UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from . . . . to . . . .
Commission file number 1-7627
FRONTIER OIL CORPORATION
(Exact name of registrant as specified in its charter)
WYOMING 74-1895085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10000 MEMORIAL DRIVE, SUITE 600 77024-3411
HOUSTON, TEXAS (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (713) 688-9600
-------------------------------------------------------------
Former name, former address and former fiscal year, if
changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No . . .
Registrant's number of common shares outstanding as of July 24, 1998: 28,151,001
<PAGE>
FRONTIER OIL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
INDEX
Page
Part I - Financial Information
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II - Other Information 11
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), including, without limitation,
statements that include the words "anticipates," "believes," "could,"
"estimates," "expects," "intends," "may," "plan," "predict," "project,"
"should," and similar expressions, and statements relating to the Company's
strategic plans, capital expenditures, industry trends and prospects and the
Company's financial position. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause actual results,
performance or achievements of the Company to differ materially from those
expressed or implied by such forward-looking statements. Although the Company
believes that its plans, intentions and expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
plans, intentions or expectations will be achieved. Important factors that could
cause actual results to differ materially from the Company's expectations
("Cautionary Statements") are set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
elsewhere in this document. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the Cautionary Statements.
Definitions of Terms
bbl(s) = barrel(s)
bpd = barrel(s) per day
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FRONTIER OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except per share amounts)
Six Months Ended Three Months Ended
June 30 June 30
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Refined products $ 153,007 $ 184,670 $ 83,984 $ 95,458
Other 943 1,230 275 872
--------- --------- --------- ---------
153,950 185,900 84,259 96,330
--------- --------- --------- ---------
Costs and Expenses:
Refining operating costs 132,433 174,383 68,243 83,234
Selling and general expenses 4,215 3,507 2,221 1,785
Depreciation 5,198 4,539 2,822 2,266
--------- --------- --------- ---------
141,846 182,429 73,286 87,285
--------- --------- --------- ---------
Operating Income 12,104 3,471 10,973 9,045
Interest Expense, Net 3,738 8,970 1,768 4,511
--------- --------- --------- ---------
Income (Loss) From Continuing
Operations Before Income Taxes 8,366 (5,499) 9,205 4,534
Provision for Income Taxes - - - -
--------- --------- --------- ---------
Income (Loss) From Continuing Operations 8,366 (5,499) 9,205 4,534
Discontinued Operations:
Income from oil and gas operations,
net of taxes - 1,721 - 167
Gain on disposal of Canadian oil and gas
properties, net of $800 of taxes - 23,301 - 23,301
Recognition of cumulative
translation adjustment - (9,862) - (9,862)
--------- --------- --------- ---------
Income Before Extraordinary Item 8,366 9,661 9,205 18,140
Extraordinary Loss on Retirement of Debt 3,013 - - -
--------- --------- --------- ---------
Net Income $ 5,353 $ 9,661 $ 9,205 $ 18,140
========= ========= ========= =========
Basic Earnings (Loss) Per Share of Common Stock:
Continuing Operations $ .30 $ (.20) $ .33 $ .17
Discontinued Operations - .55 - .49
Extraordinary Loss (.11) - - -
--------- --------- --------- ---------
Net Income $ .19 $ .35 $ .33 $ .66
========= ========= ========= =========
Diluted Earnings (Loss) Per Share of Common Stock:
Continuing Operations $ .29 $ (.20) $ .33 $ .17
Discontinued Operations - .55 - .49
Extraordinary Loss (.10) - - -
--------- --------- --------- ---------
Net Income $ .19 $ .35 $ .32 $ .66
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 1 -
<PAGE>
<TABLE>
<CAPTION>
FRONTIER OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands except shares)
June 30, 1998 and December 31, 1997 1998 1997
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash, including cash equivalents of
$13,938 in 1998 and $19,981 in 1997 $ 15,116 $ 21,735
Trade and other receivables, less allowance for
doubtful accounts of $500 in 1998 and 1997 22,415 17,204
Inventory of crude oil, products and other 23,862 27,666
Other current assets 809 1,391
--------- ---------
Total current assets 62,202 67,996
--------- ---------
Property, Plant and Equipment, at cost:
Refinery and pipeline 158,458 149,201
Furniture, fixtures and other equipment 3,216 3,044
--------- ---------
161,674 152,245
Less - Accumulated depreciation 50,784 45,586
--------- ---------
110,890 106,659
Other Assets 4,281 3,260
--------- ---------
$ 177,373 $ 177,915
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 33,743 $ 33,527
Accrued turnaround cost 1,484 6,771
Accrued liabilities and other 3,658 5,240
Accrued interest 2,499 1,530
--------- ---------
Total current liabilities 41,384 47,068
--------- ---------
Long-Term Debt, net of current maturities:
9-1/8% Senior Notes 70,000 -
12% Senior Notes - 24,572
7-3/4% Convertible Subordinated Debentures - 46,000
--------- ---------
70,000 70,572
--------- ---------
Deferred Credits and Other 2,793 2,801
Deferred Income Taxes 1,442 1,540
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $100 par value, 500,000 shares
authorized, no shares issued
Common stock, no par, 50,000,000 shares
authorized, 28,281,401 and 28,111,289 shares
issued in 1998 and 1997 57,268 57,251
Paid-in capital 85,852 84,785
Retained earnings (deficit) (80,513) (85,866)
Treasury stock, 130,400 shares and 52,500 shares
in 1998 and 1997 (853) (236)
--------- ---------
Total Shareholders' Equity 61,754 55,934
--------- ---------
$ 177,373 $ 177,915
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 2 -
<PAGE>
<TABLE>
<CAPTION>
FRONTIER OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
For the six months ended June 30, 1998 1997
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 5,353 $ 9,661
Gain on disposal of Canadian oil and gas properties - (23,301)
Recognition of cumulative translation adjustment - 9,862
Extraordinary loss on retirement of debt 3,013 -
Depreciation, depletion and amortization 5,198 8,387
Deferred credits and other (655) (205)
Change in working capital from operations (6,896) (9,224)
--------- ---------
Net cash provided by (used in) operating activities 6,013 (4,820)
INVESTING ACTIVITIES
Additions to property and equipment:
Continuing operations (8,349) (2,226)
Discontinued operations - (3,298)
Sale of Canadian oil and gas properties,
net of transaction costs - 91,307
Other - (590)
--------- ---------
Net cash (used in) provided by investing activities (8,349) 85,193
FINANCING ACTIVITIES
Borrowings:
9-1/8% Senior Notes 70,000 -
Refining credit facility - 6,400
12% Senior Notes - 2,000
Repayments of debt:
12% Senior Notes, including redemption premium (25,423) -
7-3/4% Convertible Subordinated Debentures,
including redemption premium (45,971) -
Debt issuance costs (2,501) -
Issuance of common stock 353 -
Purchase of treasury stock (617) -
Other (124) (113)
--------- ---------
Net cash (used in) provided by financing activities (4,283) 8,287
Effect of exchange rate changes on cash - (10)
--------- ---------
(Decrease) increase in cash and cash equivalents (6,619) 88,650
Cash and cash equivalents, beginning of period 21,735 5,183
--------- ---------
Cash and cash equivalents, end of period $ 15,116 $ 93,833
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 3 -
<PAGE>
FRONTIER OIL CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
1. FINANCIAL STATEMENT PRESENTATION
FINANCIAL STATEMENT PRESENTATION
The condensed consolidated financial statements include the accounts of
Frontier Oil Corporation (formerly Wainoco Oil Corporation), a Wyoming
Corporation, and its wholly owned subsidiaries, including Frontier Holdings Inc.
(the "Refinery"), collectively referred to as Frontier or the Company. The
annual meeting of the Company was held April 27, 1998 with the shareholders
approving the change in corporate name from Wainoco Oil Corporation to Frontier
Oil Corporation. These financial statements have been prepared by the
registrant without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC) and include all adjustments (comprised
of only normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. It is suggested that
the financial statements included herein be read in conjunction with the
financial statements and the notes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1997.
Frontier conducts its refining operations in the Rocky Mountain region of
the United States. The Company's Cheyenne, Wyoming Refinery purchases the crude
oil to be refined and markets the refined petroleum products produced, including
various grades of gasoline, diesel fuel, asphalt and petroleum coke.
Prior to the third quarter of 1997, the Company also explored for and
produced oil and gas in Canada and prior to the first quarter of 1996 in the
United States (together, the "oil and gas operations"). Operating results for
the Company's oil and gas operations segment are presented as discontinued
operations in the accompanying statements of operations.
EARNINGS PER SHARE
Basic earnings per share has been computed based on the weighted average
number of common shares outstanding. Diluted earnings per share assumes the
additional dilution for the exercise of in-the-money stock options. No
adjustments to income are used in the calculation of earnings per share. The
basic and diluted average shares outstanding are as follows:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30 June 30
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic 28,129,387 27,258,502 28,154,164 27,258,502
Diluted 28,887,049 27,258,502 28,911,826 27,437,537
</TABLE>
COMPREHENSIVE INCOME
Total comprehensive income for the six months and three months ended June 30,
1998 and 1997 is as follows:
<TABLE>
<CAPTION>
(in thousands)
Six Months Ended Three Months Ended
June 30 June 30
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income $ 5,353 $ 9,661 $ 9,205 $ 18,140
Cumulative translation adjustment - (1,361) - (658)
--------- --------- --------- ---------
Comprehensive income $ 5,353 $ 8,300 $ 9,205 $ 17,482
========= ========= ========= =========
</TABLE>
- 4 -
<PAGE>
REFINED PRODUCT REVENUES
Revenues are recognized when product ownership is transferred to the customer.
Excise and other taxes on products sold are netted against revenues.
NEW ACCOUNTING STATEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting.
Statement 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). Statement 133 cannot be applied retroactively. Statement 133 must
be applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997 (and, at the company's election, before January
1, 1998).
The Company has not yet quantified the impacts of adopting Statement 133 on
the financial statements and has not determined the timing of or method of the
adoption of Statement 133. However, the Statement could increase volatility in
earnings and other comprehensive income.
2. SCHEDULE OF MAJOR COMPONENTS OF INVENTORY
<TABLE>
<CAPTION>
(in thousands)
June 30, December 31,
1998 1997
-------- --------
<S> <C> <C>
Crude oil $ 1,979 $ 3,904
Unfinished products 5,250 6,338
Finished products 8,859 9,929
Chemicals 1,512 1,534
Repairs and maintenance supplies and other 6,262 5,961
-------- --------
$ 23,862 $ 27,666
======== ========
</TABLE>
3. ISSUANCE OF SENIOR NOTES
On February 9, 1998, the Company issued $70 million of 9-1/8% Senior Notes
due 2006. The Notes are redeemable, at the option of the Company, at a premium
of 104.563% after February 15, 2002, declining to 100% in 2005. Prior to
February 15, 2002, the Company at its option may redeem the Notes at a defined
make-whole amount. Interest is paid semiannually. The net proceeds were
utilized to fund redemptions of the Company's 12% Senior Notes and 7-3/4%
Convertible Subordinated Debentures as discussed in Note 4.
4. EXTRAORDINARY LOSS
On February 10, 1998, the Company called for redemption the remaining $24.8
million of its 12% Senior Notes and the $46 million 7-3/4% Convertible
Subordinated Debentures. The redemptions were completed on March 12, 1998.
Holders of $731,000 of 7-3/4% Convertible Subordinated Debentures elected to
convert into 83,542 shares of the Company's common stock. Based on the
redemptions, the Company has recognized a first quarter extraordinary loss of
$3,013,000 due to the redemption premiums on the Senior Notes and Convertible
Debentures and the write-off of the related remaining debt issuance costs. The
redemptions and retirement of these debt obligations were funded with proceeds
from the issuance of the 9-1/8% Senior Notes as discussed in Note 3.
- 5 -
<PAGE>
5. REFINING CREDIT FACILITY
The Refinery credit facility was amended in 1998 to extend the maturity from
April 2, 1999 to June 30, 2000. An additional interest rate option was added
based on the prevailing Federal Funds Rate plus 2-1/4%.
- 6 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH THE SAME PERIOD IN 1997
The Company had net income for the six months ended June 30, 1998 of $5.4
million, or $.19 per share, compared to net income of $9.7 million, or $.35 per
share, for the same period in 1997. The 1998 results include a $3.0 million
extraordinary loss on early retirement of debt. The 1997 results included a
$23.3 million gain on the sale of the Canadian oil and gas operations which
closed on June 16, 1997, a $9.9 million reduction to income in recognition of
the cumulative translation adjustment and $1.7 million of income from Canadian
oil and gas operations. The sale of the Canadian oil and gas operations closed
on June 16, 1997, thus the 1997 operating results for the Company's oil and gas
exploration and production segment have been presented as discontinued
operations in the accompanying statements of operations. Frontier's primary
continuing operation is its refining operation in the Rocky Mountain region of
the United States.
Operating income increased $8.6 million in 1998 as compared to 1997 due to an
increase in the refined product spread (revenues less material costs) of $11.7
million offset by a decrease in other income of $287,000 and increases in
refining operating expenses of $1.4 million, selling and general expenses of
$708,000 and depreciation of $659,000.
Refined product revenues and refining operating costs are impacted by changes
in the price of crude oil. The price of crude oil was significantly lower in
1998 than in 1997. The refined product spread was $6.01 per bbl compared to
$4.75 per bbl in 1997. The 1998 refined product spread increased due to an
improved light/heavy crude oil spread and better by-product margins from lower
crude oil prices. Both periods' refined product spreads were negatively
impacted by first quarter declines in crude oil prices of approximately $3.7
million in 1998 and approximately $4.0 million in 1997. Inventories are
recorded at the lower of cost on a first in, first out (FIFO) basis or market.
Refined product revenues decreased $31.7 million or 17%. The decrease in
refined product revenues resulted from a $6.11 per bbl decrease in average
gasoline sales prices and a $6.98 per bbl decrease in average diesel sales
prices. Refined product sales volumes increased 6% in 1998 over 1997 levels.
Yields of gasoline and diesel decreased 9% and 2%, respectively in 1998 compared
to the same period in 1997. The decrease in yields was due to the major
turnaround, which commenced April 19, 1998 and was completed May 15, 1998, on
the fluid catalytic cracking unit and alkylation and related units.
Other income, which consists primarily of processing fees, decreased $287,000
to $943,000 in 1998 as compared to 1997. Other income for 1997 included a
$496,000 foreign currency transaction gain while other income for 1998 includes
sulfur credit sales of $360,000.
Refining operating costs decreased $42 million or 24% from 1997 levels due to
a decrease in material costs offset by an increase in operating expenses.
Material costs per bbl decreased 33% or $6.83 per bbl in 1998 due to lower oil
prices, increased use of heavy crude oil, an increase in the light/heavy spread
and a 2% decrease in charge rates. During 1998, the Refinery increased its use
of heavy crude oil by 1% and the heavy crude oil utilization rate expressed as a
percentage of total crude oil increased to 93% in 1998 from 91% in 1997. The
light/heavy spread increased 40% to average $4.77 per bbl in the six months of
1998. Refinery operating expenses increased $1.4 million in 1998 as compared to
1997, although refining operating expense per bbl decreased $.01 per bbl to
$3.32 per bbl in 1998 due to higher sales volumes in 1998 as compared to 1997.
The increase in refining operating expenses during 1998 was due to higher
natural gas usage during the turnaround, increased chemical usage and increased
transportation costs for asphalt and other product sales.
Selling and general expenses increased $708,000 or 20% for the six months
ended June 30, 1998 reflecting increases in salaries and benefits.
Depreciation increased $659,000 or 15% in the 1998 six-month period as
compared to the same period in 1997, attributable to increases in capital
investment and the write-off of certain equipment replaced in connection with
the turnaround work.
The interest expense decrease of $5.2 million or 58% in 1998 was attributable
to utilizing Canadian sale proceeds to retire debt during the third and fourth
quarters of 1997. Average debt for the six months decreased from $161 million
in 1997 to $85 million in 1998.
- 7 -
<PAGE>
The price of light crude oil on the New York Mercantile Exchange has declined
from $17.64 per bbl at the beginning of 1998 to $14.18 per bbl at June 30, 1998.
The price of heavy crude oil has likewise declined. The low price of heavy
crude oil has caused the production of some heavy crude oil in both Wyoming and
Canada to become uneconomical. The Company is currently experiencing some
shortfalls in heavy crude oil deliveries from Wyoming and Canada due to the
shut-in of such production. Should the price of world crude oil remain at such
low levels, the Company expects the shortfalls to continue and may increase in
volume. The Company plans to utilize alternative crude oil for any shortfall;
however, the alternative crude oil will be more costly than currently contracted
heavy crude oil.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THE SAME PERIOD IN 1997
The Company had net income for the three months ended June 30, 1998 of $9.2
million, or $.33 per share, compared to net income of $18.1 million, or $.66 per
share, for the same period in 1997. The 1997 results included a $23.3 million
gain on the sale of the Canadian oil and gas operations which closed on June 16,
1997, a $9.9 million reduction to income in recognition of the cumulative
translation adjustment and $167,000 of income from Canadian oil and gas
operations. The sale of the Canadian oil and gas operations closed on June 16,
1997, thus the 1997 operating results for the Company's oil and gas exploration
and production segment have been presented as discontinued operations in the
accompanying statements of operations. Frontier's primary continuing operation
is its refining operation in the Rocky Mountain region of the United States.
Operating income increased $1.9 million in 1998 as compared to 1997 due to an
increase in the refined product spread (revenues less material costs) of $5.4
million offset by a decrease in other income of $597,000, increases in refining
operating expenses of $1.8 million, selling and general expenses of $436,000 and
depreciation of $556,000.
Refined product revenues and refining operating costs are impacted by changes
in the price of crude oil. The price of crude oil was significantly lower in
1998 than in 1997. The refined product spread was $7.15 per bbl compared to
$6.18 per bbl in 1997. The 1998 refined product spread increased due to an
improved light/heavy crude oil spread and better by-product margins from lower
crude oil prices. Refined product revenues decreased $11.5 million or 12%. The
decrease in refined product revenues resulted from a $4.97 per bbl decrease in
average gasoline sales prices and a $6.29 per bbl decrease in average diesel
sales prices. Refined product sales volumes increased 6% in 1998 over 1997
levels. Yields of gasoline and diesel decreased 19% and 10%, respectively in
1998 compared to the same period in 1997. The decrease in yields was due to the
major turnaround, which commenced April 19, 1998 and was completed May 15, 1998,
on the fluid catalytic cracking unit and alkylation and related units.
Other income, which consists primarily of processing fees, decreased $597,000
to $275,000 in 1998 as compared to 1997. Other income for 1997 included a
$496,000 foreign currency transaction gain.
Refining operating costs decreased $15 million or 18% from 1997 levels due to
a decrease in material costs offset by an increase in operating expenses.
Material costs per bbl decreased 28% or $5.28 per bbl in 1998 due to lower oil
prices, a 10% decrease in charge rates due to the turnaround and an increase in
the light/heavy spread. The light/heavy spread increased 45% to average $4.81
per bbl in the three months of 1998. Refining operating expense per bbl
increased $.28 per bbl to $3.26 per bbl in 1998 due to higher turnaround
accruals, higher natural gas usage during the turnaround and increased
transportation costs for asphalt and other product sales in 1998 compared to
1997.
Selling and general expenses increased $436,000 or 24% for the three months
ended June 30, 1998 reflecting increases in salaries and benefits and a
reallocation of certain costs in connection with the sale of the Canadian
assets.
Depreciation increased $556,000 or 25% in the 1998 three-month period as
compared to the same period in 1997, attributable to increases in capital
investment and the write-off of certain equipment replaced in connection with
the turnaround work.
The interest expense decrease of $2.7 million or 61% in 1998 was attributable
to utilizing Canadian sale proceeds to retire debt during the third and fourth
quarters of 1997. Average debt for the three months decreased from $161 million
in 1997 to $74 million in 1998.
- 8 -
<PAGE>
<TABLE>
<CAPTION>
REFINING OPERATING STATISTICAL INFORMATION
Six Months Ended Three Months Ended
June 30, June 30,
--------------------- ---------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Raw material input (bpd)
Light crude 2,265 3,187 2,237 3,064
Heavy crude 31,862 31,529 31,004 34,421
Other feed and blend stocks 5,518 5,777 4,712 4,856
--------- --------- --------- ---------
Total 39,645 40,493 37,953 42,341
Manufactured product yields (bpd)
Gasoline 15,307 16,860 13,368 16,456
Diesel 13,233 13,559 12,248 13,676
Asphalt and other 9,939 9,129 10,820 11,062
--------- --------- --------- ---------
Total 38,479 39,548 36,436 41,194
Total product sales (bpd)
Gasoline 21,935 20,324 22,687 20,359
Diesel 12,426 12,516 12,360 12,343
Asphalt and other 8,036 7,147 9,432 9,146
--------- --------- --------- ---------
Total 42,397 39,987 44,479 41,848
Operating margin information
(per sales bbl)
Average sales price $ 19.94 $ 25.51 $ 20.75 $ 25.06
Material costs (under FIFO
inventory accounting) 13.93 20.76 13.60 18.88
--------- --------- --------- ---------
Product spread 6.01 4.75 7.15 6.18
Operating expenses excluding
depreciation 3.32 3.33 3.26 2.98
Depreciation .67 .62 .69 .59
--------- --------- --------- ---------
Operating margin $ 2.02 $ .80 $ 3.20 $ 2.61
Manufactured product margin
before depreciation (per bbl) $ 2.74 $ 1.42 $ 4.04 $ 3.22
Purchased product margin
(per purchased product bbl) $ 1.79 $ 1.74 $ 1.95 $ 1.74
Light/heavy crude spread (per bbl) $ 4.77 $ 3.40 $ 4.81 $ 3.32
Average sales price (per sales bbl)
Gasoline $ 22.73 $ 28.84 $ 23.57 $ 28.54
Diesel 21.32 28.30 21.87 28.16
Asphalts and other 10.18 11.19 12.51 13.15
</TABLE>
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
On February 9, 1998, the Company issued $70 million of 9-1/8% Senior Notes
due 2006 and received net proceeds of approximately $67.9 million. On February
10, 1998, the Company called for redemption the remaining $24.8 million of its
12% Senior Notes and $46 million of its 7-3/4% Convertible Subordinated
Debentures. This redemption was completed on March 12, 1998 resulting in the
payment of $71.4 million, including redemption premiums and the issuance of
83,542 shares of common stock. Under a stock repurchase plan, approved by the
board of directors, 77,900 shares of common stock have been repurchased by the
Company for $617,000.
During the first six months of 1998, $6.0 million of cash flows were provided
by operating activities. In 1997, $4.8 million of cash flows were used in
operating activities. Consistent with the seasonality of its business, the
Company invests in working capital during the first half of the year and
recovers working capital investment in the second half of the year. In addition
to normal seasonality, the impact of lower crude oil prices and the recently
completed turnaround impacted working capital during 1998. The declines in
crude oil prices reduced inventory values despite the increase in volumes of
unfinished inventory built during the turnaround. Such unfinished products are
currently being processed into finished products which will continue through the
third quarter of 1998. Accounts payable for crude oil payments decreased
because of lower crude prices while remaining accounts payable increased and
accrued turnaround costs declined as turnaround expenditures were incurred and
payments made.
At June 30, 1998, the Company had $15.1 million of cash and $20 million
available under the Refinery line of credit. The Company had working capital of
$20.8 million at June 30, 1998.
Additions to property and equipment in the first six months of 1998 of $8.3
million increased $2.8 million from the first six months in 1997 attributable to
an increase of $6.1 million in Refinery capital expenditures in 1998 offset by
the 1997 discontinued Canadian oil and gas operations capital expenditures of
$3.3 million. Capital expenditures of approximately $15.5 million are planned
for the Refinery in 1998, an increase of $2.5 million from prior plans as
additional capital expenditures were incurred concurrent with the turnaround.
- 10 -
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings -
None, which in the opinion of management would have a material
impact on the registrant.
ITEM 2. Changes in Securities -
There have been no changes in the constituent instruments defining the
rights of the holders of any class of registered securities during the
current quarter.
ITEM 3. Defaults Upon Senior Securities -
None.
ITEM 4. Submission of Matters to a Vote of Security Holders -
None.
ITEM 5. Other Information -
None.
ITEM 6. Exhibits and Reports on Form 8-K -
(a) Exhibits
10.01 - First Amendment to Amended and Restated Revolving Credit
and Letter of Credit Agreement dated June 30, 1998 among
Frontier Oil and Refining Company, certain banks and Union
Bank of California.
27 - Financial Data Schedule
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FRONTIER OIL CORPORATION
By: /s/ Jon D. Galvin
---------------------------
Jon D. Galvin
Vice President - Controller
Date: July 28, 1998
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<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 15,116
<SECURITIES> 0
<RECEIVABLES> 22,415
<ALLOWANCES> 0
<INVENTORY> 23,862
<CURRENT-ASSETS> 62,202
<PP&E> 161,674
<DEPRECIATION> 50,784
<TOTAL-ASSETS> 177,373
<CURRENT-LIABILITIES> 41,384
<BONDS> 70,000
0
0
<COMMON> 57,268
<OTHER-SE> 4,486
<TOTAL-LIABILITY-AND-EQUITY> 177,373
<SALES> 153,007
<TOTAL-REVENUES> 153,950
<CGS> 137,631
<TOTAL-COSTS> 137,631
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,738
<INCOME-PRETAX> 8,366
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,366
<DISCONTINUED> 0
<EXTRAORDINARY> (3,013)
<CHANGES> 0
<NET-INCOME> 5,353
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</TABLE>
FIRST AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT AND LETTER OF CREDIT AGREEMENT
This Amendment, dated as of June 30, 1998, is entered into
by (1) FRONTIER OIL AND REFINING COMPANY, a Delaware corporation
(the "Borrower"), (2) the banks parties to this Amendment (the
"Banks") and (3) UNION BANK OF CALIFORNIA, N.A., a national
banking association, as agent (the "Agent") for the Banks.
Recitals
A. The Borrower, the Banks and the Agent have entered
into an Amended and Restated Revolving Credit and Letter of
Credit Agreement dated as of June 30, 1997 (the "Credit
Agreement"). Terms defined in the Credit Agreement and not
otherwise defined herein have the same respective meanings when
used herein, and the rules of interpretation set forth in
Sections 1.2 and 1.3 of the Credit Agreement are incorporated
herein by reference.
B. The Borrower, the Banks and the Agent wish to amend
the Credit Agreement to, among other things, extend the
Commitment Termination Date. Accordingly, the Borrower, the
Banks and the Agent hereby agree as set forth below.
Section 1. Amendments to Credit Agreement. Effective as
of the date first set forth above and subject to satisfaction of
the conditions precedent set forth in Section 2, the Credit
Agreement is hereby amended as set forth below.
(a) The definition of "Borrowing Base" in Section
1.1 of the Credit Agreement is amended by adding the word "and"
after the semicolon in clause (d), deleting clauses (e) and (f)
and adding the following new clause (e):
"(e) seventy percent (70%) of Eligible Invento-
ry (provided, however, that the aggregate amount of
Eligible Inventory, before making the calculation
described in this clause (e) for the purpose of
determining the aggregate amount of Eligible
Inventory to be included in the Borrowing Base
Certificate, shall not exceed thirty-five million
dollars ($35,000,000))."
(b) The definitions of "Commitment Termination
Date," "Interest Period" and "Type" in Section 1.1 of the Credit
Agreement are amended in full to read as follows:
"'Commitment Termination Date' means June 30,
2000; provided, however, that, upon (a) written
request by the Borrower not later than May 31, 1999
and (b) notice of such extension by the Agent to the
Borrower not later than June 30, 1999, the Commitment
Termination Date may be extended by the Agent and the
Banks, in their sole and absolute discretion, for up
to an additional year; and further provided, however,
that the Agent's failure to notify the Borrower of
any such extension by the applicable date referred to
above shall constitute a denial of such extension."
"'Interest Period' means, with respect to each
LIBOR Loan or Base Rate Loan making up part of the
same Borrowing, the period commencing on the date of
such Loan or the date of the Conversion of any Loan
into such a Loan and ending on the last day of the
period selected by the Borrower pursuant to the
provisions below and, thereafter, each subsequent
period commencing on the last day of the immediately
preceding Interest Period and ending on the last day
of the period selected by the Borrower pursuant to
the provisions below. The duration of each Interest
Period for LIBOR Loans shall be any number of days
between 7 days and one (1) month, or two (2),
three (3) or six (6) whole months, as the Borrower
may select upon notice received by the Agent not
later than 11:00 a.m., Los Angeles time, on the third
Business Day before the first day of such Interest
Period, and the duration of each Interest Period for
Base Rate Loans shall be any number of days between 1
day and 7 days, as the Borrower may select upon
notice received by the Agent not later than 1:30
p.m., Los Angeles time, on the Business Day
immediately preceding the first day of such Interest
Period; provided, however, that
(a) Interest Periods commencing on the
same date for Loans making up part of the same
Borrowing shall be of the same duration;
(b) whenever the last day of an Interest
Period would otherwise occur on a day other than a
Business Day, the last day of such Interest Period
shall be extended to occur on the next succeeding
Business Day, unless, if such Interest Period relates
to LIBOR Loans, such extension would cause the last
day of such Interest Period to occur in the next
succeeding calendar month, in which case the last day
of such Interest Period shall occur on the next
preceding Business Day;
(c) no more than five (5) different
Interest Periods shall be outstanding at any one
time; and
(d) no Interest Period shall end after the
Commitment Termination Date."
"'Type' refers to the distinction among LIBOR
Loans, Reference Rate Loans and Base Rate Loans."
(c) Section 1.1 of the Credit Agreement is amended
by deleting the definitions of the terms "FOC," "FOC Guaranty,"
"Wainoco," "Wainoco Demand Note" and "Wainoco Note Offering" and
adding the following new definitions in appropriate alphabetical
order:
"'Base Rate' means, for any Interest Period for
each Base Rate Loan that is part of the same
Borrowing, the rate of interest per annum equal to
the sum of (a) the Term Federal Funds Rate for such
Interest Period plus (b) 0.5% per annum."
"'Base Rate Loan' means, at any time, any Loan
that bears interest as provided in Section 2.6(a)
(iii)."
"'FOC' means Frontier Oil Corporation, a Wyoming
corporation formerly known as 'Wainoco Oil Corpora-
tion.'"
"'FOC Demand Note' means the Demand Promissory
Note executed by FOC in favor of the Borrower
substantially in the form of Exhibit A to the Note
Pledge Agreement."
"'FOC Note Offering' means the offering by FOC
pursuant to the Prospectus of one hundred million
dollars ($100,000,000) in principal amount of its
Senior Notes Due 2002."
"'FRMI' means Frontier Refining & Marketing,
Inc., a Delaware corporation that is wholly owned by
FHI and was formerly known as 'Frontier Oil
Corporation.'"
"'FRMI Guaranty' means the Amended and Restated
Guaranty executed by FRMI in favor of the Banks and
the Agent substantially in the form of Exhibit A."
"'Term Federal Funds Rate' means, for any
Interest Period for each Base Rate Loan that is part
of the same Borrowing, the rate per annum at which
Union Bank is offered federal funds in the term
federal funds market as of 10:00 a.m., Los Angeles
time, on the first day of such Interest Period, in an
amount comparable to the amount of Union Bank's Base
Rate Loan for such Interest Period and for a term
coinciding with such Interest Period."
(d) The Credit Agreement is amended by deleting the
terms "FOC," "FOC Guaranty," "Wainoco," "Wainoco Demand Note"
and "Wainoco Note Offering" wherever they appear in the Credit
Agreement (other than in the definitions set forth in Section
1(c) of this Amendment) and substituting the terms "FRMI," "FRMI
Guaranty," "FOC," "FOC Demand Note" and "FOC Note Offering,"
respectively, as appropriate in each instance.
(e) Section 2.4(a) of the Credit Agreement is
amended in full to read as follows:
"(a) Each Borrowing shall be made on notice,
given (i) with respect to any Borrowing consisting of
Reference Rate Loans or Base Rate Loans, not later
than 1:30 p.m., Los Angeles time, on the Business Day
before the date of the proposed Borrowing and
(ii) with respect to any Borrowing consisting of
LIBOR Loans, not later than 11:00 a.m., Los Angeles
time, on the third Business Day before the date of
the proposed Borrowing, each such notice to be given
by the Borrower to the Agent, which shall give each
Bank prompt notice thereof by telecopier. Each such
notice of a Borrowing (a 'Notice of Borrowing') shall
be in writing, or by telephone confirmed promptly in
writing, by an Authorized Officer, specifying (i) the
requested date of such Borrowing (which shall be a
Business Day), (ii) the requested Type of Loans
making up such Borrowing, (iii) the requested
aggregate amount of such Borrowing, (iv) in the case
of a Borrowing consisting of LIBOR Loans or Base Rate
Loans, the requested initial Interest Period for such
Loans and (v) the fact that the statements set forth
in Section 4.2(b) are true as of the date of such
Borrowing. Each Bank shall, before 11:00 a.m., Los
Angeles time, on the day of such Borrowing, make
available to the Agent at its address referred to in
Section 9.2, in immediately available funds, such
Bank's ratable portion of such Borrowing. After the
Agent's receipt of such funds and upon fulfillment of
the applicable conditions set forth in Article 4, the
Agent will make such funds available to the Borrower
by crediting the Borrower's concentration account
number 0880412175 at the Agent's aforesaid address.
Notwithstanding the provisions of the first sentence
of this Section 2.4(a), if the Borrower gives the
Agent notice of a Borrowing consisting of Reference
Rate Loans or Base Rate Loans not later than 8:30
a.m., Los Angeles time, on the day of the proposed
Borrowing, the Agent and the Banks will use their
best efforts (but shall not be obligated) to make
such Loans available on the day on which such notice
is given; provided, however, that the Agent and the
Banks shall no longer be required to use their best
efforts as described in this sentence if the Agent,
at its sole option exercisable at any time, gives the
Borrower notice of the same."
(f) Section 2.6(a) of the Credit Agreement is
amended in full to read as follows:
"(a) The Borrower shall pay interest on the
unpaid principal amount of each Loan made by each
Bank, from the date of such Loan until such principal
amount has been paid in full, (i) during such periods
as such Loan is a Reference Rate Loan, at a rate per
annum equal at all times to the sum of the Reference
Rate in effect from time to time plus 0.5% per annum,
payable monthly in arrears on the last Business Day
of each calendar month during such periods and on the
Commitment Termination Date, (ii) during such periods
as such Loan is a LIBOR Loan, at a rate per annum
equal at all times during each Interest Period for
such Loan to the sum of the LIBOR Rate for such
Interest Period for such Loan plus 1.75% per annum,
payable on the last day of such Interest Period, and
(iii) during such periods as such Loan is a Base Rate
Loan, at a rate per annum equal at all times during
each Interest Period for such Loan to the sum of the
Base Rate for such Interest Period for such Loan plus
1.75% per annum, payable on the last day of such
Interest Period."
(g) Section 2.6(d) of the Credit Agreement is
amended in full to read as follows:
"(d) If the Borrower fails to select the
duration of any Interest Period for any LIBOR Loans
or Base Rate Loans in accordance with the provisions
contained in the definition of 'Interest Period' in
Section 1.1, the Agent will forthwith so notify the
Borrower and the Banks, and such Loans shall
automatically, on the last day of the then existing
Interest Period therefor, Convert into Reference Rate
Loans."
(h) Section 2.7(a) of the Credit Agreement is
amended in full to read as follows:
"(a) The Borrower may on any Business Day, in
the case of Reference Rate Loans or Base Rate Loans
upon prior written notice not later than 9:00 a.m.,
Los Angeles time, on the day of any prepayment of
such Loans, and in the case of LIBOR Loans upon at
least three (3) Business Days' prior written notice,
to the Agent stating the proposed date and aggregate
principal amount of the prepayment, and if such
notice is given the Borrower shall, prepay the
outstanding principal amounts of the Loans making up
a Borrowing in whole or ratably in part, together, in
the case of LIBOR Loans or Base Rate Loans, with
accrued interest to the date of such prepayment on
the principal amount prepaid; provided, however, that
any prepayment of LIBOR Loans or Base Rate Loans
shall be made on, and only on, the last day of an
Interest Period for such Loans; and provided further,
however, that each partial prepayment shall be in the
aggregate principal amount of one hundred thousand
dollars ($100,000) or an integral multiple thereof."
(i) Section 2.8 of the Credit Agreement is amended
in full to read as follows:
"Section 2.8 Voluntary Conversion of Loans.
The Borrower may on any Business Day, upon prior
written notice (signed by an Authorized Officer)
given to the Agent (a) with respect to any Conversion
to Reference Rate Loans or Base Rate Loans, not later
than 11:00 a.m., Los Angeles time, on the Business
Day immediately preceding the date of the proposed
Conversion and (b) with respect to any Conversion to
LIBOR Loans, not later than 11:00 a.m., Los Angeles
time, on the third Business Day before the date of
the proposed Conversion, subject to the provisions of
Sections 3.2 and 3.3, Convert all the Loans of one
Type making up the same Borrowing into Loans of the
other Type; provided, however, that any Conversion of
LIBOR Loans or Base Rate Loans into Loans of another
Type shall be made on, and only on, the last day of
an Interest Period for such LIBOR Loans or Base Rate
Loans. Each such notice of a Conversion shall,
within the restrictions specified above, specify (i)
the date of such Conversion, (ii) the Loans to be
Converted and (iii) if such Conversion is into LIBOR
Loans or Base Rate Loans, the duration of the
Interest Period for such Loans. Each such notice of
a Conversion shall be irrevocable and binding on the
Borrower. The Agent shall give each Bank prompt
notice by telecopier of each such notice of a
Conversion."
(j) Section 3.6 of the Credit Agreement is amended
by adding the words "or Base Rate Loan" after the words "LIBOR
Loan."
(k) Section 6.1 of the Credit Agreement is amended
by deleting the word "and" at the end of clause (d),
redesignating clause (e) as clause (g), and adding the following
new clauses (e) and (f) after clause (d):
"(e) not later than June 30 of each year,
reports prepared internally by the Borrower for the
purpose of updating, as of not earlier than the
previous March 31, each of (i) the environmental
report prepared by ENSR Consulting and Engineering
("ENSR") in August of 1991 (as thereafter updated)
and (ii) the refinery review and engineering report
prepared by Wright, Killen & Co. ("Wright Killen") in
September of 1991 (as thereafter updated), in each
case addressed to the Agent and in form and scope
reasonably satisfactory to the Agent;
"(f) within 90 days after any request therefor
by the Majority Banks (but not more often than
annually), report(s) updating either or both of the
reports referred to in Sections 6.1(e)(i) and (ii),
in each case (i) prepared by ENSR or Wright Killen,
as applicable, or by another independent company or
companies acceptable to the Agent, (ii) addressed to
the Agent and (iii) in form and scope reasonably
satisfactory to the Agent; and."
(l) Section 6.6 of the Credit Agreement is amended
in full to read as follows:
"Section 6.6 Cleanup Period. The Borrower
will not permit any calendar year to pass without
there being a period of at least five (5) consecutive
Business Days in such calendar year during which the
Borrower either (a) has no Loans outstanding or
(b) to the extent any Loans are outstanding during
such period, maintains an amount equal to the
aggregate principal amount of such Loans in the
'Control Account' (as defined in the Account Pledge
Agreement)."
(m) Section 9.4 of the Credit Agreement is amended
by deleting the reference to "Sections 4.1(a)(ix) and (x)" and
substituting "Sections 6.1(e) and (f)."
Section 2. Conditions to Effectiveness. This Amendment
shall become effective as of the date first set forth above when
the Agent has received a renewal fee of $100,000 for the account
of the Banks and all of the following documents, each dated on
or before the date hereof, in form and substance satisfactory to
the Agent and in the number of originals requested by the Agent:
(a) this Amendment, duly executed by the Borrower
and the Banks;
(b) an amendment to the FOC Guaranty and the other
Credit Documents, excluding the Credit Agreement (said amendment
herein called the "General Amendment"), for the purpose, among
others, of changing references therein in accordance with
Section 1(e) above, duly executed by the Borrower, the
Affiliates and the Banks;
(c) a consent to this Amendment, duly executed by
the Affiliates;
(d) copies of the resolutions of the Board of
Directors of the Borrower approving this Amendment and any
documents delivered by the Borrower pursuant hereto, certified
by the Secretary or an Assistant Secretary of the Borrower to be
correct and complete and in full force and effect as of the date
of execution, and as of the effective date, of this Amendment;
(e) a certificate of the Secretary or an Assistant
Secretary of the Borrower as to the incumbency, and setting
forth a specimen signature, of each of the persons who has
signed this Amendment or any document delivered by the Borrower
pursuant hereto;
(f) a certificate of the Borrower, signed on behalf
of the Borrower by its President or a Vice President and its
Secretary or any Assistant Secretary, certifying as to (i) the
absence of any amendments to the charter documents or bylaws of
the Borrower on or after June 30, 1997, (ii) the truthfulness in
all material respects of the representations and warranties
contained in the Credit Documents as though made on and as of
the effective date of this Amendment and (iii) the absence of
any event occurring and continuing, or resulting from the
effectiveness of this Amendment, that constitutes a Default or
an Event of Default; and
(g) such other approvals, opinions, evidence and
documents as the Agent may reasonably request.
Section 3. Representations and Warranties of Borrower.
The Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware.
(b) The execution, delivery and performance by the
Borrower of this Amendment, the General Amendment and the Credit
Documents, as amended hereby and thereby, to which it is or is
to be a party are within the Borrower's corporate powers, have
been duly authorized by all necessary corporate action and do
not (i) contravene the Borrower's charter documents or bylaws,
(ii) contravene any Governmental Rule or contractual restriction
binding on or affecting the Borrower or (iii) result in or
require the creation or imposition of any Lien or preferential
arrangement of any nature (other than any created by the Credit
Documents) upon or with respect to any of the properties now
owned or hereafter acquired by the Borrower.
(c) No Governmental Action is required for the due
execution, delivery or performance by the Borrower of this
Amendment, the General Amendment or any of the Credit Documents,
as amended hereby or thereby, to which the Borrower is or is to
be a party.
(d) This Amendment, the General Amendment and each
of the Credit Documents, as amended hereby and thereby, to which
the Borrower is a party constitute legal, valid and binding
obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms.
(e) The Security Agreement, the Account Pledge
Agreement, the Note Pledge Agreement and the Stock Pledge
Agreement constitute valid and perfected first-priority Liens on
the Collateral covered thereby, enforceable against all third
parties in all jurisdictions, and secure the payment of all
obligations of the Borrower or FOC, as applicable, under the
Credit Documents, as amended hereby and by the General
Amendment; and the execution, delivery and performance of this
Amendment and the General Amendment do not adversely affect the
Lien of the Security Agreement, the Account Pledge Agreement,
the Note Pledge Agreement or the Stock Pledge Agreement.
(f) The consolidated balance sheet of FOC and its
Subsidiaries as of December 31, 1997 and the related
consolidated statements of income, retained earnings and cash
flows of FOC and its Subsidiaries for the fiscal year then
ended, certified by Arthur Andersen & Co., independent public
accountants, and the report as of April 30, 1998 referred to in
Section 7.1(j)(i) of the FOC Guaranty, certified by the chief
financial officer or chief accounting officer of FOC, fairly
present the consolidated financial condition of FOC and its
Subsidiaries as of such dates and the consolidated results of
the operations of FOC and its Subsidiaries for the fiscal
periods ended on such dates, all in accordance with generally
accepted accounting principles applied on a consistent basis.
Since April 30, 1998 there has been no material adverse change
in the business, condition (financial or otherwise), operations,
performance, properties or prospects of FOC or any of its
Subsidiaries. FOC and its Subsidiaries have no material
contingent liabilities except as disclosed in such financial
statements or the notes thereto.
(g) There is no pending or, to the knowledge of the
Borrower, threatened action or proceeding affecting FOC or any
its Subsidiaries before any Governmental Person or arbitrator
that may materially and adversely affect the financial condition
or operations of FOC or any of its Subsidiaries or that purports
to affect the legality, validity or enforceability of this
Amendment, the General Amendment or any of the Credit Documents,
as amended hereby or thereby.
Section 4. Reference to and Effect on Credit Documents.
(a) On and after the effective date of this
Amendment, each reference in the Credit Agreement to "this
Agreement," "hereunder," "hereof," "herein" or any other
expression of like import referring to the Credit Agreement, and
each reference in the other Credit Documents to "the Credit
Agreement," "thereunder," "thereof," "therein" or any other
expression of like import referring to the Credit Agreement,
shall mean and be a reference to the Credit Agreement as amended
by this Amendment.
(b) Except as specifically amended hereby or by the
General Amendment, the Credit Agreement and the other Credit
Documents shall remain in full force and effect and are hereby
ratified and confirmed. Without limiting the generality of the
foregoing, the Security Agreement, the Account Pledge Agreement,
the Note Pledge Agreement and the Stock Pledge Agreement, and
all of the Collateral described therein, do and shall continue
to secure the payment of all obligations of the Borrower or FOC,
as applicable, under the Credit Documents, as amended hereby and
by the General Amendment.
(c) The execution, delivery and effectiveness of
this Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of any Bank or
the Agent under any of the Credit Documents or constitute a
waiver of any provision of any of the Credit Documents.
Section 5. Costs, Expenses and Taxes. The Borrower
agrees to pay on demand all costs and expenses of the Agent in
connection with the preparation, execution and delivery of this
Amendment and the other instruments and documents to be deliv-
ered hereunder, including the reasonable fees and out-of-pocket
expenses of counsel for the Agent with respect thereto and with
respect to advising the Agent as to its rights and responsibil-
ities hereunder and thereunder.
Section 6. Execution in Counterparts. This Amendment may
be executed in any number of counterparts and by the parties
hereto in separate counterparts, each of which when so executed
and delivered shall be deemed to be an original and all of which
taken together shall constitute one and the same instrument.
Section 7. Governing Law. THIS AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED
IN THE STATE OF CALIFORNIA.
FRONTIER OIL AND REFINING COMPANY
By: _________________________
Jon D. Galvin
Vice President and Chief
Financial Officer
UNION BANK OF CALIFORNIA, N.A.,
as Agent and as a Bank
By: _________________________
Walter M. Roth
Vice President
BANQUE PARIBAS
By: _________________________
Name: _______________________
Title: ______________________
By: _________________________
Name: _______________________
Title: ______________________
DEN NORSKE BANK AS
By: _________________________
Name: _______________________
Title: ______________________
By: _________________________
Name: _______________________
Title: ______________________
