerous other domestic producers.
MARKETING
CITGO's major products are light fuels (including gasoline, jet fuel, and
diesel fuel), petrochemicals, industrial products, asphalt, and lubricants and
waxes. The following table shows revenue of each of these product categories for
the three years in the period ended December 31, 1995.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- ---------------
($ IN MILLIONS, EXCEPT AS OTHERWISE INDICATED)
<S> <C> <C> <C> <C> <C> <C>
Light Fuels................... $ 8,886 85.8% $ 7,845 86.0% $ 7,841 87.2%
Petrochemicals and industrial
products.................... 831 8.0% 707 7.8% 602 6.7%
Asphalt....................... 238 2.3% 194 2.1% 179 2.0%
Lubricants and Waxes.......... 404 3.9% 370 4.1% 370 4.1%
------- ------ ------ ------ ------ ------
Total............... $ 10,359 100.0% $ 9,116 100.0% $ 8,992 100.0%
======= ====== ====== ====== ====== ======
</TABLE>
Refined Product Purchases. Refined product purchases are required to
supplement the production of the Lake Charles and Corpus Christi refineries in
order to meet the demand of CITGO's marketing network. During 1995, CITGO's
shortage in gasoline production approximated 277 MBPD. However, due to
logistical needs, timing differences and product grade imbalances, in 1995 CITGO
purchased approximately 471 MBPD of gasoline, and CITGO sold into the spot
market or to traders or other refiners approximately 194 MBPD of gasoline. The
following table shows CITGO's purchases of refined products for the three years
in the period ended December 31, 1995.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1995 1994 1993
--- --- ---
(MBPD)
<S> <C> <C> <C>
Gasoline.......................................................... 471 380 352
Jet Fuel.......................................................... 87 89 74
Diesel/#2 fuel.................................................... 90 98 88
--- --- ---
Total................................................... 648 567 514
=== === ===
</TABLE>
CITGO purchases substantially all of the refined products produced at the
LYONDELL-CITGO refinery under a long-term contract extending through the year
2017. In 1995, CITGO purchased 103 MBPD of gasoline, 46 MBPD of distillate and
27 MBPD of jet fuel from LYONDELL-CITGO. See "-- Refining -- LYONDELL-CITGO".
12
<PAGE> 14
Light Fuels Sales. CITGO markets gasoline, jet fuel and other distillates
through an extensive marketing network. The following table provides a breakdown
of the sales made by type of product for the three years ended December 31,
1995.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------- --------------------------
1995 1994 1993 1995 1994 1993
------ ------ ------ ------ ------ ------
($ IN MILLIONS) (MILLIONS OF GALLONS)
<S> <C> <C> <C> <C> <C> <C>
Gasoline...................... $6,367 $5,252 $5,256 11,075 9,747 9,380
Jet Fuel...................... 1,163 1,102 1,019 2,249 2,131 1,827
Diesel/#2 fuel................ 1,356 1,491 1,566 2,730 3,067 3,005
------ ------ ------ ------ ------ ------
Total............... $8,886 $7,845 $7,841 16,054 14,945 14,212
====== ====== ====== ====== ====== ======
</TABLE>
Gasoline sales accounted for 61%, 57% and 58% of CITGO's total revenues in
the years 1995, 1994 and 1993, respectively. CITGO markets CITGO branded
gasoline through more than 14,000 independently owned and operated CITGO branded
retail outlets (including 12,286 branded retail outlets owned and operated by
approximately 750 independent distributors and 1,752 7-Eleven convenience
stores) located throughout the United States, primarily east of the Rocky
Mountains. In addition, CITGO itself owns, operates or leases 16 retail outlets
that operate under the name "Quik Mart." CITGO purchases gasoline to supply its
marketing network, as the gasoline production from the Lake Charles and Corpus
Christi refineries was equivalent to approximately 53%, 60% and 65% of the
volume of CITGO branded gasoline sold in 1995, 1994 and 1993, respectively. See
"-- Refined Product Purchases."
CITGO's strategy is to enhance the value of the CITGO brand in order to
obtain premium pricing for its products by appealing to consumer preference for
quality petroleum products and services. This is accomplished through a
commitment to quality, dependability and customer service to its independent
distributors, which constitute CITGO's primary distribution channel. CITGO also
promotes the CITGO brand through various cost-sharing arrangements between CITGO
and the distributors to fund local and regional advertising and other
promotional efforts, as well as to fund image enhancement and other improvements
to the retail outlets, such as signage, lighting and card reader pumps. As a
result of the implementation of this strategy, the number of independent
distributor-owned or operated CITGO branded retail outlets has grown
significantly since 1986 when there were approximately 7,000 outlets (including
7-Eleven convenience stores), with such number increasing by approximately 7%,
6% and 13% in 1995, 1994 and 1993, respectively. In 1995, the National Petroleum
News ranked CITGO third in domestic gasoline market share with 8.2%, up from
approximately 4.5% in 1989. In addition, customers have selected CITGO as the
top branded supplier in three successive biannual Supplier's Cup competitions,
held in 1990, 1992 and 1994 and sponsored by the Petroleum Marketers Association
of America, an organization of independent refined products distributors.
In 1994 CITGO began offering to its distributors a program to enhance their
stations with new card reader pumps. These pumps allow customers to pay for
their gasoline at the pumps with their credit cards instead of going into the
stores to pay. As of December 31, 1995, approximately 1,000 retail outlets had
installed the card reader pumps.
CITGO has also engaged in a strategy to aggressively expand its credit card
program since credit card sales generally are higher per transaction than cash
sales. Since 1992, CITGO has experienced growth in the number of new accounts of
8%, 9% and 11% in 1995, 1994 and 1993, respectively. The point-of-sale ("POS")
system that supports the credit card program has expanded to the point that
approximately 94% of CITGO's branded credit card sales in 1995 were processed on
the POS system.
Sales to 7-Eleven convenience stores are made under a contract that extends
through the year 2006. Under this contract, CITGO arranges all transportation
and delivery of motor fuels and handles all product ordering. CITGO also acts as
processing agent for the purpose of facilitating and implementing orders and
purchases from third-party suppliers. CITGO receives a processing fee for such
services. Sales to independent branded distributors are typically made under
three-year contracts.
13
<PAGE> 15
CITGO markets jet fuel directly to airline customers at 22 airports,
including such major hub cities as Atlanta, Chicago, Dallas/Fort Worth, New York
and Miami. Jet fuel sales volumes to airline customers increased approximately
2%, 18% and 12% in 1995, 1994 and 1993, respectively. The volume increases were
due both to higher levels of purchases by existing customers and to sales to new
customers. Sales of bonded jet fuel, which are exempt from import duties as well
as certain state and local taxes, have increased from 482 million gallons in
1993 to 555 million gallons in 1995 (accounting for over 30% of total jet fuel
sales volume to airline customers in both years).
CITGO's diesel/#2 fuel marketing strategy aims to obtain the best value for
the products manufactured at the Lake Charles and Corpus Christi refineries, as
well as those received from LYONDELL-CITGO. Growth in wholesale rack sales to
distributors has been the primary focus of marketing efforts. Such efforts have
resulted in increases in wholesale rack sales volume from approximately 896
million gallons in 1993 to approximately 1,283 million gallons in 1995. The
remaining diesel/#2 fuel production is sold either in bulk through contract
sales (primarily as heating oil in the Northeast) or on a spot basis.
CITGO's delivery of light fuels to its customers is accomplished in part
through 52 refined product terminals located throughout CITGO's primary market
territory. Of these terminals, 40 are wholly-owned by CITGO and 12 are jointly
owned. CITGO's refined product terminals provide a total of approximately 22
million barrels of storage capacity. Fifteen of CITGO's product terminals have
waterborne docking facilities, which greatly enhance the flexibility of CITGO's
logistical system. In addition, CITGO has active exchange relationships with
over 370 other refined product terminals, providing flexibility and timely
response to distribution needs. CITGO operates fleets of leased and owned trucks
for delivery of refined products from the product terminals to retail locations.
The following table identifies by state the number and capacity of CITGO's
wholly- and jointly-owned refined products terminals:
<TABLE>
<CAPTION>
NUMBER OF
REFINED STORAGE
STATE PRODUCTS TERMINALS CAPACITY(1)
----- ------------------ -----------
(THOUSANDS
OF BARRELS)
<S> <C> <C>
Indiana............................................... 2 4,554
New Jersey............................................ 2 4,341
New York.............................................. 3 1,764
Florida............................................... 5 1,613
Texas................................................. 11 1,359
Massachusetts......................................... 1 1,314
Virginia.............................................. 4 1,079
Wisconsin............................................. 3 946
North Carolina........................................ 3 753
Michigan.............................................. 3 675
All others (9 states)................................. 15 3,430
--
------
Total (19 states)........................... 52 21,828
== ======
</TABLE>
- ---------------
(1) CITGO's joint ownership interest in 12 refined products terminals ranges
from 25% to 50%, and the aggregate storage capacity attributable to
jointly-owned refined products terminals is 4,592 thousand barrels.
Petrochemicals and Industrial Products. CITGO sells petrochemicals and
industrial products in bulk to a variety of U.S. manufacturers as raw materials
for finished goods. Sulfur is sold to the U.S. and international fertilizer
industry; cycle oils are sold for feedstock processing and blending; natural gas
liquids are sold to the U.S. fuel and petrochemical industry; petroleum coke is
sold primarily in international markets for use as kiln and boiler fuel; and
residual fuel blendstocks are sold to a variety of fuel oil blenders and
customers. The majority of CITGO's cumene production is sold to a phenol
14
<PAGE> 16
production plant owned by a partnership in which CITGO is a limited partner. The
phenol plant produces phenol and acetone for sale primarily to the principal
partner in the phenol plant for the production of plastics.
Asphalt. CITGO markets asphalt through 10 terminals located along the East
Coast, from Savannah, Georgia to Albany, New York. Asphalt is sold primarily to
independent contractors for use in the construction and resurfacing of roadways.
Lubricants and Waxes. CITGO markets many different types, grades and
container sizes of lubricants and wax products, with the bulk of sales
consisting of automotive oil and lubricants and industrial lubricants. Other
major lubricant products include 2-cycle engine oil and automatic transmission
fluid.
In April 1995, CITGO acquired Cato for a purchase price of approximately
$46.8 million. CITGO sells its finished lubricant products through three classes
of trade: (i) independent distributors that specialize in lubricant sales
(representing 66% of 1995 sales), (ii) mass merchandisers (representing 8% of
1995 sales) and (iii) directly to large industrial end users (representing 26%
of 1995 sales). CITGO emphasizes sales to independent distributors in its
lubricants marketing because of the higher margins realized from these sales.
Large industrial end users include steel manufacturers for industrial lubricants
and automobile manufacturers for "original equipment" quantities of automotive
oils and fluids.
CITGO markets the largest portion of its wax production as coating
materials for the corrugated container industry. CITGO also provides wax for the
manufacture of candles, drinking cups, waxed papers, and a variety of building
and rubber products.
PIPELINE OPERATIONS
CITGO owns and operates a 959 mile crude oil pipeline system and three
product pipelines located in Texas, Oklahoma and Louisiana with a combined total
of approximately 1,100 miles. The crude oil pipeline provides CITGO with access
to extensive gathering systems throughout major production areas in Louisiana
and Texas that provide the Lake Charles refinery with domestic crude oil to
supplement supplies delivered by ship.
CITGO also has joint equity interests in three crude oil pipeline companies
with a total of nearly 5,800 miles of crude oil pipeline. In addition, CITGO has
joint equity interests in six refined product pipeline companies with a total of
approximately 8,000 miles of refined product pipeline. One of the refined
product pipelines in which CITGO has an interest, the Colonial Pipeline, is the
largest refined product pipeline in the United States. It transports gasoline,
jet fuel and diesel/#2 fuel from the Gulf Coast to the mid-Atlantic states.
These equity interest pipelines provide CITGO with access to substantial
refinery feedstocks and reliable transportation to refined product markets.
15
<PAGE> 17
For the year ended December 31, 1995, CITGO's equity interest pipeline
interests provided it with $29 million of dividends. The following table
identifies the pipelines in which CITGO held an ownership interest at December
31, 1995.
<TABLE>
<CAPTION>
CITGO
CITGO 1995
PIPELINE LOCATION SIZE OWNERSHIP DIVIDENDS
-------- -------- ----- --------- ---------
(MILES) (%) ($ IN MILLIONS)
<S> <C> <C> <C> <C>
Crude Oil Pipelines:
CITGO.................. Various locations in TX, LA and AR 959 100.0 $ --
West Texas-Gulf..... Colorado City, TX to Nederland, TX 579 11.4 0.9
Texas-New Mexico.... Aneth, UT to Houston, TX 3,803 10.0 0.9
Kaw................. Ray, KS to Chase, KS 1,396 33.3 0.1
Products Pipelines:
Colonial............... Houston, TX to Linden, NJ 5,317 13.98 $21.5
Explorer............... Lake Charles, LA to Hammond, IN 1,413 6.8 2.8
Eagle.................. Houston, TX to Drumright, OK 722 100.0 --
Casa................... Victoria, TX to Austin, TX 247 100.0 --
Badger................. E. Chicago, IN to Rockford, IL 334 32.0 1.2
Wolverine.............. Joliet, IL to Detroit, MI 618 9.5 1.0
West Shore............. Hammond, IN to Green Bay, WI 321 8.0 0.4
Lake Charles........... Lake Charles, LA 13 50.0 0.2
Lakemont............... Lake Charles, LA to 108 100.0 --
Mont Belvieu, TX
</TABLE>
These pipelines are all common carriers regulated by the Federal Energy
Regulatory Commission except for the Kaw crude oil pipeline, an intrastate
pipeline, regulated by a Kansas state agency. Historically, these pipelines have
paid out 100% of net earnings as dividends, with depreciation expense and
deferred taxes providing adequate cash flow to fund capital expenditures. CITGO,
along with other joint-interest owners (primarily major oil companies), has
obligations with respect to certain throughput and deficiency agreements in
connection with some of its joint-interest pipeline companies under the terms of
which the owners are obliged to transport sufficient product through the
pipeline in the event of a shortfall in transportation volumes. CITGO has
experienced no product shipment requirements under the throughput and deficiency
agreements, and does not anticipate any transportation volume shortfalls in the
foreseeable future.
COMPETITION
The U.S. petroleum refining and marketing industry is highly fragmented and
the Company's competitors include large integrated major oil companies as well
as independent refiners and marketers. No company accounts for more than 10% of
the total volume of gasoline sold in the U.S. Generally, U.S. refiners compete
for sales on the basis of price and brand image and recognition and, in some
product areas, product quality. Competitive factors also include: (i) the
relative balance between a refiner's crude supply sources, refining capacity,
and volumes of refined products needed to supply its marketing network, (ii)
market penetration, (iii) refining margin volatility, (iv) transportation
differentials, and (v) overall capital strength and financial flexibility.
EMPLOYEES
CITGO and its subsidiaries have a total of approximately 5,000 employees,
approximately 1,800 of whom are covered by 15 union contracts. Approximately
1,700 of the union employees are employed in refining operations. The remaining
union employees are located primarily at a lubricant blending and packaging
plant and at certain refined product terminals. The Company has recently
completed negotiations on labor contracts relating to a majority of its union
employees and the Company anticipates that contracts will be negotiated with
respect to the remainder of its union employees before the
16
<PAGE> 18
expiration of existing union contracts at the end of 1996. The Company has not
experienced any work stoppages or significant labor disputes and the Company
believes that its relationship with its employees is good.
ENVIRONMENT AND SAFETY
CITGO's operations are subject to extensive Federal, state and local
environmental laws and regulations governing air emissions, water discharges,
site remediation and the generation, handling and disposal of wastes. CITGO
believes that its operations are in substantial compliance with these laws and
regulations or are operating under consent decrees or similar arrangements with
governmental authorities to attain compliance. Past and present refining,
marketing and distribution activities have resulted in contamination at certain
CITGO properties which may, in some cases, have migrated to adjacent properties.
Upon the discovery of contamination at its refineries, terminals or other
properties, CITGO investigates and, where required, undertakes remedial measures
in accordance with applicable laws and regulations.
The Company is subject to environmental regulations adopted by the U.S.
Environmental Protection Agency ("EPA") and state environmental agencies to
implement the Clean Air Act Amendments of 1990 (the "CAA Amendments"). Among
other things, the CAA Amendments require all major sources of hazardous air
pollutants, as well as certain other sources of air pollutants, to obtain state
operating permits. The permits must contain applicable federal and state
emission limitations and standards as well as satisfy other statutory
requirements. The CAA Amendments also mandated numerous comprehensive
specifications for reformulated motor vehicle fuel, including reduced Reid vapor
pressure, lower benzene content and increased oxygenate content. In addition,
the CAA Amendments mandated significant reductions in the sulfur content of
diesel fuel. In particular, the CAA Amendments specified standards for the
"simple" model of reformulated gasoline to be used after January 1, 1995 in the
nine cities in the United States with the worst air quality and other cities
that voluntarily impose the stringent reformulated fuel specifications. CITGO
has incurred significant capital expenditures during the last several years in
order to satisfy these requirements of the CAA Amendments, and the Company
believes that it currently satisfies such requirements. The CAA Amendments also
provided that more stringent "complex" model requirements for reformulated fuels
are to be utilized in these cities beginning in May 1997, although these
"complex" model requirements have yet to be developed. The Company has budgeted
approximately $195 million for capital expenditures in the five-year period from
1996 to 2000 to modify refinery operations to satisfy the requirements of the
CAA Amendments relating to reformulated gasoline. These estimates may change due
to a variety of factors. See "Item 2. Financial Information -- Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
In 1992, CITGO reached an agreement with a state agency to cease usage of
certain surface impoundments at CITGO's Lake Charles, Louisiana refinery by
1994, which has been complied with by CITGO. A mutually acceptable closure plan
was filed with the state in 1993. The Company and a former owner agreed to share
closure costs. Final closure of these impoundments is expected to be completed
no earlier than 1998. Equipment to replace these impoundments required
approximately $146 million of capital expenditures.
CITGO has entered into administrative consent orders with the New Jersey
Department of Environmental Protection to investigate and remediate three New
Jersey properties.
While CITGO is named as a potentially responsible party ("PRP") at a number
of "Superfund" sites, pursuant to a 1992 agreement, a former owner of CITGO has
agreed to indemnify CITGO with respect to Superfund damages where offsite
hazardous waste disposal occurred prior to September 1, 1983. Based on publicly
available information, CITGO believes that such former owner has the financial
capability to fulfill all of its responsibilities under this agreement.
Accordingly, CITGO believes that its offsite liability exposure under the
Federal Superfund and similar state laws is immaterial. In addition, under the
1992 agreement, CITGO assumed any responsibility for certain other environmental
contamination at certain owned terminal properties in return for cash payments
and other agreements.
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During 1994 and 1995, CITGO received two notices of violations and two
compliance orders from the EPA relating to the operation of certain units at the
Paulsboro Refinery. CITGO has disputed the allegations contained therein, and is
currently in confidential settlement negotiations with the EPA to resolve such
allegations. The resolution of this matter is anticipated shortly and is
expected to include a Consent Decree which will contain the assessment of a
penalty and compliance measures requiring certain capital expenditures. CITGO
does not believe the ultimate resolution of these matters will have a material
adverse effect on CITGO's consolidated financial position or results of
operations.
On March 4, 1994, CITGO received a notice of violation from the EPA
alleging violations related to a crude oil discharge in November 1992 into
Claiborne Parish, Louisiana, and a crude oil discharge in March 1993 into Moody
Creek in Gregg County, Texas. CITGO has agreed to pay $62,100 to the EPA to
settle this matter.
Increasingly stringent regulatory provisions periodically require
additional capital expenditures. During 1995, CITGO expended approximately $34
million for environmental and regulatory capital improvements in its operations.
CITGO currently anticipates that it will spend approximately $330 million for
environmental and regulatory capital projects over the five-year period
1996-2000.
CITGO's accounting policy establishes environmental reserves as probable
site restoration and remediation obligations become reasonably capable of
estimation. At December 31, 1995 and 1994, CITGO had $60 million and $58 million
of environmental accruals included in other noncurrent liabilities. Based on
currently available information, including the continuing participation of
former owners in remediation actions, CITGO believes that these accruals are
sufficient to address its environmental clean-up obligations.
Conditions which require additional expenditures may exist for various
Company sites including, but not limited to, the Company's operating refinery
complexes, closed refinery sites, service stations and crude oil and petroleum
storage terminals. The amount of such future expenditures, if any, is
indeterminable.
CITGO is subject to stringent occupational health and safety laws and
regulations. CITGO maintains comprehensive safety, training and maintenance
programs, and management believes that CITGO is in substantial compliance with
occupational health and safety laws.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
The Notes are to be issued under an Indenture (the "Indenture") between the
Company and The First National Bank of Chicago, as Trustee (the "Trustee"). A
copy of the form of Indenture is an exhibit to this Registration Statement on
Form 10. The following summaries of certain provisions of the Indenture do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of the Indenture, including the definitions
therein of certain terms. Wherever particular provisions of the Indenture or
terms defined therein are referred to herein, such provisions or defined terms
are incorporated herein by reference, and the statements are qualified in their
entirety by such reference. Capitalized terms not otherwise defined herein shall
have the meanings given to them in the Indenture.
GENERAL
The Notes will be general unsecured senior obligations of the Company. The
Notes will rank pari passu in right of payment with all existing and future
senior unsecured indebtedness of the Company and senior in right of payment to
all existing and future indebtedness of the Company that is designated as
subordinate or junior in right of payment to the Notes. The Notes will be
effectively subordinated to all obligations (including trade payables) of the
Company's subsidiaries. At December 31, 1995, the Company's subsidiaries had
balance sheet liabilities of approximately $606 million. The subsidiaries also
have other liabilities (including contingent liabilities) which may be
substantial.
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Except as otherwise set forth below under "Book-Entry System", the Notes
will be represented by Global Securities deposited with a Depositary (as defined
below). Owners of beneficial interests will not be entitled to receive
certificated Notes and will not be considered the "holders" of the Notes for
purposes of the Indenture. See "-- Book-Entry System."
The Indenture does not contain covenants or other provisions designed to
afford Holders of Notes protection in the event of a highly leveraged
transaction, change in credit rating or other similar occurrence.
MATURITY AND PAYMENT DATES
The Notes will mature on May 15, 2006, and will be limited to an aggregate
principal amount of $200,000,000. The Notes will bear interest at 7 7/8% per
annum from May 15, 1996 (the "Issue Date"), or from the most recent interest
payment date to which interest has been paid, payable semi-annually on May 15
and November 15 of each year, beginning on November 15, 1996, to the person in
whose name the Note (or any predecessor Note) is registered at the close of
business on the preceding May 1 or November 1, as the case may be. Interest will
be computed on the basis of a 360-day year comprised of twelve 30-day months.
OPTIONAL REDEMPTION
The Notes are not redeemable at the option of the Company prior to their
maturity.
DENOMINATIONS, PAYMENTS OF PRINCIPAL AND INTEREST
The Notes will be issuable in denominations of $1,000 and integral
multiples thereof (Section 302 of the Indenture) and will be issued only in
fully registered form without coupons.
The principal of (and applicable premium, if any) and interest, if any, on
the Notes will be payable at the corporate trust office of the Trustee, provided
that, at the option of the Company, payment of interest may be made by check
mailed to the address of the person entitled thereto as it appears in the
Security Register or by wire transfer of funds to such Person at an account
maintained within the United States (Sections 301, 305, 306, 307 and 1002 of the
Indenture).
BOOK-ENTRY SYSTEM
The Depository Trust Company, New York, New York, will act as securities
depositary (the "Depositary") for the Notes. The Notes will be represented by
one or more global securities (collectively, the "Global Securities") registered
in the name of Cede & Co., the Depositary's nominee. Accordingly, beneficial
interests in the Notes will be shown on, and transfers thereof will be effected
only through, records maintained by the Depositary and its participants. Except
as described below, owners of beneficial interests in the Global Securities will
not be entitled to receive Notes in definitive form and will not be considered
holders of Notes.
Upon the issuance of a Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Notes represented by such Global Security to the accounts of institutions
that have accounts with the Depositary or its nominee ("participants"). The
accounts to be credited will be designated by the underwriters, dealers or
agents. Ownership of beneficial interests in a Global Security will be limited
to participants or persons that may hold interests through participants.
Ownership of interests in such Global Security will be shown on, and the
transfer of those ownership interests will be effected only through, records
maintained by the Depositary (with respect to participants' interests) and such
participants (with respect to the owners of beneficial interests in such Global
Security). The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and laws may impair the ability to transfer beneficial interests in a
Global Security.
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So long as the Depositary, or its nominee, is the registered holder and
owner of such Global Security, the Depositary or such nominee, as the case may
be, will be considered the sole owner and holder of the related Notes for all
purposes of such Notes and for all purposes under the Indenture. Except as set
forth below, owners of beneficial interests in a Global Security will not be
entitled to have the Notes represented by such Global Security registered in
their names, will not receive or be entitled to receive physical delivery of
Notes in definitive form and will not be considered to be the owners or Holders
of any Notes under the Indenture or such Global Security.
Accordingly, each person owning a beneficial interest in a Global Security
must rely on the procedures of the Depositary and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a holder of Notes under the Indenture or
such Global Security. The Indenture permits the Depositary to authorize
participants, as its agents, to take any action which the Depositary, as the
holder of a Global Security, is entitled to take under the Indenture or such
Global Security. The Company understands that under existing industry practice,
in the event the Company requests any action of Holders of Notes or an owner of
a beneficial interest in a Global Security desires to take any action that the
Depositary, as the holder of such Global Security is entitled to take, the
Depositary would authorize the participants to take such action, and that the
participants would authorize beneficial owners owning through such participants
to take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
Payment of principal of and premium, if any, and interest, if any, on Notes
represented by a Global Security will be made to the Depositary or its nominee,
as the case may be, as the registered owner and holder of such Global Security.
Upon receipt of any payment of principal, premium, if any, or interest, if
any, in respect of a Global Security, the Depositary will credit immediately
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Security
as shown on the records of the Depositary. Payments by participants to owners of
beneficial interests in a Global Security held through such participants will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such participants. The Company
will not have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests in a
Global Security for any Notes or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests or for any other aspect
of the relationship between the Depositary and its participants or the
relationship between such participants and the owners of beneficial interests in
such Global Security owning through such participants.
Unless and until it is exchanged in whole or in part for Notes in
definitive form, a Global Security may not be transferred except as a whole by
the Depositary to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary.
Securities represented by a Global Security are exchangeable for Notes in
definitive form of like tenor as such Global Security in denominations of $1,000
and in any greater amount that is an integral multiple thereof if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for such Global Security or if at any time the Depositary ceases to
be a clearing agency registered under the Securities Exchange Act of 1934, as
amended, (ii) the Company in its discretion at any time determines not to have
all of the Notes represented by a Global Security and notifies the Trustee
thereof, or (iii) an Event of Default has occurred and is continuing with
respect to the Notes. Any Note that is exchangeable pursuant to the preceding
sentence is exchangeable for Notes issuable in authorized denominations and
registered in such names as the Depositary shall direct. Subject to the
foregoing, a Global Security is not exchangeable, except for a Global Security
or Global Securities of the same aggregate denominations to be registered in the
name of the Depositary or its nominee.
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The following summary is based on information furnished by the Depositary:
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the United States Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
United States Securities Exchange Act of 1934, as amended. The Depositary holds
securities that its participants ("Direct Participants") deposit with the
Depositary. The Depositary also facilitates the settlement among Direct
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Direct Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers (including the Underwriters), banks, trust companies,
clearing corporations and certain other organizations. The Depositary is owned
by a number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the Depositary's system is also available to others such
as securities brokers and dealers, banks and trust companies that clear through
or maintain a custodial relationship with a Direct Participant, either directly
or indirectly ("Indirect Participants"). The rules applicable to the Depositary
and its Direct and Indirect Participants are on file with the United States
Securities and Exchange Commission.
Purchases of Notes under the Depositary's system must be made by or through
Direct Participants, which will receive a credit for such Notes on the
Depositary's records. The ownership interest of each actual purchaser of each
Note represented by the Global Security ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from the Depositary of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which such Beneficial Owner
entered into the transaction. Transfers of ownership interests in the Global
Securities are to be accomplished by entries made on the books of Direct or
Indirect Participants acting on behalf of Beneficial Owners. The Depositary has
no knowledge of the actual Beneficial Owners of the Global Securities; the
Depositary's records reflect only the identity of the Direct Participants to
whose accounts such Notes are credited, which may or may not be the Beneficial
Owners. The Direct and Indirect Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect to
the Global Security. Under its usual procedures, the Depositary mails an omnibus
proxy (an "Omnibus Proxy") to the Company as soon as possible after the
applicable record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the Notes are
credited on the applicable record date (identified in a listing attached to the
Omnibus Proxy).
Principal and interest payments on the Global Security representing the
Notes will be made in immediately available funds to the Depositary. The
Depositary's practice is to credit Direct Participants' accounts on the
applicable payment date in accordance with their respective holdings shown on
the Depositary's records unless the Depositary has reason to believe that it
will not receive payment on such date. Payments by Direct or Indirect
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name", and will be the
responsibility of such Participant and not of the Depositary, the Trustee or the
Company, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of principal, premium, if any, and interest to the
Depositary is the responsibility of the Company or the Trustee, disbursement of
such payments to Direct Participants shall
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be the responsibility of the Depositary, and disbursement of such payments to
the Beneficial Owners shall be the responsibility of Direct and Indirect
Participants. Neither the Company nor the Trustee will have any responsibility
or liability for the disbursement of payments in respect of ownership interests
in the Notes by the Depositary or the Direct or Indirect Participants or for
maintaining or reviewing any records of the Depositary or the Direct or Indirect
Participants relating to ownership interests in the Notes or the disbursement of
payments in respect thereof.
The Depositary may discontinue providing its services as securities
depositary with respect to the Notes at any time by giving reasonable notice to
the Company or the Trustee. Under such circumstances, and in the event that a
successor securities depositary is not obtained, Notes in definitive form are
required to be printed and delivered to each holder.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depositary). In that
event, Notes in definitive form will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company believes to
be reliable, but the Company takes no responsibility for the accuracy thereof
and such information is subject to any changes to the arrangements between the
Company and the Depositary and any changes to such procedures that may be
instituted unilaterally by the Depositary.
SAME-DAY SETTLEMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. So long as the Depositary continues to make its Same-Day Funds
Settlement System available to the Company, all payments of principal and
interest on the Notes will be made by the Company in immediately available
funds.
Secondary trading in long term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the Notes
will trade in the Depositary's Same-Day Funds Settlement System until maturity,
and secondary market trading activity in the Notes will therefore be required by
the Depositary to settle in immediately available funds. No assurance can be
given as to the effect, if any, of settlement in immediately available funds on
trading activity in the Notes.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Restricted Payments. The Company will not (and will not
permit any Restricted Subsidiary to), directly or indirectly, make any
Restricted Payment, unless:
(a) after giving effect thereto, the aggregate amount of all
Restricted Payments during the period commencing on April 1, 1996, and
ending on the date of the payment of such Restricted Payment (the
"Computation Period") shall not exceed an amount equal to the sum of:
(1) $450,000,000, plus
(2) 100% of the aggregate amount received by the Company as (i) the
net cash proceeds or (ii) the Fair Market Value of Marketable Assets
from the sale (other than to a Subsidiary of the Company) of shares of
Capital Stock of the Company or otherwise received as a capital
contribution during the Computation Period, minus
(3) 100% of the aggregate amount of all PDVSA Investments made
during the Computation Period, plus
(4) 100% of the aggregate amount received during the Computation
Period by the Company and its Restricted Subsidiaries (except, in the
case of any such amount received and held by a Restricted Subsidiary, to
the extent that such Restricted Subsidiary is prohibited,
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whether by contract, applicable law or otherwise, from paying such
amount as dividends to the Company or any other Restricted Subsidiary)
(i) as earnings (whether in the form of dividends or otherwise) on PDVSA
Investments and (ii) as net cash proceeds in connection with the sale,
redemption or other disposition of one or more PDVSA Investments or any
part thereof or any interest therein, plus
(5) 75% (or minus 100% if negative) of the aggregate Consolidated
Net Income for the period commencing on April 1, 1996, and ending on and
including the last day of the fiscal quarter ended immediately prior to
the date of payment of such Restricted Payment, plus
(6) 100% of the aggregate principal amount of any Senior
Indebtedness of the Company converted into or exchanged for Capital
Stock of the Company during the Computation Period;
(b) immediately after giving effect to such Restricted Payment, no
Default or Event of Default shall have occurred and be continuing; and
(c) immediately after giving effect to any such Restricted Payment,
Consolidated Net Worth shall be at least equal to the sum of:
(1) $1,400,000,000, plus
(2) an amount equal to $10,000,000 multiplied by the number of
completed fiscal quarters of the Company since April 1, 1996.
Notwithstanding the foregoing, the foregoing provisions do not prohibit the
payment of any dividend or making of any distribution within 90 days after the
date of its declaration if the dividend or distribution would have been
permitted on the date of declaration; provided, however, that such dividend
shall be deemed to have been made as of its date of declaration for purposes of
this covenant.
Specified Agreements. The Company will not, and will not permit any of its
Restricted Subsidiaries to, amend, modify or waive:
(a) any Pricing Term of any Specified Agreement, unless the Trustee
shall have first received (i) a certified resolution of the Board of
Directors of the Company to the effect that such amendment, modification or
waiver would not have a Materially Adverse Effect and (ii) the written
opinion of a nationally recognized firm of investment bankers that such
amendment, modification or waiver is fair, from a financial point of view,
to the Company and its Restricted Subsidiaries;
(b) any Material Non-Pricing Term of any Specified Agreement; or
(c) any provision of the CITGO Supplemental Supply Agreement (unless
an amendment thereto shall be required to conform the CITGO Supplemental
Supply Agreement to the CITGO Supply Agreement following an amendment of
the CITGO Supply Agreement effected in compliance with the provisions of
this covenant or otherwise not in violation of the Indenture).
Transactions with Affiliates. The Company will not, and will not permit any
of its Restricted Subsidiaries to, engage in any transaction with an Affiliate
of the Company (other than the Company or a Restricted Subsidiary of the
Company) on terms less favorable to the Company or such Restricted Subsidiary
(as the case may be) than would have been obtainable in arms' length dealing
with a Person other than an Affiliate; provided that nothing in this covenant
shall prohibit any transaction where the amount involved is less than
$1,000,000; provided further that the aggregate amount involved in all
transactions consummated in reliance on the preceding proviso in any
twelve-month period shall not exceed $10,000,000. In determining whether, for
purposes of this covenant, any transaction between or among parties is arms'
length, all other contemporaneous transactions between or among such parties
shall be taken into account so that such transaction and such other transactions
shall be considered as a single transaction.
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The limitations of the preceding paragraph do not apply to transactions
with Affiliates contemplated by agreements in effect on the date of the
Indenture in accordance with the terms of such agreements as in effect on the
date of the Indenture or any renewals or extensions thereof on substantially the
same terms (and, with respect to Specified Agreements, as amended in compliance
with the "Specified Agreements" covenant or otherwise not in violation of the
Indenture).
Limitation on Liens. The Indenture provides that the Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
Incur any Lien on or with respect to any Significant Property of the Company or
such Restricted Subsidiary, or any interest therein or any income or profits
therefrom, unless the Notes are secured equally and ratably with (or prior to)
any and all other Indebtedness secured by such Lien, except for: (a) Liens
existing on the Issue Date; (b) Liens on Property existing at the time of
acquisition thereof or Liens affecting Property of a Person existing at the time
it becomes a Subsidiary of the Company or at the time it is merged into or
consolidated with the Company or a Subsidiary of the Company; provided that, in
either case, such Liens do not extend to or cover any Property of the Company or
of any of its Restricted Subsidiaries other than the Property that secured the
Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of the Company or a Subsidiary; (c) Liens on Property Incurred to
secure payment of all or a part of the purchase price thereof or to secure
Indebtedness Incurred prior to, at the time of, or within 12 months after the
acquisition thereof for the purpose of financing all or part of the purchase
price thereof; (d) Liens on any Property to secure all or part of the cost of
improvements or construction thereon or Indebtedness Incurred to provide funds
for such purpose in a principal amount not exceeding the cost of such
improvements or construction and Incurred within 12 months after completion of
such improvements or construction; (e) Liens to government entities granted to
secure pollution control or industrial revenue bond financings; (f) Liens which
secure Indebtedness owing by a Restricted Subsidiary of the Company to the
Company, by the Company to a Restricted Subsidiary or by one Restricted
Subsidiary to another Restricted Subsidiary; (g) Liens imposed by law, including
mechanics', materialmens', carriers' or other like Liens, arising in the
ordinary course of business; (h) any Lien Incurred to secure the performance of
surety or appeal bonds Incurred in the ordinary course of business consistent
with past practice; (i) any Lien incidental to the normal conduct of the
business of the Company or any Restricted Subsidiary or the ownership of its
property or the conduct of the ordinary course of its business (including,
without limitation, (A) zoning restrictions, easements, rights of way, licenses,
covenants, reservations, restrictions on the use of real property and other
minor irregularities of title, (B) rights of lessees under leases, (C) rights of
collecting banks having rights of setoff, revocation, refund or chargeback with
respect to money or instruments of the Company or any Restricted Subsidiary on
deposit with or in the possession of such banks, (D) Liens to secure the
performance of statutory obligations, tenders, bids, leases, progress payments,
performance or return-of-money bonds, performance or other similar bonds or
other obligations of a similar nature incurred in the ordinary course of
business, (E) Liens required by any contract or statute in order to permit the
Company or a Subsidiary of the Company to perform any contract or subcontract
made by it with or pursuant to the requirements of a governmental entity and (F)
"first purchaser" Liens on crude oil), in each case which are not Incurred in
connection with the borrowing of money, the obtaining of advances or credit or
the payment of the deferred purchase price of Property and which do not in the
aggregate impair the use of Property in the operation of the business of the
Company and its Restricted Subsidiaries taken as a whole; (j) Liens for taxes
not yet due or which are being contested in good faith by appropriate
proceedings, so long as reserves have been established to the extent required by
GAAP; (k) Liens securing obligations in respect of Interest Rate Protection
Agreements or Exchange Rate Contracts; (l) Liens on the assets of the Company or
any Restricted Subsidiary created or existing to secure stay or appeal bonds or
otherwise resulting from any litigation or legal proceeding which are currently
being contested in good faith by appropriate action promptly initiated and
diligently conducted, including the Lien of any judgment, provided that the
aggregate amount secured by all such Liens does not exceed $25 million; and (m)
any extension, renewal, replacement or refinancing of any Lien referred to in
the foregoing clauses (a) through (e); provided, however, that (X) such new Lien
shall be limited to all or part of the same property that secured the original
Lien (plus improvements on such property) and (Y) the
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Indebtedness secured by such Lien at such time is not increased to any amount
greater than the sum of (A) the outstanding principal amount or, if greater,
committed amount of the Indebtedness described under clauses (a) through (e) at
the time the original Lien became a Lien permitted under this "Limitation on
Liens" covenant and (B) an amount necessary to pay any fees and expenses,
including premiums, related to such refinancing, refunding, extension, renewal
or replacement. Notwithstanding the foregoing, the Company and any one or more
of its Restricted Subsidiaries may, without securing the Notes, Incur Liens
which would otherwise be subject to the foregoing restrictions securing (x)
Current Indebtedness and (y) Funded Indebtedness in an aggregate principal
amount which, together with all other such Funded Indebtedness of the Company
and its Restricted Subsidiaries which would otherwise be subject to the
foregoing restrictions (not including Indebtedness permitted to be secured under
clauses (f) through (k), inclusive, above) and the aggregate Attributable
Indebtedness of Sale and Leaseback Transactions does not at the time such Lien
is Incurred exceed 15% of Consolidated Net Tangible Assets of the Company and
its consolidated Restricted Subsidiaries.
Limitation on Sale and Leaseback Transactions. The Indenture provides that
the Company will not, and will not cause or permit any Restricted Subsidiary to,
enter into, assume, Guarantee or otherwise become liable with respect to any
Sale and Leaseback Transaction, unless (a) the obligation of the Company or such
Restricted Subsidiary with respect thereto would be permitted under the
"Limitation on Liens" covenant; (b) after the Issue Date and within a period
commencing six months prior to the effective date of such Sale and Leaseback
Transaction (or, if later, commencing on the Issue Date) and ending six months
after such effective date, the Company or any Restricted Subsidiary shall have
expended (or entered into a binding commitment to expend) for any Property
(including amounts expended or committed for the acquisition of such Property,
and for additions, alterations, improvements and repairs thereto; provided that
such expenditures constitute additions to property, plant and equipment under
GAAP; and provided further that any expenditure which shall have been financed
by Indebtedness secured by a Lien permitted under clause (c) or (d) of the
"Limitation on Liens" covenant shall be disregarded for purposes of determining
whether the Company or such Restricted Subsidiary shall have satisfied the
requirements of this clause (b)) an amount equal to all or a portion of the net
proceeds received from such transaction (but excluding any portion of such
proceeds which are applied as set forth in (c) below); or (c) the Company,
within six months after the effective date of any such Sale and Leaseback
Transaction, applies to the defeasance or retirement of the Notes or other
Senior Indebtedness an amount equal to the net proceeds of the sale or transfer
of the Property leased in such transaction (with any such amount required to be
applied under this clause (c) to be reduced to reflect any amount utilized by
the Company or a Restricted Subsidiary as set forth in (b) above).
Restricted and Unrestricted Subsidiaries. Subject to the following
paragraph, the Company may designate a Subsidiary (including a newly formed or
newly acquired Subsidiary) of itself or of any of its Restricted Subsidiaries as
an Unrestricted Subsidiary if (i) such Subsidiary does not have any obligations
which, if in default, would result in a cross default on Indebtedness of the
Company and (ii) either (a) such Subsidiary has total assets of $1,000 or less,
or (b) such designation is effective immediately upon such Person becoming a
Subsidiary of the Company or any of its Restricted Subsidiaries. Unless so
designated an Unrestricted Subsidiary, any Person that becomes a wholly-owned
Subsidiary of the Company or its Restricted Subsidiaries shall be classified as
a Restricted Subsidiary thereof. Except as provided in the first sentence of
this paragraph, no Restricted Subsidiary may be redesignated as an Unrestricted
Subsidiary. Subject to the following paragraph, an Unrestricted Subsidiary may
be redesignated as a Restricted Subsidiary. No Restricted Subsidiary may be a
Subsidiary of an Unrestricted Subsidiary. The designation of an Unrestricted
Subsidiary or the removal of such designation in compliance with the following
paragraph shall be made by the delivery to the Trustee of a certificate of
designation executed by the President, the Chief Executive Officer, the Chief
Operating Officer, the Chief Financial Officer, any Executive Vice President,
any Senior Vice President or the Treasurer of the Company.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, take any action or enter into any transaction or series of
transactions that would result in a Person becoming a Restricted
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Subsidiary (whether through an acquisition, the redesignation of an Unrestricted
Subsidiary or otherwise) unless after giving effect to such action, transaction
or series of transactions, on a pro forma basis, (i) no Default or Event of
Default would occur or be continuing, and (ii) there exist no Liens with respect
to the Property of such Person other than Liens permitted under the "Limitation
on Liens" covenant.
Reports to Holders. Whether or not the Company is then required to do so
under the Exchange Act, the Company will file with the Securities and Exchange
Commission (the "Commission") the documents, reports and other information
required by the Exchange Act to be filed by domestic issuers of debt securities
registered under the Exchange Act and, upon such filing, will promptly furnish
such reports, documents and information to the Trustee and, within 15 days after
such filing with the Commission, the Holders of the Notes.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company shall not, and shall not permit any Restricted Subsidiary to,
consolidate or merge with or into any other Person, or convey, transfer or lease
all or substantially all its assets to any Person, unless: (1) either (a) the
Company shall be the continuing Person in the case of a merger or consolidation
or (b) the resulting, surviving or transferee Person if other than the Company
(the "Successor Company") shall be a solvent corporation, limited partnership or
limited liability company organized and validly existing under the laws of the
United States of America, any State thereof or the District of Columbia, and the
Successor Company shall expressly assume, by a supplement to the Indenture,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Notes and the Indenture; (2)
immediately before and after giving effect to such transaction on a pro forma
basis (and treating any Indebtedness which becomes an obligation of the
Successor Company or any Restricted Subsidiary as a result of such transaction
as having been Incurred by the Successor Company or such Restricted Subsidiary
at the time of such transaction), no Default or Event of Default shall have
occurred and be continuing; and (3) the Company shall have delivered to the
Trustee an Officer's Certificate and an Opinion of Counsel, each stating that
such transaction and such supplemental indenture (if any) comply with the
Indenture.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of the Company under the Indenture, and the
predecessor Company (except in the case of a lease and except in the case of any
conveyance or transfer of assets in which the transferee does not acquire the
assets of the Company as an entirety or virtually as an entirety) will be
released from its obligations in respect of the Notes.
MODIFICATION OF THE INDENTURE; WAIVER OF COVENANTS
Subject to certain exceptions, the provisions of the Indenture applicable
to the Notes may be amended or supplemented with the written consent of the
Holders of at least a majority in principal amount of the Notes then outstanding
and compliance with any provisions may be waived with the consent of the Holders
of at least a majority in principal amount of the Notes then outstanding.
However, without the consent of each Holder of each Note so affected, no
amendment or waiver may, among other things, (i) reduce the amount of Notes
whose Holders must consent to an amendment, (ii) reduce the rate of or extend
the time for payment of interest on any Notes, (iii) reduce the principal of or
extend the Stated Maturity of any Notes, (iv) reduce the premium payable upon
the redemption of any Note or change the time or times at which any Notes may be
redeemed, (v) make any Note payable in money other than that stated in the Note,
or (vi) impair the right of any Holder to institute suit for the enforcement of
any payment on or with respect to any Notes.
Without the consent of any Holder of the Notes, the Company and the Trustee
may, among other things, amend or supplement the Indenture to cure any
ambiguity, omission, defect or inconsistency provided that such change does not
adversely affect the rights of any Holder, to provide for the assumption by a
Successor Company of the obligations of the Company under the Indenture, to add
Guarantees with respect to the Notes or to secure the Notes, to add to the
covenants of the Company for
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the benefit of the Holders or to surrender any right or power conferred upon the
Company, to make any change that does not adversely affect the rights of any
Holder or to comply with any requirement of the Securities and Exchange
Commission in connection with the qualification of the Indenture under the Trust
Indenture Act of 1939.
EVENTS OF DEFAULT
An "Event of Default" will occur under the Notes if:
(i) the Company defaults in the payment of interest on any Note when
it becomes due and payable and such default continues for a period of 30
days; or
(ii) the Company defaults in the payment of the principal of or
premium, if any, on any Note when the same becomes due and payable at
maturity, upon acceleration, required repurchase or otherwise; or
(iii) the Company fails to comply with any of its agreements or
covenants in, or provisions of, the Notes or the Indenture (other than
clause (i) or (ii) above) and the default continues for the period and
after the notice specified below; or
(iv) any Indebtedness of the Company or any Restricted Subsidiary
having an outstanding principal amount of $25 million or more in the
aggregate, whether such Indebtedness now exists or shall hereafter be
created, is (A) declared to be due and payable prior to its Stated Maturity
or (B) not paid when due by the Company or any Restricted Subsidiary (after
giving effect to any extension of such due date by the holder of such
Indebtedness and after the expiration of any grace period in respect of
such due date contained in the instrument under which such Indebtedness is
outstanding), or any combination of (A) and (B); or
(v) one or more judgments or orders for the payment of money are
entered by a court of competent jurisdiction against the Company or any
Restricted Subsidiary in an aggregate amount in excess of $50 million and
such judgments or orders are not discharged, waived, stayed or satisfied
for a period of 60 consecutive days after judgment is entered; or
(vi) certain events involving bankruptcy, insolvency or reorganization
of the Company or any Restricted Subsidiary occur.
A default under clause (iii) above is not an Event of Default with respect
to the Notes until the Trustee notifies the Company in writing, or the Holders
of at least 25% in principal amount of the Notes then Outstanding notify the
Company and the Trustee, in writing, of the default, and the Company does not
cure the default within 60 days after receipt of the notice. The notice must
specify the default, demand that it be remedied and state that the notice is a
"Notice of Default". Such notice to the Company shall be given by the Trustee if
so requested in writing by the Holders of at least 25% of the principal amount
of the Notes then Outstanding.
If an Event of Default with respect to Notes (other than an Event of
Default specified in clause (vi)) occurs and is continuing, the Trustee, by
written notice to the Company, or the Holders of at least 25% in principal
amount of the Notes by written notice to the Company and the Trustee, may
declare the principal of all Notes to be due and payable immediately. Upon such
declaration, such principal will be due and payable immediately. If an Event of
Default specified in clause (vi) occurs, the principal of all Notes will become
and be immediately due and payable without any declaration or other act on the
part of the Trustee or any Holders. The Holders of a majority in principal
amount of the Notes by written notice to the Company and the Trustee may rescind
an acceleration and its consequences if the rescission is made before any
judgment or decree for payment of the money due has been obtained by the Trustee
and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
acceleration and the Company has paid or deposited with the Trustee a
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<PAGE> 29
sum sufficient to pay in the currency or currency unit or composite currency in
which the Notes are payable (except as otherwise specified):
(A) all overdue installments of interest on and any Additional Amounts
payable in respect of all Outstanding Notes and any related coupons,
(B) the principal of (and premium, if any, on) any Outstanding Notes which
have become due otherwise than by such declaration of acceleration and
interest thereon at the rate or rates borne by or provided for in the
Notes,
(C) to the extent that payment of such interest is lawful, interest upon
overdue installments of interest and any Additional Amounts at the rate
or rates borne by or provided for in the Notes, and
(D) all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel.
No such rescission will affect any subsequent default or impair any right
consequent thereto.
The Holders of a majority in principal amount of the Outstanding Notes by
notice to the Trustee may on behalf of all Holders of Notes and any related
coupons waive an existing or past default and its consequences except (i) a
default in the payment of the principal of or interest on or Additional Amounts
payable in respect of any Note or any related coupons or (ii) a default in
respect of a provision that cannot be amended without the consent of each Holder
of each Outstanding Note. When a default is waived such default shall cease to
exist and any Event of Default arising therefrom shall be deemed to have been
cured, but no such waiver will extend to any subsequent or other default or
Event of Default or impair any consequent right thereon.
The Holders of a majority in principal amount of the Outstanding Notes may
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to the Notes. However, such direction may not be in
conflict with any rule of law or with the Indenture and the Trustee may refuse
to follow any direction that the Trustee determines is unduly prejudicial to the
rights of other Holders of each Outstanding Note or would involve the Trustee in
personal liability; provided, however, that the Trustee may take any other
action deemed proper by the Trustee that is not inconsistent with such
direction.
A Holder of Notes or any related coupons may not pursue any remedy with
respect to the Indenture or any Notes unless: (i) such Holder has previously
given to the Trustee written notice stating that an Event of Default with
respect to the Notes is continuing; (ii) Holders of at least 25% in principal
amount of the Outstanding Notes shall have made a written request to the Trustee
to pursue the remedy; (iii) such Holder or Holders offer to the Trustee
reasonable security or indemnity against any loss, liability or expense to be
incurred in compliance with such request; (iv) the Trustee does not comply with
the request within 60 days after receipt of the request and the offer of
security or indemnity; and (v) the Holders of a majority in principal amount of
the Notes do not give the Trustee a written direction inconsistent with the
request during such 60-day period; it being understood and intended that no one
or more of such Holders shall have any right in any manner whatever by virtue
of, or by availing of, any provision of the Indenture to affect, disturb or
prejudice the rights of any other of such Holders, or to obtain or to seek to
obtain priority or preference over any other of such Holders or to enforce any
right under the Indenture, except in the manner provided in the Indenture and
for the equal and ratable benefit of all such Holders.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other capitalized terms used herein for which no
definition is provided.
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"Acquired Indebtedness" of any Person means Indebtedness of another Person
and any of its Subsidiaries existing at the time such other Person becomes a
Subsidiary (or a Restricted Subsidiary, in the case of the Company) of the
referent Person or at the time it merges or consolidates with the referent
Person or any of the referent Person's Subsidiaries (or Restricted Subsidiaries,
in the case of the Company) or assumed by the referent Person or any Subsidiary
(or any Restricted Subsidiary, in the case of the Company) of the referent
Person in connection with the acquisition of assets from such other Person.
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, controls, is under common control with, or is controlled by, such
Person. As used in this definition, "control" (and, with correlative meanings,
"controlled by" and "under common control with") shall mean possession, directly
or indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise), provided that (a) each
Unrestricted Subsidiary shall be deemed to be an Affiliate of the Company and of
each Restricted Subsidiary of the Company, (b) no individual shall be deemed to
be an Affiliate of a Person solely by reason of his or her being an officer or
director (or equivalent) of such Person and (c) none of the Company or any of
its Restricted Subsidiaries shall be deemed to be Affiliates of each other.
"Attributable Indebtedness" means, in respect of a Sale and Leaseback
Transaction at the time of determination thereof, the capitalized amount in
respect of such transaction that would appear on the face of a balance sheet of
the lessee thereunder in accordance with GAAP.
"Bankruptcy Law" means Title 11, United States Code, or any similar Federal
or state law for the relief of debtors.
"Board of Directors" means either the board of directors of the Company or
any duly authorized committee thereof.
"Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other arrangement conveying the
right to use) real or personal property of such Person which is required to be
classified and accounted for as a capital lease or a liability on the face of a
balance sheet of such Person in accordance with GAAP. For purposes of the
"Limitation on Liens" covenant, a Capital Lease Obligation shall be deemed to be
secured by a Lien on the property being leased.
"Capital Stock" in any Person means any and all shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person and any rights (other than debt securities convertible into an
equity interest), warrants or options to subscribe for or to acquire an equity
interest in such Person; provided, however, that "Capital Stock" shall not
include Redeemable Stock.
"Cit-Con" means Cit-Con Oil Corporation, a Delaware corporation.
"CITGO Supplemental Supply Agreement" means that certain Supplemental Crude
Supply Agreement, dated as of September 30, 1986, by and between the Company and
PDVSA, and as amended, supplemented, restated or otherwise modified from time to
time in compliance with the provisions of the "Specified Agreements" covenant or
otherwise not in violation of the Indenture.
"CITGO Supply Agreement" means that certain Crude Supply Agreement dated as
of September 30, 1986, by and between the Company and PDVSA, and as amended,
supplemented, restated or otherwise modified from time to time in compliance
with the provisions of the "Specified Agreements" covenant or otherwise not in
violation of the Indenture, which Agreement has been heretofore assigned by the
Company to CIVESCO, and by PDVSA to Commercit, S.A., a Venezuelan corporation
and a Subsidiary of PDVSA, and by Commercit, S.A. partially to PMI.
"CIVESCO" means CITGO Venezuela Supply Company, a Delaware corporation and
a Restricted Subsidiary of the Company.
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"Common Stock" of any Person means any and all shares, interests or other
participations or other equivalents in the equity interest (however designated
and whether voting or non-voting) of such Person, which have no preference as to
dividends or liquidation over any other equity interest, whether outstanding on
the Issue Date or issued after the Issue Date, and includes, without limitation,
all series and classes of such common stock.
"Consolidated Net Income" means, for any period, the net income of the
Company and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP (as in effect and applied by the
Company on the Issue Date), after eliminating (without duplication) all (a)
gains (net of expenses and taxes applicable thereto) or losses arising from the
sale or other disposition of assets other than current assets, (b) gains arising
from any write-up of assets (other than write-ups of inventories as a result of
the lower of cost or market adjustments), (c) gains arising from the acquisition
by any such Person of its outstanding Indebtedness, (d) that portion (if any) of
the net income of any Restricted Subsidiary which such Restricted Subsidiary is
prohibited (whether by contract, applicable law or otherwise) from paying as
dividends to the Company or any other Restricted Subsidiary, (e) amounts
representing the equity of the Company or any Restricted Subsidiary in the
undistributed earnings of any other Person (other than a Restricted Subsidiary),
(f) in the case of a successor to the Company by consolidation or merger or a
transferee of its assets after the Issue Date, any earnings of the successor or
transferee corporation prior to the consolidation, merger or transfer of assets,
(g) any earnings of any Restricted Subsidiary prior to becoming a Restricted
Subsidiary, (h) any deferred credit (or amortization of a deferred credit)
arising from the acquisition after the date hereof of any Restricted Subsidiary
representing the excess of equity in such Restricted Subsidiary at the date of
acquisition thereof over the cost of investment in such Restricted Subsidiary,
(i) any reversal of any contingency reserve, except to the extent that provision
for such contingency reserve shall have been made from income arising after the
Issue Date and (j) the aggregate amount received during such period by the
Company and all Restricted Subsidiaries as earnings (whether in the form of
dividends or otherwise) on PDVSA Investments or as net cash proceeds in
connection with the sale, redemption or other disposition of one or more PDVSA
Investments or any part thereto or interest therein.
"Consolidated Net Tangible Assets" means, as of any date of determination,
the sum of the amounts that would appear on a consolidated balance sheet of the
Company and its Restricted Subsidiaries for the total assets (less accumulated
depletion, depreciation or amortization, allowances for doubtful receivables,
other applicable reserves and other properly deductible items) of the Company
and its Restricted Subsidiaries, determined on a consolidated basis in
accordance with GAAP, after giving effect to purchase accounting and after
deducting therefrom, to the extent included in total assets, in each case as
determined on a consolidated basis in accordance with GAAP (without
duplication): (a) the aggregate amount of liabilities of the Company and its
Restricted Subsidiaries which may properly be classified as current liabilities
(including taxes accrued as estimated); (b) current Indebtedness and current
maturities of long-term Indebtedness; (c) minority interests in the Company's
Restricted Subsidiaries held by Persons other than the Company or a wholly owned
Restricted Subsidiary of the Company; and (d) unamortized debt discount and
expenses and other unamortized deferred charges, goodwill, patents, trademarks,
service marks, trade names, copyrights, licenses, organization or developmental
expenses and other intangible items.
"Consolidated Net Worth" means, at any date, all assets of the Company and
its Restricted Subsidiaries at such date determined on a consolidated basis in
accordance with GAAP minus all liabilities of the Company and its Restricted
Subsidiaries (including minority interests in consolidated Subsidiaries of the
Company) at such date determined on a consolidated basis in accordance with
GAAP.
"CRCCLP" means CITGO Refining and Chemicals Company L.P., a Delaware
limited partnership and successor by merger to CRCI, and a Restricted
Subsidiary.
"CRCCLP Supply Agreement" means that certain Crude Oil and Feedstock Supply
Agreement dated as of March 31, 1987, originally by and between CRCI and PDVSA,
and currently between CRCCLP and
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PDVSA, and as amended, supplemented, restated or otherwise modified from time to
time in compliance with the provisions of the "Specified Agreements" covenant or
otherwise not in violation of the Indenture.
"CRCI" means CITGO Refining and Chemicals, Inc., a Delaware corporation
formerly known as Champlin Refining & Chemicals, Inc., and a Restricted
Subsidiary.
"Current Indebtedness" means any Indebtedness for borrowed money which is
not Funded Indebtedness.
"Custodian" will mean any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.
"Default" will mean any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Exchange Rate Contract" means, with respect to any Person, any currency
swap agreements, forward exchange rate agreements, foreign currency futures or
options, exchange rate collar agreements, exchange rate insurance and other
agreements or arrangements, or combination thereof, designed to provide
protection against fluctuations in currency exchange rates.
"Fair Market Value" means, with respect to any assets to be transferred or
any noncash consideration or Property received by any Person, the fair market
value of such consideration or Property (a) in the case of a contribution to
capital in the form of Marketable Assets, as determined by the applicable
readily ascertainable market price and (b) in all other cases, as determined in
good faith by the Board of Directors of the Company, as evidenced by a certified
resolution delivered to the Trustee, provided that, in the case of clause (b)
above, if such resolution indicates that such fair market value exceeds $25
million, such resolution shall be accompanied by the written opinion of a
nationally recognized firm of investment bankers to the effect that such
consideration or Property is fair, from a financial point of view, to such
Person.
"Funded Indebtedness" means Indebtedness having a Stated Maturity, as of
the time such Indebtedness was Incurred, in excess of one year (or outstanding
under a revolving credit agreement with a scheduled expiration date in excess of
one year after the date such facility originally became available to the obligor
thereunder).
"GAAP" means generally accepted accounting principles in the United States
as in effect as of the date of the Indenture, including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession.
All ratios and computations based on GAAP contained in the Indenture shall be
computed in conformity with GAAP consistently applied.
"Guarantee" by any person means any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, and including, without limitation, any Lien on the
assets of such Person securing obligations of the primary obligor and any
obligation of such Person (a) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or to purchase (or to advance or
supply funds for the purchase or payment of) any security for the payment of
such Indebtedness, (b) to purchase Property, securities or services for the
purpose of assuring the holder of such Indebtedness of the payment of such
Indebtedness, or (c) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness (and "Guaranteed" and
"Guarantor" shall have meanings correlative to the foregoing); provided,
however, that a Guarantee by any Person shall not include endorsements by such
Person for collection or deposit, in either case, in the ordinary course of
business.
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"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), extend,
assume, Guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or obligation on the balance sheet of such Person (and
"Incurrence", "Incurred", "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); provided, however, that a change in GAAP that
results in an obligation of such Person that exists at such time becoming
Indebtedness shall not be deemed an Incurrence of such Indebtedness.
"Indebtedness" means at any time (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person,
and whether or not contingent, (a) any obligation of such Person for borrowed
money, (b) any obligation of such Person evidenced by bonds, debentures, notes,
Guarantees or other similar instruments, including, without limitation, any such
obligations Incurred in connection with the acquisition of Property, assets or
businesses, (c) any reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such Person, (d) any obligation of such Person issued or assumed as
the deferred purchase price of Property or services (but excluding trade
accounts payable or accrued liabilities arising in the ordinary course of
business), (e) any Capital Lease Obligation of such Person, (f) the maximum
fixed redemption or repurchase price of Redeemable Stock of such Person at the
time of determination, (g) any obligation to pay rent or other payment amounts
of such person with respect to any Sale and Leaseback Transaction to which such
Person is a party and (h) any obligation of the type referred to in clauses (a)
through (g) of this paragraph of another Person and all dividends of another
Person the payment of which, in either case, such Person has Guaranteed or is
responsible or liable, directly or indirectly, as obligor, Guarantor or
otherwise. For purposes of this definition, the maximum fixed repurchase price
of any Redeemable Stock that does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Stock as if such
Redeemable Stock were repurchased on any date on which Indebtedness shall be
required to be determined pursuant to the Indenture; provided, however, that if
such Redeemable Stock is not then permitted to be repurchased, the repurchase
price shall be the book value of such Redeemable Stock. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the maximum
liability of any contingent obligations in respect thereof at such date.
"Interest Rate Protection Agreement" means, with respect to any Person, any
interest rate swap agreement, interest rate cap or collar agreement or other
financial agreement or arrangement designed to protect such Person or its
Restricted Subsidiaries against fluctuations in interest rates, as in effect
from time to time.
"Investment" means, as applied to the Company or any Restricted Subsidiary,
(a) any direct or indirect purchase or other acquisition by the Company or such
Restricted Subsidiary (as the case may be) of stock or other securities of any
Person or (b) any direct or indirect loan, advance or capital contribution by
the Company or such Restricted Subsidiary (as the case may be) to any other
Person.
"Issue Date" means, with respect to the Notes, the date of original issue
of the Notes by the Company.
"Lien" means, with respect to any Property, any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, security interest, lien
(statutory or other), charge, easement, encumbrance, preference, priority or
other security or similar agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing). For purposes of
the "Limitation on Liens" covenant, a Capital Lease Obligation shall be deemed
to be secured by a Lien on the property being leased.
"Marketable Assets" means crude oil or petroleum products which are readily
marketable and have a readily ascertainable market price.
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"Material Non-Pricing Term" means (a) any provision of Section 2.10 (force
majeure; liability exemptions), 2.11 (limitation of liabilities; remedies), 3.1
(grounds for termination), 3.2 (other rights and remedies) or 4.3 (commercial
acts and obligations; waiver of immunities; consent to jurisdiction) of the
CITGO Supply Agreement; and (b) any provision of Section 2.10 (force majeure;
liabilities exemptions), 2.11 (limitation of liabilities; and remedies), 3.1
(grounds for termination), 3.2 (other rights and remedies) or 5.3 (commercial
acts and obligations; waiver of immunities) of the CRCCLP Supply Agreement.
"Materially Adverse Effect" means, relative to any occurrence of whatever
nature (including any adverse determination in any litigation, arbitration or
governmental investigation or proceeding) and after taking into account
insurance coverage and effective indemnification with respect to such
occurrence, a materially adverse effect on a consolidated basis for the Company
and its Restricted Subsidiaries on (a) the consolidated financial condition,
business, operations or properties of the Company and its Restricted
Subsidiaries or (b) the ability of the Company to perform any of its payment
obligations or other obligations under the Indenture.
"Officers' Certificate" will mean a certificate signed by two officers of
the Company at least one of whom shall be the principal executive officer,
principal accounting officer or principal financial officer of the Company.
"Opinion of Counsel" will mean a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"PDVSA" means Petroleos de Venezuela, S.A., a Venezuelan corporation.
"PDVSA Investment" means any Investments made by the Company or any
Restricted Subsidiary (other than Investments in the Company or a Restricted
Subsidiary) using funds or other Property contributed after March 31, 1996, to
the Company or any Restricted Subsidiary by PDVSA or its Affiliates (but
excluding the Company and its Restricted Subsidiaries) in exchange for Capital
Stock or as an equity contribution.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PMI" means PDVSA Marketing International, S.A., a Panamanian corporation
and a Subsidiary of PDVSA.
"Pricing Term" means (a) any provision of a Supply Agreement or the CITGO
Supplemental Supply Agreement, the proposed amendment, modification or waiver of
which, directly or indirectly, would (i) materially increase the price the
purchaser under such agreement (the "Purchaser") would pay for oil or feedstocks
or (ii) materially reduce the volumes of oil or feedstocks (whether base,
supplemental or incremental) the seller thereunder would be required to sell and
the Purchaser would be required or entitled to purchase; or (b) any provision of
the Tax Allocation Agreement, the proposed amendment, modification or waiver of
which, directly or indirectly, would materially increase the amount or
materially accelerate the payment of amounts otherwise payable thereunder by the
Company or its Restricted Subsidiaries.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, including, without limitation, Capital Stock in any other Person.
"Redeemable Stock" of any Person means any equity security of such Person
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable), or otherwise (including on the happening of an
event), is or could be required to be redeemed or is or could be redeemable at
the option of the holder thereof, in whole or in part, on or prior to the Stated
Maturity of the Debt Securities, or is or could be exchangeable for Indebtedness
at any time, in whole or in part, on or prior to the Stated Maturity of the Debt
Securities.
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"Restricted Payment" means:
(a) the payment of dividends by the Company on, or
(b) other payments or distributions (whether made by the Company or
any of its Restricted Subsidiaries) on account, or to the Holders, of, or
(c) the purchase, redemption, retirement or other acquisition (whether
by the Company or any of its Restricted Subsidiaries) of,
any shares of any class of Capital Stock or Redeemable Stock of the Company or
any warrant, option or other right to acquire such Capital Stock or Redeemable
Stock (whether in cash, Property, obligations or other securities), but
excluding dividends or other distributions payable solely in Common Stock of the
Company. Notwithstanding the foregoing, Restricted Payments shall not include
(i) the acquisition of Capital Stock of the Company either (A) solely in
exchange for shares of Capital Stock of the Company, or (B) through application
of net proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Capital Stock of the Company; and (ii)
payments by the Company under the Tax Allocation Agreement.
"Restricted Subsidiary" means any direct or indirect wholly-owned
Subsidiary of the Company that, as of the date of determination, is not an
Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means, with respect to any Person, any
direct or indirect arrangement (excluding, however, any such arrangement between
such Person and a Restricted Subsidiary of such Person or between one or more
Restricted Subsidiaries of such Person) pursuant to which a Significant Property
is sold or transferred by such Person or a Restricted Subsidiary of such Person
and is thereafter leased back from the purchaser or transferee thereof by such
Person or one of its Restricted Subsidiaries for a term of more than one year.
"Senior Indebtedness" means, at any date, any outstanding Indebtedness of
the Company that is pari passu in right of payment with the Notes.
"Significant Property" means (a) the Company's refinery located at Lake
Charles, Louisiana, (b) the Company's lubricants blending plant located at
Cicero, Illinois and (c) CRCCLP's refinery located at Corpus Christi, Texas, in
each case including all associated interests in real property, fixtures,
equipment and other tangible and intangible assets used in connection with such
facilities.
"Specified Agreements" means (a) the Supply Agreements, (b) the CITGO
Supplemental Supply Agreement and (c) the Tax Allocation Agreement.
"Stated Maturity" means, when used with respect to any security or debt
obligation, the date specified in such security or obligation as the fixed date
on which the principal or redemption price of such security or obligation is due
and payable and, when used with respect to any installment of interest on a
security or debt obligation, the fixed date on which such installment of
interest is due and payable. The Stated Maturity of the deemed principal amount
of a Capital Lease Obligation shall be the date of the last payment of rent or
any other amount due under such lease prior to the first date upon which such
lease may be terminated by the lessee without payment of a penalty.
"Subsidiary" of a Person means (a) a corporation a majority of whose Voting
Stock is at the time, directly or indirectly, owned by such Person, by one or
more subsidiaries of such Person or by such Person and one or more subsidiaries
of such Person, (b) a partnership in which such Person or a subsidiary of such
Person is, at the date of determination, a general or limited partner of such
partnership, but only if such Person or its subsidiary is entitled to receive
more than 50% of the assets of such partnership upon its dissolution, or (c) any
other Person (other than a corporation or partnership) in which such Person,
directly or indirectly, at the date of determination thereof, has (i) at least a
majority ownership interest or (ii) the power to elect or direct the election of
a majority of the directors or other governing body of such Person.
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"Supply Agreements" means (a) the CRCCLP Supply Agreement and (b) the CITGO
Supply Agreement.
"Tax Allocation Agreement" means the Tax Allocation Agreement dated as of
June 24, 1993, among PDV America, VPHI Midwest, Inc., the Company, and PDV USA,
Inc., as in effect on the date of the Indenture and as amended, supplemented,
restated or otherwise modified from time to time in compliance with the
"Specified Agreements" covenant or otherwise not in violation of the Indenture.
"Unrestricted Subsidiary" means Cit-Con and any other Subsidiary of the
Company that the Company has classified, in accordance with the terms of the
Indenture, as an Unrestricted Subsidiary and that has not been reclassified as a
Restricted Subsidiary.
"Voting Stock" means all classes of Capital Stock of a Person then
outstanding normally entitled to vote in elections of directors or Persons
performing similar functions.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company may at its option, by Board
Resolution, at any time, elect to (a) defease all of the Company's obligations
with respect to the Notes and any coupons appertaining thereto ("legal
defeasance option") or (ii) defease the Company's obligations to comply with
certain restrictive covenants, including certain of the covenants described
under "Certain Covenants" ("covenant defeasance option") with respect to the
Notes and any coupons appertaining thereto. The Company may exercise its legal
defeasance option with respect to the Notes notwithstanding its prior exercise
of its covenant defeasance option with respect thereto.
If the Company exercises its legal defeasance option with respect to the
Notes, payment of the Notes may not be accelerated because of an Event of
Default. If the Company exercises its covenant defeasance option with respect to
the Notes, payment of the Notes may not be accelerated because of certain Events
of Default described under "Events of Default" (not including, among others,
Events of Default relating to nonpayment, bankruptcy and insolvency events) or
because of the failure of the Company to comply with certain covenants specified
in the Indenture.
The Company may exercise its legal defeasance option or its covenant
defeasance option with respect to the Notes only if (a) the Company irrevocably
deposits with the Trustee in trust for the purpose of making the following
payments, specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of the Notes and any coupons appertaining thereto, (i) an
amount in such currency, currencies or currency unit in which the Notes and any
coupons appertaining thereto are then specified as payable at Stated Maturity,
(ii) U.S. Government Obligations applicable to the Notes and coupons
appertaining thereto (determined on the basis of the currency, currencies or
currency unit in which the Notes and coupons appertaining thereto are then
specified as payable at Stated Maturity) which through the scheduled payment of
principal and interest in respect thereof in accordance with their terms will
provide money in an amount, or (iii) a combination thereof, in any case, in an
amount, sufficient, without consideration of any reinvestment of such principal
and interest, to pay (A) the principal of (and premium, if any) and interest, if
any, on the Outstanding Notes and any coupons appertaining thereto on the Stated
Maturity of such principal or installment of principal or interest and (B) any
mandatory sinking fund payments or analogous payments applicable to the
Outstanding Notes and any coupons appertaining thereto on the day on which such
payments are due and payable in accordance with the terms of the Indenture and
of the Notes and any coupons appertaining thereto; (b) the Company delivers to
the Trustee a certificate from a nationally recognized firm of independent
certified public accountants expressing their opinion that such deposit without
reinvestment will provide cash at such times and in such amounts as will be
sufficient to pay (i) the principal of (and premium, if any) and interest, if
any, on the Outstanding Notes and any coupons appertaining thereto on the Stated
Maturity of such principal or installment of principal or interest and (ii) any
mandatory sinking fund payments or analogous payments applicable to the
Outstanding Notes and any coupons appertaining thereto on the day on which such
payments are due and payable in accordance with the terms of the Indenture and
of the Notes and any coupons appertaining thereto; (c) the deposit does not
constitute a
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default under any other agreement or instrument binding on the Company; (d) no
Default or Event of Default has occurred and is continuing on the date of such
deposit and after giving effect thereto; (e) the Company delivers to the Trustee
an Opinion of Counsel to the effect that the trust resulting from the deposit
does not constitute, or is not qualified as, a regulated investment company
under the Investment Company Act of 1940; (f) in the case of the legal
defeasance option, the Company delivers to the Trustee an Opinion of Counsel
stating that (i) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling, or (ii) since the date of the Indenture
there has been a change in the applicable Federal income tax law, to the effect,
in either case, that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the Notes and any coupons relating thereto will not
recognize income, gain or loss for Federal income tax purposes as a result of
such defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance had not occurred; (g) in the case of the covenant defeasance option,
the Company delivers to the Trustee an Opinion of Counsel to the effect that the
Holders of the Notes and any coupons relating thereto will not recognize income,
gain or loss for Federal income tax purposes as a result of such covenant
defeasance and will be subject to Federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such covenant
defeasance had not occurred; and (h) the Company delivers to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent to the defeasance have been complied with as required by
the Indenture.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will cease to be of further effect with regard to the Notes
(except as otherwise expressly provided for in the Indenture) when (a) either
(i) all Outstanding Notes and all coupons relating thereto have been delivered
(other than (A) coupons appertaining to the Notes in bearer form surrendered for
exchange for Notes in registered form and maturing after such exchange, whose
surrender is not required or has been waived, (B) the Notes and all coupons
relating thereto which have been destroyed, lost or stolen and which have been
replaced or paid, (C) coupons appertaining to the Notes called for redemption
and maturing after the relevant Redemption Date, whose surrender has been waived
and (D) Notes and all coupons relating thereto for whose payment money has
theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust, as
provided in Section 1003 of the Indenture) to the Trustee for cancellation or
(ii) all outstanding Notes and all coupons relating thereto (A) have become due
and payable, (B) will become due and payable at their Stated Maturity within one
year or (C) if redeemable at the option of the Company, are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in the name, and at the
expense, of the Company, and the Company has irrevocably deposited with the
Trustee funds in the currency or currencies, currency unit or units or composite
currency or currencies in which the Notes are payable, sufficient to pay at
maturity or upon redemption all outstanding Notes and such coupons, including
interest thereon and any Additional Amounts with respect thereto, to the date of
such deposit (in the case of Notes which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be, (b) the Company has paid
all sums payable by it under the Indenture and (c) the Company has delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent herein provided for relating to the satisfaction
and discharge of the Indenture as to such series have been complied with. The
Trustee will be required to acknowledge satisfaction and discharge of the
Indenture on demand of the Company accompanied by such Officer's Certificate and
Opinion of Counsel at the cost and expense of the Company.
NOTICES
Notices to holders of Notes will be given by mail to the registered
addresses of such holders.
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CONCERNING THE TRUSTEE
The First National Bank of Chicago is the Trustee under the Indenture. The
Trustee has lending and other customary banking relationships with the Company
and its subsidiaries in the ordinary course of business and receives customary
fees and compensation in connection therewith.
GOVERNING LAW
The Indenture will provide that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the laws of another jurisdiction would be required thereby.
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
CITGO Petroleum Corporation
By: /s/ Eddie R. Humphrey
----------------------------------
Name: Eddie R. Humphrey
Title: Treasurer
Date: May 20, 1996
