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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
MARCH 17, 2000
VALERO ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-13175 74 -1828067
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(State of incorporation) Commission File (I.R.S. Employer
jurisdiction Number Identification No.)
of incorporation
One Valero Place, San Antonio, Texas 78212
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(Address of principal executive offices) (Zip Code)
(210) 370-2000
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(Registrant's telephone number, including area code)
Not applicable
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(Former name or address, if changed since last report)
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ITEM 5. OTHER EVENTS
FINANCIAL INFORMATION RELATED TO PENDING ACQUISITION OF EXXONMOBIL'S BENICIA,
CALIFORNIA REFINERY AND ASSOCIATED RETAIL BUSINESS
On March 17, 2000, Valero Energy Corporation published a news release
containing projected financial information related to its pending acquisition of
ExxonMobil Corporation's Benicia, California refinery and associated retail
business. That news release is filed as a part of this report on Exhibit 99.1.
ITEM 7(c). EXHIBITS FILED
Exhibit 99.1 News release dated March 17, 2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
VALERO ENERGY CORPORATION
By: /s/ John D. Gibbons
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John D. Gibbons
Vice President - Finance and
Chief Financial Officer
Dated: March 17, 2000
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EXHIBIT INDEX
Valero Energy Corporation
Current Report on Form 8-K
Dated March 17, 2000
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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<S> <C>
99.1 News release dated March 17, 2000.
</TABLE>
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EXHIBIT 99.1
VALERO WILL CONDUCT A CONFERENCE CALL MONDAY, MARCH 20, 2000, AT 10:00 A.M. EST
(9:00 A.M. CST), TO DISCUSS THIS RELEASE. YOU MAY LISTEN TO THE LIVE CONFERENCE
CALL BROADCAST OVER THE INTERNET AT http://www.videonewswire.com/valero/032000.
TO OBTAIN THE CORRESPONDING SLIDE PRESENTATION AND FOR A REPLAY OF THE COMPANY'S
CONFERENCE CALL, PLEASE VISIT OUR WEB SITE AT http://www.valero.com.
VALERO ENERGY CORPORATION
DISCLOSES FINANCIAL INFORMATION
FOR THE BENICIA ASSETS ACQUISITION
SAN ANTONIO, March 17, 2000 -- Valero Energy Corporation (NYSE:VLO) today
released projected financial and operating information related to its pending
acquisition of ExxonMobil Corporation's 160,000 barrel-per-day (BPD) Benicia,
California refinery and associated retail business (collectively, the Benicia
Assets). The financial information provides projected financial results for the
company for the years 2000 and 2001, including the anticipated contribution from
the Benicia Assets. Completion of the transaction is subject to approval by the
Federal Trade Commission and the California Attorney General. The transaction is
expected to close on June 15, 2000.
Based on the assumptions set forth below, the Company expects consolidated
earnings per share for 2000 and 2001 to be approximately $2.99 per share and
$3.85 per share, respectively. These projections include an anticipated earnings
accretion from the Benicia Assets acquisition of approximately $.32 per share
for 2000 and $1.17 per share for 2001.
In preparing the projected financial and operating information included in this
press release, Valero has made certain assumptions, both with respect to general
refining and marketing industry conditions and with respect to the future
operations of the Benicia Assets. The projections and underlying assumptions set
forth in this release have been made in good faith and reflect Valero's judgment
regarding such matters. Further, the feedstock and product price differentials
and charge and yield assumptions for 2000 were essentially held constant for
purposes of the 2001 projections. There can be no assurance that actual results
will not vary, perhaps significantly, from the future projections contained in
this press release. See "Forward-Looking Statements" below.
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The following table shows certain projected income statement, cash flow and
other financial information for Valero and the Benicia Assets, for the years
ended December 31, 2000 and 2001, assuming that the acquisition closes June 30,
2000. This financial information (i) assumes the impact of certain key commodity
price differentials, retail margin and operating assumptions described below for
the remainder of 2000 and 2001, (ii) assumes the issuance of $150 million of
Valero Common Stock at $28 per common share and $150 million of tax deductible
mandatory convertible preferred securities, (iii) assumes interest expense for
the Benicia Assets and the combined entity includes the dividends related to the
$150 million of tax deductible mandatory convertible preferred securities, and
(iv) includes a preliminary estimate of the allocation of the purchase price of
the Benicia Assets acquired and liabilities assumed. These assumptions, as well
as other assumptions made by the Company in preparing the projected financial
information set forth below, and the results ultimately reflected in Valero's
financial statements may vary, perhaps significantly, from the information
presented here.
PROJECTED FINANCIAL INFORMATION
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
As of or for the Year Ended December 31,
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2000 2001
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Benicia Benicia
Valero Assets Combined Valero Assets Combined
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<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION:
EBITDA ....................................... $ 439.1 $ 93.8 $ 532.9 $ 459.5 $ 237.6 $ 697.1
Interest expense, net ........................ $ 45.8 $ 35.2 $ 81.0 $ 38.8 $ 64.8 $ 103.6
Income taxes ................................. $ 82.4 $ 15.4 $ 97.8 $ 84.9 $ 51.4 $ 136.3
Net income ................................... $ 151.4 $ 26.3 $ 177.7 $ 153.6 $ 87.5 $ 241.1
Earnings per share of common stock ........... $ 2.67 $ 2.99 $ 2.68 $ 3.85
CASH FLOW INFORMATION:
Depreciation expense ......................... $ 102.9 $ 14.4 $ 117.3 $ 108.8 $ 29.2 $ 138.0
Amortization expense ......................... $ 56.7 $ 3.8 $ 60.5 $ 73.6 $ 7.1 $ 80.7
Capital expenditures ......................... $ 153.9 $ 31.7 $ 185.6 $ 193.3 $ 29.6 $ 222.9
Deferred turnaround and catalyst costs ....... $ 75.7 $ 3.1 $ 78.8 $ 91.7 $ 3.7 $ 95.4
Cash flow per share .......................... $ 6.13 $ 6.87 $ 6.71 $ 8.83
OTHER FINANCIAL INFORMATION:
Debt-to-capitalization ....................... 35.7% 46.2% 31.9% 39.3%
Fixed charge coverage ........................ 5.4x 4.1x 6.0x 4.3x
Cash flow-to-debt ............................ 51.4% 30.9% 59.8% 48.4%
Return on equity ............................. 13.2% 14.4% 11.9% 16.1%
Fully diluted common shares outstanding ...... 56.6 59.3 57.2 62.6
</TABLE>
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The primary feedstocks for the Benicia refinery have historically been low-cost
sour crude oils, including Alaskan North Slope crude oil (ANS) (62% of total
feedstocks) and San Joaquin Valley crude oil (SJV) (19% of total feedstocks).
These sour crude oil feedstocks are typically purchased at significant discounts
to West Texas Intermediate crude oil (WTI). The Benicia refinery produces an
exceptionally high percentage of premium light products, including gasoline
(69%, most of which is CARB Phase II gasoline) and low sulfur distillates (16%,
primarily jet fuel and diesel). These products generally sell for significant
premiums over conventional light products.
The following table provides projected throughput volumes and cash operating
costs for 2000 and 2001 for Valero's refineries and the Benicia refinery.
<TABLE>
<CAPTION>
2000 2001
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Valero Benicia Valero Benicia
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<S> <C> <C> <C> <C>
Throughput volumes
(MBPD) 742 160 770 160
Cash operating costs
per barrel $ 1.85 $ 3.13 $ 1.72 $ 3.07
</TABLE>
The following table shows projected charges and yields for Valero's refineries
and the Benicia refinery, as well as for the combined operations, for 2000 and
2001, reflecting the principal feedstocks utilized and products produced as a
percentage of total charges and yields, respectively.
<TABLE>
<CAPTION>
Valero Benicia Combined
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<S> <C> <C> <C>
Charges:
Crude Oils:
Sour 52% 81% 57%
Heavy Sweet 10 -- 8
Light Sweet 10 -- 8
--- --- ---
Total Crude Oils 72 81 73
Resid 8 -- 7
Other 20 19 20
--- --- ---
Total Charges 100% 100% 100%
=== === ===
Yields:
Gasoline and blendstocks 51% 69% 54%
Distillates 30 16 28
Petrochemicals 5 -- 4
Lubes and Asphalts 3 -- 2
Other Products 11 15 12
--- --- ---
Total Yields 100% 100% 100%
=== === ===
</TABLE>
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The following tables provide historical and projected feedstock and product
price differentials for the principal feedstocks utilized and products produced
at both the Benicia refinery and Valero's refineries.
Feedstock Differentials ($ per barrel):
<TABLE>
<CAPTION>
2000 Projected 2000/2001
Volumes Average(1) 1999 estimate
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<S> <C> <C> <C> <C>
WTI -- $ 19.11 $ 19.28 $ 27.08
Benicia
WTI - ANS 100 $ 1.65 $ 1.49 $ 1.65
WTI - SJV 30 $ 4.66 $ 4.01 $ 4.65
Valero (x-Benicia)
WTI - Sour Crude Oil 390 $ 2.34 $ 2.26 $ 2.35
WTI - Sweet Crude Oil 150 $ .15 $ .38 $ (.55)
(1)1996 through 1999.
</TABLE>
Product Differentials ($ per barrel):
<TABLE>
<CAPTION>
2000 Projected 2000/2001
Volumes Average(1) 1999 estimate
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<S> <C> <C> <C> <C>
Benicia
CARB Gasoline - ANS 105 $ 10.31 $12.28 $ 10.14
LS Diesel - ANS 25 $ 6.22 $ 6.91 $ 6.08
Valero (x-Benicia)
Conv. 87 - WTI 375 $ 3.07 $ 2.53 $ 3.86
HS #2 Oil - WTI 220 $ 1.51 $ .33 $ 1.70
Propylene - WTI 25 $ 3.11 $ .93 $ 3.49
Lubes - WTI 10 $ 18.38 $11.76 $ 8.74
(1)1996 through 1999.
</TABLE>
In addition to the refining projections presented above, Valero has also
projected its average retail margins for 2000 and 2001 to be approximately 8.0
cents per gallon and average product volumes to be approximately 110,000 gallons
per store per month. The retail system includes 260 distributor sites located
throughout California and 80 company owned sites, primarily located in the San
Francisco Bay Area.
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Valero Energy Corporation is a Fortune 500 company based in San Antonio, with
2,500 employees and 1999 revenues of approximately $8 billion. The Company
currently owns and operates five refineries in Texas, Louisiana and New Jersey
with a combined throughput capacity of approximately 785,000 BPD, making it the
nation's second largest independent refining company. Valero is recognized
throughout the industry as a leader in the production of premium,
environmentally clean products such as reformulated gasoline, CARB Phase II
gasoline, low-sulfur diesel and oxygenates. The Company also has an extensive
wholesale bulk and rack marketing business and markets in more than 30 states
through 190 terminals.
Forward-Looking Statements
Statements contained in this press release that state the Company's or
management's expectations or predictions of the future are forward-looking
statements intended to be covered by the safe harbor provisions of the
Securities Act of 1933 and the Securities Exchange Act of 1934. It is important
to note that the Company's actual results could differ materially from those
projected in its forward-looking statements. For more information concerning
factors that could cause actual results to differ from those expressed or
forecast, see the Company's annual report on Form 10-K and quarterly reports on
Form 10-Q, filed with the Securities and Exchange Commission and available on
the Company's web site at http://www.valero.com. These factors include potential
changes in gasoline, crude oil, distillate and other commodity prices, varying
market conditions, actions of government, adverse rulings in litigation and
potential delays or other changes in work and repair schedules. The Company
undertakes no obligation to update or publicly release the result of any
revisions to any forward-looking statements that may be made to reflect events
or circumstances that occur, or which the Company becomes aware of, after the
date of this release or to reflect the occurrence of unanticipated events.
