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 September 30, 1999
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 001-12138
PDV America, Inc.
-----------------
(Exact name of registrant as specified in its charter)
Delaware 51-0297556
-------- -----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
750 Lexington Avenue, New York, New York 10022
----------------------------------------------
(Address of principal executive office) (Zip Code)
(212) 753-5340
--------------
(Registrant's telephone number, including area code)
N.A.
------------------------------------------------------------------
(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 _____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $1.00 par value 1,000
----------------------------- -----
(Class) (Outstanding at October 31, 1999)
<PAGE>
PDV AMERICA, INC.
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1999
Table of Contents
-----------------
Page
----
FACTORS AFFECTING FORWARD LOOKING STATEMENTS...................................3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets --
September 30, 1999 and December 31, 1998.......................4
Condensed Consolidated Statements of Income --
Three-Month and Nine-Month Periods Ended
September 30, 1999 and 1998....................................5
Condensed Consolidated Statement of Shareholder's Equity --
Nine-Month Period Ended September 30, 1999.....................6
Condensed Consolidated Statements of Cash Flows --
Nine-Month Periods Ended September 30, 1999 and 1998...........7
Notes to the Condensed Consolidated Financial Statements.......8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations.................14
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................24
Item 6. Exhibits and Reports on Form 8-K.................................24
SIGNATURES....................................................................25
2
<PAGE>
FACTORS AFFECTING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Specifically, all statements under the caption "Item 2 -- Management's
Discussion and Analysis of Financial Condition and Results of Operations"
relating to Year 2000 matters, capital expenditures and investments related to
environmental compliance and strategic planning, purchasing patterns of refined
products and capital resources available to the Companies (as herein defined)
are forward-looking statements. In addition, when used in this document, the
words "anticipate," "estimate," "prospect" and similar expressions are used to
identify forward-looking statements. Such statements are subject to certain
risks and uncertainties, such as increased inflation, continued access to
capital markets and commercial bank financing on favorable terms, increases in
regulatory burdens, changes in prices or demand for the Companies' products as a
result of competitive actions or economic factors and changes in the cost of
crude oil, feedstocks, blending components or refined products. Such statements
are also subject to the risks of increased costs in related technologies and
such technologies producing anticipated results. Should one or more of these
risks or uncertainties, among others, materialize, actual results may vary
materially from those estimated, anticipated or projected. Although PDV America,
Inc. believes that the expectations reflected by such forward-looking statements
are reasonable based on information currently available to the Companies, no
assurances can be given that such expectations will prove to be correct.
3
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
PDV AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
- -------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS:
CURRENT ASSETS
Cash and cash equivalents $ 38,619 $ 34,822
Accounts receivable - net 899,016 592,315
Due from affiliates 58,155 52,666
Inventories 1,205,942 835,128
Current portion of notes receivable from PDVSA 250,000 -
Prepaid expenses and other 15,758 85,571
----------- ----------
Total current assets 2,467,490 1,600,502
NOTES RECEIVABLES FROM PDVSA AND AFFILIATES 798,000 1,010,000
PROPERTY, PLANT AND EQUIPMENT - net 3,414,110 3,420,053
RESTRICTED CASH 2,977 9,436
INVESTMENTS IN AFFILIATES 739,618 807,659
OTHER ASSETS 236,198 227,760
----------- ----------
TOTAL ASSETS $ 7,658,393 $ 7,075,410
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY:
CURRENT LIABILITIES
Short-term bank loans $ 92,000 $ 37,000
Accounts payable 629,367 492,090
Payables to affiliates 323,377 158,956
Taxes other than income 179,591 219,642
Other current liabilities 233,285 247,966
Income taxes payable 5,521 1,607
Current portion of long-term debt 297,078 47,078
Current portion of capital lease obligation 15,484 14,660
----------- ----------
Total current liabilities 1,775,703 1,218,999
LONG-TERM DEBT 1,997,827 2,071,843
CAPITAL LEASE OBLIGATION 93,972 101,926
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 211,206 200,281
OTHER NONCURRENT LIABILITIES 232,884 230,007
DEFERRED INCOME TAXES 595,788 621,463
MINORITY INTEREST 29,911 29,559
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY
Common stock, $1.00 par, 1,000 shares authorized,
issued and outstanding 1 1
Additional capital 1,532,435 1,532,435
Retained earnings 1,188,666 1,068,896
----------- -----------
Total shareholder's equity 2,721,102 2,601,332
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 7,658,393 $ 7,075,410
=========== ===========
</TABLE>
(See Notes to the Condensed Consolidated Financial Statements.)
4
<PAGE>
PDV AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------------- -----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Net Sales $3,623,953 $2,681,613 $ 8,970,409 $ 8,292,442
Sales to affiliates 49,381 50,285 122,083 132,689
----------------------------------------------------------------
3,673,334 2,731,898 9,092,492 8,425,131
Equity in earnings of affiliates 13,274 25,533 10,794 66,991
Interest income from affiliates 21,697 16,369 62,566 55,232
Other income (expense) - net (4,853) (4,470) (17,999) (6,587)
----------------------------------------------------------------
3,703,452 2,769,330 9,147,853 8,540,767
COST OF SALES AND EXPENSES:
Cost of sales and operating expenses 3,553,097 2,523,825 8,641,047 7,812,545
Selling, general and administrative
expenses 53,411 63,456 171,633 185,430
Interest expense:
Capital leases 3,078 3,469 9,636 10,766
Other 39,183 41,368 113,723 128,182
Minority interest (42) 404 352 764
----------------------------------------------------------------
3,648,727 2,632,522 8,936,391 8,137,687
----------------------------------------------------------------
INCOME BEFORE INCOME TAXES 54,725 136,808 211,462 403,080
INCOME TAXES 21,204 51,439 69,677 151,753
----------------------------------------------------------------
NET INCOME $ 33,521 $ 85,369 $ 141,785 $ 251,327
================================================================
</TABLE>
(See Notes to the Condensed Consolidated Financial Statements.)
5
<PAGE>
PDV AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock Additional Retained
Shares Amount Capital Earnings Total
------ ------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
RETAINED EARNINGS, DECEMBER 31, 1998 1 $1 $1,532,435 $1,068,896 $2,601,332
Dividend paid -- -- -- (22,015) (22,015)
Net income -- -- -- 141,785 141,785
------ ------ ---------- ---------- -----------
RETAINED EARNINGS, SEPTEMBER 30, 1999 1 $1 $1,532,435 $1,188,666 $2,721,102
====== ====== ========== ========== ===========
</TABLE>
(See Notes to the Condensed Consolidated Financial Statements.)
6
<PAGE>
PDV AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Nine Months Ended September 30,
------------------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 22,474 $ 806,183
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (181,191) (164,213)
Proceeds from notes receivable from PDVSA - 250,000
Proceeds from sale of property, plant and equipment 10,815 17,947
Notes receivables PDV Finance (38,000) -
Decrease (increase) in restricted cash 6,459 (2,516)
Proceeds from sale of investments 4,980 7,160
Loans to LYONDELL-CITGO Refining LP (19,700) (19,800)
Investments in and advances to affiliates (4,212) (5,030)
--------- ----------
Net cash (used in) provided by investing activities (220,849) 83,548
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayments of) revolving bank loans 181,000 (173,000)
Net proceeds from (repayments of) short-term bank loans 55,000 (3,000)
Proceeds from issuance of tax-exempt bonds 25,000 47,200
Repayments of (net proceeds from) taxable bonds (25,000) 100,000
Payments on term bank loans - (58,823)
Dividend paid (22,015) (224,500)
Payments on Senior Notes - (250,000)
Repayments of other debt (4,683) (5,334)
Payments of capital lease obligations (7,130) (6,390)
--------- ----------
Net cash provided by (used in) financing activities 202,172 (573,847)
--------- ----------
INCREASE IN CASH AND CASH EQUIVALENTS 3,797 315,884
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 34,822 35,268
--------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 38,619 $ 351,152
========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest (net of amount capitalized) $116,552 $ 141,582
======== =========
Income taxes, net of refunds of $30,052 in 1999 $(27,672) $ 47,097
========= =========
</TABLE>
(See Notes to the Condensed Consolidated Financial Statements.)
7
<PAGE>
PDV AMERICA, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
THREE-MONTH AND NINE-MONTH PERIODS ENDED
SEPTEMBER 30, 1999 AND 1998
- -------------------------------------------------------------------------------
1. Basis of Presentation
The financial information for PDV America, Inc. ("PDV America" or the
"Company") subsequent to December 31, 1998 and with respect to the interim
three-month and nine-month periods ended September 30, 1999 and 1998 is
unaudited. In the opinion of management, such interim information contains all
adjustments, consisting only of normal recurring adjustments, with the exception
of the tax matter described in Footnote 6, necessary for a fair presentation of
the results of such periods. The results of operations for the three-month and
nine-month periods ended September 30, 1999 are not necessarily indicative of
the results to be expected for the full year. Reference is made to PDV America's
Annual Report for the fiscal year ended December 31, 1998 on Form 10-K, dated
March 30, 1999, for additional information.
The condensed consolidated financial statements include the accounts
of PDV America, its wholly-owned subsidiaries, CITGO Petroleum Corporation
("CITGO") and its wholly-owned subsidiaries and Cit-Con Oil Corporation, which
is 65 percent owned by CITGO, VPHI Midwest, Inc. ("Midwest") and its wholly-
owned subsidiary, PDV Midwest Refining, L.L.C. ("PDVMR"), and PDV USA, Inc.
("PDV USA") (collectively, the "Companies").
2. Inventories
Inventories, primarily at LIFO, consist of the following:
September 30 December 31,
1999 1998
(Unaudited)
------------------- ------------------
(000's omitted)
Refined products $ 887,167 $ 580,666
Crude oil 246,516 186,503
Materials and supplies 72,259 67,959
---------- -----------
$1,205,942 $ 835,128
========== ===========
Inventories at December 31, 1998 were carried at estimated net market
value which was $172 million lower than historical cost. At September 30, 1999
estimated net market values exceeded historical cost, and accordingly, no
write-down was necessary.
8
<PAGE>
3. Long-Term Debt
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
(Unaudited)
----------------- -------------------
(000's omitted)
<S> <C> <C>
Revolving bank loans $ 391,000 $ 210,000
Senior Notes due from 2000 to 2006 with interest rates from 7.75% to
7.875% 947,841 947,499
Private Placement Senior Notes, due from 1999 to 2006 with interest
rates from 9.03% to 9.30% 176,623 176,623
Master Shelf Agreement Senior Notes, due from 2002 to 2009 with
interest rates from 7.17% to 8.94% 260,000 260,000
Tax Exempt Bonds, due from 2004 to 2029 with variable interest rates 300,520 275,520
Taxable Bonds, due from 2008 to 2028 with variable interest rates 202,850 227,850
Cit-Con bank credit agreement 16,071 21,429
-------------------------------------------
2,294,905 2,118,921
Current portion of long-term debt (297,078) (47,078)
-------------------------------------------
$1,997,827 $2,071,843
-------------------------------------------
</TABLE>
On April 15, 1999, CITGO issued $25 million of tax exempt revenue
bonds due 2029. The proceeds were used to redeem $25 million of the taxable Gulf
Coast environmental facilities revenue bonds due 2028.
4. INVESTMENT IN LYONDELL-CITGO REFINING LP
LYONDELL-CITGO Refining LP ("LYONDELL-CITGO") owns and operates a 265
MBPD refinery in Houston, Texas. LYONDELL-CITGO was formed in 1993 by
subsidiaries of CITGO and Lyondell Chemical Company. The heavy crude oil
processed by the Houston refinery is supplied by a subsidiary of PDVSA under a
long-term crude oil supply contract that expires in 2017. CITGO purchases
substantially all of the refined products produced at the Houston refinery under
a long-term contract.
In April 1998, the crude oil supplier exercised its contractual rights
and reduced deliveries of crude oil to LYONDELL-CITGO. LYONDELL-CITGO has been
required to obtain alternative sources of crude oil supply in replacement which
has resulted in lower operating margins.
9
<PAGE>
At September 30, 1999, CITGO had a 41.25% participation interest in
LYONDELL-CITGO. CITGO has a one-time option to increase, for an additional
investment, its participation interest to 50 percent. This option may be
exercised after January 1, 2000 but not later than September 30, 2000.
CITGO has notes receivable from LYONDELL-CITGO which total $56 million
and $36.3 million at September 30, 1999 and December 31, 1998, respectively. The
notes bear interest at market rates and are due July 1, 2003. These notes are
included in other assets in the accompanying consolidated balance sheets.
CITGO accounts for its investment in LYONDELL-CITGO using the equity
method of accounting and records its share of the net earnings of LYONDELL-CITGO
based on allocations of income agreed to by the owners. Information on CITGO's
investment in LYONDELL-CITGO follows:
September 30, December 31,
1999 1998
(Unaudited)
----------------- -------------
(000's omitted)
Carrying value of investment $ 536,910 $ 597,373
Notes receivable 56,009 36,309
Participation interest 41% 41%
Equity in net (loss) income $ (7,639) 58,827
Cash distributions received 52,823 91,763
Summary of financial position:
Current assets $ 227,896 $ 197,000
Non current assets 1,410,599 1,440,000
Current liabilities 261,638 203,000
Non current liabilities 826,771 785,000
Member's equity 550,086 649,000
Summary of operating results:
Revenue $ 1,694,386 $ 2,055,000
Gross profit 75,649 291,000
Net (loss) income (2,445) 169,000
5. Commitments and Contingencies
Litigation and Injury Claims - Various lawsuits and claims arising in
the ordinary course of business are pending against the Companies. The Companies
record accruals for potential losses when, in management's opinion, such losses
are probable and reasonably estimable. If known lawsuits and claims were to be
determined in a manner adverse to the Companies, and in amounts greater than the
Companies' accruals, then such determinations could have a material adverse
effect on the Companies' results of operations in a given reporting period.
However, in management's opinion the ultimate resolution of these lawsuits and
claims will not exceed, by a material amount,
10
<PAGE>
the amount of the accruals and the insurance coverage available to the
Companies. This opinion is based upon management's and counsel's current
assessment of these lawsuits and claims. The most significant lawsuits and
claims are discussed below.
In May 1997, an explosion and fire occurred at CITGO's Corpus Christi
refinery. No serious personal injuries were reported. CITGO received
approximately 7,500 individual claims for personal injury and property damage
related to the above noted incident. Approximately 1,300 of these claims have
been resolved for amounts which individually and collectively were not material.
There are presently seventeen lawsuits filed on behalf of approximately 9,000
individuals arising out of this incident pending against CITGO in federal and
state courts in Corpus Christi alleging property damages, personal injury and
punitive damages. A trial of one of the federal court lawsuits in October 1998
involving ten bellwether plaintiffs, out of approximately 400 plaintiffs,
resulted in a verdict for CITGO. The remaining plaintiffs in this case have
agreed to settle for an immaterial amount.
A class action lawsuit is pending in Corpus Christi, Texas state court
against CITGO and other operators and owners of nearby industrial facilities
which claims damages for reduced value of residential properties located in the
vicinity of the industrial facilities as a result of air, soil and groundwater
contamination. Trial is scheduled for January 2000. CITGO has contracted to
purchase approximately 267 properties that were included in the lawsuit and are
in a neighborhood adjacent to CITGO's Corpus Christi refinery and settle the
property damage claims relating to these properties. CITGO has offers open to
purchase the remaining eight properties in the neighborhood. Related to this
purchase, $15.7 million was expensed in 1997. Two related personal injury and
wrongful death lawsuits were filed against the same defendants in 1996, one of
which is scheduled for trial in 2000. A trial date for the other case has not
been set.
Litigation is pending in federal court in Lake Charles, Louisiana,
against CITGO by a number of current and former Lake Charles refinery employees
and applicants asserting claims of racial discrimination in connection with
CITGO's employment practices. Trials in this case began in October 1999.
CITGO is among defendants to lawsuits in California and North Carolina
alleging contamination of water supplies by methyl tertiary butyl ether
("MTBE"), a component of gasoline. The action in California was filed in
November 1998 by the South Tahoe Public Utility District and CITGO was added as
a defendant in February 1999. The North Carolina case, filed in January 1999, is
a putative class action on behalf of owners of water wells and other drinking
water supplies in the state. Both actions allege that MTBE poses public health
risks. Both actions seek damages as well as remediation of the alleged
contamination. These matters are in early stages of discovery. CITGO has denied
all of the allegations and is pursuing its defenses.
Environmental Compliance and Remediation - The Companies are subject
to various federal, state and local environmental laws and regulations which may
require the Companies to take action to correct or improve the effects on the
environment of prior disposal or release of petroleum substances by the
Companies or other parties. Management believes that the Companies are in
compliance with these laws and regulations in all material aspects. Maintaining
compliance with
11
<PAGE>
environmental laws and regulations in the future could require significant
capital expenditures and additional operating costs.
The Companies' accounting policy establishes environmental reserves as
probable site restoration and remediation obligations become reasonably capable
of estimation, or when the payment of fines or other penalties proposed by
regulatory authorities is considered probable and reasonably estimable. Based on
currently available information, including the continuing participation of
former owners in remediation actions and indemnification agreements with third
parties, the Companies' management believe that their accruals are sufficient to
address such obligations.
In July 1997, the Texas Natural Resources Conservation Commission
("TNRCC") issued a Preliminary Report and Petition alleging that CITGO violated
TNRCC rules relating to the operation of a hazardous waste management unit
without a permit and recommended a penalty of $699,200. The TNRCC later expanded
the alleged violations to include alleged unauthorized emissions to the
atmosphere and alleged unauthorized discharges to waters of the state. CITGO has
settled all of these matters by entering into an Agreed Order with the TNRCC,
which required the payment of a penalty of $325,000, implementation of an
approved Supplemental Environmental Project at a cost of $325,000 and compliance
with terms and conditions of the order.
The TNRCC conducted an environmental compliance review at the Corpus
Christi refinery in the first and second quarters of 1998. In January 1999, the
TNRCC issued the Companies a Notice of Violation (NOV) arising from this review
and in October 1999 proposed fines of approximately $1.6 million related to the
NOV. Most of the alleged violations refer to record keeping and reporting
issues, failure to keep proper records, failure to meet required emission
levels, and failure to properly monitor emissions. The Companies intend to
vigorously contest the proposed fines and allegations.
In June 1999, CITGO and numerous other industrial companies received
notice from the U.S. Environmental Protection Agency ("EPA"), that the EPA
believes these companies have contributed to contamination in the Calcasieu
Estuary, in the proximity of Lake Charles, Calcasieu Parish, Louisiana and are
Potentially Responsible Parties ("PRPs") under the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA"). The EPA made a demand for
payment of its past investigation costs from CITGO and other PRPs and advised it
intends to conduct a Remedial Investigation/Feasibility Study ("RI/FS") under
its CERCLA authority. CITGO and other PRP's may be potentially responsible for
the costs of the RI/FS. CITGO disagrees with the EPA's allegations and intends
to contest this matter. CITGO does not believe its potential exposure in this
matter is material.
In October 1999, the EPA issued an NOV to CITGO for violations of
federal regulations regarding reformulated gasoline found during a May 1998
inspection at CITGO's Braintree, Massachusetts terminal and recommended a
penalty of $218,500. CITGO intends to vigorously contest the proposed fines and
allegations.
12
<PAGE>
On June 28, 1999, PDVMR received a Finding of Violation ("FOV") from
the EPA (Region V) for alleged violations of the federal benzene New Source
Hazardous Air Pollutants regulations under the Federal Clean Air Act at the
Lemont refinery operated by CITGO. PDVMR is currently in negotiations with the
EPA concerning the FOV and anticipates resolving this matter by the end of 1999.
While PDVMR does not expect this matter to have a material financial impact on
the company, it can reasonably anticipate proposed penalties to exceed $100,000.
Conditions which require additional expenditures may exist with
respect to various Companies' sites including, but not limited to, the
Companies' operating refinery complexes, closed refineries, service station
sites and crude oil and petroleum product storage terminals. The amount of such
future expenditures, if any, is indeterminable.
Derivative Commodity and Financial Instruments - The Companies enter
into petroleum futures contracts, options and other over-the-counter commodity
derivatives, primarily to reduce their inventory exposure to market risk. Such
contracts are generally entered into through major brokerage houses and traded
on national exchanges and can be settled in cash or through delivery of the
commodity. Such contracts generally qualify for hedge accounting and correlate
to market price movements of crude oil and refined products. Resulting gains and
losses on such contracts, therefore, will generally be offset by gains and
losses on the Companies' hedged inventory or future purchases and sales. In the
nine-month period ended September 30, 1999, there was no non-hedging activity.
The Companies have only limited involvement with other derivative
financial instruments and do not currently use them for trading purposes. The
Companies have entered into various interest rate swap agreements to manage
their risk related to interest rate changes on their debt. The fair value of the
interest rate swap agreements in place at September 30, 1999, based on the
estimated amount that the Companies would receive or pay to terminate the
agreements as of that date and taking into account current interest rates, was
an unrealized loss of $2.0 million. In connection with the determination of fair
market value, the Companies consider the creditworthiness of the counterparties,
but no adjustment was determined to be necessary as a result.
The impact of these instruments on cost of sales and operating
expenses and pretax earnings was immaterial for all periods presented.
Management considers the market risk to the Companies related to these
instruments to be insignificant during the periods presented.
6. Income Taxes
The effective tax rate for the current year is unusually low due to a
favorable resolution in the second quarter of 1999 of a significant tax issue in
the last IRS audit. During the years under audit, deferred taxes were recorded
for certain environmental expenses deducted in the tax returns in the event the
deductions were denied on audit. The deductions were allowed on audit and,
accordingly, the deferred tax liability of approximately $11 million was
reversed with a corresponding benefit to tax expense.
13
<PAGE>
7. Related Party Transactions
As of September 30, 1999, PDVSA Petroleo y Gas, S.A. ("PDVSA P&G")
deliveries of crude oil to CITGO were less than contractual base volumes due to
PDVSA P&G's declaration of force majeure pursuant to four long-term crude oil
supply contracts related to CITGO's refineries. As a result, the Companies have
been required to obtain alternative sources of crude oil. As a result, the
Companies estimate the margins in three months and nine months ended September
30, 1999 were reduced by $11 million and $28 million, respectively, from what
would have otherwise been the case. It is not possible to forecast the future
financial impacts of these reductions in crude oil deliveries on CITGO's margins
because the correlation between crude oil and refined product prices is not
constant over time. Additionally, because of, among other things, changes in
crude oil economics, the duration of force majeure cannot be forecasted.
Additionally, during the third quarter of 1999, PDVSA P&G did not
deliver naphtha pursuant to one of the contracts and will make contractually
specified payments in lieu thereof. The financial impact to the three-month and
nine-month periods ended September 30, 1999 was immaterial.
During 1999, PDV America has paid dividends to its parent, PDV
Holding, Inc. as follows: $2,297,000 in March, $5,944,000 in April, $5,759,500
in May and $8,015,000 in June.
On July 2, 1999, PDV America loaned to PDVSA Finance, Ltd., a
wholly-owned subsidiary of Petroleos de Venezuela, S.A., $38,000,000. Interest
is payable in arrears quarterly commencing on August 15, 1999 at a rate per
annum equal to 10.395%. Principal is payable in eight equal quarterly
installments commencing August 15, 2012.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The following discussion of the financial condition and results of
operations of the Companies should be read in conjunction with the unaudited
condensed consolidated financial statements of the Companies included elsewhere
herein. Reference is made to the Companies' Annual Report for the fiscal year
ended December 31, 1998 on Form 10-K, dated March 30, 1999, for additional
information and a description of factors which may cause substantial
fluctuations in the earnings and cash flows of the Companies.
In the quarter ended September 30, 1999, the Companies generated net
income of $34 million on revenue of $3.7 billion compared to the net income of
$85 million on revenue of $2.8 billion for the same period last year. In the
nine-month period ended September 30, 1999, the Companies generated net income
of $142 million on revenue of $9.1 billion compared to net income of $251
million on revenue of $8.5 billion for the same period last year. Gross margin
for the first nine months of 1999 benefited from the sale of inventories that
were written down by $172 million at December 31, 1998, to reflect market prices
at that time. At September 30, 1999, estimated net
14
<PAGE>
market value of inventories exceeded historical cost and, accordingly, no write
down of inventories was required. (See "Gross margin").
Results of Operations
The following table summarizes the sources of PDV America's sales
revenues and sales volumes for the three-month and nine-month periods ended
September 30, 1999 and 1998:
15
<PAGE>
PDV America Sales Revenues and Volumes
<TABLE>
<CAPTION>
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
------------------- ------------------- --------------------- -----------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
($ in millions) (MM gallons)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gasoline $2,172 $1,566 $5,306 $4,882 3,231 3,378 9,718 9,898
Jet fuel 297 186 726 600 520 463 1,591 1,347
Diesel/#2 fuel 637 449 1,649 1,473 1,136 1,142 3,738 3,512
Asphalt 124 113 243 223 271 286 568 566
Petrochemicals and industrial
products 217 239 649 711 448 774 1,494 1,851
Lubricants and waxes 129 111 370 336 77 57 220 172
------ ------ ------ -------- -------------------- ------ -------
Total refined products sales 3,576 2,664 8,943 8,225 5,683 6,100 17,329 17,346
Other sales 97 68 149 200
------------------- -------------------- -------------------- -------------------
Total sales $3,673 $2,732 $9,092 $8,425 5,683 6,100 17,329 17,346
=================== ==================== ===================== ===================
</TABLE>
The following table summarizes PDV America's cost of sales and
operating expenses for the three-month and nine-month periods ended September
30, 1999 and 1998:
PDV America Cost of Sales and Operating Expenses
Three Months Nine Months
Ended Ended
September 30, September 30,
------------------ --------------------
1999 1998 1999(1) 1998
-------- -------- --------- --------
($ in millions)
Crude oil $1,077 $ 676 $2,556 $1,983
Refined products 1,833 1,261 4,542 3,973
Intermediate feedstocks 340 217 682 714
Refining and manufacturing costs 242 234 735 711
Other operating costs, expenses
and inventory changes(1) 61 136 126 432
------------------ -------------------
Total costs of sales and
operating expenses $3,553 $ 2,524 $8,641 $7,813
================== ===================
- ------------
(1) The nine months ended September 30, 1999, includes the impact of the
inventory write-down of $172 million recorded at December 31, 1998.
See "Gross Margin."
Sales revenues and volumes. Sales increased $941 million, or
approximately 34%, in the three-month period ended September 30, 1999 as
compared to the same period in 1998. This was due to an increase in average
sales price of 45% offset by a decrease in sales volume of 7%. Sales increased
$667 million, or approximately 8%, in the nine-month period ended September 30,
1999 as compared to the same period in 1998. This was due to an increase in
average sales price of 8%. (See PDV America Sales Revenues and Volumes table
above).
16
<PAGE>
Equity in earnings of affiliates. Equity in earnings of affiliates
decreased by $12 million for the three-month period and decreased by $56 million
for the nine-month period as compared to the same period in 1998. The decrease
was primarily due to the change in the earnings of LYONDELL-CITGO, CITGO's share
of which decreased $57 million, from $49 million in the first nine months of
1998 to $(8) million in the first nine months of 1999. This decrease was due
primarily to a reduction of contract crude supply, lower margins on crude
purchased in the spot market and costs and lower operating rates related to
operating unit outages.
Other income (expense). Other income (expense) was $(18) million for
the nine-month period ended September 30, 1999 as compared to $(7) million for
the same period in 1998. The difference is primarily due to disposals of
property, plant and equipment which were sold at a loss in 1999, but were sold
at a gain in 1998.
Cost of sales and operating expenses. Cost of sales and operating
expenses increased by $1,029 million or 41%, in the quarter ended September 30,
1999 and increased $829 million or 11% in the nine-month period ended September
30, 1999 as compared to the same period in 1998. The average cost of
hydrocarbons increased by 50% in the three-month period ended September 30, 1999
as compared to the same period in 1998. In the nine-month period ended September
30, 1999, the average cost of hydrocarbons increased by 13% as compared to the
same period in 1998. As a result of the invocation of the force majeure clause
in its crude oil supply contracts, the Companies estimate that the cost of crude
oil purchased in the three months and nine months ended September 30, 1999,
increased by $11 million and $28 million, respectively, from what would have
otherwise been the case. (See PDV America Cost of Sales and Operating Expenses
table above.)
The Companies purchase refined products to supplement the production
from their refineries to meet marketing demands and resolve logistical issues.
Refined product purchases represented 52% and 50% of total cost of sales and
operating expenses for the third quarters of 1999 and 1998, respectively, and
53% and 51% for the first nine months of 1999 and 1998, respectively. The
Companies estimate that margins on purchased products, on average, are somewhat
lower than margins on produced products due to the fact that the Companies can
only receive the marketing portion of the total wholesale margin received on the
produced refined products. However, purchased products are not segregated from
the Companies' produced products and margins may vary due to market conditions
and other factors beyond the Companies' control.
Gross margin. The gross margin for the three-month period ended
September 30, 1999 was $120 million, or 3.3%, compared to $208 million, or 7.6%,
for the same period in 1998. The gross margin for the nine-month period ended
September 30, 1999 was $451 million, or 5.0%, compared to $613 million, or 7.3%,
for the same period in 1998. In the three-month period ended September 30, 1999,
the revenue per gallon component increased approximately 44% while the cost per
gallon component increased approximately 51%. As a result, the gross margin
decreased approximately one cent on a per gallon basis in the three-month period
ended September 30, 1999 compared to the same period in 1998. In the nine-month
period ended September 30, 1999, the revenue per gallon component increased
approximately 8% and the cost per gallon component increased approximately 11%.
As a result, the gross margin decreased approximately nine-tenths of one cent on
a per gallon basis in the nine-month period ended September 30, 1999 compared to
17
<PAGE>
the same period in 1998. (See also "Notes to the Condensed Consolidated
Financial Statements," Note 7.)
Income taxes. Income taxes reported were based on an effective tax
rate of 33% for the nine-month period ended September 30, 1999, as compared to
38% for the comparable period in 1998. The effective tax rate for the current
year is unusually low due to a favorable resolution in the second quarter of
1999 of a significant tax issue in the last IRS audit. During the years under
audit, deferred taxes were recorded for certain environmental expenses deducted
in the tax returns in the event the deductions were denied on audit. The
deductions were allowed on audit and, accordingly, the deferred tax liability of
approximately $11 million was reversed with a corresponding benefit to tax
expense.
Liquidity and Capital Resources
For the nine-month period ended September 30, 1999, the Companies'
consolidated net cash provided by operating activities totaled approximately $22
million. Operating cash flows were derived from net income of $142 million and
depreciation and amortization of $207 million reduced by changes in other assets
and liabilities of $327 million. The more significant changes in other items
included an increase in notes and accounts receivable (including amounts due
from affiliates) of $364 million and an increase in inventories of $199 million,
offset by an increase in current liabilities of $278 million.
Net cash used in investing activities totaled $221 million for the
nine-month period ended September 30, 1999 consisting primarily of capital
expenditures of $181 million (compared to $164 million for the same period in
1998), loan to PDVSA Finance of $38 million and loans to LYONDELL-CITGO of
$20 million.
Net cash provided by financing activities totaled $202 million for the
nine-month period ended September 30, 1999 consisting primarily of a $181
million from revolving bank loans and $55 million from short-term borrowings
offset by a $22 million dividend to parent.
As of September 30, 1999, capital resources available to the Companies
include cash generated by operations, available borrowing capacity under CITGO's
committed bank facilities of $221 million and $93 million of uncommitted
short-term borrowing facilities with various banks and $63 million in unused
availability under PDVMR's revolving credit facility with various banks.
Additionally, the remaining $400 million from CITGO's shelf registration with
the Securities and Exchange Commission for $600 million of debt securities may
be offered and sold from time to time. The Companies' management believes that
the Companies have sufficient capital resources to carry out planned capital
spending programs, including regulatory and environmental projects in the near
term, and to meet currently anticipated future obligations as they arise. The
Companies periodically evaluate other sources of capital in the marketplace and
anticipate that long-term capital requirements will be satisfied with current
capital resources and future financing arrangements, including the issuance of
debt securities. The Companies' ability to obtain such financing will depend on
numerous factors, including market conditions and the perceived creditworthiness
of the Companies at that time.
18
<PAGE>
The Companies are in compliance with their obligations under their
debt financing arrangements at September 30, 1999.
New Accounting Standard
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). The statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives, at fair value,
as either assets or liabilities in the statement of financial position with an
offset either to shareholder's equity and comprehensive income or income
depending upon the classification of the derivative. The Companies have not
determined the impact on their financial statements that may result from
adoption of SFAS No. 133, which is required no later than January 1, 2001.
Year 2000 Readiness
General. The inability of computers, software and other equipment
using microprocessors to recognize and properly process data fields containing a
two-digit year is commonly referred to as the Year 2000 issue. As the Year 2000
approaches, such systems may be unable to accurately process certain date-based
information.
To mitigate any adverse impact this may cause, the Companies have
established a company-wide Year 2000 Project (the "Project") to address the
issue of computer programs and embedded computer chips which may be unable to
correctly function with the Year 2000. The Project is proceeding on schedule. In
addition, CITGO is updating major elements of its information systems by
implementing programs purchased from SAP. The first phase of SAP implementation,
which included the financial reporting and materials management modules, was
brought into production on January 1, 1998. Additional SAP modules, including
plant maintenance work order and cost tracking, were implemented throughout
1998. The light oils product scheduling, inventory and billing module and the
human resources module were brought into production on June 1 and July 1, 1999,
respectively. The total cost of the SAP implementation is estimated to be
approximately $125 million, which includes software, hardware, reengineering and
change management. Management has determined that SAP is an appropriate solution
to the Year 2000 issue related to the systems for which SAP is implemented. Such
systems comprise approximately 80% of the Companies' total information systems.
The implementation of SAP is 95% complete, and is on schedule and on budget as
revised through September 30, 1999. Remaining business software systems are
expected to be made Year 2000 ready through the Year 2000 Project or they will
be replaced.
The Project. The Companies' Year 2000 Project Team is divided into two
groups. One group is working with Information Systems ("I.S.") and Information
Technology ("I.T.") related matters, while the other is analyzing non-I.S. and
non-I.T. business and asset integrity matters. A risk-based approach toward Year
2000 readiness was applied to non-SAP systems and processes, with most
fix-or-replace decisions made by year-end 1998. The strategy for achieving Year
2000
19
<PAGE>
business and asset integrity is focused on equipment, software and relationships
that are critical to the Companies' primary business operation, including
refinery operations, terminal operations, crude oil purchase and shipment
operations, and refined product distribution operations. The Companies engaged
third party consultants to review and validate the methodology and organization
of the Project. The Project strategy involves a number of phases: Inventory and
Assessment of Critical Equipment, Software and Relationships; Contingency
Planning; Remediation; Testing; and Readiness.
The Companies require that all new contracts with vendors, suppliers,
or business partners include a clause covering Year 2000 readiness. The
Companies also seek evidence of Year 2000 readiness from service providers prior
to procuring new services.
While the Project is systematically assessing the Year 2000 readiness
of third party suppliers and customers, there can be no guarantee that third
parties of business importance to the Companies will successfully and timely
reprogram, replace or test all of their own computer hardware, software and
process control systems. The Companies have therefore chosen to continue
assessment and reevaluation of third party relationships beyond the deadline for
completion of other aspects of Inventory and Assessment phases of the Project.
Reviews of third party Year 2000 readiness will continue through 1999.
The Companies have established a Year 2000 Contingency Planning Team.
The strategy for Contingency Planning included a review and analysis of existing
contingency plans for the Companies' refineries, terminals, pipelines and other
operations, in light of potential Year 2000 issues discovered in the Inventory
and Assessment phases of the Project. The Contingency Planning phase has also
evaluated and implemented changes to the existing contingency plans. Contingency
plans based on this process were completed for mission critical items and
external providers as of June 30, 1999. Remediation continues and includes
technical analysis, testing and, if necessary, retrofitting or replacement of
systems and equipment determined to be incapable of reliable operations in the
Year 2000. As of August 1, 1999, the Remediation phase was substantially
complete. The final phase of the Project, Readiness, is being completed.
The following is the Companies' definition of Year 2000 Readiness:
o Correctly and accurately handle date information before, during and
after midnight, December 31, 1999.
o Function correctly and accurately, and without disruption, before,
during and after January 1, 2000.
o Respond to two-digit year date input in a way that resolves ambiguity
as to the century in a disclosed, defined and predetermined manner.
o Process all date data to reflect the year 2000 as a leap year.
20
<PAGE>
o Correctly and accurately recognize and process any date with a year
specified as "99" and "00."
Costs. The estimated total cost of the Project is not expected to
exceed $21 million, down from an original estimate of $35 million. The reduction
is due to less than expected need for remediation of embedded systems and
refinements in expense estimates. This estimate does not include the Companies'
potential share of Year 2000 costs that may be incurred by partnerships and
joint ventures in which the Companies participate but are not the managing
partner or operator. The total amount expended through September 30, 1999 was
approximately $15 million. Approximately 45% of these expenditures were for
internal costs to conduct the various phases of the Project. Approximately 25%
were primarily for consultants in the specialized areas of Project Management,
Contingency Planning, Information Technology, Database Administration and
Operations Analysis, as well as fees paid to third parties for Quality
Assessment analysis of Project organization and methodology. The remaining 30%
were for actual remediation of critical items, systems, and external providers,
as well as contingency planning and testing.
The costs of the Project are being funded with cash from operations.
No existing or planned I.T. projects have been deferred or delayed due to Year
2000 readiness initiatives. The cost of implementing SAP replacement systems is
not included in these estimates.
The majority of remaining costs for completing the Project is
anticipated to be directed toward the replacement and repair of systems and
equipment found to be incapable of reliable operation in the Year 2000.
Risks. The failure to correct a material Year 2000 problem could
result in an interruption, or failure of, certain normal business activities or
operations. Because the Companies are dependent, to a very substantial degree,
upon the proper functioning of their computer systems and their interaction with
third parties, including vendors and customers and their computer systems, a
failure of any of these systems to be Year 2000 compliant could have a material
adverse effect on the Companies. Failure of this kind could, for example, cause
disruption in the supply of crude oil, cause disruption in refinery operations,
cause disruption in the distribution of refined products, lead to incomplete or
inaccurate accounting, recording, or processing of purchases of supplies or
sales of refined products, or result in generation of erroneous results. If not
remedied, potential risks include business interruption, financial loss,
regulatory actions, reputational harm, and legal liability. Such failures could
adversely affect the Companies' results of operations, liquidity and financial
condition. Unlike other business interruption scenarios, Year 2000 implications
could include multiple, simultaneous events which could result in unpredictable
outcomes.
Due to the general uncertainty inherent in the Year 2000 problem,
resulting in part from the uncertainty of the Year 2000 readiness of third party
suppliers and customers, the Companies' management is unable to determine at
this time whether the consequences of Year 2000 failures will have a material
impact on the Companies' operations, liquidity or financial position. The
Project has significantly reduced the Companies' level of uncertainty about the
Year 2000 impact. The Companies' management believes that, with the
implementation of new SAP business
21
<PAGE>
systems and completion of the Project as scheduled, the possibility of
significant interruptions of normal operations should be minimized. See also
"Factors Affecting Forward-Looking Statements."
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Introduction. The Companies have exposure to price fluctuations of
crude oil and refined products as well as fluctuations in interest rates. To
manage these exposures, management has defined certain benchmarks consistent
with their preferred risk profile for the environment in which the Companies
operate and finance their assets. The Companies do not attempt to manage the
price risk related to all of their inventories of crude oil and refined
products. As a result, at September 30, 1999, the Companies were exposed to the
risk of broad market price declines with respect to a substantial portion of
their crude oil and refined product inventories. The following disclosures do
not attempt to quantify the price risk associated with such commodity
inventories.
Commodity Instruments. The Companies balance their crude oil and
petroleum product supply/demand and manages a portion of its price risk by
entering into petroleum futures contracts, options and other over-the-counter
commodity derivatives. Generally, the Companies' risk management strategies
qualify as hedges. However, certain strategies do not qualify as hedges. The
Companies may take commodity positions based on their views or expectations of
specific commodity prices or price differentials between commodity types.
Non Trading Commodity Derivatives
Open Positions at September 30, 1999
<TABLE>
<CAPTION>
Maturity Number of Contract Market
Commodity Derivative Date Contracts Value(2) Value
- --------- ---------- -------- --------- -------- -------
($ in millions)
<S> <C> <C> <C> <C> <C>
No Lead Gasoline(1) Futures Purchased 1999 225 $6.6 $6.5
Futures Sold 1999 75 $2.2 $2.2
Heating Oil(1) Futures Purchased 1999 192 $4.9 $5.0
Futures Purchased 2000 51 $1.2 $1.3
Futures Purchased 2001 6 $0.1 $0.1
Futures Sold 2000 325 $9.0 $8.6
Swaps 1999 20 $0.4 $0.5
Swaps 2000 34 $0.7 $0.8
Natural Gas(3) Futures Purchased 1999 33 $0.8 $0.9
</TABLE>
- ------------------------
(1) 1000 barrels per contract
(2) Weighted average price
(3) 10,000 mmbtu per contract
Debt Related Instruments. The Companies have fixed and floating U.S.
currency denominated debt. The Companies use interest rate swaps to manage their
debt portfolio toward a benchmark of 40 to 60 percent fixed rate debt to total
fixed and floating rate debt. These instruments
22
<PAGE>
have the effect of changing the interest rate with the objective of minimizing
the Companies' long- term costs. At September 30, 1999, the Companies' primary
exposures were to U.S. dollar LIBOR and U.S. Treasury rates.
For interest rate swaps, the table below presents notional amounts and
interest rates by expected (contractual) maturity dates. Notional amounts are
used to calculate the contractual payments to be exchanged under the contracts.
Non Trading Interest Rate Derivatives
Open Positions at September 30, 1999
Notional
Expiration Fixed Rate Principal
Variable Rate Index Date Paid Amount
- ------------------- ------ ------ --------------
($ in millions)
One-month LIBOR May 2000 6.28% $ 25
J.J. Kenny May 2000 4.72% 25
J.J. Kenny February 2005 5.30% 12
J.J. Kenny February 2005 5.27% 15
J.J. Kenny February 2005 5.49% 15
------
$ 92
======
The fair value of the interest rate swap agreements in place at
September 30, 1999, based on the estimated amount that the Companies would
receive or pay to terminate the agreements as of that date and taking into
account current interest rates, was an unrealized loss of $2.0 million.
For debt obligations, the table below presents principal cash flows
and related weighted average interest rates by expected maturity dates. Weighted
average variable rates are based on implied forward rates in the yield curve at
the reporting date.
Debt Obligations at September 30, 1999
<TABLE>
<CAPTION>
Expected
Fixed Average Fixed Variable Average Variable
Expected Maturities Rate Debt Interest Rate Rate Debt Interest Rate
- ------------------- --------- ------------- --------- -----------------
($ in millions) ($ in millions)
<S> <C> <C> <C> <C>
1999 $ 40 9.11% $ 94 5.83%
2000 290 7.94% 7 6.32%
2001 40 9.11% 7 6.69%
2002 36 8.78% 62 6.82%
2003 559 7.98% 329 6.89%
Thereafter 422 8.02% 500 6.90%
------ ---- ---- ----
Total $1,387 8.07% $999 6.78%
====== ==== ==== ====
Fair Value $1,374 $999
====== ====
</TABLE>
23
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The required information is incorporated by reference into Part II of
this Report from Note 5 of the Notes to the Condensed Consolidated Financial
Statements included in Part I of this Report.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
27 Financial Data Schedule (filed electronically only)
(b) Reports on Form 8-K
None.
24
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
PDV AMERICA, INC.
Date: November 12, 1999 /s/ Luis Centeno
----------------------------------------
Luis Centeno
Chairman, President, Chief Executive
Officer and Chief Financial Officer
Date: November 12, 1999 /s/ Jose I. Moreno
----------------------------------------
Jose I. Moreno
Secretary
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
This schedule contains summary financial information extracted from PDV America,
Inc.'s financial statements for the period ending September 30, 1999.
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000906422
<NAME> PDV America, Inc.
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 38,619
<SECURITIES> 0
<RECEIVABLES> 977,352
<ALLOWANCES> 20,181
<INVENTORY> 1,205,942
<CURRENT-ASSETS> 2,467,490
<PP&E> 4,493,733
<DEPRECIATION> 1,079,623
<TOTAL-ASSETS> 7,658,393
<CURRENT-LIABILITIES> 1,775,703
<BONDS> 1,997,827
0
0
<COMMON> 1
<OTHER-SE> 2,721,102
<TOTAL-LIABILITY-AND-EQUITY> 7,658,393
<SALES> 9,092,492
<TOTAL-REVENUES> 9,147,853
<CGS> 8,641,047
<TOTAL-COSTS> 8,812,680
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,811
<INTEREST-EXPENSE> 123,359
<INCOME-PRETAX> 211,462
<INCOME-TAX> 69,677
<INCOME-CONTINUING> 141,785
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 141,785
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
